Our website is set to allow the use of cookies. For more information and to change settings click here. If you are happy with cookies please click "Continue" or simply continue browsing. Continue.

Employment Law

Legal guidance - compliance - software

29 SEP 2014

Prophet plc v Huggett [2014] EWCA Civ 1013

Daniel  Clarke

Barrister

Prophet plc v Huggett [2014] EWCA Civ 1013
In March 2014 the High Court concluded in Prophet plc v Huggett [2014] EWHC 615 (Ch) that it could correct an obvious drafting mistake to make a restrictive covenant effective. That decision has now been reversed by the Court of Appeal [2014] EWCA Civ 1013.

Facts

Prophet employed Mr Huggett as a sales manager. He was involved with promoting 2 software products for use in the fresh produce sector - Pr2 and Pr3. These were produced solely by Prophet. His contract contained a post-termination restrictive covenant. This contained 2 stipulations in particular. First, he would not for 12 months engage in any business which was similar to or competed with Prophet. It was agreed by all that this would have been unreasonably broad if unmodified by the second stipulation – prohibiting him “from being so engaged, employed, concerned or interested in any area and in connection with any products in, or on, which he […] was involved whilst employed.”

Mr Huggett left and began work for a competitor (which paid him a basic salary 50% than he was on with Prophet) promoting software products also used in the fresh produce sector. Prophet sought an injunction to prevent this. The High Court held that if the covenant were read literally, it would offer minimal protection to Prophet. It would only relate to Pr2 and Pr3. But these were not produced by any other company. In order to avoid this apparent absurdity, the High Court added the words “or similar thereto” to the end of the second stipulation set out above, so as to allow the clause to encompass products similar to Pr2 and Pr3.

Decision

The Court of Appeal disagreed with this approach and discharged the injunction. It acknowledged that a literal reading of the clause in question gave rise to an apparent absurdity and left Prophet with a toothless restrictive covenant without life or purpose. It also acknowledged that “reading in” words (as the High Court had done) lead to a commercially sensible result. This would normally be favoured. However, the language was unambiguous. There was no reason requiring the court to interpret it so as to change its effect. It was not for the courts to widen the language of the covenant to include other products against its clear language. As Rimer LJ put it: “it was not for the judge nor is it for this court to remake the parties’... bargain. Prophet made its … bed and it must now lie upon it”.

Comment

The decision serves as a reminder that there are strict limits on the extent to which the courts can take account of commercial sense in interpreting restrictive covenants. Faced with a provision that can be seen to be ambiguous in meaning, with one interpretation leading to an apparent absurdity and the other to a commercially sensible solution, the court is, of course, likely to favour the latter. However, such an approach can only be adopted in cases where the language of the provision is both truly ambiguous and also admits of clear alternatives as to the sense the parties intended to achieve.

TUPE

Law and Practice

The status of employment rights on the transfer of an undertaking is an extremely complex area of...

More Info from £85.00
Available in Employment Law Online
EU & International Employment Law

EU & International Employment Law

"A very welcome addition to the very limited range of material available on domestic employment...

More Info £1,348.00
Available in Employment Law Online
Subscribe to our newsletters