X-R Touring LLP v Joshua Javor & Anor

Whether a post-employment commission clause restrains trade depends on its practical effect at the date of contracting, not its label. The court should apply a broad and flexible rule of reason. It should consider whether the doctrine applies, whether the clause is accepted commercial machinery outside the doctrine, and, if engaged, whether the restraint is reasonable. An employer may have a legitimate interest in receiving the fruits of work done during company time. The clause must first receive a realistic construction that preserves validity where possible. Severance is permitted only where it causes no substantial alteration. If construction, practical effect or reasonableness raises a triable issue, summary disposal is inappropriate.

X-R, a concert booking agency, employed Joshua Javor on a fixed salary. His contract contained a 12-month non-solicitation covenant and a commission provision assigning to X-R monies related to bookings discussed, scheduled, made or contemplated before termination. Javor left to work for WME.

Kerr J, in [2024] EWHC 562 (KB), allowed the non-solicitation claim to proceed but struck out X-R’s claim for a declaration that the commission provision was valid and enforceable. He held that the provision was plainly an unreasonable restraint of trade. X-R appealed on six grounds, principally concerning restraint of trade, legitimate business interests, interpretation, severance and summary determination.

Majority disposition. Bean LJ allowed the appeal, and Phillips LJ agreed. Moylan LJ dissented and would have dismissed it.

1. Restraint of trade. The issue is determined by practical effect at the date of the contract, rather than by the form of the provision. The inquiry is one of substance and involves a broad and flexible rule of reason. The principles in Stenhouse Australia Ltd v Phillips [1974] AC 391; [1973] UKPC 1 and Quantum Actuarial LLP v Quantum Advisory Ltd [2022] 1 All ER (Comm) 473; [2021] EWCA Civ 227 did not make it inevitable that every commission clause of this kind was an unreasonable restraint. The evidence that the clause was industry standard was insufficient to resolve the issue summarily, but it created a triable question.
2. Legitimate business interest. The categories of legitimate interests are not closed. An employer may have a legitimate interest in securing the fruits of work performed by an employee during company time, including commission on a booking substantially advanced before departure. The judge’s failure to identify that interest was an error of principle. Whether the clause went no further than reasonably necessary remained a separate question.
3. Construction and severance. Under the validity principle in Egon Zehnder Ltd v Tillman [2020] AC 154; [2019] UKSC 32, a realistic construction preserving validity should be preferred where available. The commission provision could plausibly be confined to bookings involving Javor. Applying the blue-pencil test, the word discussed could not be severed because that would substantially change the clause, whereas or contemplated could potentially be removed without a major change in its overall effect.
4. Summary disposal. With the latter words severed, it was not plain and obvious that the provision was wider than reasonably necessary. The comparison with a non-dealing covenant, which would have imposed a more drastic restriction on earning capacity, reinforced the need for a full understanding of the industry and the clause’s operation. The claim was therefore unsuitable for strike-out or reverse summary judgment. Subsequent payments by WME were admissible only for the limited purpose of contradicting an assertion in open correspondence, not as an aid to construction or reasonableness.
5. Dissent. Moylan LJ considered that the provision was plainly a restraint of trade from its terms. It required payment regardless of Javor’s involvement or benefit, applied without a time limit, and sought 100% of commission. In his view it was far wider than necessary and could not be saved by severance without substantive rewriting.

• Court of Appeal (Civil Division): By majority, allowed X-R’s appeal against the strike-out of the commission claim.
• High Court of Justice, King’s Bench Division: In [2024] EWHC 562 (KB), Kerr J allowed the non-solicitation claim to proceed but struck out the claim seeking a declaration that the commission provision was valid and enforceable.