Restraint Clauses in the Court of Appeal: SafetyNet v Coppage, ten years on
Posted on 31st July 2023 at 16:15
It is now ten years since we were involved in a dispute over post-employment termination restraint clauses that went to the Court of Appeal. Time for a look back at what happened.
Our clients, a security service company, were faced with what could reasonably have been described, in military terms, as a clear and present danger to their customer base. In defiance of a six month restraint clause that prevented him poaching customers for his own benefit, their senior employee “Mr C” had set about doing exactly that, via a newly formed company in the name of a junior employee who had resigned from our clients at the same time as him.
Armed with the knowledge that the courts would prevent such conduct via an injunction, as long as the balance of convenience favoured its grant rather than its refusal, we issued an early court application for this very purpose. Terms were agreed for an accelerated trial timetable that would enable the court to make a meaningful order, if necessary, before the restraint expired. Steps were successfully taken on the way to trial to obtain a specific disclosure order for copies of a set of phone records that would shed crucial light upon what Mr C and his colleagues had been up to.
Having determined that the six month restraint clause was well drafted and carefully balanced as to what it sought to protect, the judge proceeded to examine the defendant’s evidence. Mr C’s manner was described as “unhelpful and closed”. As to his colleague, the judge observed that “his assertion that it was possible for him to incorporate a business and obtain his first customer overnight in the absence of a business plan, marketing material, internet presence, a shop front or solicitation, defies belief”. The evidence of the customers who had sought to support the defendants, having been tested beyond breaking point in cross-examination, was dismissed as “wilfully inaccurate”.
The damages claim had been conservatively limited to £50,000 when the court action was issued. In upholding the claim, the judge awarded this sum without hesitation and assessed costs then and there.
The defendants were not minded to take this lying down, and initiated an appeal. This is how we reported the outcome of the appeal ten years ago.
“Court of Appeal success for Birmingham legal team”
“The dismissal of the appeal in Coppage & Freedom Security v SafetyNet Security involved victory for Mark Anderson QC and Yasmin Yasseri of No 5 Chambers, Birmingham, instructed by David Cooper of Cox Cooper Solicitors. The appeal judges decided that there is no need for a court ‘to be troubled by theoretical or fanciful possibilities’ when deciding whether a bar on soliciting customers after termination of employment is reasonable.
“Following SafetyNet’s victory at trial in the Birmingham Mercantile Court in August 2012, when much of the Defendants’ evidence was rejected as false and deliberately misleading, the Defendants appealed against an injunction and a £50,000 damages award, their primary case being that the six month restraint was too wide. Because it precluded the solicitation of ‘any customer during your period of employment’, rather than customers from only the preceding 6 or 12 months of employment, the Defendants argued that this was greater protection than necessary, and the clause should fail.
“The Court of Appeal disagreed. The clause was qualified by the proviso ‘to solicit business which could have been undertaken by us’, and was adjudged fair and reasonable protection for a company with a single branch and a relatively small number of customers, few of whom had ever been lost. The damages award was in turn upheld as one that an experienced Mercantile Court judge was entitled to reach upon unchallenged general evidence about revenue and profitability.
“In praising the overall role of the Birmingham Mercantile Court, David Cooper said: ‘We were given an accelerated timetable for a trial to be held barely three months after we sought an interim injunction. We even managed to bring a crucial specific disclosure application part way through. And our trial costs were assessed then and there. Anyone believing that London is the only place for this kind of litigation should think again.’ ”
Has anything changed, ten years on? The Birmingham Mercantile Court has now become the Business and Property Court. The legal principles, however, remain the same. As does our capacity to advise clients and act on their behalf in disputes involving contracts of employment and post termination restraint clauses. Contact David Cooper on 0121 325 5402 or via dmc@coxcooper.co.uk for further information.
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