Credico Marketing Ltd & Anor v Lambert & Ors

A restrictive covenant in a commercial agreement is enforceable where it protects a legitimate business interest and goes no further than reasonably necessary. The degree of scrutiny depends on the relationship, bargaining power, contractual setting and availability of legal advice. A restriction imposed by standard terms on inexperienced business owners attracts closer scrutiny than one negotiated at arm’s length, although the test remains less stringent than in employment cases.

A pre-termination exclusivity clause and a six-month, 10-mile post-termination restraint were enforceable. Face-to-face lead generation was sufficiently similar to face-to-face sales to fall within the covenants. A personally assumed obligation to comply with restrictive covenants was independent of the company’s default and was therefore outside section 4 of the Statute of Frauds 1677.

Credico Marketing Ltd and PerDM Trading Ltd operated a network of marketing companies. S5 Marketing Ltd, owned by Benjamin Lambert, had entered into a Trading Agreement with PerDM containing pre-termination and post-termination restrictive covenants. Lambert also signed a Guarantee.

Credico acquired PerDM’s business in 2016. In late 2020, Lambert arranged for S5’s independent sales advisors to work on campaigns for Novibet and Energy Sales Marketing. He later gave undertakings to Credico and the parties consented to an interim injunction.

The court had to determine whether Credico had succeeded to the contractual rights, whether the covenants and undertakings were enforceable, whether the activities breached them, and whether confidential information had been misused.

1. Contractual succession. The Trading Agreement was novated to Credico by conduct. The parties’ objective conduct showed that Credico assumed PerDM’s rights and obligations, including payment of commission, provision of campaigns and back-office support. The inference was necessary to give business efficacy to what occurred. The Guarantee was an integral part of the Trading Agreement and was novated at the same time.
2. Statute of Frauds. Clause 10 of the Guarantee was a free-standing promise by Lambert personally to comply with the restrictive covenants. It was not a promise to answer for S5’s debt, default or miscarriage. Section 4 of the Statute of Frauds 1677 therefore did not apply to that clause.
3. Restraint of trade. Clause 21.1 fell within the doctrine of restraint of trade. The court must first construe the covenant, identify legitimate interests, and assess whether the restraint is no wider than reasonably necessary. Scrutiny was stricter than in an arm’s-length commercial bargain because the restrictions were standard terms imposed on inexperienced business owners with unequal bargaining power, but it remained less stringent than in an employment case.
4. Construction. “Similar business” covered face-to-face marketing through individuals selling or marketing products, or procuring customers, in the field. It included the 60 Second Challenge, although the resulting sale was completed by telephone. It did not extend to telesales alone or business-to-business marketing. The 10-mile restriction applied both to marketing within the area and to the location of the marketing company’s base.
5. Reasonableness and breach. Credico had legitimate interests in protecting its investment in ready-made campaigns, back-office services, support and training. The pre-termination exclusivity clause, and the six-month, 10-mile post-termination restraint, went no further than reasonably necessary. Lambert and S5 breached the pre-termination restrictions through the Novibet and ESM activities, including limited assistance after the undertakings. They did not breach the post-termination restrictions or the injunction.
6. Undertakings and relief. The undertakings were a binding contract supported by Credico’s promise to refrain from immediate legal action. They were enforceable as arrangements made to avert threatened proceedings. Credico was entitled to declarations that the restrictions were enforceable and to a final injunction until 25 June 2021. The claim for relief concerning misuse of confidential information and know-how was refused.

First-instance decision. The judgment states that the claim was tried following an interim injunction granted by Jacobs J by consent on 22 December 2020. The proceedings against the third to fifth defendants had been settled and stayed. No appellate decision is stated.