East England Schools CIC (trading as 4Myschools) v Luci Palmer and Another
| Jurisdiction | England & Wales |
| Judge | Mr Salter |
| Judgment Date | 20 December 2013 |
| Neutral Citation | [2013] EWHC 4138 (QB) |
| Date | 20 December 2013 |
| Docket Number | Case No: HQ13X03527 |
| Court | Queen's Bench Division |
[2013] EWHC 4138 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London WC2A 2LL
Mr Richard Salter QC
Sitting as a Deputy Judge of the Queen's Bench Division
Case No: HQ13X03527
Mr Adam Solomon (instructed by Field Fisher Waterhouse LLP) appeared for the Claimant
Mr David Brook (instructed by Penningtons Manches LLP) appeared for the Defendants
Hearing dates: 10, 11, 12, 13, and 20 December 2013
Mr Salter QC:
Introduction
This action concerns restrictive covenants in the contract of employment of an employee of a recruitment consultancy. It raises for decision a number of issues concerning the validity of such covenants, including whether the increasing use by teachers and schools of social media and the internet means that the employer no longer has any protectable connection with its customers, and an interesting point about the effect on the enforceability of such covenants of restrictions on the acts which the ex-employee may take "as a shareholder" of a competing company.
Background
The Claimant, East England Schools CIC (which trades as, and which I shall refer to as, "4myschools") is a Community Interest Company which carries on business as a recruitment agency in the educational sector. Broadly, its business involves matching teacher applicants with schools that have vacancies, both for short-term placements of a day or so (to cover sickness and similar absences) and for longer-term positions. It employs 13 staff across all of its businesses, and had a turnover in 2012 of approximately £3.2m.
The First Defendant, Luci Palmer ("Ms Palmer") was employed by 4myschools as a "Recruitment Consultant" at its Chelmsford offices, under a contract of employment dated 17 January 2011 (the "4myschools Contract"). Ms Palmer's starting salary was £25,000 per annum plus commission. At 4myschools, Ms Palmer was primarily responsible for matching teachers with vacancies at secondary schools in Essex.
Clause 15 of the 4myschools Contract contained covenants not to solicit or to deal for a period of 6 months after the ending of her employment with the candidate teachers or client schools with whom Ms Palmer had dealt in her last 12 months at 4myschools. Those covenants were expressed to extend to actions carried out by Ms Palmer, not merely on her own account, but also "as principal, partner, shareholder, director, employee, consultant or in any other capacity whatsoever".
Towards the end of 2012, Ms Palmer became disillusioned with her prospects at 4myschools. She therefore started to look for a new job. On 31 January 2013 she was offered a post by the Second Defendant, Sugarman Group Limited ("Sugarman Education") as a "Senior Consultant", at a higher salary than she was receiving at 4myschools. Sugarman Education is another educational sector recruitment agency. It operates from premises in the City of London Ms Palmer accepted the post offered by Sugarman Education by email dated 4th February 2013, and on 1st March 2013 she gave notice to 4myschools that she was leaving. Clause 11.1.2 of the 4myschools Contract required Ms Palmer to give 4 weeks' notice to terminate her employment. Her employment with 4myschools therefore ended on Friday, 29 th March 2013.
On Tuesday 2 April 2013 (Monday 1 April was a Bank Holiday), Ms Palmer started work with Sugarman Education. Sugarman Education wished to develop its business in Essex, and so assigned Ms Palmer to work on building Sugarman Education's business with secondary schools in Essex, the same area that she had covered for 4myschools.
Not long after Ms Palmer started work, 4myschools received information which led it to believe that Ms Palmer was breaking the terms of her restrictive covenants by soliciting and/or dealing with the candidate teachers and client schools with whom she had dealt while employed by 4myschools. On 30 April 2013, Field Fisher Waterhouse LLP ("FFW"), who are 4myschools' solicitors, wrote letters both to Ms Palmer and to Sugarman Education. Those letters drew attention to Ms Palmer's contractual obligations. The letter to Ms Palmer demanded that she sign an undertaking to comply with the terms of clause 15 of the 4myschools Contract, and provide a list of all teachers and schools that she had contacted in breach of those terms. The letter to Sugarman Education asked Sugarman Education to confirm whether any information confidential to 4myschools was on Sugarman Education's systems or had been used by Sugarman Education since Ms Palmer had joined it.
In response, Ms Palmer (at Sugarman Education's expense) and Sugarman Education each consulted solicitors. Ms Palmer instructed Bignalls Balderston Warren ("BBW"). Sugarman Education instructed Manches LLP ("Manches", now Penningtons Manches LLP). BBW and Manches entered into correspondence with FFW. Eventually, under cover of emailed letters dated 24 th May 2013, BBW sent to FFW a form of undertaking signed by Mr Palmer ("the 24 May Undertakings"). The wording of the 24 May Undertakings did not follow the wording proposed by FFW on 30 April 2013. However, the undertakings which were contained in the 24 May Undertakings essentially mirrored the terms of sub-clauses 15.2.2, 15.2.3, 15.2.6 and 15.2.7 of the 4myschools Contract, with the addition of a 30-mile geographical restriction.
To reinforce the 24 May Undertakings, under cover of an email dated 31 May and a letter dated 3 June 2013, BBW sent to FFW a copy of an Affidavit sworn by Ms Palmer. In that Affidavit, she "state[d] unequivocally that I shall abide by the terms of the undertakings". Under cover of a letter dated 13 June 2013, BBW also sent to FFW a copy of a Schedule which purported to show that, in the 4-week period beginning on 22 April 2013, Ms Palmer had placed candidates to fill 31 days of vacancies at 6 schools which were (in BBW's words) "common clients of both 4myschools and Sugarman [Education]".
Thereafter, 4MySchools received additional information which led it to believe that Ms Palmer had committed further breaches of her restrictive covenants, over and above those about which FFW had been informed by BBW. 4myschools therefore decided to bring High Court proceedings against Ms Palmer and Sugarman Education. On 8 July 2013 4myschools issued and served on BBW and Manches a Claim Form and an Application for an interim injunction. That Application came on for hearing on 12 July 2013 before Sharpe J, and was disposed of by a Consent Order under which Ms Palmer and Sugarman Education gave undertakings, against a cross-undertaking in damages given by 4MySchools. The order of Sharpe J contained directions for a speedy trial of the action, and it is that trial which has come before me for hearing.
The Issues
The undertakings given by Ms Palmer and by Sugarman Education to Sharpe J lasted only for the balance of the 6-month period from the termination of Ms Palmer's employment with 4myschools prescribed by clause 15 of the 4myschools Contract. Those undertakings accordingly expired on 29 September 2013, more than 2 months before the trial before me began. In practical terms, therefore, the central issue which I have to determine is whether, had an injunction been granted on 12 July 2013 in the terms of the undertakings then given by Ms Palmer and Sugarman Education, that injunction would have been "wrongly granted" 1. Put in positive terms, I have to decide whether (on the facts as I now find them) Sharpe J should have granted an injunction to 4myschools, if undertakings had not been given by the Defendants. If so, I shall have to consider whether 4myschools is additionally entitled to an award of damages or to any other further relief. If not, I shall have to consider whether to order an enquiry under the cross-undertaking given by 4myschools as to the damage (if any) suffered by Mr Palmer and Sugarman Education by reason of the undertakings which they gave to Sharpe J.
In order to decide that central issue, and the other issues which arise in this action, I have to answer the following main questions:
12.1. What, if any, was the legal effect of the 24 May Undertakings?
12.2. Were the restrictive covenants to which Ms Palmer agreed in sub-clauses 15.2.2, 15.2.3, 15.2.6 and 15.2.7 of the 4myschools Contract and/or in the 24 May Undertakings (to the extent, if any, that I find that the 24 May Undertakings have any independent contractual force) legally enforceable? In particular, has 4myschools established that:
12.2.1. It had a legitimate proprietary interest requiring protection; and that
12.2.2. Each of the covenants and/or undertakings on which it relies was, on its true construction (and taken together with the other covenants and undertakings), no wider than was reasonably necessary to protect that interest?
12.3. To the extent, if any, that I find that any of these covenants and undertakings was legally enforceable:
12.3.1. To what extent did Ms Palmer breach that covenant or undertaking, and to what extent (if any) at the time of the application to Sharpe J did she threaten and intend to do so in the future?
12.3.2. What recoverable loss (if any) have the breaches by Ms Palmer caused to 4myschools?
12.3.3. Did Sugarman induce any of those breaches by Ms Palmer, and to what extent (if any) at the time of the application to Sharpe J did it threaten and intend to act in that way in the future?
12.3.4. If Sugarman did induce any breaches by Ms Palmer, is Sugarman liable to pay exemplary, as well as compensatory, damages to 4myschools for that tort?
12.3.5. As a matter of discretion, and having regard to all the circumstances, would it have been right (if no undertakings to the Court had been offered in lieu) to grant...
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