Score Draw Ltd v PNH International Ltd

A non-compete covenant in a shareholders’ agreement is enforceable where it protects an established customer connection and goes no further than reasonably necessary. A “customer” requires an ongoing business relationship; a mere hope of future business is insufficient. Products may remain within the covenant’s scope even after a formal intellectual-property licence has expired, if they are of the type supplied under licence. A covenantor may breach the covenant through a closely connected company. Where the lost benefit depends on a third party’s hypothetical conduct, damages may be assessed by reference to a real and substantial chance, rather than a speculative chance, of that conduct occurring.

Score Draw supplied retro football shirts and had a shareholders’ agreement with PNHI and others. Clause 6.1 prohibited PNHI from soliciting or accepting business from Score Draw’s customers in respect of specified products. Score Draw alleged that PNHI, acting through associated PNH companies, supplied shirts directly to Liverpool Football Club and thereby diverted its business.

PNHI disputed the meaning and enforceability of the covenant. It also alleged waiver, estoppel, termination following breaches by Score Draw, and intervening causation arising from Liverpool’s decision not to renew Score Draw’s licence. The central issues were the construction and enforceability of clause 6.1, whether PNHI had breached it, and the damages caused by the breach.

1. Construction. Liverpool remained a “Restricted Person” while Score Draw continued supplying it, including during the licence run-off period. After mid-September 2016, Liverpool was no longer a customer because there was no ongoing business relationship. A “Restricted Product” could include retro shirts after expiry of Score Draw’s formal licence, because the definition concerned goods of the type supplied under licence.
2. Restraint of trade. Applying the principles summarised in Cavendish Square Holdings BV v Makdessi [2012] EWHC 3582, clause 6.1 was enforceable. Score Draw had legitimate goodwill and customer connections to protect. The clause was limited to existing customers and retro shirts, and was freely agreed by sophisticated parties of comparable bargaining strength.
3. Defences. The October 2014 email did not waive the covenant or create an estoppel. PNHI also failed to establish any repudiatory breach by Score Draw. The relevant contractual obligations were principally owed to shareholders or directors, and the alleged conduct did not breach clause 5.2.3.
4. Breach. PNHI breached clause 6.1.1 by accepting and soliciting Liverpool’s business through PNH Ltd. The close corporate connection, common control, shared address and joint conduct meant that the acts were carried out jointly with or through another person within the covenant’s wording.
5. Causation and damages. Under Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602, Vasiliou v Hajigeorgiou [2010] EWCA Civ 1475 and Wellesley Partners LLP v Withers LLP [2015] EWCA Civ 1146, the relevant question was whether Liverpool had a real and substantial chance of renewing a comparable licence absent the breach. The chance was assessed at 80 per cent. Damages were £592,800 for lost licence-related profits and £17,450 for the Istanbul shirts, totalling £610,250.
6. Order. PNHI was ordered to pay £610,250, with interest to be determined, and an injunction was granted restraining further breaches of clause 6.1.