Commercial Plastics Ltd v Vincent
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE PEARSON |
| Judgment Date | 17 July 1964 |
| Judgment citation (vLex) | [1964] EWCA Civ J0717-6 |
| Court | Court of Appeal |
| Date | 17 July 1964 |
[1964] EWCA Civ J0717-6
Lord Justice Sellers
Lord Justice Pearson and
Lord Justice Salmon
In The Supreme Court of Judicature
Court of Appeal
From: Mr. Justice Widgery - Middlesex)
Mr. OWEN STABLE. Q. C. and Mr. RICHARD YORKE (instructed by Messrs. Slaughter & May) appeared on behalf of the Appellants (Plaintiffs).
Mr. MARK LITTMAN, Q. C. and Mr. GERALD OWEN (instructed by Messrs. Rubinstein. Nash & Co.) appeared on behalf of the Respondent (Defendant).
LORD JUDTICE PEARSON: The judgment which I am about to read is the judgment of the Court.
This is an appeal by the plaintiffs from a judgment of Mr. Justice Widgery. The plaintiffs are suing on a restrictive provision contained in the defendant's contract of employment with them. By their writ issued on the 7th April, 1964, they claimed on the basis of that provision an injunction for one year to restrain the defendant from entering the employment of Armoride Limited and a declaration that the defendant was not entitled for one year to enter the employment of any competitor of the plaintiffs in the calender P. V. C. field. On the 8th April there was an interim injunction pending the hearing of a summons. On the 14th April the summons was heard and affidavits were read: the interim injunction was continued until after the trial of the action or further order, and there was a certificate for a speedy trial, and it was directed that the affidavits should stand as pleadings and other directions were given. The trial took place on the 3rd, 4th and 5th June, and on the 5th June Mr. Justice Widgery in his judgment decided that the restrictive provision contained in the defendant's contract of employment with the plaintiffs and relied upon by the plaintiffs in this action went beyond what was reasonably necessary for the protection of the plaintiffs' legitimate interests and was therefore void and could not be enforced against the defendant. Accordingly he dismissed the plaintiffs' claim. On the 8th June the plaintiffs gave notice of appeal, and on the same day on a motion by the plaintiffs, who gave certain undertakings, this Court granted an injunction restraining the defendant from entering the employment of Armoride Limited until after the hearing of the appeal. The hearing of the appeal was expedited, and it began on the 18th June. At the conclusion of the hearing in this Court on the 25th June it was announced that the appeal would be dismissed and the reasons would be given later. We are now giving reasons.
The facts of the case have been fully and accurately summarised by the learned judge, but we will for convenience mention a few of the salient points.
The plaintiffs are engaged in the P. V. C. section of the plastics industry. The initials "P. V. C." stand for Poly-Vinyl-Chloride, which is one of the basic materials of the industry. Other basic materials which may be more familiar are polythene and bakelite. Dr. Herbert, the principal witness for the plaintiffs, whose evidence was accepted by the judge, estimated that about a quarter of the plastics industry is based on P. V. C. It may be treated by a number of different processes, one of which is calendering. Dr. Herbert estimated that about 20 per cent, of the total P. V. C. production is calendered. The word "calender" is according to the Oxford Dictionary derived from a Greek word "kylindros" meaning a roller or cylinder. Calendering is a process similar in principle to mangling. The material is put through revolving rollers which reduce it to the required thinness. A calendering machine in this industry is elaborate and expensive, costing about a quarter of a million pounds. The product of calendering may be as thick as a quarter of an inch or as thin as 3/1,000ths of an inch.
The plaintiffs' business consists wholly or mainly of manu-facturing thin P. V. C. calendered sheeting and selling it to the makers of the final products which will be sold to the consumers. Such final products include cinematograph film, hygienic sheets for hospitals, wall coverings and - most important in this case - adhesive tape for tying up parcels or for use in sticking plasters. The plaintiffs had in 1959 five principal rivals in the United Kingdom market for thin P. V. C. calendered sheeting, and the position was the same at the date of the trial except that one of the five rivals had gone into liquidation. The proportions however were approximately the same in 1959 and at the date of the trial. We are still giving Dr. Herbert's estimates. The plaintiffs have about 20 per cent, of the United Kingdom market for thin P. V. C, calendered sheeting, the rivals having nearly all of theremaining 80 per cent. There are also small quantities produced by minor competitors in the United Kingdom and small quantities imported from the Continent of Europe. In the specialised field of thin P. V. C. calendered sheeting for adhesive tape the proportions are reversed, the plaintiffs having about 80 per cent, of the market and the rivals only about 20 per cent. The sheeting for adhesive tape is important for the plaintiffs, as the plaintiffs' production of it is 20 per cent, of their total production of thin P. V. C. calendered sheeting. For the plaintiffs and their rivals taken together the production of the sheeting for adhesive tape is less important, being only 5 per cent, of their total production of thin P. V. C. calendered sheeting.
There are special technical difficulties in the production of the sheeting for adhesive tape, because it has, so to speak, to maintain good relations with the adhesive substance which is put on it. There is a special risk of adhesive tape deteriorating in storage. The plaintiffs have spent some £200,000 on research into methods of producing the sheeting for adhesive tape. Many factors are involved, for example the choice of ingredients, the quantity of each ingredient, the sequence of nixing, the heating of the rollers in the calendering machine, the speed at which the rollers are operated, and the cooling of the product. When small quantities of a material have been produced and tested in a laboratory, it may be necessary to have large quantities put through a full production trial, which involves considerable usage of time, labour, fuel and materials.
The plaintiffs have established a pre-eminence in this field of sheeting for adhesive tape, and have maintained it for a substantial period of years and are anxious to maintain it for the future. They take careful precautions to ensure the secrecy of their recent discoveries in this field. The mixing specifications, which result from successful experiments, are kept in code, and only a few persons in the plaintiffs' organisation have access to the code. The test reports from the laboratory have avery restricted circulation. The monthly reports, which are mere general, have a wider but still restricted circulation. There is frequent consultation with customers, and experiments and testing are carried out with a view to satisfying their requirements, hut they are not permitted to know the details of the formulations and processes involved.
Dr. Herbert in his evidence explained how the plaintiffs came to engage the defendant. He said: "In 1959 the business had grown to a very considerable volume and it was our opinion that it then merited some special attention, so the idea was to engage a technical person who should be fully responsible for the co-ordination of the research and development work that had to be conducted in connection with the adhesive tapes production. This person would embrace all the work that had to be done in this direction starting from the raw materials, considering the right types of raw materials to use and testing them, formulating the mixtures, doing all the tests that were necessary to ensure that the quality of the produced materials was correct and co-ordinating with the customers". I have read from Day 1, page 5"A"-"B".
The defendant's previous experience is referred to in the judgment of the learned judge. For the last three years of his employment with Imperial Chemical Industries Ltd. he was mainly engaged on work connected with calendering P. V. C. The plaintiffs' advertisement in "The Guardian" in September, 1959, and the resulting interviews and letters, and the defendant's entry into the plaintiffs' employment in February, 1960, are referred to in the judgment. We should mention for the sake of accuracy chat the defendant initially was employed by the plaintiffs' subsidiary or associated company Greenwich Plastics Limited, but in 1963 there was a reorganisation of the group of companies, and the defendant, evidently with his own tacit consent, was transferred to the plaintiffs' employment but in their Greenwich Plastics Division. This nominal change of employment did not alter the work which he had to do, or the conditions of his employment, and, as neither side contended either in the Court below or in thisCourt that it materially affected the content or the validity or invalidity of the restrictive provision, it can he disregarded in this Court as it was in the judgment of the learned judge.
The contract of employment was concluded by the defend-ant's letter to the plaintiffs dated the 20th December, 1959, in which he accepted their Offer. The restrictive provision was contained in the plaintiffs' second letter of the 27th November, 1959, and was in these terms: "In view of the highly technical and confidential nature of this appointment you have agreed not to seek employment with any of our competitors in the P. V. C. calendering field, for at least one year after leaving our employ".
The words "you have agreed" indicate that there was some previous agreement for a restrictive provision. The evidence and the findings of the learned judge show that there was at one...
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