The Importance of a well drafted Restrictive Covenant

The case of Prophet Plc v Huggett [2014] EWHC 615 (Ch) concerned a UK sales manager for a software developer in the fresh produce industry.

The non-compete clause in question sought to prevent the employee dealing in any way with companies in the fresh produce industry. Inexplicably, the clause then went on to include a proviso that the restriction only operated to prevent the employee from being so engaged in connection with any products with which he was involved whilst employed.

As no competitor would ever be selling the claimant employer’s actual products, a literal reading of the clause did not provide any protection at all. The High Court took the stance that it was prepared to treat this issue as a drafting error, which could be corrected by looking at what a reasonable person would have understood the parties to have meant by their use of the language. It went on to uphold the re-worded covenant.

The Court of Appeal overturned this decision. It disagreed with the High Court’s view that the clause was ambiguous and that there had been a drafting error. The only interpretation was the one that rendered the covenant useless. The employer had simply not thought through the extent to which its chosen words would in fact provide adequate protection.

This case highlights the need for absolute precision when drafting restrictive covenants as the Courts will not always be willing to correct any inaccuracies, however sensible one might claim those corrections to be.

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