Credit Suisse Asset Management Ltd. v. Armstrong and others

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Credit Suisse Asset Management Ltd. v. Armstrong and others


Court of Appeal

CA (Civ Div)



Neill, Morritt and Hutchison L.JJ.


Neill L.J.

15 May. The following judgments were read.

Credit Suisse Asset Management Ltd. ("the plaintiff") carries on business
as a
provider of investment services to both private individuals and to institutions. One
division of the plaintiff provides fund management services to private clients. The
plaintiff is a subsidiary of Credit Suisse. Until the determination of their contr
acts of
employment all 10 defendants were employees of the plaintiff working in the private
client division. The sixth defendant, Mr. Lynne, was a marketing officer. The other
defendants were fund managers. Mr. Knowles's contract terminated on 23
November
1995. The contracts of Mr. Horstead and Mr. Tripp terminated on 8
February 1996. Mr. Side's contract terminated on 21 February 1996. The contracts
of employment of the other six defendants terminated on 28 February 1996.

In the summer of 1995 the senior ma
nagement responsible for the plaintiff
sought to introduce various changes in the manner in which clients' portfolios were
supervised by fund managers. In particular, it was proposed that there should be an
increase in the amount of centralised decision
-
ma
king and that there should be
greater emphasis on the use of authorised unit trusts. The defendants were unhappy
about these and other changes and, on various dates beginning on 9 August 1995,
they gave in their notices. On giving notice the defendants wer
e almost immediately
placed on what is called garden leave. They continued to be employed by the
plaintiff but were not required to undertake any duties in regard to fund
management.

It soon became apparent that the defendants were seeking employment with
James Capel and Co. Ltd. which operates a private client fund management business
in the City which is in direct competition with the plaintiff. In these circumstances
the plaintiff thought it necessary to take steps to protect its position and to try to
e
nsure, as far as possible, that its private clients remained despite the departure of
the individual fund managers who had supervised their investments. The plaintiff
sought to rely not only on the duty of confidence owed by each of the defendants
during t
he remainder of their employment but also on the restrictive covenants
which, it was said, controlled the activities of the defendants for a period after their
contracts of employment had terminated.

The matter could not be resolved amicably and on 15 Febr
uary 1996 the plaintiff
issued a writ against the 10 defendants seeking injunctive relief and damages. The
application for an injunction came before Mr. David Steel Q.C., sitting as a deputy
judge of the Queen's Bench Division, on 20 and 21 February 1996.
In his judgment
delivered on 28 February the judge granted injunctions against the defendants. I
should refer to the terms of the order:

"It is ordered that each of the defendants be restrained for a period of
six months following the termination of his em
ployment (being the
date specified against his name in the second schedule hereto), or
trial or further order in the meantime (whichever shall be the soonest)
from directly or indirectly (and whether for himself or on behalf of
some other person) without t
he prior written consent of the board of
the plaintiff ... (i) canvassing, soliciting or approaching,
*886

any
business of a kind offered by the plaintiff at the termination of his
employment and which the employee performed for the plaintiff
during the la
st 12 months of his employment, from a client of the
plaintiff with whom that employee dealt in a material way in the
course of business on behalf of the plaintiff in that 12
-
month period
and which client was in the habit of dealing with or had transacted
business with the plaintiff in that period or at the date of the
termination of his employment was in the process of negotiating with
the plaintiff; (ii) performing any such business (which, for the
avoidance of doubt, shall include the managing of any ass
ets, funds
or accounts) for a client of the plaintiff with whom that employee
dealt in the course of business on behalf of the plaintiff in the last 12
months of his employment and which client was in the habit of
dealing with or had transacted business wi
th the plaintiff in that
period or at the date of termination of the employment was in the
process of negotiating with the plaintiff.

"Provided that: (1) the restrictions in (i) and (ii) shall not apply, in the
case of any defendant, to their own funds and

to clients to whom they
are related or to assets, funds or accounts which belong to a family
trust of which he is a trustee and a member of the family; (2) in the
case of each of the defendants, each of the restraints in (i) and (ii)
above shall apply to
a client of the plaintiff who is in the habit of
dealing with or had transacted business with the plaintiff in the last
12 months of his employment or at the date of the termination of his
employment was in the process of negotiating with the plaintiff,
as
sets, funds or accounts for which he performed services which were
of a kind offered by the plaintiff at the date of the termination of his
employment, prior to the commencement of his employment with the
plaintiff or which or whom he introduced to the pla
intiff."

The judge refused an application for leave to appeal, but leave was subsequently
given by Leggatt L.J. on 11 March 1996. The six
-
month periods specified in the
order will expire in the case of Mr. Knowles on 23 May 1996 and in the case of the
oth
er nine defendants on various dates between 8 and 28 August 1996.

I come now to the issues which arise on this appeal. The first issue concerns the
proper approach to the grant of an injunction. It is said that, as the matter cannot be
tried until after th
e expiry of the covenants, it would not be right to adopt the
conventional approach set out in
American Cyanamid Co. v. Ethicon Ltd. [1975]
A.C. 396
. It is necessary for the court to have regard to the merits: see
Lansing
Linde Ltd. v. Kerr [1991] I.C.R. 428
.

The second issue relates to the 1994 edition of the plaintiff's handbook.
It is
accepted that Mr. Mercer, the seventh defendant, is bound by the covenants in this
handbook, but it is argued on behalf of the other defendants that they are not so
bound. If the defendants other than Mr. Mercer are not bound by the 1994
covenants, i
t is necessary to consider the effect of the covenants contained in the
1992 handbook. It is accepted that these covenants formed part of the contracts of
the second, fourth, sixth, eighth and tenth defendants. It is also common ground that
*887

unless the

first, third, fifth and ninth defendants are bound by the 1994
covenants the restrictive covenants in their original contracts of employment have
no bearing on this appeal. In relation, however, to the five defendants bound by the
1992 covenants, it is sa
id that the covenants are unenforceable for two reasons.

First, it is said that the 1992 covenants purported to apply after the termination
of the employees' employment "however caused." They purported, therefore, to
apply in the event of an unlawful deter
mination of the employment by the plaintiff.
Such a provision was unreasonable and rendered the covenants unenforceable.

Secondly, it is said in summary that the 1992 covenants prohibited the
defendants from managing funds, etc., even if their contact with

the relevant clients
had been very slight. There was no provision, as there was in the 1994 covenants, to
the effect that their concern with that client had to be material. The validity of the
1992 covenants gives rise to the third main issue.

If on the o
ther hand the 1994 covenants are incorporated into the contracts of the
defendants, it is then necessary to consider whether the period of notice specified in
those covenants can be enforced on the facts of this case. The defendants ceased to
work at the p
laintiff's premises almost immediately after they sent in their letters of
resignation. They then began a period of garden leave corresponding with the
contractual term of their notice. The period of notice in the case of Mr. Knowles was
three months, in t
he case of Mr. Horstead, Mr. Mercer and Mr. Side it was six
months, and in the case of the other six defendants it was 12 months.

It is argued on behalf of the defendants that, as the post
-
termination restrictive
covenants set out in the 1994 handbook are
stated to last for a period of six months,
this period must be treated as the period which the plaintiff has itself chosen as the
length of time during which it needs protection from the activities of former
employees and during which it requires an opport
unity to rebuild a team of
investment managers. In this case, it is argued, the plaintiff has already had the
complete protection afforded by the six months of garden leave and the effect of the
judge's order is to double the period of time which the plain
tiff has itself selected.
This argument gives rise to the fourth main issue.

The fifth issue relates to the interrelation between two of the covenants set out in
the 1994 handbook. I need say no more about this issue at this stage.

I propose to deal with t
hese issues in turn.


The approach to the injunction

In most cases the proper approach to the question whether an interlocutory
injunction should be granted is that laid down in
American Cyanamid Co. v. Ethicon
Ltd. [1975] A.C. 396
. The court should not seek to form a view on the merits but
sho
uld consider whether there is a serious issue to be tried. In some cases, however,
this approach has to be modified. Thus, where it seems probable that any injunction
granted will expire before the case could come on for trial, some consideration of
the me
rits is appropriate. It is sufficient to refer to the judgment of
*888

Staughton
L.J. in
Lansing Linde Ltd. v. Kerr [1991] I.C.R. 428
, 435, where he said:

"If it will not be possible to hold a trial before the period for which
the plaintiff claims to be entitled to an injunction has expired, or

substantially expired, it seems to me that justice requires some
consideration as to whether the plaintiff would be likely to succeed at
a trial. In those circumstances it is not enough to decide merely that
there is a serious issue to be tried."

In this
case it was suggested on behalf of the plaintiff that, if immediate steps
had been taken following the judge's decision to obtain a date for the hearing, the
case might well have been heard during the present month of May. Instead the
defendants chose to a
ppeal. It is right to say, however, that Mr. Burton did not press
this matter very strongly. I am satisfied that the defendants were entitled to exercise
their right to appeal and that there must be a very serious risk that, if the injunctions
remain, they

will expire before the case can be heard. I would therefore apply the
more stringent test indicated in
Lansing Linde
.


Whether the defendants are bound by the 1994 handbook

This issue arises in the case of all the defendants other than Mr. Mercer who
signed a contract in which reference was ma
de to the handbook. On 23 May 1994
each of the defendants was sent an inter
-
office memo by Mr. P. J. Jeffery, the
plaintiff's personnel director. Attached to the memorandum was a bound staff
handbook. I should read the memorandum:

"Please find attached the

new ... staff handbook. It is largely an
update of existing terms and policies although in areas such as
compliance we have taken the opportunity to introduce new material
arising from recent legislation or rule changes. In addition, we now
have an extra
benefit within our pension scheme
--

a 'death
-
in
-
service' widows/widowers pension of one
-
third of final salary, to add
to the existing lump sum insurance of four times salary. Details are
included in the pension scheme section of the handbook. Please note
that section 10, Health and Safety at Work, is not yet issued.

"Could you please sign the section at the foot of the page
confirming
your receipt

of the handbook. The contents supersede any previous
documentation on the subjects listed and contain importan
t
contractual rights and obligations. Please try to find the time to read
the book and keep it available for future reference. From time to time
it will be updated by distribution of replacement pages or additional
sections. If you have any queries or conc
erns, please ensure that I
hear from you within one month of issue. In the absence of any such
response, you will be treated as having fully accepted the rights and
obligations as written. This process is part of our programme of
updating all contracts in
line with recent legislative change. Further
contract material relating to each individual employee will follow
later in the year."

Beneath that there was a space headed: "This confirms receipt of the ... staff
handbook," and there was room for a name to
be printed and a
*889

signature and
date to be inserted. Though there is some doubt as to whether Mr. Knowles returned
a signed copy of this memorandum, it is accepted for the purposes of the present
appeal that all nine defendants confirmed their receipt
of the handbook.

It is argued on behalf of the defendants, however, that the issue of the 1994
handbook merely represented a unilateral attempt by the plaintiff to vary the terms
of the individual defendants' contracts but there was no sufficient evidence
to show
that the defendants had accepted these variations. The argument was developed on
the following lines. (a) The memorandum itself made no reference to the restrictive
covenants nor to the fact that the 1994 covenants differed to a significant degree
from the covenants in the 1992 handbook. The memorandum stated that the new
handbook was "largely an update of existing terms and policies." (b) The
memorandum required the recipient to sign it but merely to confirm the receipt of
the handbook. (c) The thi
rd paragraph of the memorandum did no more than to
invite the recipient to "try to find time to read the book." This language was not
sufficient to introduce the variation of a written contract. (d) It was true that in the
last paragraph of the memorandum
it was stated that, in the absence of a response
within one month, the recipient would be treated as "having fully accepted the rights
and obligations as written," but it was clear law that the acceptance of a variation of
contractual terms could not be in
ferred from mere silence. (e) It followed therefore
that there was no written acceptance of the incorporation of the handbook as a
contractual document nor could such acceptance be inferred from the fact that none
of the defendants had raised any queries o
r concerns about it.

In support of this submission we were referred to a number of authorities
including
Jones v. Associated Tunnelling Co. Ltd. [1981] I.R.L.R. 477

and the
judgment of Lightman J. in
Powdrill v. Watson
(sub nom.
In re Leyland DAF Ltd.)
[1995] I.C.R. 1100
. It was further submitted that, though the applicant in the
Jones

case was a tunneller, the principle that silence was not enough applied thr
oughout all
levels of employees. In the
Leyland DAF

case senior executives were involved.

We have seen a copy of the 1994 staff handbook. It was sent to the defendants
some 14 or 15 months before the resignations began. It is a substantial publication
with an index at the front. At the foot of
the index there is a note: "The provisions of
this handbook are contractual unless otherwise described." At this stage it is not
necessary to reach any final conclusion on this issue. I have, however, studied the
wording of the memorandum and considered th
e scope of the matters which are
dealt with in the 1994 staff handbook. The defendants are men of experience and
sophistication who are used to looking at complex documents. In his judgment the
judge said: "I conclude that it is likely that the plaintiff w
ill succeed in establishing
that the defendants' contracts contained the restrictive covenants relied upon." In
reaching his conclusion the judge relied on passages in the affidavit of the fourth
defendant in which he referred to the defendant's history. I

do not attach the same
importance to these passages as did the judge, but nevertheless I am quite satisfied
that, applying the
Lansing Linde test [1991] I.C.R. 428
, there is a sufficient
likelihood that the plaintiff will succeed on this issue of incorporation of the 1994
handbook to support t
he judge's decision.


*890

The covenants in the 1992 handbook

In the view of the conclusion which I have reached on the previous issue, it is
not necessary to consider Mr. Elias's interesting arguments about the 1992
covenants. It is sufficient merely to r
ecord that the main argument was based on the
fact that the 1992 covenants purported to apply after the termination of the
employees' employment "however caused." It was submitted that the inclusion of
these words invalidated the covenants because they cou
ld apply in the event of an
unlawful termination of the employment by the employer. Reference was made to a
number of authorities including
Briggs v. Oates [1990] I.C.R. 473

and Living
Design (Home Improvements) Ltd. v. Davidson [1994] I.R.L.R. 69. I do not propose
to say any more about this is
sue.


Garden leave and the restrictive covenants

This was the principal issue to which the arguments were directed. It was also
the issue on which Leggatt L.J. gave leave to appeal. Before I turn to consider the
arguments on this issue, I should first set
out the post
-
termination covenants in
section 2 of the 1994 staff handbook. The covenants are in paragraph 6 of section 2.
I propose to read sub
-
paragraphs (a), (b), (c) and (f).

"6. Post
-
termination restrictive covenants

"(a) For a period of six months af
ter the termination of your
employment, you agree that you will not without the prior
written consent of the board directly or indirectly either on
your own account or on behalf of any person firm or company
manage any assets, funds or accounts managed by
the
company at the date of termination of your employment with
which you have been materially concerned at any time during
the 12 months prior to the termination of your employment.

"(b) For a period of six months after the termination of your
employment,
you agree that you will not without the prior
written consent of the board directly or indirectly either on
your own account or on behalf of any other person firm or
company canvass, solicit or approach any business from a
client with whom you have dealt i
n a material way in the
course of business at any time during the 12 months prior to
termination of your employment. For the purposes of this and
the following paragraph 'client' means any person, firm or
company who is in the habit of dealing or has trans
acted
business with the company at any time within the 12 months
prior to the date of termination of your employment, or at the
date of termination was in the process of negotiating with the
company; and 'business' means business or services of a kind
offe
red by the company at the date of termination of your
employment which you have performed during the 12 months
prior to the termination of your employment.

"(c) For a period of six months after the termination of your
employment, you agree that you will no
t without the prior
written consent of the board directly or indirectly either on
your own account or on behalf of any other person firm or
company perform any business for a client with whom you
have dealt in the course of
*891

business at any time during

the 12 months prior to the termination of your employment ...

"(f) The covenants in clauses (a), (b), and (c) above shall not
apply to your own funds or to clients to whom you are
personally related or to assets, funds or accounts which
belong to a family

trust of which you are a trustee and a
member of that family."

The argument on behalf of the defendants can be stated quite shortly. It was
apparent from the terms of the restrictive covenants that the plaintiff had selected six
months as the period for w
hich it required protection. In the present case because of
the garden leave the protection for which the restrictive covenants were designed
would in effect extend for a period of 12 months from the date when the defendants
ceased working at the plaintiff
's premises. The protection given during the period of
garden leave was greater but clearly comprehended all the activities set out in
paragraph 6(a), (b) and (c). The law relating to restraint of trade raised questions of
public policy. Thus, it was said,

an employer should not be given any protection
beyond that which was necessary in the circumstances. It was by that criterion that
the validity of restrictive covenants was determined. The nature of the protection
which the plaintiff needed had been state
d in the restrictive covenants. The
defendants did not, certainly at this stage, seek to challenge the reasonableness of
the six months. But, in considering whether the restrictive covenants should be
enforced, regard had to be given to the period of even
wider protection which the
plaintiff had achieved during the garden leave. Counsel suggested various ways in
which credit could be given for the garden leave which, except in the case of Mr.
Knowles, had extended for six months.

It is a normal rule of prac
tice that a court will not enforce a contract of
employment, either by way of specific performance or by the granting of an
injunction that would have a similar effect. In the ordinary way therefore an
employee who has been wrongfully dismissed will have t
o accept the repudiation
and sue the employer for damages. The courts have come to recognise, however,
that there may be cases where either the employer, or more rarely the employee, is
entitled to refuse to accept a repudiation. The circumstances in which

an employer
may refuse to accept the repudiation of his contract by an employee were considered
in detail by Sir Robert Megarry V.
-
C. in
Thomas Marshall (Exports) Ltd. v. Guinle
[1978] I.C.R. 905
. In recent years the ability of an employer to refuse to accept a
repudiation has led to a number
of developments. Moreover, uncertainty as to the
enforceability of restrictive covenants has influenced the introduction of what have
come to be known as "garden leave clauses." The 1994 handbook itself has such a
clause which is included in paragraph 8 of

section 2 under the heading "Termination
of employment." The clause is in these terms:

"(g) the company shall have the right during the period of
notice or any part thereof to assign you to any other duties or
to change your duties to the performance of c
onsulting
services as and when requested by the company, or to place
you on leave, in either case paying the basic salary and
benefits (excluding bonus or commission) due to you."

*892

It is the words "to place you on leave" which are relevant. By means o
f such a
clause employers are able to obtain protection from competition by people who wish
to leave their employment but who may have confidential information or important
contacts with customers or clients which the employer wishes to terminate before
th
e end of the period of notice. I understand that these clauses may be included in
addition to or in substitution for restrictive covenants. In the present case paragraph
8(g) is in addition to paragraph 6(a), (b) and (c).

The court's reaction to these clau
ses has been more flexible than in the case of
restrictive covenants. In the case of restrictive covenants it is the practice for the
court to consider first whether the covenant, which has to be tested at the date when
the contract of employment came into

existence, is valid. If it is found to be valid
and there is no other reason, such as the adequacy of the remedy in damages, to
impede its enforcement it will be enforced according to its terms. The doctrine of
severance allows for some modification of th
e original terms of covenant but only so
as to exclude that which is too wide. The valid part of the covenant will be enforced
and, as far as I am aware, the courts have not rewritten a restrictive covenant so as to
enforce it for a lesser period or for a
smaller area than that which the parties have
purported to agree. A different approach, however, has been adopted in the case of
garden leave clauses which, it is recognised, are open to abuse. It will be convenient
to refer first to the judgment of Dillon

L.J. in
Provident Financial Group Plc.
v.
Hayward [1989] I.C.R. 160
, 165:

"The practice of long periods of 'garden leave' is obviously capable of
abuse. It is a weapon in the hands of employers to ensure that an
ambitious and able executive will not give notice if he is going to be
unable to w
ork at all for anyone for a long period of notice. Any
executive who gives notice and leaves his employment is very likely
to take fresh employment with someone in the same line of business
not through any desire to act unfairly or to cheat the former empl
oyer
but to get the best advantage of his own personal expertise. It is well
established that the court will not specifically enforce a contract of
personal service between an employer and his employee. Therefore,
it has been held that the court will not g
rant an injunction in very
wide terms following the wording of a clause in a contract of
employment, which would prevent the employee working for
anybody else at all, if the effect of granting such an injunction would
be to compel him to go back to work fo
r his previous employer."

Dillon L.J. then referred to cases which had established this principle. But he
continued, at pp. 165
-
166:

"Those were all cases, however, in which no pay was being offered
by the employer to the employee while the employee was a
way from
the employer's business. The notion was that, without pay and
injuncted from obtaining any work, the employee would be left to
starve and the court could not force him back to work as the only
alternative to starvation because that would be tantam
ount to
specifically enforcing the contract of employment. Here there is no
question whatever of
*893

the defendant starving because he is
offered his full pay and allowances up to the termination date of his
contract."

Dillon L.J. then considered an argu
ment put forward on behalf of the employer that
the court could not enforce by injunction only a modified form of the ordinary
obligation on a employee to devote the whole time to the employer's business.
Dillon L.J. continued, at p. 167:

"[counsel] persis
ts that the negative term that is actually enforced
must be expressed in the agreement; it is not possible to have a wide
term in the agreement which the court will whittle down so as to
enforce as much of it as the court thinks right. Of course that is
co
rrect where you have in the service agreement a contract
restraining the employee after termination of his agreement from
operating in a particular line of activity within the specified
geographical area or over a period of restriction. If it is held that
the
area that has been chosen by the employer or the period of restriction
are too wide or too long, the court will reject the whole clause as void
and will not enforce whatever maximum shorter or smaller field of
restriction the court thinks would have be
en permissible if the parties
had made such an agreement. But that, as I see it, is not this case. The
negative clause here not to work for anyone else during the term of a
contract of service is a common form of clause which has often been
held to be vali
d. The question is whether it should be enforced in
particular circumstances by injunction. The lesser form of relief
suggested, not to work during the continuance of the service
agreement for specified rivals or rivals generally, if there were no
express
contract not to do so in the service agreement, could still be
restrained as a breach of the employee's obligation of good faith ..."

In the result the Court of Appeal concluded that the court could limit the
protection given during the period of notice. I
n the words of Taylor L.J., at p. 170:
"the court has power to grant an injunction and, if necessary, to narrow the scope of
the contractual embargo." A little earlier, Dillon L.J. at p. 168, had drawn attention
to the fact that the employee had a concern
to work and a concern to exercise his
skills. Dillon L.J. continued, at p. 168D:

"That has been recognised in some circumstances concerned with
artists and singers who depend on publicity, but it applies equally, I
apprehend, to skilled workmen and even to

chartered accountants."

We were also referred to other cases in which injunctive relief, either under a
garden clause or at common law, has been granted for lesser periods than the period
of notice. It seems clear that the court has a wide discretion both

as to the period of
the injunction and as to its scope.

It was argued on behalf of the plaintiff in the present case that there was no
relationship at all between a garden clause and a restrictive covenant. It would have
been open to the defendants to try

to limit the period during which the garden clause
applied. Indeed, in the case of the defendants who were subject to a period of 12
months' notice the judge had in terms declined to enforce the garden clause for any
longer than six months. But, it was sa
id, the restrictive covenant stood on quite a
different
*894

footing. If it were valid, it should be enforced. There was no juridical
basis on which the court could allow some kind of set off against the period of
garden leave.

I am satisfied that in the p
resent state of the law Mr. Burton is correct. The court
can exercise its discretion in deciding the permissible length of garden leave but, if
the restrictive covenant is valid, the employer is entitled to have it enforced, subject
to all the usual ground
s on which an injunction may be withheld, such as delay and a
finding that damages would be an adequate remedy in the circumstances. Moreover,
it is to be remembered that the existence of a garden leave clause may be a factor to
be taken into account in de
termining the validity of a restrictive covenant as at the
date of the contract.

I would, however, add a caveat. Terms which operate in restraint of trade raise
questions of public policy. The opportunity for an individual to maintain and
exercise his skil
ls is a matter of general concern. I would therefore leave open the
possibility that in an exceptional case where a long period of garden leave had
already elapsed, perhaps substantially in excess of a year, without any curtailment
by the court, the court
would decline to grant any further protection based on a
restrictive covenant. But that is not this case.

It is clear from the judge's judgment that he concluded that
some

protection for
12 months was appropriate, except in the case of Mr. Knowles. I shoul
d read the
judge's conclusion. He said:

"As regards garden leave, I have started from the position that prima
facie employees of the status and earning power of the defendants
given the nature of the industry in which they are employed should
be held to th
e terms of their contract. However, other considerations
have led me to conclude that, even at this interlocutory stage, it
would not be appropriate to grant an injunction enforcing the balance
of garden leave. I reach this conclusion with as much reluctan
ce as
that conveyed by Holland J. in
G.F
.I. Group Incorporated v.
Eaglestone [1994] I.R.L.R. 119
. The impact of Big Bang and the
subsequent recession has no doubt increased the need for financial
institutions to look at the contractual terms to enforce loyalty. Of
course employees such as the d
efendants are very close to the client
but institutions such as the plaintiff invest very large sums by way of
back
-
up quite apart from paying good salaries. I see no reason why in
appropriate circumstances a 12
-
month garden leave period is not
appropriate
.

"But here, trying to form some view of the likely outcome at trial, I
was impressed by the argument that the plaintiff has a long way to go
to establish that another six months garden leave is the minimum
time reasonably necessary to protect their inter
ests. I recognise the
temptations of employers to exaggerate the need for protection. My
doubts as to the need for a further six months free of all competition
from the defendants is reinforced by the terms of the restrictive
covenants. As indicated, my pr
ovisional view is that the plaintiff is
likely to succeed on the issues relating to the restrictive covenants,
i.e., that they form part of the employment contracts and are
enforceable as from the end of garden leave. (I should add in
*895

parentheses that

the plaintiff accepts that, in the event it is unable to
enforce the garden leave provisions, it will be forced to accept the
defendants' repudiatory breach and thus terminate the employment
contracts.) This protection goes a long way to deal with the pla
intiff's
concerns. The other considerations such as enforced idleness, loss of
bonus and delay do not add much to the equation. Accordingly, I
conclude that it would not be appropriate to enforce any further
period of garden leave but that it would be appr
opriate to grant
interlocutory injunctive relief with regard to the restrictive covenants
against all the defendants (having regard to the fact that they have
operated as a group throughout)."

It seems clear that the judge considered that the complete pro
tection for 12 months
afforded by the garden clause was unnecessary but that some protection for this
period was appropriate. He therefore enforced the more limited protection in the
restrictive covenants.

I consider that on the facts of this case the judg
e was entitled to reach the
conclusion that he did. It may be that another court might have taken a different
view and have concluded that a total period of protection of six months was
sufficient. But I can see no error of principle in the judge's approac
h and I do not
consider that he was plainly wrong. I turn therefore to the last issue.


The interrelation between paragraph 6(a) and (c)

It was argued that, if the clause in paragraph 6(c) was construed in its widest
sense, the clause in paragraph 6(a) was

mere surplusage. Accordingly paragraph 6(c)
should be construed as being subject to paragraph 6(a) and as excluding any activity
which was already covered by paragraph 6(a). The resolution of this issue may
require some evidence. I am satisfied that it wo
uld not be appropriate to reach a
conclusion on it at this stage. It seems clear from the terms of the order that the
judge treated the words "performing any business" in paragraph 6(c) as including
"managing any assets, funds or accounts," but I do not co
nsider that it is necessary
to express any view about the terms of the order in this regard.

For these reasons I would dismiss the appeal.


Morritt L.J.

I agree.

Hutchison L.J.

I also agree.

Appeal dismissed with costs. Leave to appeal refused.