Enforceability of 12 month non-solicitation restrictive covenant (High Court)

Article by PINI FRANCO LLP

Categories: Employment Law
Typology: Articles

In Romero Insurance Brokers Ltd v T. and another [2013], the High Court  upheld a 12 month non-solicitation restrictive covenant in a senior insurance broker's contract, and awarded damages and an injunction to his former employer for the remaining period of the covenant.

Facts

Mr T., a senior insurance broker, was recruited  by Romero Insurance Brokers Ltd (Romero) in 2011 to manage a new branch in Halifax. Over a long career he had developed strong relationships with clients, and Romero was keen on him persuading as many as possible to follow him. Mr  T.  entered   into an agreement with Romero, separate from his contract of employment, which contained a number of restrictive covenants. These included the following non-solicitation restriction:

"The Employee will not for the period of 12 months immediately  following the termination of his employment without the prior  consent  of  the Board  in  connection with the carrying on of any business similar to or in competition with the business of Insurance Brokers/Services on his own behalf or on behalf of any person firm or company directly or indirectly seek to procure  orders from  or  do  business  with any person firm  or company who has at any time in the 6 months immediately preceding such termination done business with or been a customer or client of the Company  or any Subsidiaries   or Associated Companies and with whom the Employee has had dealings."

In August 2012, there was a suggestion of restructuring which could result in Mr T.'s position becoming redundant. During the redundancy consultation process  Mr   T.  resigned with immediate effect in response to Romeo’s handling of the procedure which Mr T. considered a sham. The day after he resigned, Mr T. commenced employment with Eastwood and Partners Ltd. A large number of Romero's clients followed him. Romero issued proceedings against Mr T. for breach of the restrictive covenant in his contract, and later joined Eastwood on the basis that it had induced the breaches.

Decision

The High Court (Sir Raymond Jack) found that the 12 month restrictive covenant was enforceable.

The purpose of the covenant was to give Romero time to  build a connection between  clients looked  after by Mr T.  and  his  replacement.  Taking into account the circumstances of Mr T.'s recruitment (that he had been brought in to build up the business), it was reasonable that Romero would want to protect its client relationships. Just as Mr T. could deliver a following of clients to Romero, he might well be able to take clients with him when he left.

It was clear that Romero had a legitimate interest to protect, which was the trade connection with customers with whom Mr T. was dealing. The question was whether 12 months was more than was reasonably necessary to protect this interest.

The court found that the 12 month period was  reasonable  in  the context  of  selling insurance, where policies are traditionally renewed annually. The broker had been specifically recruited in order to build up the employer's business, and it was legitimate for the employer to seek to protect its client relationships. A longer restriction would not have been enforceable.
 

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