In Towry EJ Ltd v Bennett and Others, the High Court has considered whether a group of financial advisers solicited clients in breach of post-termination nonsolicitation clauses contained in their contracts of employment.
Following the acquisition of their former employer by Towry, the group of financial advisers had independently taken the decision to join Raymond James Investment Services Ltd. A large number of clients followed them to Raymond James, which led to claims by Towry that the employees had persuaded those clients to transfer their investments in breach of the 12 month non-solicitation clauses. However, the financial advisers were able to show that the clients had wanted to follow them of their own volition. This reflected their previous business model of building up an individual client base in their local community through forging strong personal relationships. Their new employer had also taken sensible precautions to ensure that they did not breach their non-solicitation requirements, including paying for the advisers to have independent legal advice. A script was used during the recruitment process to ensure that each employee was aware of the restrictions imposed by the non-solicitation covenant, and every new client in the following 12 months was asked to complete a form asking how they had heard about Raymond James. The High Court concluded from the evidence that there had been no solicitation.
This decision illustrates the importance of not assuming that former employees have solicited clients without proper evidence. It also highlights that in appropriate cases, it is advisable to have nondealing as well as non-solicitation clauses to maximise protection of a client base in the event that an employee leaves to join a competitor.