It is often said that a court, when considering contractual issues, will overlook drafting errors in order to give effect to what the parties intended and therefore make sense of what would otherwise be contradictory or plainly “wrong”. Indeed there are many High Court judgments which clearly apply that approach.
However, it is a dangerous game to assume that a court will always do so, as discovered by Prophet plc, a computer software company.
In Prophet plc v Christopher Huggett the Court of Appeal was asked to consider restrictive covenants in a contract of employment. On first reading the restrictions were fairly unremarkable. Prophet has for a number of years developed, sold and updated computer software for the fresh produce industry. Typically customers were granted 12-month renewable licences to use the software.
Mr Huggett, who had experience in the fresh produce market, was employed on a salary of £50,000 plus commission, with a notice period of three months. His contract included the following:
The Employee shall not during the continuance of this Agreement, or for a period of twelve months from the determination thereof (for whatever reason or in whatsoever manner), without the consent in writing of the Board of Directors of the Company, either solely or jointly with, or as, a Director, Manager, Agent, Consultant or Employee of any other person, firm or company, directly or indirectly, carry on or be engaged, concerned or interested in any business which is similar to, or competes with, any business of the Company in which the Employee shall have worked whilst employed hereunder (in that they provide computer software systems of whatever kind to any company involved in the fresh produce industry) within the geographical area (namely the United Kingdom), except as a shareholder or debenture holder not having a controlling interest in any Company the shares of which are quoted on a recognised Stock Exchange. Provided that this restriction shall only operate to prevent the Employee from being so engaged, employed, concerned or interested in any area and in connection with any products in, or on, which he/she was involved whilst employed hereunder.
The court took the view that the restriction in the long sentence was unenforceable since it was an unreasonable restraint of trade. However, the limitation in the second sentence was clearly designed to make the restriction reasonable. But it didn’t work. Sentence one would provide Prophet with the protection it wanted (but wouldn’t be allowed). However, sentence two, read literally, excluded that protection. The inclusion of the word “and” is critical. As the court observed there is no doubt that it is a true conjunctive. Therefore the condition concerning “products” is operative and, critically, could be taken only as referring to Prophet’s own products. The competitor Mr Huggett wanted to work for unsurprisingly sold their own products rather than Prophet’s products and therefore the clause did not provide the intended protection.
In the High Court it was suggested that “products” might mean (a) specific Prophet products, (b) any Prophet products, (c) business process software designed for the fresh produce market, (d) business process software for businesses or (e) any software. The Court opted for (c) and therefore granted an injunction as follows:
The Defendant is prohibited, until 3 January 2015 and within the United Kingdom only, from being directly involved in the provision of business process computer software designed for the fresh produce industry, save that the prohibition shall not prevent the Defendant from acting as a minority shareholder or debenture holder or in a business which does not compete with the Claimant.
The Court of Appeal disagreed. However it was acknowledged that “if there is a clear choice between an interpretation of the proviso that gives rise to an apparent absurdity and one that achieves a commercially common sense result, a court will ordinarily favour the latter interpretation”. However, that approach “can only be adopted in a case in which the language of the provision is truly ambiguous and admits of clear alternatives as to the sense the parties intended to achieve”. In this case Lord Justice Rimer was not satisfied that something had “gone wrong” with the drafting. However, what likely did go wrong is that the draftsman did not think through what the consequences would be. In these circumstances it was not for the court to remake the parties’ bargain – “Prophet made its clause 19 bed and it must no lie upon it”.