M & S Drapers (A Firm) v Reynolds
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE HODSON,LORD JUSTICE MORRIS,LORD JUSTICE DENNING |
| Judgment Date | 08 November 1956 |
| Judgment citation (vLex) | [1956] EWCA Civ J1108-1 |
| Court | Court of Appeal |
| Date | 08 November 1956 |
[1956] EWCA Civ J1108-1
In The Supreme Court of Judicature
Court of Appeal
Lord Justice Denning
Lord Justice Hodson and
Lord Justice Morris
Mr. PETER FOSTER (instructed by Messrs. Smith & Hudson, Agents for Messrs. Waller & Houseman, Newcastle-upon-Tyne) appeared on behalf of the Appellant Plaintiffs.
Mr. R.J. PARKER (instructed by Messrs. Doyle, Devonshire & Co., Agents for Mr. T.H. Campbell Wardley) appeared on behalf of the Respondent Defendant.
LORD JUSTICE DENNING; I will ask Lord Justice Hodson to give the first judgment.
The Defendant was first employed by the Plaintiffs as a collector and salesman in March 1953 without any formal agreement. When he Joined the Plaintiffs he had a connection with customers presumably of other employers, having at the time of the hearing been in the credit drapery trade for five or six years in all; and the Plaintiffs benefited from that connection in that persona who composed it became customers of the Plaintiffs when the Defendant joined the firm.
On the 11th August, 1955, the parties entered into a written agreement determinable at two weeks notice on either side, providing for a weekly wage of £10 to be paid to the Defendant. On the 17th May, 1956, he left the employment of the Plaintiffs.
Clause 8 of the agreement provided: "For a period of 5 years following the determination of this agreement the servant shall not directly or indirectly either by himself or as the agent servant or partner of another person or company sell or canvas or solicit orders and in either case by way of the business of a credit draper from any person whose name shall have been inscribed upon the books of the firm as a customer during the three years Immediately preceding such determination upon whom the servant has called in the course of his duties for the firm"–.
Since he left the employment of the Plaintiffs the Defendant sold goods to persons whose names were on the books of the Plaintiffs as customers during the three years before he left their employment by way of the business of a credit draper. The Plaintiffs seek to enforce the covenant against him. The Plaintiffs as covenantees accepted the proposition that prima face the covenant was void and unenforceable unless they could establish that the restraint was reasonable.
The County Court Judge held that although it might be that the Plaintiffs had acme proprietary rights is their lists of customers, a restriction for as long as give years for a men in the position of the Defendant, earning a modest wage and liable to be dismissed on two weeks notice was quite unreasonable and gave Judgment for the Defendant.
The Plaintiffs have appealed, contending that since a proprietary right is established, the protection of which le necessary, the restriction does not necessarily become unreasonable even if it is unlimited in point of time and the notice is short. They maintain, correctly, that they had a legitimate interest to protect and were entitled to take steps to prevent their existing customers from being interfered with or being enticed away.
So far as the question of shortness of notice is concerned, it appears that although the position of the employee has to be considered, the Court will not enquire into the adequacy of the consideration or weigh the advantages accruing to the covenantor under the contract against the disadvantages imposed upon him by the restraint. See the observations of Lord Parker of Waddington in Herbert Morris Ld. v. Saxelby (1916 A.C.) at page 707.
On the question of time they rely mainly on the authority of ( Mills v. Dunham 1891, 1 Ch. 576), ( Dubowski & Son v. Goldstein 1896, 1 Q.B. 478) and ( Gilford Motor Co. v. Horne 1933 Ch. 935).
In the first case there was an agreement for the employment of the Defendant as a traveller providing that he was to "call upon and solicit orders" for all articles in the way of the Plaintiffs' business of antiseptic manufacturers and in the case of the determination of the agreement that he should not, either on his own account or for any employer, "call upon or directly or indirectly solicit orders from or in any way deal or transact business with" anyone who had while the agreement was inin force been a customer of the Plaintiffs. The Defendant was in breach of the agreement and it was held to be enforceable because the restriction did not go by and what was reasonable although unlimited as to time and although the employment was terminable at one week's notice on either side.
It is to be noted that Lord Justice Lindley was of opinion that the case was not cost upon the person supporting the covenant to show it was reasonable. This view is not now accepted. See Lord Parker's observations in Herbert Morris Ld, v. Saxelby (supra.)
In the second case a similar covenant was held valid in the case of a milk roundsman.
Those authorities, prior to 1913, as Lord Justice Atkin sad Lord Justice Younger pointed out in ( Atwood v. Lamont 1920, 9 K.B. 571) must be read in the light of the recent decisions of the House of Lords in ( Mason v. Provident Clothing & Supply Co. 1913 A.C. 724) and Morris v. Saxebly (Supra).
Since those decisions it has been recognised that as the time of the restriction lengthens and the space of its operation extends, the weight of the case upon the covenantees grows. See per Lord Shaw in Morris v. Saxelby at page 715. In Mason's Case at page 743 Lord Moulton described the position of a local canvasser and debt collector such as that of the Defendant in this case. He said: "It would be reasonable for the employer to protect himself against the danger of his former servant canvassing or collecting for a rival firm is the district in which he had been employed. If he were permitted to do so before the expiry of a reasonably long interval he would be in a position to give to his now employer all the advantages of that personal knowledge of the inhabitants of the locality, and more especially of his former customers, which he had acquired in the service of the respondents and at their expense. Against such a contingency themaster might reasonably protect himself but I can see no other protection which he could possibly demand."
Those observations of Lord Moulton apply, I think, to this case and show that the time of the restriction ought to be taken into account is considering whether or not it is reasonable. In this case there is the added circumstance which has to be taken into account, namely, that a large proportion of the customers covered by the covenant were in fact composed of persona who had formed the connection of the Defendant before he entered the service of the Plaintiffs.
The third case, strongly relied upon by the Plaintiffs, especially as it is a decision of this Court given since the two House of Lords cases above mentioned were decided, is ( Gilford Motor Co. v. Horne 1933 Ch. 935). This case concerns a covenant in restraint of trade between a company which bought parts of motor vehicle from manufacturers, assembled the parts on the company's premises and sold the products under the name of Gilford Motor Vehicles. They also sold separate parts for cash. By agreement dated the 30th May, 1929, the defendant was appointed Managing Director for 6 years from September let, 1928. Clause 9 of the agreement provided that: "The managing director shall not at any time while he shall hold the office of managing director or afterwards solicit, interfere with or endeavour to entice away from the company any person, firm or company who at any time during or at the date of the determination of the employment of the managing director were customers of or in the habit of dealing with the company."
In November 1931 the defendant's employment was terminated by an agreement providing that he was to receive a fixed sum payable in instalments. Shortly afterwards he opened a business for the sale of spare parts of Gilford vehicles. It was held by the Court of Appeal that in the circumstances the covenant wasnot wider than was reasonably necessary for the protection of the plaintiff company's trade and was therefore enforceable by injunction.
This was a covenant unlimited as to time and is an authority in favour of the Appellants, who seek to enforce a covenant against solicitation of customers which is limited to five years and therefore to that extent an a fortiori case, for the Court did not take the view that such a covenant in the case under consideration was so wide as to be unreasonable by reason of the time element. I think, however, the answer to this argument is to be found in the fact that the circumstances of that case were entirely different from those of this case.
The first task of the Court, it has been said, in these casts is to ascertain the nature of the master's business and of the servant's employment.
The managing director is not regarded in the same light as the traveller or canvasser. Each case must be considered in the light of its own circumstances, and I have come to the conclusion that, paying due regard to the decisions of the House of Lords in Mason v. Provident Clothing Co. and Morris v. Saxelby. the decision of the learned County Court Judge was right and ought to be affirmed. He considered all the circumstances of the case, recognising the proprietary right which the Plaintiffs were entitled to protect, and held that the restriction for as long as five years against dealing...
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