In Coppage & Anor v Safety Net Security Ltd the Court of Appeal looked at the reasonableness of a six month non solicitation covenant entered into by Mr Coppage, a director of a security company which supplied door supervisors and other security staff. The covenant was expressed so that it would cover anyone who had been a customer of the company at any time during the director’s period of employment. He said that was unreasonable. The Court of Appeal did not agree. The reasonableness of restrictive covenants is highly fact sensitive. Taking into account all the circumstances, including the short length of the restriction, the fact that it was a non-solicitation clause rather than a non-compete clause, and the fact that Mr Coppage had been the “face” of the company and so able to influence the customers, the judge’s original decision had been right.
Having reached this conclusion, the Court did not feel it necessary to rule on a second appeal based on the extent of a director’s fiduciary duty where solicitation took place after resignation, and declined to interfere with the finding that damages be set at £50,000. Although the evidence on loss had been limited, the first instance court had made a reasonable assessment on the information provided.
No general conclusions can be drawn about the validity of covenants covering long standing or even ex customers from this case. One does also suspect that the palpable unreliability of the evidence adduced on behalf of Mr Coppage did his case no good at all.
In another situation, it might be reasonable to seek to protect such a wide customer base. Here the customer base was a stable one – in a business where customers come and go more frequently, a restriction to the customer base for the last year or so might well be necessary to meet the test of reasonableness. For example, in Croesus Financial Services Limited v Matthew & David Bradshaw Mrs Justice Simler, sitting in the High Court, considered whether a restriction period of 12 months was appropriate relating to soliciting and dealing with former clients and the misuse of the Company’s information. As the name suggests the Claimant is a financial services company, a sector in which competition is notoriously fierce. The client base was stable, with many long-standing clients. the majority of the Claimant’s income derived from recurring fees. The Defendants are father and son. Father worked for the Company more or less from its inception in 2002 and son Matthew joined in 2010. Matthew resigned in December 2012 and joined a competitor business in January 2013. He admitted doing business with a number of the Claimant’s client and solicited at least one former client. Father David was alleged to have assisted, supported and encouraged his son to do so. Proceedings were not issued until July 2013.
Having considered the evidence and established that the contractual restrictions did apply to Matthew, the next question was whether they were reasonable in the interests of the contracting parties and reasonable in the public interest, i.e. no more than reasonably necessary for the protection of the business. In this case the restrictions were both appropriate and reasonable and they were accordingly upheld. Father David had knowingly assisted in the breaches and he was therefore also liable.
Although there had been significant delay on the part of the Claimant (normally fatal to a claim for an injunction) in this case it was appropriate to make an order for an interim injunction for the remainder of the restriction period. Damages amounting £1 million had been claimed at the outset. However, at a very late stage in the proceedings, a revised schedule of losses claimed only £117,555. In the event the sum awarded was just £30,000.
For those with a particular interest in such matters the judgment is well worth reading since it provides a detailed analysis and application of the applicable legal principles. The much diminished award of damages by comparison with what was initially claimed also serves to remind litigants that such claims must be based on facts and not speculation.