Littlewoods Organisation Ltd v Harris

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeTHE MASTER OF THE ROLLS,LORD JUSTICE MEGAW,LORD JUSTICE BROWNE
Judgment Date03 Aug 1977
Judgment citation (vLex)[1977] EWCA Civ J0803-1
Docket Number1977 L. No. 1222

[1977] EWCA Civ J0803-1

In The Supreme Court of Judicature

Court of Appeal

On Appeal from the High Court of Justice

Queen's Bench Division

(Mr. Justice Caulfield)

Before:

The Master of the Rolls

(Lord Denning)

Lord Justice Megaw and

Lord Justice Browne

1977 L. No. 1222
The Littlewoods Organisation Limited
Plaintiffs
(Appellants)
and
Paul Melvin Harris
Defendant
(Respondent)

MR. A. RANKIN. Q.C. and MR. J. STANNARD (instructed by Messrs. Sharpe, Pritchard & Co., Solicitors, London, agents for Messrs. Kirk & Co., Solicitors, Liverpool) appeared on behalf of the Plaintiffs (Appellants).

MR. R. YORKE, Q.C. and MR. C. GRAY (instructed by Messrs. Paisner & Co., Solicitors, London) appeared on behalf of the Defendant (Respondent).

1

THE MASTER OF THE ROLLS
2

This case is urgent. So we must give our decision straight away. There are two giants in the mail order business, Littlewoods and Great Universal Stores. They are rivals. There is a young man in the business who is of outstanding ability. He is Mr. Paul Harris. He has been employed for some time by Littlewoods. A few years back, he entered into a covenant with Littlewoods that, if he left them, he would not go to their rival, Great Universal Stores, for 12 months. That was a 12 months bar. Both he and Great Universal Scores knew this. Nevertheless Great Universal Stores seek to induce him to do that very thing - to leave Littlewoods and to start working for them straight away in spite of the 12 months bar. The question is whether this can be lawfully done or not.

3

Much depends on the nature of the mail order business. The foundation of it is a big catalogue which is produced twice a year. One is the autumn/winter catalogue. The other is the spring/summer catalogue. Each runs to about 1,000 pages. They are full of all sorts of things for sale. Pretty pictures of clothes to be worn by ladies. Also by men. Not only clothes, but carpets, chairs, lawnmowers and so forth. Everything which a householder or his family may conceivably want is pictured in the catalogue with prices: and, be it noted, payable by instalments over a period, such as 20 weeks or longer.

4

These catalogues are issued to thousands and thousands of people who are called "agents". These "agents" show the catalogue to their relatives at home or to their friends at work and persuade them to buy from the catalogue. The "agents" send the orders to the company. The company sends the goods to the agents who deliver them to the buyers: and collectthe instalments: and send the instalments to the company. On average every agent has four to five customers.

5

The business has become so large that the mail order companies have a turnover of well over 1,100 million pounds a year - coming from over 15 million purchasers. The "agents" number about 4 million. This huge business is largely in the hands of two concerns - Littlewoods and Great Universal Stores. Between them they have two-thirds of the whole mail order business in the United Kingdom. Each of them has about one third of the business. Great Universal Stores are slightly larger. They have 35.2 per cent of the trade. But Littlewoods have been creeping up. They have 30.3 per cent.

6

Now a word about Mr. Paul Harris. He was born in May 1939. So he is now 38. He went to Littlewoods in 1965 when he was 26. From that time onwards he has progressed rapidly. At first he was an assistant buyer in handbags. Within four years in 1969 he had become the buying controller in ladies fashions. At that time he bought, not only for the mail order business, but also for the ordinary retail trade which Littlewoods run though a group of chain stores. In August 1970 he was solely on the mail order side, especially concerned with ladies fashions. He worked his way up. On the 1st January, 1974-, when he was about 34, he was made divisional director of ladies' fashions at a salary of £8,500 a year. His agreement, which was in writing, gave him security for two years but was determinable thereafter at six calendar months' notice.

7

In that agreement there was the provision which comes up for consideration in this case. It is clause 8(i). It reads as follows:

8

"In the event of the determination of this Agreement forany reason whatsoever the Divisional Director shall not at any time within twelve months after such determination:- (i) Enter into a Contract of Service or other Agreement of a like nature with Great Universal Stores Ltd. or any company subsidiary thereto or "be directly or indirectly engaged concerned or interested in the trading or business of the said Great Universal Stores Ltd. or any such company aforesaid".

9

The reason for that clause is clear: Littlewoods and Great Universal Stores were rivals in business. Littlewoods feared that if Mr. Harris left them and joined Great Universal Stores he might take their trade secrets or confidential information with him. So they stipulated that he was not to join the Great Universal Stores group for 12 months after he left them. That is the 12 months' restriction. Was it valid or not? Will the courts confirm it? That is the question in this case.

10

That clause continued to apply to Mr. Harris on his various promotions. On the 1st August, 1976 he was appointed an executive director at a salary of £16,000 a year. In addition, no doubt, he received many fringe benefits. This appointment meant that he was in a very commanding and responsible position with Littlewoods. We have the structure of Littlewoods before us. It is a private company but of considerable size running both the mail order business and a retail business by means of chain stores. Mr. Harris was the executive director in change of the mail order business. He attended the board meetings and knew all the policy decisions of the company. He had a very important part to play in arranging for the catalogues which were the foundation of the whole business. He started in about August 1976 to preparethe catalogue which was to come out in the ensuing year. He collected information from many sources and got everything together. He had access to all the confidential information of the company.

11

So pleased were Littlewoods with him and so much trust did they place in him that on the 1st September, 1976 he was given a salary increase to £18,000 a year. In return he trusted them. He was happy with them and with the rewards they gave him. The increases in salary were generous and more than he expected. All goes to show a relationship of trust and confidence between him and Littlewoods.

12

Then on the 12th January, 1977 the blow fell. On the 4th January, 1977 Mr. Harris wrote to Mr. Carter, the managing director of the whole Littlewoods organisation: "I hereby tender to you my resignation from the Littlewoods Organisation. I have accepted an offer of employment from the G.U.S. group which will give me an immediate and substantial improvement in earnings, together with enhanced opportunities for further progress in the future. I hope sincerely that my motives are not misunderstood. It is my belief that pay restraint will remain in force for some time to come, and I therefore consider it my duty to my family to respond to an offer of substance. I am not prompted by any wish to harm the Littlewoods, Organisation, but am motivated by the opportunities offered by a company which has sought me out for my personal abilities. I should like to make it clear that I hold Mr. John, the board and the Organisation in the highest possible regard and respect, and I shall always be grateful to you personally for the opportunities given me. For my part I have given every effort and loyalty to the company, and Ihope I have made a worthwhile contribution to the successes of recent years".

13

That letter was a shock for Littlewoods. Mr. Carter saw Mr. Harris, It was a very trying interview for both men. Mr. Harris himself was very upset at leaving a firm which had treated him so well. On the 7th January, 1977 Mr. Carter wrote to him, saying: "I am very sorry to learn of your decision to leave the company. Your service agreement requires that you should give six calendar months notice to determine your employment. Accordingly I must accept your letter of the 4th inst. as appropriate notice terminating your appointment with effect from 4th July 1977 … I am gravely concerned by your intimation that you have accepted an offer of employment by the GUS Group of Companies. You must have overlooked Clause 8 of your Service Agreement, which expressly prohibits your accepting such employment within the period specified therein. I must ask you for your written assurance within the next ten days that you acknowledge you are bound by clause 8 of your Service Agreement and do not intend to infringe it by accepting employment with the GUS Group of Companies during the period mentioned".

14

Mr. Harris replied on the 16th January: "… I have taken my own legal advice and, as a consequence, I regret that I am unable to give you the assurance for which you ask". So there it was. On legal advice he was going to ignore the 12 months1 limitation and go to Great Universal Stores.

15

His six months notice took effect from the 4th January, 1977 to the 4th July, 1977. Littlewoods required him to work that period for them. But they took him off the mail order business because of the confidential information which thatwould give him. They put him on to the retail trade with their chain stores for those six months. During that time Littlewoods issued a writ claiming an injunction to stop him going to the Great Universal Stores for the 12 months from the 4th July, 1977 to the 4th July, 1978. An interim injunction was granted and a speedy trail ordered. The case was heard quickly by Mr. Justice Caulfield in the first days of July 1977. He gave judgment on the 7th July, 1977. He refused to grant any injunction to prevent Mr., Harris going to Great...

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