Tenon FM Ltd v Cawley & Ors

Where a claimant seeks an interim injunction for a period likely to expire before trial, the court should assess the claimant’s prospects of success, while recognising that the evidence is incomplete and that prospects are not the sole consideration. Restrictive covenants are prima facie unenforceable unless reasonable and supported by a legitimate business interest. An unsigned employment contract may be accepted by conduct, but the issue is fact-sensitive. More onerous restrictive covenants introduced by variation require consideration referable to that variation; continued employment alone will not ordinarily suffice. Where the employer cannot establish that the covenants formed part of the contract, or that consideration was given for their introduction, interim relief will fail. The court retains a broad discretion and may also consider the parties’ conduct and proportionality.

Tenon sought interim injunctions against Susan Cawley to enforce alleged post-termination restrictive covenants and against B38 Support Services Limited and two associated defendants for allegedly inducing breaches of those covenants. The application followed undertakings given before Sweeney J on 18 June 2018.

The principal issues were whether the alleged 2011 or 2012 employment contract, containing more onerous restrictive covenants, bound Miss Cawley; whether consideration had been given for the contractual variations; whether constructive dismissal might release her from the covenants; whether the covenants were enforceable; and whether interim relief should continue until trial.

1. Interim approach. The court applied the principles in American Cyanamid Co v Ethicon Ltd [1975] AC 396, as modified where the restraint would substantially expire before trial by Lansing Linde v Kerr [1991] 1 WLR 251. The court therefore considered the claimant’s prospects of success, while recognising that the evidence was incomplete and that prospects were not the sole consideration.
2. Contractual incorporation. The claimant had not shown a serious question to be tried, or realistic prospects of success, on whether the 2011 or 2012 contract bound Miss Cawley. The contracts were unsigned, expressly stated to take effect on signature, and were met by her positive evidence that she had refused to sign them. The evidence relied upon by the claimant supported, at most, weak inferences. The authorities on acceptance by conduct, including Wess v The Science Museum Group [2014] UKEAT 120 and Credit Suisse Asset Management v Armstrong, were factually distinguishable.
3. Consideration. The claimant had produced no evidence of consideration referable to the 2011 or 2012 variations. The court accepted the principle reflected in Re-Use Collections Limited and Sendall [2014] EWHC 3852 and Solectron Scotland Ltd v Roper [2004] IRLR 4: continued employment and continued permission to work cannot, without more, be treated as consideration for imposing more onerous restraints.
4. Other issues. There was a serious issue concerning whether constructive dismissal had occurred, since acceptance of an employer’s repudiatory breach could release an employee from restrictive covenants, as stated in General Billposting Company Ltd v Atkinson [1909] AC 118. There was also a serious issue as to the covenants’ reasonable necessity, including the unexplained absence of comparable covenants in contracts of other senior employees, a factor considered in CEF Holdings Limited v Mundey [2012] EWHC 1524.
5. Disposition. The primary reasons for refusal were the failure to establish that the restrictive covenants applied and the absence of evidence of referable consideration. The claimant’s unreasonable conduct and disproportionate costs were additional discretionary factors. The applications for interim injunctive relief against all four defendants were dismissed. The court approved the Tomlin order agreed with the second, third and fourth defendants.