Whitwood Chemical Company v Hardman
| Jurisdiction | England & Wales |
| Year | 1891 |
| Date | 1891 |
| Court | Court of Appeal |
Contract of Service - Manufacturer's Manager - Agreement to give Whole Time - Absence of Negative Stipulation - Breach of Contract - Injunction - Specific Performance.
The manager of a manufacturing company agreed to give during a specified term “the whole of his time to the company's business”:—
Held (reversing the decision of Kekewich, J.), that (whatever other remedies the company might have), in the absence of any negative stipulation in that behalf, they were not entitled to an injunction to restrain the manager from giving, during the term, part of his time to a rival company.
Lumley v. WagnerF1 discussed.
APPEAL from Mr. Justice Kekewich.
By an agreement, dated the 25th of September, 1885, between the Plaintiffs and the Defendant, it was provided that the Defendant, a manufacturing chemist, should be the manager of the Plaintiffs' works at Normanton for five years, at a salary of £300 per annum, with a commission of 7½ per cent. on the dividends; and it was further provided that the Defendant should give due diligence to the performance of his duties, conduct himself with propriety, and conform to the reasonable requirements of the board of directors. The agreement contained no provision as to exclusive service or in restriction of the Defendant's employment at the end of the term.
By an agreement, dated the 24th of July, 1889, it was agreed that the Defendant should be manager for the remainder of an extended term of ten years from September, 1885, at the same salary and with the same commission. This agreement contained the following clause: “The said manager shall give the whole of his time to the company's business, he shall give due diligence to the performance of his duties, and shall conform to the reasonable requirements of the board of directors, and he shall reside within two miles from the company's said works.” The agreement contained no negative contract by the Defendant.
The Plaintiffs were incorporated in 1883 for the purpose of working a license, dated the 25th of September, 1885, from Hardman's Patent Carbonization Process Company, Limited, under letters patent for improvements in the carbonization of coal and coal shale, and in the treatment of coal gas for obtaining benzole, solvent naphtha and other products. Hardman, the patentee, was the Defendant's brother.
The license granted an exclusive right to work the patent within an area of ten miles from the company's works at Normanton.
One of the directors of the Plaintiff company stated in an affidavit that it had recently come to the knowledge of the company that the Defendant was in communication with a firm of colliery proprietors, whose colliery was distant about a mile from the company's works, with a view to setting up a rival establishment at or near the colliery for carbonizing coal, in which the Defendant was to invest a large sum as capital, and to be a director.
It was proved that the Defendant had written to one of the directors that it was practically impossible for him to work any longer with the company, and that for the benefit of both parties it would be advisable that the agreement should be cancelled, and that he was willing to leave at once, or at a month, or at the end of the half-year terminating on the 31st of March, 1891; and also that he had written to another of the directors that he had “decided to instruct a new company” about to be formed for carbonizing coal, and likewise to assume the position of a director, and take up one-third of the capital thereof.
It was alleged that the Defendant had had special opportunities of mastering all the details of the patent processes and their successful application, both in the service of the patentee himself, and in that of the Plaintiff company, and by the use of their property and resources.
The Defendant admitted that he had been actively engaged in forming a company to work the proposed new business, but stated that the Plaintiffs' process was widely known, and that he himself had gained his own skill, knowledge, and experience while with his brother, the patentee; and that he had learned nothing whatever whilst with the Plaintiffs regarding the patent, and the working thereof, which he did not know before.
The Plaintiffs brought this action, and claimed an injunction to restrain the Defendant from setting up any business, or entering into any agreement, or making any engagement with any person or company other than the Plaintiffs, by which the whole of the Defendant's time would cease to be devoted to the business of the Plaintiffs, or by which the Defendant would be prevented from carrying out the agreement of the 24th of July, 1889, and in particular from assisting in the formation of, and from becoming a director, manager, or agent of any company or partnership then or thereafter to be formed for the purpose of carrying on a similar business and manufacture to those carried on by the Plaintiffs during the residue of the term specified in the agreement. The Plaintiffs then moved for an injunction in the terms of their claim until the hearing of the action or further order. The motion was heard before Mr. Justice Kekewich on the 6th of February, 1891.
Warmington, Q.C., and Dibdin, for the Plaintiffs, contended that the Defendant would, by assisting in carrying on the business of the new company, be committing a direct breach of his covenant to devote the whole of his time to the business of the Plaintiffs. They referred to Wolverhampton and Walsall Railway Company v. London and North Western Railway CompanyF3, Lumley v. WagnerF4, Montague v. FlocktonF5, and Fechter v. MontgomeryF6.
Marten, Q.C., and Archibald Brown, for the Defendant, contended that an ordinary contract for personal service such as that in the present case could not be enforced. Cases such as Lumley v. Wagner were cases of special contract and special service. They also referred to Johnson v. Shrewsbury and Birmingham Railway CompanyF7. They offered, on behalf of the Defendant, to resign his appointment as the Plaintiffs' manager.
Warmington, in reply.
KEKEWICH, J.: —
Under these two agreements of the 25th of September, 1885, and the 24th of July, 1889, read together, the Defendant is engaged and bound to serve the Plaintiffs for a period of ten years at a salary of £300 and a commission of 7½ per cent. on the profits; and he is bound during the term of his employment to give the whole of his time to the company's business.
On these two agreements, and the facts as proved by the affidavits, two questions have been raised. First, it is said on behalf of the Defendant that he is now entirely free from that engagement; that he may, if he pleases, quit the company's employment, and that, if he does, he will not be liable to an action for damages; that he is only continuing the employment for the convenience of the company, and not because he in any way desires to do so. That may turn out to be a question of some difficulty; but I am unwilling, and I think it is unnecessary, to decide it finally now, because I do not think I have before me all the materials which would be required for a final decision; and I am not prepared to say that a master may not so behave to a servant — or, to prevent misunderstanding, an employer to an employé — in such a way as to justify the employé in breaking his engagement. The employer may refuse to admit him into his works; he may decline to allow him to work when he goes there; he may treat him with an entire want of confidence; he may use such language to him as to make it impossible, as Mr. Marten said, for a man with any proper self-respect to stay there. And there may be extreme cases in which the employé would be entitled to say to his employer, “You have yourself broken the contract, and you cannot sue me.” That there may be many cases in which a jury would give merely nominal damages cannot, I think, be doubted. But I will go further. I think there may be cases in which the Court would hold that the action would not lie — that there was no question of fact to be submitted to the jury. But I am not satisfied that anything of that kind appears here. I think, if the Defendant is hereafter advised to raise that question, that must be raised in a proper way on a full investigation of the facts. I do not think the affidavits here, standing alone, disclose such a case; and, without going further, I think I should be wrong in saying that the Defendant is entitled to defeat the motion on the ground that he is either no longer the servant of the company, or is in such a position that he may determine his service to-morrow, in which case, of course, an injunction would be useless, because he has only to give the whole of his time to the company's business while he remains as manager.
The other argument is that there ought not to be any injunction to restrain the Defendant, even though he may be doing something which contravenes the covenant into which he has entered. It is common knowledge that a covenant of this kind is not enforceable, in the sense that specific performance cannot be decreed; and that proceeds, not only on cases and on law, but on common sense. It would be quite impossible to make a man work, and therefore the Court never attempts to do it. But a covenant is enforceable in another sense, namely, that so long as it has not been determined and is not immediately determinable, it can be made the ground of an action for damages; and it is therefore binding upon the party, and can be enforced in that way. And the Court of Chancery has, over and over again, in a large variety of cases, enforced a contract where it has found an exclusive term — that is to say, where the employe' has bound himself not to do that which is inconsistent with the terms of his engagement. There are...
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