Beckett Investment Management Group Ltd. Beckett Financial Services Ltd. Beckett Asset Management Ltd & Ors v Hall & Ors

A post-termination non-dealing covenant must first be construed according to ordinary contractual principles and the relevant factual background. The employer must then prove a legitimate business interest requiring protection and show that the restraint goes no further than reasonably necessary.

A covenant cannot ordinarily be enlarged to protect a subsidiary’s interests where the contract refers only to the employing holding company. A restraint covering former clients and imposing an arbitrary twelve-month prohibition may be wider than necessary. Severance is unavailable where it would rewrite a single covenant rather than remove distinct, severable covenants.

The claimants, a holding company and two subsidiaries providing financial services, sued two former employees and their new company. They alleged breaches of contractual restrictive covenants, fiduciary duties and conspiracy after the employees left and acted for former clients.

At trial, the factual allegations of collaboration, solicitation and planned misuse of confidential information were rejected. The live legal issue was the enforceability of clause 17.3, which prohibited dealing with relevant clients for twelve months after termination.

1. The claims were dismissed. The court rejected the alleged conspiracy, fiduciary breaches and solicitation. The defendants had not agreed to breach their contracts, and the evidence did not establish unlawful solicitation.
2. Clause 17.3 had to be construed before its enforceability was assessed. Applying ordinary contractual construction principles, the word “deal” meant doing business, not every interaction. A “client” described a past or present contractual relationship for professional services; it was not a permanent status.
3. The definition of “Prohibited Services” referred to services provided by BIMG, the employing company. The court declined to read “or Subsidiary Company” into that definition. The repeated use elsewhere of “Company (or Subsidiary Company)” showed that the parties knew how to include subsidiaries.
4. On that construction, clause 17.3 did not restrain the defendants from providing services of a type provided by BFS or BAM, because BIMG itself carried on no business. Neither defendant therefore breached the clause.
5. In any event, BIMG had no legitimate business interest requiring protection. The evidence also failed to establish such an interest for BFS or BAM. The twelve-month period was arbitrary and excessive; if the asserted interest was merely to contact clients and rebuild relationships, about three months would have been sufficient.
6. The extended definition of “Relevant Client” was unjustified. Following Attwood v Lamont, [1920] 3 KB 571, severance could not be used to rewrite a single covenant by deleting part of its incorporated definition.
7. The court noted that it was unnecessary to decide whether Mr Yadev owed fiduciary duties, although its inclination was against that proposition. Had enforceable breaches been established, appropriate injunctions would probably have been granted.