Cartlidge Morland (a firm) v Thomas

A contractual restraint of trade covenant must be construed in its commercial context. Where the contract expressly excludes clients brought by an employee from a previous employer, the exclusion may also cover clients introduced through close family or personal connections with those clients. An employer seeking post-termination injunctive relief must act fairly and consistently with its implied duty of trust and confidence. Materially unbalanced allegations and non-disclosure when obtaining an interim injunction may constitute a serious breach of contract and may bar equitable relief. A permanent injunction is unnecessary where no breach or threatened breach is proved.

Cartlidge Morland, a wealth management partnership, sought to enforce contractual non-compete and non-solicitation restrictions against Gerard Thomas after he resigned and joined another wealth management business. Thomas contended that his employment contract excluded clients brought from his previous employer and clients introduced through those clients.

The court determined the contractual documents, the effect of the agreed exclusion, alleged breaches by Thomas, CM’s conduct in obtaining an interim injunction, and the parties’ claims for injunctive relief, damages and delivery up. An interim injunction had been granted by Openshaw J on 25 February 2011, followed by an expedited trial.

1. Contractual terms. The signed offer letter, the confirmatory letter dated 21 May 2004 and the client list formed one employment contract. Mr Turner had actual and implied authority to bind CM. The contract expressly excluded from the restraint clients brought by Thomas from his previous employer.
2. Construction of the exclusion. The phrase referring to clients brought from the previous employer had to be construed commercially against the factual matrix. It covered clients on the attached list, other clients transferred from the previous employer, and clients introduced through family or close personal connections with those clients. Those “green” and “amber” clients were outside the restraint. Clients first acquired at CM without that connection remained “red” clients covered by the covenant.
3. Unnecessary issues. It was inappropriate to decide the wider enforceability and severance issues on hypothetical facts. Thomas accepted that the covenant applied to red clients, but there was no evidence that he had solicited them or intended to do so.
4. CM’s conduct. An employer’s implied duty of trust and confidence includes an obligation not to act in a way calculated seriously to damage the employee’s relationship with the employer or professional reputation. That obligation survived termination in relation to conduct connected with enforcement of a valid restraint. CM’s materially incomplete and partisan evidence in support of the interim injunction amounted to a serious breach of contract and inequitable conduct.
5. Disposition. The interim injunction was discharged. CM’s claims for an injunction, damages and delivery up were dismissed. Thomas was entitled to pursue damages under CM’s cross-undertaking and for CM’s breaches of its implied contractual duty to act fairly.