Brake Brothers Ltd v Ungless & Anor

Restrictive covenants in employment contracts are prima facie unenforceable unless the employer identifies a legitimate business interest and proves that the restraint goes no further than reasonably necessary to protect it. Legitimate interests may include supplier connections, staff stability and trade secrets or confidential information akin to trade secrets.

A non-competition covenant may be reasonable where confidentiality obligations alone would be difficult to police, including where information may be retained in an employee’s memory. The covenant must nevertheless be construed narrowly, tested at the date of contracting, and balanced against the employee’s right to use general skill and knowledge and to compete lawfully.

Brake Brothers Limited sought permanent injunctions against two former national buyers, Darren Ungless and Timothy Adams. Each had left after a period of garden leave to join 3663 First Foods Service Limited, a major competitor.

The contracts contained six-month restrictions on soliciting employees, customers and suppliers, disclosing confidential information, and working for qualifying competitors. The defendants accepted undertakings concerning several restrictions but challenged the area covenant, arguing that it was too wide, excessive in duration and unnecessary to protect any legitimate interest. The central issues were the proper construction, enforceability and discretionary enforcement of the covenants.

1. Construction. The area covenant was construed in context and in the manner most favourable to validity. It restrained the defendants from undertaking competing business activities of the type with which they had been materially involved during the preceding twelve months. It did not prevent employment by a competitor in every capacity.
2. Legitimate interests. The claimant had legitimate interests in protecting supplier connections, staff stability and confidential information akin to trade secrets. Buyers had recurrent dealings with suppliers and could develop goodwill and influence. They also had influence within a team of employees. The information included trading-agreement terms, rebates, discounts, prices, business plans, marketing plans, product development and profit margins.
3. Confidential information. The information was sufficiently identified, objectively confidential and capable of causing commercial harm if disclosed. The fact that some detail might not be remembered did not defeat protection. Headline information was likely to be memorable, particularly where the employee had created or negotiated it. The information’s relevance corresponded with an annual business cycle.
4. Necessity and proportionality. A non-competition covenant could protect confidential information where a confidentiality covenant alone would be difficult to police. A buyer could influence a competitor’s dealings with common suppliers without any readily traceable disclosure. Six months after garden leave was no more than reasonably necessary, and the restriction applied only to competitors with turnover exceeding £30 million.
5. Discretion. The defendants’ proposed undertakings did not provide equivalent protection. The risk of deliberate or inadvertent misuse remained real, and the period of garden leave did not make further protection inappropriate. The injunctions were therefore granted in the terms sought, with the precise order to be discussed.

Not stated in the judgment. The judgment records earlier interim injunctions granted by Treacy J, but this was a first-instance trial decision.