Kores Manufacturing Company Ltd v Kolok Manufacturing Company Ltd

JurisdictionEngland & Wales
JudgeLORD JUSTICE JENKINS
Judgment Date31 March 1958
Judgment citation (vLex)[1958] EWCA Civ J0331-3
Docket Number1957. K. No. 358
CourtCourt of Appeal
Date31 March 1958
Between:
Kores Manufacturing Company Limited
Plaintiffs
and
Kolok Manufacturing Company Limited
Defendants

[1958] EWCA Civ J0331-3

Before:

Lord Justice Jenkins,

Lord Justice Romer and

Lord Justice Ormerod.

1957. K. No. 358

In The Supreme Court of Judicature

Court of Appeal

The Hon. CHARLES RUSSELL, Q.C., and Mr PETER OLIVER (instructed by Messrs Hardman, Phillips & Mann) appeared on behalf of the Appellants (Plaintiffs).

Mr F.W. BENEY, Q.C., and Mr R.S. LAZARUS (instructed by Messrs Richards, Butler & Co.) appeared on behalf of the Respondents (Defendants).

LORD JUSTICE JENKINS
1

The Judgment that I am about to deliver is the Judgment of the court in this case.

2

The action in which this appeal arises was brought by the appellants, Kores Manufacturing Company Limited, as plaintiffs against the respondents, Kolok Manufacturing Company Limited, as defendants, for a declaration that an agreement contained in letters passing between the plaintiffs and the defendants dated the 30th August 1934 and the 3rd September 1934 was a valid and subsisting agreement, and for injunctions to eetrain the defendants from committing breaches of It. The letters constituting the agreement sued upon passed between the respective managing directors of the plaintiffs and defendants, and were in these terms. The first is addressed to the defendant company from the plaintiff company; "Dear Sirs, In consideration of your agreeing not without our written consent to at any time employ any person who, during the then past five years, shall have been a servant of ours, we undertake not, without your written consent, to at any time employ any person who, during the then past five years, shall have been a servant of yours", and that is signed by Mr Lefebure, the managing director of Koreska (Great Britain) Limited, which was the then name of the plaintiff company.

3

The next letter dated the 3rd September.1934 was in reply to that; "Dear Mr Lefebure, I went away for the weekend on Friday and did not have an opportunity of acknowledging the letter which you left with mo on Thursday evening. I now send our agreement herewith, and am sure that this arrangement is a move in the right direction", and that is signed by Mr O'Brien on behalf of the defendant company. The letter enclosed with the one I have just read was in these terms: "Dear Sirs, We acknowledge receipt of your letter of the 30th ultimo with reference to the employment of our respective employees. We welcome this suggestion, from which it is understood that your company and our own will refrain from engaging any person or persons who have been in the employ of either firm during the previous period of five years. As such an arrangement has our fullest support, we hereby agree to the terms of your letter of the above date. We are sure that this arrangement will prove to be of mutual benefit, and we shall be happy at any time to consider other proposals which have for their objects similar safeguards", and that was signed by Mr O'Brien as managing director of the defendant company.

4

The next letter dated the 3rd September.1934 was in reply to that; "Dear Mr Lefebure, I went away for the weekend on Friday and did not have an opportunity of acknowledging the letter which you left with mo on Thursday evening. I now send our agreement herewith, and am sure that this arrangement is a move in the right direction", and that is signed by Mr O'Brien on behalf of the defendant company. The letter enclosed with the one I have just read was in these terms: "Dear Sirs, We acknowledge receipt of your letter of the 30th ultimo with reference to the employment of our respective employees. We welcome this suggestion, from which it is understood that your company and our own will refrain from engaging any person or persons who have been in the employ of either firm during the previous period of five years. As such an arrangement has our fullest support, we hereby agree to the terms of your letter of the above date. We are sure that this arrangement will prove to be of mutual benefit, and we shall be happy at any time to consider other proposals which have for their objects similar safeguards", and that was signed by Mr O'Brien as managing director of the defendant company.

5

It will be seen that the agreement constituted by these letters was ex facie in restraint of trade in that it precluded either party from employing at time, without the written consent of the other, any person who, during the then past five years, should have been in the employment of the other.

6

The plaintiffs and the defendants are both engaged in the manufacture of carbon papers, typewriter ribbons and similar products, and the preent dispute arose out of the threatened or intended employment by the defendants of Mr Hugh Anthony O'Neill, who from the year 1948 onwards had been in the service of the plaintiffs as a chemist in their research and under a contract of service terminable by three months notice. In March 1957 Mr O'Neill gave notice to the plaintiffs to terminate his employment with them on the 30th June of that year. He gave this notice with a view to entering the employment of the defendants, with whom he was already in negotiation; and on the development branch 4th April 1947 the defendants applied to the plaintiffs for information as to his character and ability. The plaintiffs objected to the proposed employment of Mr O'Neill by the defendants as being in breach of the agreement of 1954, but the defendants persisted in their intention to employ him, contending that the letters relied on as constituting the agreement of 1934 were not of contractual effect, and that, oven if they were of contractual effect, the agreement so constituted had been abandoned by mutual consent, and was in any case void as contrary to public policy.

7

In these circumstances, the plaintiffs issued their writ on the 3rd May 1957, and later in that month moved the court for injunction to restrain the defendants from employing Mr O'Neill. On this application, an order dated the 28th May 1957 was made by Mr Justice Danckwerts with the consent of the parties, the effect of which was to provide for the action to be tried without pleadings on the issues formulated in the schedule to the order; "The plaintiffs and the defendants by their counsel stating that they have agreed that the issues between them in this action… are those formulated in the schedule hereto and that those are the only Issued between them in this action". The issues scheduled to the order were these; "(1) Whether (as the plaintiffs contend and the defendants deny) the letters mentioned in the endorsement on the writ of summons were of contractual effect. (2) If the answer to (l) be Yes, whether (as the defendants contend and the plaintiffs deny) such contract was and is void as being in unreasonable restraint of trade and contrary to public policy. (3) If the answer to (2) be No, whether (as the defendants contend and the plaintiffs deny) such contract was terminated by the tacit mutual consent of the plaintiffs and the defendants in or about 1941 or alternatively in or about June 1955. (4) If the answer to (3) be No, whether (as the defendants contend and the plaintiffs deny) such contract contains an implied term that the same is terminable by reasonable notice given by either party to the other and that six months notice is reasonable".

8

It is not now disputed that the letters constituting the agreement of 1934 were of contractual effect, and that the agreement of 1934 was void as being in unreasonable restraint of trade, and contrary to public policy; while on the fourth issue he held that the agreement of 1934 did contain an implied term making it terminable by reasonable notice by either party, but that the reasonable period to be allowed was twelve moths, and not six months as claimed by the defendants. N conformity wit his finding to the effect that the agreement of 1934 was void as being in unreasonable restraint of trade and contrary to public policy, the learned restraint of trade and contrary to public policy, the learned Judge by his order dated the 26th July 1957 dismissed the action with costs, and from that order the plaintiffs now appeal to this court.

9

As to the fourth issue - that is to say, the terminability of the agreement of 1934 by reasonable notice - both parties accept the view that it was so terminable, and that the length of notice to be regarded as reasonable must be assessed by reference to the circumstances existing at the time when any purported notice of determination is given or proposed. The plaintiffs further accept the learned judge's assessment of twelve months as the reasonable period of notice. On the other hand, the defendants, who have in fact given (or purported to give) six months notice which expired on the 24th November 1957 to terminate the agreement on that date, adhere to the contention raised by them on the fourth issue to the effect that the reasonable period of notice was and is no more than six months. Accordingly, the defendants served a respondents' notice of their intention to contend, in the event of the appeal being allowed, that the learned Judge ought to have held six months notice to be reasonable for the purpose of determining the agreement of 1934.

10

If the point was before us for decision, we would, as at present advised, have some difficulty in collecting from the terns of the 1934 agreement any implication of an intention that it should be terminable by reasonable notice. The agreement expressly imposes an obligation on either party not to employ at any time any person who, during the then past five years, shall have been a servant of the other, the then past five years clearly meaning the period of five years immediately preceding the date on which the question of engaging the person concerned comes under...

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