The High Court has implied additional words into a post termination non-compete restriction so as to produce a commercially sensible result where, on the face of it, the restriction offered the employer no protection due to a drafting error.
Prophet plc v Huggett
Mr Huggett resigned from his position as UK sales manager with Prophet Plc ("Prophet"), having accepted an alternative position with a competitor. His contract of employment contained a 12 month post termination non-compete restriction but it only prevented him from being engaged or concerned in connection with any products with which he was involved during his employment with Prophet. As he was only involved in Prophet's products during this time, read literally, the restriction gave no protection to Prophet because it would not prevent him from being involved with its competitors' products.
Prophet applied to the court for an injunction to enforce the restriction preventing him from working for a competitor until the expiration of the 12 months.
The High Court granted the injunction. The first point it had to consider was the proper interpretation of the restriction. It was clear that there had been an error in the drafting. To correct the error, the Court had to determine what a reasonable person would have understood the parties to have meant by their use of the language.
The Court found that the restriction could be corrected by adding words to the end of it so that it would read "in connection with any products in…which he/she was involved whilst employed or similar thereto". This represented (a) the minimum change necessary to produce a commercially sensible result, and (b) the probable formula which parties would employ for this purpose, given that this wording was used in the non-solicitation and non-dealing restrictions in Mr Huggett's contract.
The Court then went onto consider whether Prophet had a legitimate business interest to protect and if so, whether the restriction was a proportionate means of protecting that interest. While the Court considered that the risk of any abuse of confidential information to Prophet's detriment was "no more than modest", it nevertheless decided on balance to grant the injunction, noting in particular that it found Mr Huggett an unreliable witness and had little confidence in his assurance that he had not retained any of Prophet's confidential data or would not use it to Prophet's detriment, and the difficulty that Prophet would face in proving loss caused as a result.
This decision is a reminder of the fact-specific nature of restrictive covenant cases and the scope of the court's powers to interpret their meaning. The court will generally interpret covenants strictly against the employer who has drafted them and is seeking to enforce them. However, this case shows that the courts will still apply the normal principles of construction to correct an obvious drafting error in a clear case.
Despite the court's willingness to take a broader approach in this case, employers should still ensure that any post termination restrictions are properly and tightly drafted so as to maximise the chances of enforceability.