Manufacturing Excellence Ltd v Hemming (t/a Hemming-Mann Ltd) & Ors

A company named incorrectly in a contract may nevertheless be identified by extrinsic evidence where the intended contracting party is clear. A director is not personally liable merely because the company’s registered name has been misstated.

Contractual renewal machinery may be waived by the parties’ subsequent conduct. Restraint clauses must be construed restrictively and are enforceable only so far as reasonably necessary to protect legitimate trade connections or confidential information. Consultants who use customer relationships and competing branding to divert work may be liable for breach of contract, unlawful means conspiracy, inducement of breach and unlawful interference.

Manufacturing Excellence Ltd claimed damages against three individual consultants and Parallax Partners Ltd. It alleged breaches of consultancy agreements, misuse of confidential information, breach of fiduciary and agency duties, unlawful means conspiracy, inducement of breach and unlawful interference.

The principal disputes concerned whether Steve Hemming was personally a contracting party, whether expired consultancy agreements continued by conduct, the construction and enforceability of post-termination restrictions, whether the defendants diverted the claimant’s customers, and the appropriate basis for damages.

1. Contracting party. The 2007 agreement was a contract between the claimant and HMIM, misnamed as Hemming-Mann Ltd. The ambiguity permitted consideration of the surrounding circumstances, including the earlier agreement, company number, invoices and the parties’ conduct. The misnomer did not engage the statutory personal-liability rule for contracts made before incorporation. Mr Hemming was not personally liable, and HMIM was not his agent.
2. Continuation of terms. Although the agreements required renewal by exchange of letters, the parties continued to operate as if the written terms remained in force. That conduct impliedly waived the formal renewal requirement. The contractual restrictions therefore continued to bind HMIM and Mr Hill, subject to enforceability.
3. Construction and enforceability. The restraint clauses were construed narrowly. “The business of Manufacturing Excellence in which you were actively involved” referred to the specific work actually performed, principally BIT NVQ level 2 and 3 work, rather than the claimant’s whole business. The geographical restraint, if given its wider meaning, was unreasonable and severable. The narrower customer and service restrictions were reasonably necessary to protect valuable customer connections and were enforceable.
4. Breach. Mr Hill, Mr Birkhead and HMIM breached clause 1.9 by corresponding with the claimant’s customers using Parallax or other competing branding. Mr Hill and Mr Birkhead also breached clause 6 by undertaking relevant BIT NVQ work for customers during the six-month post-termination period, including work arising from earlier proposals.
5. Economic torts. The defendants combined deliberately to divert business while appreciating the likely damage to the claimant. The ingredients of unlawful means conspiracy, inducement of breach and unlawful interference were established. Knowledge included turning a blind eye to the contractual obligations of the other defendants.
6. Loss and remedies. The claimant could recover the greater of the defendants’ profit or its own loss for relevant pre-termination breaches where the consultants’ fiduciary duties were sufficiently extensive. The court gave provisional guidance on the assessment of damages and quantum issues, leaving the experts to agree figures where possible.

Judgment was therefore entered for the claimant on liability, with damages to be assessed or agreed.