Quilter Private Client Advisers Ltd v Falconer & Anor

An employee’s post-termination restraint must protect a legitimate business interest and extend no further than reasonably necessary when assessed at the date of contracting. A covenant preventing competition generally, rather than protecting customer connections or confidential information, is unenforceable. Customer non-solicitation and non-dealing covenants may also fail where their duration and retrospective client definition are unsupported by evidence. Confidential client records can remain confidential even if an adviser remembers some information. An employer must prove solicitation by evidence of persuasion or encouragement; dealing alone is insufficient. A third party is liable for inducing breach only where it knowingly and intentionally procures an actionable breach, not where it merely facilitates conduct without the requisite knowledge.

Quilter employed Emma Falconer as a financial planner and transferred to her a substantial client bank. Her contract contained confidentiality obligations, implied duties of fidelity and trust and confidence, and nine-month non-competition and 12-month non-solicitation and non-dealing covenants. Falconer later joined Continuum, an independent financial advisory business, after discussions and preparatory steps undertaken while she remained employed by Quilter.

Quilter alleged breaches of contract, confidence and implied duties by Falconer, and alleged that Continuum induced those breaches and itself misused confidential information. By trial, the time-limited covenants had expired. The issues included constructive dismissal, the validity and construction of the covenants, confidentiality, solicitation, repayment of a guaranteed bonus, inducement of breach and Continuum’s equitable obligation of confidence.

1. Constructive dismissal. Falconer was not constructively dismissed. Quilter’s shortcomings in administrative support, training and office culture did not objectively amount to conduct likely seriously to damage trust and confidence. In any event, her decision to leave was driven principally by the opportunity at Continuum. The court also observed that, had there been a repudiatory breach, the delay, continued work and two weeks’ notice would have raised a substantial affirmation issue, although knowledge of the legal right to elect was not established.
2. Express and implied duties. Falconer breached the contractual obligation to devote her working time to Quilter by attending Continuum’s induction course, undertaking its competency assessment and making preparations to join it during working hours. She breached the contractual requirement to provide a copy of her contract to a prospective consultancy, the garden-leave prohibition on contacting Quilter-connected customers, and the conflict-of-business-interest clause. She did not breach the contractual obligation to disclose Continuum’s identity after accepting its offer. Her implied duty of fidelity included duties not to compete, assist a competitor, divert business opportunities, misuse confidential information, conceal wrongdoing or mislead the employer about future plans. Scanning Quilter’s client documents onto her personal laptop, using them to populate Continuum’s system and concealing that conduct breached those duties and the equitable obligation of confidence.
3. Restrictive covenants. Quilter had legitimate interests in customer connections and confidential information. The non-competition covenant was nevertheless an unlawful restraint of trade because Quilter produced insufficient evidence that a nine-month prohibition on joining a competitor was reasonably necessary. It protected competition generally and went beyond the protection afforded by customer and confidentiality restrictions. The non-solicitation and non-dealing covenants also failed because the 18-month backstop and 12-month restraint were not justified and captured stale, family, non-contacted and merely allocated clients. The consent proviso did not save the covenants.
4. Solicitation and Continuum. Because the covenants were unenforceable, the covenant claims failed. If valid, Falconer would have solicited clients JB and JE, but not the others relied on. Solicitation requires a material element of persuasion or encouragement; client initiation is relevant but not determinative. Continuum did not induce actionable breaches: it lacked knowledge that the relevant acts breached Falconer’s contract, and the unenforceable covenants could not support accessory liability. Continuum also lacked the requisite knowledge and misuse for an independent equitable confidence claim.
5. Disposition. Claims based on the restrictive covenants and the guaranteed bonus were dismissed. The claim against Continuum was dismissed. The judgment otherwise established the breaches by Falconer identified above.