Home Counties Dairies Ltd v Skilton
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE HARMAN,LORD JUSTICE SALMON |
| Judgment Date | 21 January 1970 |
| Judgment citation (vLex) | [1970] EWCA Civ J0121-1 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 January 1970 |
[1970] EWCA Civ J0121-1
Lord Justice Harman
Lord Justice Salmon and
Lord Justice Cross
In The Supreme Court of Judicature
Court of Appeal
Civil Division
On appeal from Order of Mr Justice Pennycuick
Mr G. B. H. DILLON, Q. C. and Mr IAN McCULLOCH (instructed by Messrs Reynolds, Porter & Co.) appeared on behalf of the Appellants (Plaintiffs).
Mr JOHN W. MILLS, Q. C. and Mr J. A. R. FINLAY (instructed by Messrs Atkins, Walter & Locke, Dorking) appeared on behalf of the Respondents (Defendants).
The milkman is a familiar figure to all town dwellers. In my youth he walked behind a rattling cart with a milk churn in the middle of it, surrounded by numerous small cups hung on the rail, and as he stopped at each house he drew off a quantity of milk in one of his cups and delivered it to the cook who came up the area stairs with a jug. Nowadays he rides round in what is called a float and delivers his milk, more hygienically I suppose, certainly more silently, in bottles; but he has been throughout the years, one way or the other, a familiar and probably influential character well-known to every householder in the road. It is natural in the circumstances that he acquires usually on behalf of a master a clientele along his round who, if he is an agreeable and competent man, will tend to rely on him for his arrival and to follow his departure to serve another employer. In these circumstances it is natural that employers should make great efforts to retain the goodwill so acquired and to restrain, so far as they can, the employee who leaves their service from taking his clients with him. This is very much a part of the employer's goodwill which he is entitled to protect, for it is his most saleable asset.
Thus it comes about that cases concerning milk roundsmen have been a familiar topic in the Courts for a number of years, and the present is only the latest of them.
I do not think I need trace the long history of agreements in restraint of trade from the time of Lord Macclesfield, reported in 1 Peere Williams, 181, Mitchell v. Reynolds, down to quite recent years. An agreement in partial restraint of trade generally speaking may be upheld if partial and on the long view to the advantage of both parties to it. There is a great difference between what restrictions are allowable as between the vendor of the goodwill of a business and the buyer and those allowable as between master and servant. These are perhaps best illustrated by Attwood v. Lamont (1920 3 King's Bench, 571). When a man sells the goodwill ofhis business, one of the principal items will be his trade connections, and the buyer is entitled to protect that by restraining the vendor from setting up in competition with the very thing which he has agreed to buy. In the case of a master and servant, aside from confidential information, the servant is entitled to make use of the skill and knowledge he has acquired in the master's service and may not be prevented from competing with it. There has certainly been in the course of time a swing in the view taken by the Court in these matters, and many cases in which an injunction was granted in the last century would not succeed now. Nevertheless, if the object be merely to protect the master's legitimate interest in his goodwill and doesn't have as its paramount object to restrain competition, nor have the effect of hindering the employee in activities outside the area of the master's trade, a restraint can still be imposed.
If one follows the course of the milk-rounds agreements, it is clear that the employers have often failed because they tried to get too much and indeed made use of such restrictions as these as what the Courts thought to be instruments of oppression. The type of restriction has been much narrowed as time went on, and the only importance of the present case except to the parties is that this particular restriction has been framed in the interests of the employers and apparently carefully limited in order to avoid the pitfalls which the decisions have shown to exist.
The Judge here took the view that the agreement in question was nevertheless too wide to be enforced, as it did go to matters beyond the employer's interest. Notwithstanding all the precautions taken, he held that there were circumstances in which the present agreement could be used to restrain the defendant from activities altogether outside the employer's goodwill and that therefore the whole agreement was void. It is necessary, therefore, to examine the agreement in detail.
The second plaintiffs had for a number of years up to 1969 carried on a dairyman's business at Chapel Road, Westcott, near Dorking, and in June 1963 they employed the first defendant as a roundsman in that business. The agreement was made on the 3rd of July, 1964, when that defendant had already been in the employment as a roundsman in the business for a year. It consists of a printed form of agreement under a 6d. stamp. Clause 1B provides, by way of recital: "That the Employer and Employee confirm that the Employer has continuously employed the Employee since the 8th day of June 1963 and that he is now employed as a salesman. 2. That the terms of the employment as at the date hereof are as set out in the Schedule hereto". I need not, I think, read the details of the Schedule about wages, holidays and so on, hours of work and sickness, pensions and so forth. It provides in Clause 6 that in the first year there is to be one week's notice; two years, two weeks notice; and more than five years, four weeks notice to terminate on either side. Clause 9 provides: "The Employee shall pay into the Employer's office daily all monies collected on his behalf. (ii) The Employer shall afford the Employee every facility for checking the amounts of milk, dairy and other commodities issued to him for sale to customers". Here you have for the first time the subject-matter, namely, "milk, dairy and other commodities". Clause 10 is: "The Employee shall accept full responsibility for all milk, dairy produce and other commodities issued to him, and will faithfully record all sales made on behalf of the Employer, and also account for same either by monies paid in or by it demised credit as recorded by him in the rounds book". One notes there that this is a round, because its receipts are to be recorded in a rounds book. Clause 11 is about protective clothing. Clause 12 has some importance and is in these terms: "During his employment hereunder the Employee shall not, without the previous consent of the Employer, enter the service of or be employed in any capacity or for any purpose whatsoever byany person, firm or company carrying on any dairy business". In other words, he must not serve another dairyman except with consent; but it is only dairymen he may not serve. Clause 15 provides: "The Employee expressly agrees not at any time during the period of one year after the determination of his employment under this agreement (whether the same shall have been determined by notice or otherwise) either on his own account or as representative or agent of any person or company, to serve or sell milk or dairy produce to, or solicit orders for milk or dairy produce from any person or company who at any time during the last six months of his employment shall have been a customer of the Employer and served by the Employee in the course of his employment".
This agreement continued until March 1969, with slight variation of the amount of wages, when the second plaintiff sold its goodwill for a large sum to the first plaintiff. There was a written agreement dated the 27th March 1969 to assign, but that has not so far been followed by an actual assigning document. The first plaintiff agreed to take over all employees of the second plaintiff, but of course it could not oblige them to transfer their services, and at the end of March the first defendant left the service of the second plaintiff, a week's notice being given by agreement. On the 7th April the first defendant entered the employment of the second defendant, who are dairymen in the same area, and immediately started to serve the same milk round as he had worked when he had been employed by the second plaintiff - a flagrant breach of his covenant - whereupon the first plaintiff on the 11th April issued the writ in this action to enforce the covenant in Clause 15, which I have read. By amendment, the second plaintiff was added as a plaintiff, and the second defendant as a defendant, but the person seeking to enforce the covenant is the first plaintiff, the second being joined only because the first plaintiff's title remains anequitable one. It was not disputed before us that the obligations the first defendant, whatever they were, assignable.
The action as against the second defendant was for an injunction to restrain them from procuring the alleged breach. The Judge refused the motion on the ground that the covenant was too wide and so void. He also held that the second defendant had not joined in any solicitation of customers of the plaintiffs. It is against the first of those refusals that this appeal is brought, so that the words we have to construe are: "serving or selling milk or dairy produce to any person or company who at any time between the 4th October 1968 and the 4th April 1969 was a customer of the second plaintiff and served by the first defendant during that period in the course of his employment by the second plaintiff". It is limited to as short a time as one year after the determination of the employment and so as to apply to customers only during the last six months of the employment and further to customers who shall have been served by the employee himself....
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