Ashcourt Rowan Financial Planning Ltd v Hall

A garden-leave provision may apply during notice even where the employee performs some duties. However, a separate covenant deducting time spent on garden leave from post-termination restraints normally refers to garden leave in its conventional sense, where the employee performs no duties.

A non-competition covenant in an employment contract is enforceable only so far as reasonably necessary to protect legitimate business interests. Client information may constitute a protectable business interest, and practical difficulties in policing confidentiality may justify some restraint. They do not justify a covenant extending to unrelated roles or large parts of a competing industry where narrower protection would suffice.

Ashcourt Rowan Financial Planning Ltd sought interim and final relief against Carlton John Hall, a former senior financial adviser who had joined Fidelius during the six-month period following his resignation. The claimant relied on contractual garden-leave provisions and post-termination covenants, including a six-month non-competition covenant.

The court decided the principal liability issues at the return hearing because the essential material was available and a speedy trial would have involved little additional evidence. The central questions were whether the notice period qualified as a garden-leave period so as to reduce the covenant periods, and whether the non-competition covenant was an unreasonable restraint of trade.

1. Garden leave. The powers in clause 14.2, including the power to require some or no duties, and the contractual label “the garden leave period” operated in the same circumstances. The provision was not confined to cases where the employee performed no duties. Its wording contemplated that the employer might require only part of the employee’s normal duties or restrict contact with particular people or premises.
2. That construction did not mean that the whole notice period was deducted from the post-termination restrictions. Appendix II clause 8 referred to time spent on garden leave, which carried its ordinary meaning. It required a period when the employee was not required or permitted to work. Hall had not been placed on garden leave in that sense. The claimant had not exercised clause 14.2, and the notice period was not deductible.
3. Non-competition covenant. The court adopted the staged approach identified in TFR Derivatives v Morgan [2005] IRLR 246: construe the covenant; identify legitimate business interests; assess whether the restraint is no wider than reasonably necessary; and, if valid, consider whether relief should be granted as a matter of discretion.
4. Information concerning clients, their contact details, advice history, investments and policies was a legitimate business interest capable of protection. The claimant’s interest in workforce stability added nothing on the facts. The employment covenants were to be assessed as employment restraints at the date of contract, not by reference to the later sale of the business or Hall’s subsequent duties.
5. The covenant was construed narrowly enough to exclude purely financial investments in competitors, but it extended beyond work directly competing with the claimant. It could prohibit indirect involvement in management, compliance, training, research or financial planning for a competitor, and could apply to areas in which Hall had only transiently worked. Those effects were wider than reasonably necessary.
6. Although practical policing difficulties may justify a non-competition covenant protecting trade secrets or comparable confidential information, the court had to scrutinise whether a lesser restraint would suffice. Balancing the extensive restraints against the claimant’s ability to detect misuse when clients requested the transfer of their information, the covenant was held to be an unreasonable restraint of trade and unenforceable. The garden-leave argument was rejected, but the enforceability challenge succeeded. Further submissions were invited on relief and case management.