Leonard Coppage (1) v Freedom Security Ltd (2) and Another
| Jurisdiction | England & Wales |
| Judge | Sir Bernard Rix,Sir Stanley Burnton,Lord Justice Ryder |
| Judgment Date | 11 October 2013 |
| Neutral Citation | [2013] EWCA Civ 1176 |
| Docket Number | Case No: A3/2012/2273 |
| Court | Court of Appeal (Civil Division) |
| Date | 11 October 2013 |
and
[2013] EWCA Civ 1176
Lord Justice Ryder
Sir Bernard Rix
and
Sir Stanley Burnton
Case No: A3/2012/2273
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM Birmingham District Registry
HHJ Simon Brown QC
2BM40032
Royal Courts of Justice
Strand, London, WC2A 2LL
Richard O'Dair (instructed by Mayflower Solicitors) for the Appellants
Mark Anderson QC with Ms Yasmin Yasseri (instructed by Cox Cooper Solicitors) for the Respondent
Hearing date: 5 March 2013
Approved Judgment
On 9 July 2008 Leonard Coppage, the first defendant in this litigation and in this court the first appellant, joined the claimant, here the respondent, Safetynet Security Limited ("Safetynet), a security company employing security guards and door supervisors in the Birmingham area. Its sole shareholder and chief executive is Mr Otis Hanley. Mr Coppage's role in Safetynet immediately on joining the company is not clear but he became a director of it on 5 May 2010 with the title of business development director and entered into a new contract of employment at that time (the "contract").
The contract contained a restrictive covenant in the following terms:
"It is a condition of your employment, that for a period of six months immediately following termination of your employment for any reason whatsoever, you will not, whether directly or indirectly as principal, agent, employee, director, partner or otherwise howsoever approach any individual or organisation who has during your period of employment been a customer of ours, if the purpose of such an approach is to solicit business which could have been undertaken by us."
The principal issue in this appeal is whether that covenant is binding on Mr Coppage, as the judge found, or, as Mr Coppage submits, is unenforceable as being in unreasonable restraint of trade. It appears that the clause was present in Mr Coppage's contract of employment at all times. There are also issues concerning breach of fiduciary duty, and quantum. The judgment in question on this appeal is that of HH Judge Simon Brown QC dated 15 August 2012, sitting in the Birmingham mercantile court.
In his defence, Mr Coppage described himself as "a key figure in [Safetynet's] business operation being the main person who was able to and did bring and retain new business". Although the judge plainly regarded Mr Coppage as a highly unsatisfactory witness, he nevertheless accepted this description of his role in the company, which does not appear to have been disputed. In an affidavit Mr Coppage described himself as employed "to be the face of the business". The judge recorded that in a witness statement Mr Coppage had boasted that at least one fifth of Safetynet's client base and income was as a result of his "pizzazz".
Whatever the substance of this boast, on 14 April 2012 Mr Hanley began a redundancy consultation with Mr Coppage. Mr Hanley considered that there was no need to employ a business development director and planned to take more of this function back to himself. At trial Mr Coppage counterclaimed for repudiatory breach of his employment contract on the basis that the redundancy exercise was a sham. However, the judge found that this was not so and rejected the counterclaim. Together with the other findings at trial, that is no longer in issue.
In the event, Mr Coppage resigned by email on 16 April 2012. What happened immediately thereafter was the catalyst for this litigation. An hour later, Mr Joshua Hadley, a 21 year old trainee electrician and part-time door supervisor, who had also been employed by Safetynet, resigned. On 17 April, it was Mr Hadley who incorporated the second defendant, Freedom Security Solutions Limited, ("Freedom"), here the second appellant. However, the judge found in effect that Mr Hadley was the mere face of Mr Coppage's enterprise and that it had been Mr Coppage who had been the directing mind of Freedom from its incorporation, even though he formally became its director only on 30 April 2012. Indeed, disclosure of telephone records revealed that there were 62 calls from Mr Coppage to Mr Hadley between 12 and 30 April, and 84 text messages in the same direction in the month of April. The judge therefore held that Freedom was liable alongside Mr Coppage for the breaches of Mr Coppage's restrictive covenant which he found had taken place in the immediate aftermath of Mr Coppage's resignation.
The details of those breaches are as follows. On 18 April, two days after Mr Coppage's resignation and the day immediately after the incorporation of Freedom, two Safetynet customers, Lab 11 and Prince Albert, sent emails to Mr Hanley terminating their contracts. On 21 April, a third customer, Qclub, did the same. And on 30 April, two more, Fixxion Warehouse and Rainbow, followed suit, openly stating that they were moving to Freedom. At trial there were substantial issues as to whether this had occurred because Mr Coppage had solicited the custom of these five former customers of Safetynet or had simply occurred because of dissatisfaction with Safetynet. In a substantial central passage of his judgment, the judge set out his reasons for rejecting as false the defence evidence that there had been no solicitation by Mr Coppage. Disclosure of telephone records in the course of the litigation, after the defendants had committed themselves to false denials of any contact between Mr Coppage and the five Safetynet customers, was very damaging and led the judge, among other reasons, to the conclusion that Mr Coppage had deliberately sought to mislead the court. There had in fact been 135 calls and 175 texts from Mr Coppage to the five customers between 12 and 30 April 2012. All five had become customers of Freedom. They had given evidence to the judge in support of the defence, but the judge accepted none of that evidence. The judge found:
"43. Contrary to suggestions in their affidavits, there is no documentary evidence that any of the five customers were dissatisfied with the service that the Claimant was providing prior to 16 April 2012. Of the five customers who left, four were relatively new customers, but one, Rainbow, had been a customer of the Claimant since April 2008. In the face of the wilful inaccuracy of the affidavits, the customers' evidence that their reason for terminating their relationship with the Claimant was not by reason of solicitation is rejected…
48. I disbelieve each of the Defendants' witnesses that solicitation did not occur. I find them to be lying and acting under the control of Mr Coppage. But for the solicitation, in my judgment, the customers would have continued in their working relationship with the Claimant being bound by their contracts until a period of notice had expired as they had no complaints about Safetynet the company, just about Mr [Hanley] personally."
Safetynet's claim was premised on a breach of the non-solicitation clause in Mr Coppage's contract and/or on breach of fiduciary duty. The judge found each of those claims to have been satisfied. He went on the find damages of at least £50,000 proved. On this appeal, while unable to challenge the judge's findings of fact, the appellants raise three grounds of appeal. First, they submit that the non-solicitation clause was unreasonable because it ought to have been restricted to the non-solicitation of current customers, viz customers "within 6 or perhaps 12 months of the termination of the contract". It is suggested that only the interpolation of words such as "the last 12 months of" into the clause in question, so that it reads "you will not…approach any…organization which has during the last 12 months of your period of employment been a customer of ours" could save the clause from unreasonableness and invalidity. It is submitted that because the clause could have been so drafted, therefore it ought to be held to be unreasonable as affording the employer greater protection than was necessary. Secondly, they submit that the parties had joined issue for the purposes of the breach of fiduciary duty claim on post-termination events and that the law stigmatises only some breach of fiduciary duty which is at least initiated before that duty terminates with resignation. Thirdly, as to quantum, they submitted that the judge had no basis on which he could have found a loss of £50,000.
Ground 1: the validity of the non-solicitation clause
The law relating to restrictive covenants in the employment context was not in dispute, although at trial and again on appeal the parties were able to point to different aspects of the jurisprudence in support of their respective cases. I take the following general principles from the discussion of the subject to be found in Chitty on Contracts, 31 st ed, at paras 16–105ff and in the jurisprudence there cited. (i) Post-termination restraints are enforceable, if reasonable, but covenants in employment contracts are viewed more jealously than in other more commercial contracts, such as those between a seller and a buyer. (ii) It is for the employer to show that a restraint is reasonable in the interests of the parties and in particular that it is designed for the protection of some proprietary interest of the employer for which the restraint is reasonably necessary. (iii) Customer lists and other such information about customers fall within such proprietary interests. (iv) Non-solicitation clauses are therefore more favourably looked upon than non-competition clauses, for an employer is not entitled to protect himself...
To continue reading
Request your trial
-
Adorn Spa Ltd v Amjad
...were helpfully and accurately summarised by Sir Bernard Rix in his judgment in the case of Coppage & Anor v Safety Net Security Ltd [2013] EWCA Civ 1176, [2013] IRLR 970 (QB) at paragraph 15. Sir Bernard Rix stated the principles as follows: "(i) Post-termination restraints are enforceable......
-
East England Schools CIC (trading as 4Myschools) v Luci Palmer and Another
...3 Emphasis in the original. 4 Emphasis in the original. 5 See Chitty on Contracts (31st ed) para 1–113. 6 (31 st ed) para 16–076. 7 [2013] EWCA Civ 1176 ; [2013] IRLR 970, at 8 [1985] 1 Lloyd's Rep 1 at 57. See, to similar effect, the passage from Lord Bingham's essay The Judge as Juror: ......
-
P14 Medical Ltd v Edward Mahon
...part of a restrictive covenant: Egon Zehnder v Tillman [2019] UKSC 32; [2020] AC 154. 58 In Coppage v Freedom Security Limited [2013] EWCA Civ 1176, at paragraph 9, the Court of Appeal said: “(i) Post-termination restraints are enforceable, if reasonable, but covenants in employment cont......
-
Harcus Sinclair LLP and another v Your Lawyers Ltd
... ... LLP [2009] EWHC 1952 (Ch) ; [ 2010 ] 2 All ER 955 Coppage v Safety Net Security Ltd [2013] EWCA Civ 1176 ; [ 2013 ] IRLR 970 , ... (Stourport) Ltd [ 1968 ] AC 269 favouring a pre-existing freedom test was departed from in favour of applying a trading society test. 45 ... ...