Alan James Boydell v NZP Limited & Anor

On an interim application to enforce an employment restraint, the court should determine the covenant’s proper construction where it can fairly do so. A claimant cannot establish a serious question to be tried if, even on the claimant’s assumed facts, the covenant is plainly unenforceable.

The ordinary commercial meaning of a covenant is preferred. Remote and fanciful applications outside the parties’ contemplation do not make it unreasonable. An unenforceable part may be severed where the blue-pencil test is met and its removal makes no major change to the overall legal effect of the post-employment restraints. The reasonable scope of a non-compete covenant remains fact-sensitive, particularly where the former employer has a specialised business and the employee held confidential information.

NZP, a pharmaceutical business within the ICE Pharma group, employed Dr Boydell as Head of Commercial—Speciality Products. After resigning, he intended to join Zellbios GmbH, a business within a competitor group, to head its bile acid business.

The claimant companies sought to enforce 12-month employment covenants restraining competition, solicitation and dealing. His Honour Judge Auerbach, sitting in the High Court, granted interim injunctions pending trial after severing parts of the non-compete covenant. He declined to enforce separate two-year restrictions in a shareholders’ agreement.

Dr Boydell appealed the injunctions, principally challenging construction, width and severance. The claimants sought permission to cross-appeal the severance of references to group companies. The central issue was whether the employment covenants were plainly unenforceable or could properly be enforced until trial.

1. Appeal dismissed unanimously. Bean LJ, with whom Coulson and Macur LJJ agreed, upheld the interim injunctions enforcing the 12-month employment covenants. Permission to advance the additional grounds of appeal, including delay, was refused. The claimants’ application for permission to cross-appeal the severance ruling was also refused.

2. The American Cyanamid serious-question threshold is not an inflexible substitute for deciding construction. In an employment case, particularly where the restraint may expire before trial, the court may construe the covenant at the interim stage and take a preliminary view of the merits. If, taking the claimant’s case at its highest, the covenant is plainly unenforceable, there is no serious issue to be tried. The court was able to determine the relevant construction without resolving material factual disputes.

3. Clause 3.1 as drafted broadly prevented involvement in any activity for the benefit of a company carrying on any competing activity. The judge was nevertheless entitled to sever the references which extended the restraint to other group companies, and the peripheral supply-chain wording. Applying the severance principles in Egon Zehnder Ltd v Tillman [2019] UKSC 32, the remaining covenant could stand without a major change in the overall legal effect of the restraints.

4. The suggested application of the covenant to employment with a retailer selling unrelated products was fanciful and outside the parties’ reasonable contemplation. It fell within the principle in Home Counties Dairies Ltd v Skilton [1970] 1 WLR 526. After severance, the non-compete was not plainly too wide: its validity depended on the specialised nature of NZP’s business, the direct competition involved, and Dr Boydell’s confidential knowledge. Wincanton Ltd v Cranny [2000] IRLR 716 and Ashcourt Rowan Financial Planning v Hall [2013] IRLR 637 concerned materially broader restraints.

5. The non-solicitation and non-dealing covenants were likewise not plainly invalid. Their hypothesised application to wholly unrelated business was unrealistic in the context of NZP’s specialised customer base. Damages were adequate for Dr Boydell because NZP offered his full salary during the restraint, whereas damages would plainly be inadequate for the claimants if confidential competitive harm occurred. The balance of convenience therefore favoured an injunction until trial.

• Court of Appeal (Civil Division) — dismissed Dr Boydell’s appeal and upheld the interim injunctions: [2023] EWCA Civ 373 .

• High Court of Justice, King’s Bench Division — His Honour Judge Auerbach granted interim injunctions enforcing the 12-month employment covenants after severance, but declined to enforce the two-year shareholders’ agreement restrictions. A report or neutral citation for that decision was not stated in the judgment.