Prophet Plc v Huggett

A court may prefer a commercially sensible construction to an apparent absurdity only where the contractual language is genuinely ambiguous and admits clear alternative meanings. It cannot rewrite an unambiguous post-employment restrictive covenant merely because its natural meaning gives the employer little or no practical protection.

Before correcting an alleged drafting mistake, the court must be confident that something has gone wrong with the language and that the necessary correction is clear. Particular caution is appropriate where a carefully drafted covenant restricts an employee’s freedom to work. The employer must bear the consequences of the words it chose.

A former employer obtained an injunction enforcing a 12-month post-employment restrictive covenant against its former United Kingdom sales manager. The covenant prohibited work for certain competitors but contained a proviso limiting the restriction to products in or on which the employee had been involved.

The Deputy High Court Judge held that the proviso contained a drafting mistake. He added the words “or similar thereto” and restrained the employee from involvement in business process computer software designed for the fresh produce industry: [2014] EWHC 615 (Ch).

The employee appealed. The central issue was whether the proviso could be interpreted or corrected to cover products similar to the employer’s Pr2 and Pr3 software, or whether its natural meaning referred only to those specific products.

1. Appeal allowed. The proviso’s natural and unambiguous meaning was that “any products” referred to the particular products with which the employee had been involved during his employment, namely Pr2 and Pr3. It was expressed generally because the parties could not know, when contracting, which products would fall within that description when the employment ended.
2. The resulting restriction had little or no practical commercial effect because no competitor supplied Pr2 or Pr3. The existence of third-party agents did not change that conclusion. Those agents did not provide the relevant software systems and future employment with them was unlikely to have been contemplated when the covenant was drafted.
3. A court may favour a commercially sensible interpretation over an apparent absurdity where contractual language is truly ambiguous and admits clear alternative meanings. That principle did not apply here. The employer’s proposed meanings were reformulations designed to give the covenant differing degrees of commercial effect, rather than genuine interpretations of ambiguous language.
4. The principles concerning linguistic mistakes discussed in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 did not justify correction. The proviso appeared to be carefully drafted to narrow an otherwise unreasonably wide restraint. The court could not be confident that its language was mistaken. The likely error was instead a failure to appreciate that the chosen restriction would provide little practical protection.
5. It was not open to the court to remake the parties’ bargain by adding “or similar thereto” or substituting a wider product description. Since the proposed new employer did not provide Pr2 or Pr3, the employee’s proposed work would not breach the covenant.
6. The injunction was discharged and paragraph 1 of the order below was set aside. Lewison and Christopher Clarke LJJ agreed with Rimer LJ.

1. Court of Appeal (Civil Division): The court allowed the appeal unanimously, set aside paragraph 1 of the order below and discharged the injunction: [2014] EWCA Civ 1013.
2. High Court of Justice, Chancery Division: Mr David Donaldson QC, sitting as a Deputy High Court Judge, construed the covenant by adding “or similar thereto”, held it enforceable and granted an injunction until 3 January 2015: [2014] EWHC 615 (Ch).