When Mr Penfold started employment with Decorus in 2012, his contract of employment contained a post termination restriction preventing him from soliciting or dealing with customers.
In 2013 the company decided to carry out a "three phase review" of all employees, in which each employee would have an appraisal, milestones would be agreed and signed off and finally an updated contract would be prepared. Following his appraisal in mid-April, Mr Penfold was given a pay increase and a few days later was given a new contract to sign. This included more detailed restrictive covenants than appeared in the original employment contract. He eventually signed and returned the new contract on 31 May.
Mr Penfold resigned in early 2016, having incorporated a company through which he intended to compete with Decorus. He argued that he was bound by the 2012 covenants, not those in the 2013 contract, because he had not received consideration for the new restrictions. In the absence of consideration, the company could not rely on the covenants. His pay rise was awarded before the new contract was issued, so could not be consideration for restrictions that he had not at that stage agreed to.
The High Court disagreed. The new contract had been issued to the employee as part of a three stage process. Mr Penfold had an appraisal when he had not had one previously and received a salary increase immediately afterwards; a salary review under the old contract would not have been due for eight months. He was then asked to sign the new contract and his manager gave evidence that his employment would have been terminated had he refused to sign. Taken together, the appraisal, pay rise and continued employment amounted to consideration for the new restrictions, which the company was entitled to enforce.