Beckett Investment Management Group Ltd and others v Hall and others
(Court of Appeal)
Mr Hall was a registered independent financial adviser and sales director of Beckett Investment Management. His employment contract with Beckett Investment Management contained post termination restrictive covenants which included a 12 month non dealing clause in the financial services sector.
Beckett Investment Management appealed against the decision that Mr Hall had not been in breach of contract by his involvement with a competitor business after leaving his employment. This finding had been reached by taking a narrow view of the definition of “the Company” as provided in the contract of employment by holding that “the Company” only referred to Beckett Investment Management, which itself had no dealings with clients, provided no direct financial advice and was the holding company of the group.
The Court of Appeal rejected the literal interpretation that words referring to the protection of “the Company” does not include protection with regard to clients of subsidiary companies in a large group. The Court of Appeal said that the only sensible construction of the clause was a wider one which enabled it to apply to advice of a kind provided by one of the subsidiary companies. Mr Hall had been employed in the group for sometime and was familiar with the structure of the group and well aware of the respective roles of the employer and the subsidiary companies. Therefore, there was no need to find a construction which deprived a covenant of all practical utility because all parties were familiar with the background to and aim of the clause. It was inappropriate to be inhibited by considerations of corporate personality. The Court of Appeal confirmed that the law will recognise the reality of big business and not take a “purest approach to corporate personality” which leads to a “futile result”.
The Court of Appeal also looked at the period for which the restrictive covenant was to be in force and stated that the mere fact that a period is arbitrary (such as a 12 month period) does not prevent a clause being enforceable, since any fixed duration bears an element of arbitrariness.