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Court of Appeal overturns decision of High Court

5th August, 2014

We recently reported on the case of Prophet plc v Huggett [2014] EWHC 615 (Ch), in which the High Court considered the intentions of the parties to find that a restrictive covenant was enforceable, despite a drafting error.

The restriction sought to prevent Huggett (“H”) from competing with, or working for a competitor of, Prophet plc (“P”). However, the wording of the restriction instead provided that H would not work for a competitor of P who sold software systems produced by P. P was the only company selling the software products that it had produced. It was clear, therefore, on a literal reading that the covenant offered no protection whatsoever to P.

The High Court used its discretion to rewrite the covenant and insert three words “[produced by] or similar thereto” which gave effect to the intentions of P and thereby offered P the intended protection. The High Court then allowed the injunction against H. H appealed.

The Court of Appeal has overturned the decision and held that although leading to a very undesirable outcome for P, the language of the covenant was unambiguously clear and the High Court erred in inserting the words to give effect to P’s intentions. The covenant was therefore unenforceable to prevent H from working for a competitor of P.

This decision has further emphasised the necessity of instructing specialist employment lawyers to draft enforceable restrictive covenants, which will properly protect legitimate business interests.

For further information and advice in relation to restrictive covenants, please contact Claire Brook on 01244 405575 or send an email to [email protected]

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