Allan Janes Llp v Johal

Restrictive covenants in employment contracts are enforceable only to the extent reasonably necessary to protect a legitimate business interest, such as client connections, goodwill or confidential information. Reasonableness is assessed at the date of contracting and depends on the evidence and circumstances of the particular case. The court cannot rewrite an unreasonable covenant, although severance may be possible where the offending words are independent. Solicitors are not exempt from ordinary restraint-of-trade principles, but the nature of solicitor-client relationships may justify a wider restriction than would be reasonable in another business. A non-dealing covenant covering the employer’s clients may be reasonable even where the employee personally dealt with only a minority of them, provided the restriction reflects the parties’ reasonable contemplation and is limited in area and duration.

Allan Janes LLP employed Balraj Kaur Johal as an assistant solicitor. Her contract contained an indefinite non-solicitation covenant and post-termination radial and non-dealing restrictions. After leaving, she solicited the firm’s clients and prepared to practise in competition from nearby premises. The court had earlier granted interim relief against her and two other defendants; the claims against those other defendants were later discontinued.

At trial, the principal issues were whether the radial and non-dealing restrictions were enforceable restraints of trade, whether the defendant’s misconduct and removal of confidential information justified equivalent relief independently of the covenants, and whether the non-dealing restriction was too wide because it covered clients with whom she had not personally dealt.

1. Applicable principles. Restrictive covenants in employment contracts are prima facie void. They may be enforced only where they go no further than reasonably necessary to protect a legitimate interest, including client connections, goodwill, trade secrets and confidential information. The covenant must be assessed when the contract was made, and the burden lies on the employer.
2. Construction and severance. The court must first construe the covenant in the context of the contract as a whole, then identify the legitimate interest and decide whether the restraint is no wider than necessary. The court cannot rewrite an unreasonable covenant, although independent and severable words may be removed.
3. Solicitors. Solicitors are not a special category exempt from ordinary restraint-of-trade principles. However, the nature of solicitor-client relationships is relevant to the factual assessment. Clients may return after long intervals, may use different departments of the same firm, and may have been introduced to a solicitor through the firm’s marketing and reputation.
4. Radial restriction. The six-mile restriction on practising or doing the work of a solicitor was wider than necessary because it protected the claimant against competition for a large number of persons who were not, or had ceased to be, clients of the firm. It was therefore unenforceable.
5. Non-dealing restriction. The one-year restriction, limited to clients within the specified local-authority areas, was reasonable. Its width was not fatal because reasonableness had to be judged in 2000, when the defendant was recruited for a senior role and was expected to be promoted widely to actual and potential clients. The term “client” did not extend to lenders merely because they funded transactions for the firm’s clients.
6. Misconduct. The defendant’s serious breaches of duty and removal of confidential material did not justify enforcing an otherwise unreasonable covenant. No properly pleaded case for a springboard injunction had been advanced.
7. A final injunction was granted in the terms of the non-dealing covenant. The interim order was otherwise discharged.

First-instance decision. The judgment records that HH Judge Rich granted interim injunctive relief on 27 October 2005, after which the matter proceeded to trial before the High Court.