(1) HANOVER INSURANCE BROKERS LIMITED v (2) CHRISTCHURCH INSURANCE BROKERS LIMITED [1993] EWCA Civ 2

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(ORDER OF MR. JUSTICE LATHAM)
[1993] EWCA Civ 2Venue Royal Courts of Justice, Strand, London WC2
Between
(1) HANOVER INSURANCE BROKERS LIMITED(2) CHRISTCHURCH INSURANCE BROKERS LIMITEDPlaintiffsAppellants(1) MONTY SCHAPIRO(2) PAUL ANTHONY ANSCOMBE(3) PETER WILSON ROSE(4) DAVID GEORGE KNOWLESDefendants/Appellants
Before
Lord Justice DillonLord Justice NolanMR. D. SEROTA QC and MR. P. LOWENSTEIN (Instructed by Messrs. Herbert Smith, London EC2A 2HS) appeared on behalf of the Plaintiffs/Appellants.MR. A.J. MCGREGOR and MR. S. MELIGAN (Instructed by Paisner & Co., London EC4A 2DQ) appeared on behalf of the Defendant/Appellants.Date 20 August 1993
[1]Wednesday 20th August 1993 JUDGMENT LORD JUSTICE DILLON: This is an appeal by the defendants in the action against a decision by Latham J sitting as judge in chambers on 6th August 1993. There is also a cross-appeal by the plaintiffs. The background to the action is that the four defendants were before the end of June 1993, or in the case of the fourth defendant a date in July 1993, employed by the first plaintiff, Hanover Insurance Brokers Ltd ("HIB") under service contracts. HIB, as the name suggests, carries on business as insurance brokers. It is a subsidiary (75%) of a company called Hanover Acceptances Ltd ("Hanover") which has a wide range of other subsidiaries which carry on a variety of different businesses. Hanover can, it seems, be described by the possibly pejorative description of a "conglomerate". The first defendant, Mr. Schapiro, was Chairman of HIB and consultant to it. The second defendant, Mr. Anscombe, was Managing Director. The third defendant, Mr. Rose, was a director and was concerned with pensions in the life assurance department. The fourth defendant, Mr. Knowles, was not a director and was concerned in some capacity not disclosed in the evidence in management. The total staff, including directors, of HIB amounted to 41 people. Each of the defendants had a service agreement with HIB which contained provisions restricting the defendant's activities during the 12 months after the termination of his employment. This action was brought to enforce those restrictions during the relevant 12 month periods. The writ was issued on 6th July 1993. In effect, the four defendants are seeking to carry on a business of insurance brokers through some other company and the plaintiffs assert that they are acting in breach of the restrictions. The service agreements of the four defendants, though substantially similar, are not identical and in consequence the issues arising on this appeal are not the same in respect of all defendants. Mr. Schapiro's final service agreement is dated 13th October 1989. It replaced earlier service agreements starting with one entered into in December 1986 in anticipation of his entering the service of HIB on 1st January 1987. The relevant restriction is contained in clause 6 which provides so far as material as follows:
"6. In the event of the termination of the arrangements you will not for a period of 12 months from the date of such termination either on your own account or jointly with or on behalf of any other person firm or company directly or indirectly: (a) canvass solicit or endeavour to take away from the company the business of (i) any of its customers or clients who have been its customers or clients during the period of 12 months immediately preceding the termination of these arrangements. ... (b) Solicit or entice any employees of the company to the intent or effect that such employee terminates that employment."
Mr. Schapiro also had a service agreement, also dated 13th October 1989, with a subsidiary of HIB, Hanover Insurance Brokers (Isle of Man) Ltd. which also carried on business as insurance brokers. But the Isle of Man service agreement did not contain any contractual restrictions to take effect after termination of the agreement. Mr. Anscombe's service agreement does not materially differ from Mr. Schapiro's. Mr. Rose's and Mr. Knowles' service agreements are in a slightly different form. It appears to have been the desire of the employers group to extend the benefit of the service agreement from HIB alone to Hanover and all its subsidiaries. It is sufficient to take Mr. Rose's service agreement, dated 21st December 1987. The relevant clause reads so far as material:
"In the event of the termination of your employment with us you will not for the period of 12 months from the date of such termination either on your own account or jointly with or on behalf of any other person firm or company directly or indirectly: (a) canvass solicit or endeavour to take away from Hanover Acceptances Ltd. and or Subsidiaries ("
Hanover") the business of: (i) any of Hanover's customers of clients who have been Hanover's customers or clients during the period of 12 months immediately preceding the termination of your employment. ... (b)solicit or entice any employee of Hanover to the intent or effect that such employee terminates that employment." The procedural history is as follows. On the day the writ was issued, 6th July 1993, the plaintiffs, erroneously supposing that all four service agreements were in the terms of Mr. Schapiro's, obtained ex parte from Mitchell J, on the usual undertakings, an injunction restraining each of the defendants until 29th June 1994 in the terms of (a) and (b) of the clause in Mr. Schapiro's agreement set out above. There was other relief not material to this appeal and the order gave the defendants liberty to apply on 48 hours notice to set aside or vary the order. On 19th July 1993, both parties were before Scott Baker J. He fixed the hearing of the defendants' application to discharge or vary the order of Mitchell J as vacation business to be heard in August and he gave interim directions. He also varied the order of Mitchell J by deleting the words in paragraph 1(a) "or endeavouring to take away from the plaintiffs and each of them". We do not have any judgment to explain why that variation was made at that juncture. The application for discharge or variation of the injunctions was accordingly heard in August by Latham J. It is from his judgment, given on 6th August, that the present appeal and cross-appeal are brought. The substance of the order of Latham J is as follows: 1. He dismissed the application of Mr. Schapiro and Mr. Anscombe to discharge the injunction in paragraph 1(a) of the order and he reinstated the words deleted by Scott Baker J. 2. He discharged the order made under paragraph 1(b) of the order of Mitchell J. That is concerned with soliciting or enticing employees. 3. He discharged the injunctions made against Mr. Rose and Mr. Knowles in the order of Mitchell J, but substituted an injunction in the terms of paragraph 1(a) of the order of Mitchell J against both of them. The point of this apparent complication, which is irrelevant for the purpose of this appeal, was that the original injunction against Mr. Rose and Mr. Knowles had been founded on the wrong service agreements. 4. He made provision for costs and certified that the action was fit for a speedy trial. The approach of Latham J was expressed to be on a strict American Cyanamid basis on the footing that on the information then available, if he directed a speedy trial it would be possible to have the action tried as a floater over five days in November or December of this year. The defendants' subsequent enquiries suggested that the trial might be somewhat later in January or February of next year. In these circumstances, the issues arise are as follows. On the cross-appeal the plaintiffs seek to reinstate the injunction under paragraph 1(b) of the order of Mitchell J; that is to say the injunction restraining the defendants from soliciting or enticing any employees of HIB to the intent or effect that they terminate their employment. The Appeal 1. (In some ways this is the least important issue on the appeal) all the defendants submit that the words in paragraph 1(a) of the order which were deleted by Scott Baker J should again be deleted, because their meaning is too uncertain for them to be enforced by an injunction. 2. Mr. Schapiro submits that the agreement in Clause () of his service agreement, paragraph 1(a) of the order, is unreasonably wide and therefore void as an unreasonable restraint of trade on an employee, because it would preclude him from continuing to act for his personal connection; that is to say those who were his clients or customers before he entered into any service agreement with HIB and who he then introduced to HIB as customers for HIB. 3. Mr. Rose and Mr. Knowles submit that paragraph 1(a) of the order is unreasonably wide and therefore void because the reference in their service agreements is not to soliciting or taking away from HIB the business of HIB's customers, but much more widely it is a reference to soliciting or taking away from Hanover, or its subsidiaries, the business of Hanover or its subsidiaries' customers. 4. Mr. Rose and Mr. Knowles also submit that paragraph 1(a) of the order is unreasonably wide and therefore void because the ban on canvassing or soliciting or endeavouring to take away the business of customers is not limited to customers whom they, Mr. Rose and Mr. Knowles, knew to be customers of HIB during the last 12 months of their respective employments with HIB. This is a point which was not taken in the court below. A further point which was raised and discussed in argument is that there is no evidence that Mr. Knowles had any such contact with customers or knowledge of trade secrets of HIB as would warrant any restraints being enforced against him. No such point singling out Mr. Knowles position was, however, taken in the court below or in the notice of appeal. Had it been taken, evidence of Mr. Knowles' position, whatever it may have been, could no doubt have been given. This is not a point that this court should entertain. I turn to consider the points in the order I set out above. The cross appeal The effect of the injunction under paragraph 1(b) of the order would be to prevent the defendants, as employers in the insurance brokerage business in competition with HIB which they are entitled to set up, from poaching employees from HIB. But the difficulties in law in the way of a non poaching agreement between employers are very clearly explained in the decision of the Court in Kores Manufacturing Co. Ltd. v Kolok Manufacturing Co. Ltd [1959] Ch 109. In particular, the employee has the right to work for the employer he wants to work for if that employer is willing to employ him. Moreover the restriction as drawn would apply to all employees of HIB irrespective of expertise or juniority and would apply to those who were employees at the time of the solicitation or enticement, even if they had only become employees after all the defendants had left HIB's service. HIB cannot impose a mere covenant against competition on the defendants. That is why a covenant not to canvass persons who had become customers of HIB only after the defendants had ceased to be employees of HIB would be invalid: (see Konski v Peet [1915] 1 Ch 530). The same must be the case with employees. I agree with the judge on this and would dismiss the cross-appeal. Mr. Serota submits that an insurance broker depends on its staff and the team will of its staff and that the goodwill of an insurance broker's business depends on its staff. So in a sense it does, as with any other company, but that does not make the staff an asset of the company like apples or pears or other stock in trade, nor does it entitle HIB to impose a covenant against competition on the defendants. The Appeal 1. The defendants say that they do not know what the words "or endeavour to take away from HIB" mean if they mean something more than "canvass or solicit". The judge dealt with this by holding that the phrase "endeavouring to take away" connotes positive action which may not constitute direct persuasion of the potential customer but nonetheless constitutes a positive act to produce that result which might otherwise, in the hands of a clever lawyer, be capable of being described as something other than soliciting or canvassing. With all respect to the judge, I do not find that at all illuminating, not least in its reference to what a clever lawyer might seek to say. The defendants know sufficiently well where they are with canvassing and soliciting. If they do not themselves or by their agents make the approach they are not canvassing or soliciting the person in question. But would they be endeavouring to take away the business if the person makes the approach and they respond favourably or even enthusiastically and business is done on terms that undercut HIB. To resolve this Mr. Serota has submitted that the words are only intended to prevent active seeking out of HIB's clients. That, in my judgment, is sufficient clarification and with that clarification the words should stand in the injunction. 2. Mr. Schapiro who is now aged 70 had, before he joined the service of HIB, long and successful experience of acting as an insurance broker in South Africa. He, of course, did so not as a sole trader but through various corporate bodies. He thereby built up a trading relationship with many South African individuals and companies who wanted the services of an experienced insurance broker. It was because of these contacts that HIB desired to recruit Mr. Schapiro. HIB wanted to expand its business by acquiring extra customers outside the Hanover Group and it wanted Mr. Schapiro to provide those customers from his connections. Under his original letter of engagement of 1st December 1986 he was to use his best endeavours to (a) improve the profitability of the company and (b) solicit and introduce profitable new business including life and pensions to it. In return, he received a substantial salary with a profit related bonus and participation in a share option scheme. No doubt he performed his duties until this year to everyone's satisfaction but those he introduced became HIB's customers or clients. He now says that it is an unreasonable restraint of trade if he cannot take the customers he introduced away with him now that he has resigned from the service of HIB. I do not see anything unreasonable in it. The claim is founded entirely on the decision of this court in M. & S. Drapers (A Firm) v Reynolds [1957] 1 WLR 9. In that case a collector salesman entered the employment of a firm of credit drapers at a weekly wage of £10. He brought with him the connection of customers acquired in previous employments. He entered into a restrictive covenant that he would not for a period of 5 years, following the termination of his service, canvass or solicit orders in the way of the business of a credit draper from anyone who had during the three years immediately preceding such termination, been a customer upon whom he, the servant, had called in the course of his duties for the firm. It was held that the covenant was unreasonably restrictive having regard to the firm's business and the salesman's employment, to the duration of the restriction and to the circumstances that a large proportion of the customers covered by the covenant were persons who had formed the salesman's connection before he entered the firm's employment. I get the feeling that the Court regarded the salesman's connection when he entered the employer's service as the tools of his trade of which he could not reasonably be deprived when he left that service. Much turned on the unreasonable length of the restriction which undoubtedly justified the actual decision. Apart from that, however, the court distinguished the case of the collector salesman from a case of a managing director in Gilford Motor Co. Ltd v Horne [1933] Ch 935 who had been restrained from soliciting customers of the company of which he had been managing director. Hodson LJ said at the foot of page 13:
"The first task of the court it has been said in these cases is to ascertain the nature of the master's business and of the servant's employment. The managing director is not regarded in the same light as the traveller or canvasser. Each case must be considered in the light of its own circumstances."
Denning LJ adopted that reasoning and said at the top of page 19 that:
"A managing director can look after himself. A traveller is not so well placed to do so. The law must protect him."
On that basis if, even apart from the problem of the five year duration, the restriction in M & S Drapers v Reynolds was not valid the case is distinguishable from the present case. Mr. Schapiro is not a traveller or collector salesman. He was the Chairman and at least as well placed as the managing director. I would reject this point. 3. The objection is that the restraint on canvassing of customers is inadmissibly wide because it is not limited to customers or clients of HIB by which company alone Mr. Rose and Mr. Knowles were employed, but purports to extend to customers or clients of Hanover and all Hanover's other subsidiaries. It is conceded however by Mr. McGregor for Mr. Rose and Mr. Knowles that the "business" in the phrase "canvass solicit or endeavour to take away the business" must refer to the business of insurance brokerage and not to any other business for instance in the food industry or financial services which is carried on by some subsidiary of Hanover. The concession is plainly right in the light of the current approach of the court in construing restrictive covenants on employees as indicated in cases such as Home Counties Dairies Ltd. v Skilton [1971] WLR 526. It must follow, in my judgment, that the canvassing and soliciting is only to apply in relation to insurance broking activities. Placing Mr. McGregor's submission to the contrary, it must follow that the customers or clients who cannot be canvassed or solicited must be limited to customers or clients who, during the relevant 12 month period, had been customers or clients for insurance broking services. The covenant does not extend to prevent Mr. Rose or Mr. Knowles soliciting business of an insurance broking nature from persons who, during the last 12 months of Mr. Rose's or Mr. Knowles' employment, were customers for food products, for instance, of a subsidiary of Hanover engaged in the food industry but who have never been customers for insurance broking services. On the facts the only subsidiary of Hanover apart from HIB which was clearly engaged in insurance broking is the Isle of Man company, which I have already mentioned, which is incorporated and registered in the Isle of Man. There is also a passing reference in the accounts of HIB to a wholly owned subsidiary of HIB called Chesterfield Management Ltd. but there is no evidence at all of the extent, if any, of that company's insurance broking activities. So far as the Isle of Man company is concerned, Mr. Schapiro's service agreement with it was limited to the carrying out of services in all the countries and territories of the world, excluding the United Kingdom, and the agreement expressly provided that nothing in the agreement should require or permit him to perform services in the United Kingdom. In those circumstances, I would not regard the Isle of Man company as relevant at all to the validity of the restrictions on canvassing or soliciting imposed on Mr. Rose or Mr. Knowles by their service agreements. Also, I would not regard those restrictions as invalidated as a matter of law by the mere possibility that Chesterfield Management Ltd. may have carried out some insurance broking activities of wholly unknown extent. On the facts of this case, therefore, the introduction into the restriction of the reference to Hanover and/or its subsidiaries adds nothing to what the position would have been if only HIB had been named. Accordingly, there is nothing, in my judgment, in point 3 to absolve Mr. Rose or Mr. Knowles from their obligations. 4. The point here is that there is nothing in the restriction for 12 months in the service agreements on canvassing or soliciting of customers for the purposes of insurance broking to limit the restriction to customers who Mr. Rose and Mr. Knowles knew to be customers of HIB during the last 12 months of their respective employments with HIB. This point is not taken on behalf of Mr. Schapiro or Mr. Anscombe because it is accepted that it is at least clearly arguable that as chairman and managing director of HIB each had full knowledge of every aspect of HIB's business and activities. The validity of the point depends on the reconciliation of two decisions of this Court. The first is G.W. Plowman & Son Ltd. v Ash [1964] 1 WLR 568 decided by Harman, Davies and Russell LLJ. In that case the plaintiff employers carried on business in and around Spalding in Lincolnshire as corn and agricultural merchants and animal feeding stuff manufacturers. The defendant was one of five sales representatives acting for the plaintiffs in South Lincolnshire and the surrounding area. His service agreement contained a restriction for a period of two years from the termination of his employment on his soliciting any farmer or market gardener who should, at any time during the employment of the defendant, have been a customer of the employers. So far as material for the present case this Court held that that restriction was not too wide and therefore void because it was not confined to customers known to the defendant. The Court followed observations of Lawrence LJ in Gilford Motor Co. v. Horne [1933] Ch 935 at 964 to the effect that the covenant was not invalidated by the possibility that the person under the restriction might innocently and inadvertently breach the injunction by canvassing a person whom he had not realised had been a customer at the relevant time. The Court also pointed out that as the nature of the trade involved the defendant in going round and calling on farmers and market gardeners, the defendant could easily extricate himself from his difficulties, such as they were, by asking any farmer or market gardener he called on whether he had been a customer of the plaintiffs at the relevant time. The other decision of this Court is Marley Tile Co. v Johnson [1982] IRLR 75 decided by Denning MR and Eveleigh and Templeman LLJ. In that case the employers were the well known roofing and tiling firm, Marley Tiles. The area within which the restrictions imposed, including a restriction on canvassing soliciting or dealing with customers, were to apply was to the whole of Devon and Cornwall and within that area the plaintiffs had 2,500 customers. The covenant against soliciting was, as I have indicated, also a covenant against dealing. Denning MR regarded the defendant as a "small" man in a small way of business in South West Cornwall and he seems to have regarded the case as a David and Goliath situation. He said at page 77:
"In these circumstances, it seems to me that it would be quite wrong to restrain Mr. Johnson from having any dealings with any of the 2500 customers in this large area. It goes beyond all bounds. Mr. Johnson cannot possibly have known of or come into contact with more than a small percentage of them. Even if it were 15 or 16%, most of those would be in south west Cornwall. Mr. Johnson would be restrained from dealing for a whole year with those 2500. Taking the size of the area, the number of customers, the class of products - because Marley have many lines other than roofing and tiling - it seems to me that the covenant is too wide to be reasonable."
Eveleigh LJ said at paragraph 21:
"In so far as that is concerned - and, bearing in mind the hour I will not say what I had intended to say on these subjects - suffice it to say that I regard the two clauses relied upon, 10(a) and 10(c), as too wide; and I will deal with it again, in view of the hour, compendiously by saying that it in effect prevents the defendant from dealing as a manager of a timber yard or a builder's merchant with products which might be used for purposes far removed from that of roofing - for example, aluminium nails, which are a substantial part of the business, and timber ranging from 25mm by 50mm downwards. Thus it would be - to advert only to 10(c) - that, if a greengrocer's shop had been re-roofed by the plaintiff, the defendant, in the management of a small "do-it-yourself" shop, could no sell 25mm by 50mm timber to be used for vegetable and fruit racks in the greengrocer's shop. It seems to me that is much too wide, and for the reasons stated by my Lord I would allow this appeal."
Templeman LJ said in paragraph 22:
"In the absence of any evidence that the defendant had a substantial influence over this massive 2500 customers, I agree that on the present evidence there is no justification for protecting the plaintiffs against the competition of the defendant, particularly having regard to the fact that the consequences will simply be to condemn him to unemployment for 12 months."
From the nature of the business of the employer and of the products, as to which the defendant was restricted by a covenant which was a covenant against dealing as well as against canvassing and soliciting, this was a very different case from the present case. Its message is that every case must be dealt with on its facts. It does not in any way impair the authority of Plowman v Ash . In the present case we know that the total of HIB;s insurance broking customers was 2,000 in the year before the termination of the defendants' employment with HIB. We do not know how many of those customers were known to Mr. Rose or Mr. Knowles or had had any contact with either of them. We were indeed invited to admit fresh evidence by affidavit as to Mr. Rose and Mr. Knowles knowledge of customers. But we refused to admit that evidence because the affidavits came at a very late stage and admission of them would have required an adjournment which, on the state of the lists, would have to have been until October to enable HIB to answer the affidavits. We know that this point 4 is not relied on by Mr. Schapiro or Mr. Anscombe because they were chairman and managing director of HIB: compare Gilford Motor Co. v Horne already mentioned. We also know that Mr. Rose was a director of HIB, but we do not know on what factual basis a distinction is drawn by the defendants between his position and that of Mr. Schapiro and Mr. Anscombe. Also, as I have already indicated, we have no information at all about Mr. Knowles. In these circumstances, and as point 4 was not taken in the court below, it would not, in my judgment, be right for us to decide the point on this interlocutory appeal. Indeed, we do not have enough information to decide it; in particular, information about how the insurance broking business was carried on and what as a practical matter the positions of Mr. Rose and Mr. Knowles were. For the foregoing reasons I would dismiss both the defendant's appeal and the plaintiff's cross-appeal. LORD JUSTICE NOLAN : I agree and wish to add only a short judgment of my own. General Approach The employments of the first three defendants with the plaintiffs came to an end at or about the end of June of this year. The employment of the fourth defendant, Mr. Knowles, came to an end of 27th July. The trial of the action is not expected to take place until November or December. It follow that if and in so far as the interlocutory injunctions are upheld the plaintiff will have succeeded in respect of one third or more, or in Mr. Knowles' case one quarter or more, of the 12 month period for which the covenants run, even if the plaintiff fails at the trial. Conversely, if the interlocutory injunctions are set aside and the plaintiff succeeds at the trial it will have lost irretrievably a substantial part of the benefit of the covenant. It is not suggested that either the plaintiff or the defendants can be adequately compensated in damages for any loss suffered in the mean time. It must, I think, be assumed that the first three or four months of the 12 month period are at least as important to the parties as any of the later months. For these three or four months or more the interlocutory decision is effectively the final decision. This is a factor which, as it seems to me, must be taken into account in striking the interlocutory balance. It is one of the practical realities of the matter. This is not a case like Lansing Linde v Kerr [1991] 1 WLR 251 in which no trial was expected to take place until the 12 month period had almost expired. There is not, therefore, the same need as there was in that case for the court to take account of the plaintiff's prospects of success at the interlocutory stage. The time factor, given the time scale such as that of the present case, must none the less carry some weight in its own right. Having said that, I must add at once however that I have not found it a decisive factor in the particular balance which we have to strike. The words "endeavour to take away the business" I am unable to accept the defendants' submission that these words must necessarily be struck out for want of clarity or for ambiguity. They are simple English words which any businessman should have been able to understand without difficulty. Mr. Sorota concedes that they should not be taken to rule out dealings between the defendants and customers of the plaintiff but merely to prevent the defendants from approaching such customers with a view to doing insurance broking business with them. For my part, I would have taken the same view without the aid of the concession. I accept that argument might arise over, for example, the wording of advertisements by the defendants. I do not accept that this court should be expected to anticipate and forestall such arguments by exegesis or paraphrase of the words in question. Everything would depend upon the nature and the content of the particular advertisement. No-one would be better placed than the defendants themselves to know what it is designed to achieve. The First Defendant's Separate Ground of Appeal There is no dispute about the importance of the part played by Mr. Schapiro in building up the business of the plaintiffs during the six years for which he served as its chairman. His departure from the service of the plaintiff must have inflicted upon it a loss of corresponding magnitude and one which the restrictive covenants, included in his successive contracts of employments since 1986, must have anticipated and attempted to limit. His case is comparable to that of Mr. Reynolds, the travelling salesman in M & S Drapers v Reynolds [1957] 1 WLR 9 in that both men brought to their employments the benefit of valuable customers, but the two cases are by no means on all fours. I have in mind the distinction drawn by Hodgson LJ at page 13 of the report and by Denning LJ at page 19 between the inhibiting effect of such a covenant upon a travelling salesman as compared with its effect on a managing director. I bear in mind also the fact that the covenant in that case was to last for five years. There is a serious issue here to try in the present case. The Separate Grounds of Appeal of the Third and Fourth Defendants. I have found the question of construction the most difficult point in the case. At first sight, if one approaches it without predispositions as to its legality or illegality, the covenant in the agreements of the third and fourth defendants is for the protection of the Hanover Acceptances Group and all its businesses. As such, it is plainly and irremediably unlawful. But Mr. McGregor accepts that in its context the covenant must be construed as if business meant only insurance broking business. If that is right then the objection to the clause largely falls away. I agree with Mr. Sorota's submission that if "business" means only insurance broking business then "customer" must mean only insurance broking customers. One is not, therefore, contemplating a monolithic group but only such member or members of it as are concerned with insurance broking. At the hearing below, and in the skeleton arguments put before us, it was evidently assumed that Hanover Insurance Brokers Ltd. was the only company concerned. In the course of argument before us reference was also made to the Group's Isle of Man insurance broking company and to the Chesterfield Management Ltd, a subsidiary of HIB whose principal activity, nominally at least, is insurance broking. The third and fourth defendants were not, however, employed by the Isle of Man company and nothing is known of their involvement, if any, with the Chesterfield Management Ltd. In these circumstances, it seems to be arguable to say no more that the covenant, entered into, as it was, between the third and fourth defendants on the one hand, and HIB alone on the other, should be construed as applying only to the business and to the customers of that company. In urging us to take the contrary view, Mr. McGregor relied heavily on the recent decision of this Court in J. A. Mont (UK) Ltd v Mills [1993] IRLR 172. The facts of that case are plainly distinguishable, but I would accept that there is an apparent difference between the unsympathetic approach there adopted towards the construction of restrictive covenants of excessive width and the more flexible and supportive approach adopted by Denning MR and, although less explicitly, by Megaw LJ in Littlewoods Organisation Ltd, v Harris [1987] 1 WLR 1472. If this difference is to be reconciled or resolved, however, this should be done by a full court at a final hearing. Of the new point sought to be taken in this Court by the third and fourth defendants to the effect that the covenant could only properly operate in respect of customers of HIB known to them, I would simply say in agreement with Dillon LJ that this is not a point which can properly be taken for the first time on appeal. It raises a question of law depending on the answer to a disputed question of fact as the extent of their acquaintance with customers. The defendants did not seek to raise the point below and should not be allowed to raise it now. The Cross Appeal I agree with the judgment of Dillon LJ and have nothing to add. As I have indicated, I concur in the order proposed.[2]Mr. Schapiro's final service agreement is dated 13th October 1989. It replaced earlier service agreements starting with one entered into in December 1986 in anticipation of his entering the service of HIB on 1st January 1987.[3]The relevant restriction is contained in clause 6 which provides so far as material as follows:
"6. In the event of the termination of the arrangements you will not for a period of 12 months from the date of such termination either on your own account or jointly with or on behalf of any other person firm or company directly or indirectly: (a) canvass solicit or endeavour to take away from the company the business of (i) any of its customers or clients who have been its customers or clients during the period of 12 months immediately preceding the termination of these arrangements. ... (b) Solicit or entice any employees of the company to the intent or effect that such employee terminates that employment."
[4]Mr. Schapiro also had a service agreement, also dated 13th October 1989, with a subsidiary of HIB, Hanover Insurance Brokers (Isle of Man) Ltd. which also carried on business as insurance brokers. But the Isle of Man service agreement did not contain any contractual restrictions to take effect after termination of the agreement.[5]Mr. Anscombe's service agreement does not materially differ from Mr. Schapiro's. Mr. Rose's and Mr. Knowles' service agreements are in a slightly different form. It appears to have been the desire of the employers group to extend the benefit of the service agreement from HIB alone to Hanover and all its subsidiaries. It is sufficient to take Mr. Rose's service agreement, dated 21st December 1987. The relevant clause reads so far as material:
"In the event of the termination of your employment with us you will not for the period of 12 months from the date of such termination either on your own account or jointly with or on behalf of any other person firm or company directly or indirectly: (a) canvass solicit or endeavour to take away from Hanover Acceptances Ltd. and or Subsidiaries ("
Hanover") the business of: (i) any of Hanover's customers of clients who have been Hanover's customers or clients during the period of 12 months immediately preceding the termination of your employment. ... (b)solicit or entice any employee of Hanover to the intent or effect that such employee terminates that employment."[6]The procedural history is as follows. On the day the writ was issued, 6th July 1993, the plaintiffs, erroneously supposing that all four service agreements were in the terms of Mr. Schapiro's, obtained ex parte from Mitchell J, on the usual undertakings, an injunction restraining each of the defendants until 29th June 1994 in the terms of (a) and (b) of the clause in Mr. Schapiro's agreement set out above. There was other relief not material to this appeal and the order gave the defendants liberty to apply on 48 hours notice to set aside or vary the order.[7]On 19th July 1993, both parties were before Scott Baker J. He fixed the hearing of the defendants' application to discharge or vary the order of Mitchell J as vacation business to be heard in August and he gave interim directions. He also varied the order of Mitchell J by deleting the words in paragraph 1(a) "or endeavouring to take away from the plaintiffs and each of them".[8]We do not have any judgment to explain why that variation was made at that juncture. The application for discharge or variation of the injunctions was accordingly heard in August by Latham J. It is from his judgment, given on 6th August, that the present appeal and cross-appeal are brought. The substance of the order of Latham J is as follows: 1. He dismissed the application of Mr. Schapiro and Mr. Anscombe to discharge the injunction in paragraph 1(a) of the order and he reinstated the words deleted by Scott Baker J. 2. He discharged the order made under paragraph 1(b) of the order of Mitchell J. That is concerned with soliciting or enticing employees. 3. He discharged the injunctions made against Mr. Rose and Mr. Knowles in the order of Mitchell J, but substituted an injunction in the terms of paragraph 1(a) of the order of Mitchell J against both of them. The point of this apparent complication, which is irrelevant for the purpose of this appeal, was that the original injunction against Mr. Rose and Mr. Knowles had been founded on the wrong service agreements. 4. He made provision for costs and certified that the action was fit for a speedy trial.[9]The approach of Latham J was expressed to be on a strict American Cyanamid basis on the footing that on the information then available, if he directed a speedy trial it would be possible to have the action tried as a floater over five days in November or December of this year. The defendants' subsequent enquiries suggested that the trial might be somewhat later in January or February of next year. In these circumstances, the issues arise are as follows. On the cross-appeal the plaintiffs seek to reinstate the injunction under paragraph 1(b) of the order of Mitchell J; that is to say the injunction restraining the defendants from soliciting or enticing any employees of HIB to the intent or effect that they terminate their employment. The Appeal 1. (In some ways this is the least important issue on the appeal) all the defendants submit that the words in paragraph 1(a) of the order which were deleted by Scott Baker J should again be deleted, because their meaning is too uncertain for them to be enforced by an injunction. 2. Mr. Schapiro submits that the agreement in Clause () of his service agreement, paragraph 1(a) of the order, is unreasonably wide and therefore void as an unreasonable restraint of trade on an employee, because it would preclude him from continuing to act for his personal connection; that is to say those who were his clients or customers before he entered into any service agreement with HIB and who he then introduced to HIB as customers for HIB. 3. Mr. Rose and Mr. Knowles submit that paragraph 1(a) of the order is unreasonably wide and therefore void because the reference in their service agreements is not to soliciting or taking away from HIB the business of HIB's customers, but much more widely it is a reference to soliciting or taking away from Hanover, or its subsidiaries, the business of Hanover or its subsidiaries' customers. 4. Mr. Rose and Mr. Knowles also submit that paragraph 1(a) of the order is unreasonably wide and therefore void because the ban on canvassing or soliciting or endeavouring to take away the business of customers is not limited to customers whom they, Mr. Rose and Mr. Knowles, knew to be customers of HIB during the last 12 months of their respective employments with HIB. This is a point which was not taken in the court below.[10]A further point which was raised and discussed in argument is that there is no evidence that Mr. Knowles had any such contact with customers or knowledge of trade secrets of HIB as would warrant any restraints being enforced against him. No such point singling out Mr. Knowles position was, however, taken in the court below or in the notice of appeal. Had it been taken, evidence of Mr. Knowles' position, whatever it may have been, could no doubt have been given. This is not a point that this court should entertain.[11]I turn to consider the points in the order I set out above. The cross appeal[12]The effect of the injunction under paragraph 1(b) of the order would be to prevent the defendants, as employers in the insurance brokerage business in competition with HIB which they are entitled to set up, from poaching employees from HIB. But the difficulties in law in the way of a non poaching agreement between employers are very clearly explained in the decision of the Court in Kores Manufacturing Co. Ltd. v Kolok Manufacturing Co. Ltd [1959] Ch 109. In particular, the employee has the right to work for the employer he wants to work for if that employer is willing to employ him. Moreover the restriction as drawn would apply to all employees of HIB irrespective of expertise or juniority and would apply to those who were employees at the time of the solicitation or enticement, even if they had only become employees after all the defendants had left HIB's service. HIB cannot impose a mere covenant against competition on the defendants. That is why a covenant not to canvass persons who had become customers of HIB only after the defendants had ceased to be employees of HIB would be invalid: (see Konski v Peet [1915] 1 Ch 530). The same must be the case with employees. I agree with the judge on this and would dismiss the cross-appeal.[13]Mr. Serota submits that an insurance broker depends on its staff and the team will of its staff and that the goodwill of an insurance broker's business depends on its staff. So in a sense it does, as with any other company, but that does not make the staff an asset of the company like apples or pears or other stock in trade, nor does it entitle HIB to impose a covenant against competition on the defendants. The Appeal 1. The defendants say that they do not know what the words "or endeavour to take away from HIB" mean if they mean something more than "canvass or solicit". The judge dealt with this by holding that the phrase "endeavouring to take away" connotes positive action which may not constitute direct persuasion of the potential customer but nonetheless constitutes a positive act to produce that result which might otherwise, in the hands of a clever lawyer, be capable of being described as something other than soliciting or canvassing. With all respect to the judge, I do not find that at all illuminating, not least in its reference to what a clever lawyer might seek to say.[14]The defendants know sufficiently well where they are with canvassing and soliciting. If they do not themselves or by their agents make the approach they are not canvassing or soliciting the person in question. But would they be endeavouring to take away the business if the person makes the approach and they respond favourably or even enthusiastically and business is done on terms that undercut HIB. To resolve this Mr. Serota has submitted that the words are only intended to prevent active seeking out of HIB's clients. That, in my judgment, is sufficient clarification and with that clarification the words should stand in the injunction. 2. Mr. Schapiro who is now aged 70 had, before he joined the service of HIB, long and successful experience of acting as an insurance broker in South Africa. He, of course, did so not as a sole trader but through various corporate bodies. He thereby built up a trading relationship with many South African individuals and companies who wanted the services of an experienced insurance broker. It was because of these contacts that HIB desired to recruit Mr. Schapiro. HIB wanted to expand its business by acquiring extra customers outside the Hanover Group and it wanted Mr. Schapiro to provide those customers from his connections.[15]Under his original letter of engagement of 1st December 1986 he was to use his best endeavours to(a) improve the profitability of the company and(b) solicit and introduce profitable new business including life and pensions to it. In return, he received a substantial salary with a profit related bonus and participation in a share option scheme.[16]No doubt he performed his duties until this year to everyone's satisfaction but those he introduced became HIB's customers or clients. He now says that it is an unreasonable restraint of trade if he cannot take the customers he introduced away with him now that he has resigned from the service of HIB. I do not see anything unreasonable in it. The claim is founded entirely on the decision of this court in M. & S. Drapers (A Firm) v Reynolds [1957] 1 WLR 9. In that case a collector salesman entered the employment of a firm of credit drapers at a weekly wage of £10. He brought with him the connection of customers acquired in previous employments. He entered into a restrictive covenant that he would not for a period of 5 years, following the termination of his service, canvass or solicit orders in the way of the business of a credit draper from anyone who had during the three years immediately preceding such termination, been a customer upon whom he, the servant, had called in the course of his duties for the firm. It was held that the covenant was unreasonably restrictive having regard to the firm's business and the salesman's employment, to the duration of the restriction and to the circumstances that a large proportion of the customers covered by the covenant were persons who had formed the salesman's connection before he entered the firm's employment. I get the feeling that the Court regarded the salesman's connection when he entered the employer's service as the tools of his trade of which he could not reasonably be deprived when he left that service. Much turned on the unreasonable length of the restriction which undoubtedly justified the actual decision. Apart from that, however, the court distinguished the case of the collector salesman from a case of a managing director in Gilford Motor Co. Ltd v Horne [1933] Ch 935 who had been restrained from soliciting customers of the company of which he had been managing director. Hodson LJ said at the foot of page 13:
"The first task of the court it has been said in these cases is to ascertain the nature of the master's business and of the servant's employment. The managing director is not regarded in the same light as the traveller or canvasser. Each case must be considered in the light of its own circumstances."
[17]Denning LJ adopted that reasoning and said at the top of page 19 that:
"A managing director can look after himself. A traveller is not so well placed to do so. The law must protect him."
[18]On that basis if, even apart from the problem of the five year duration, the restriction in M & S Drapers v Reynolds was not valid the case is distinguishable from the present case. Mr. Schapiro is not a traveller or collector salesman. He was the Chairman and at least as well placed as the managing director. I would reject this point. 3. The objection is that the restraint on canvassing of customers is inadmissibly wide because it is not limited to customers or clients of HIB by which company alone Mr. Rose and Mr. Knowles were employed, but purports to extend to customers or clients of Hanover and all Hanover's other subsidiaries. It is conceded however by Mr. McGregor for Mr. Rose and Mr. Knowles that the "business" in the phrase "canvass solicit or endeavour to take away the business" must refer to the business of insurance brokerage and not to any other business for instance in the food industry or financial services which is carried on by some subsidiary of Hanover. The concession is plainly right in the light of the current approach of the court in construing restrictive covenants on employees as indicated in cases such as Home Counties Dairies Ltd. v Skilton [1971] WLR 526. It must follow, in my judgment, that the canvassing and soliciting is only to apply in relation to insurance broking activities. Placing Mr. McGregor's submission to the contrary, it must follow that the customers or clients who cannot be canvassed or solicited must be limited to customers or clients who, during the relevant 12 month period, had been customers or clients for insurance broking services. The covenant does not extend to prevent Mr. Rose or Mr. Knowles soliciting business of an insurance broking nature from persons who, during the last 12 months of Mr. Rose's or Mr. Knowles' employment, were customers for food products, for instance, of a subsidiary of Hanover engaged in the food industry but who have never been customers for insurance broking services. On the facts the only subsidiary of Hanover apart from HIB which was clearly engaged in insurance broking is the Isle of Man company, which I have already mentioned, which is incorporated and registered in the Isle of Man. There is also a passing reference in the accounts of HIB to a wholly owned subsidiary of HIB called Chesterfield Management Ltd. but there is no evidence at all of the extent, if any, of that company's insurance broking activities. So far as the Isle of Man company is concerned, Mr. Schapiro's service agreement with it was limited to the carrying out of services in all the countries and territories of the world, excluding the United Kingdom, and the agreement expressly provided that nothing in the agreement should require or permit him to perform services in the United Kingdom. In those circumstances, I would not regard the Isle of Man company as relevant at all to the validity of the restrictions on canvassing or soliciting imposed on Mr. Rose or Mr. Knowles by their service agreements. Also, I would not regard those restrictions as invalidated as a matter of law by the mere possibility that Chesterfield Management Ltd. may have carried out some insurance broking activities of wholly unknown extent. On the facts of this case, therefore, the introduction into the restriction of the reference to Hanover and/or its subsidiaries adds nothing to what the position would have been if only HIB had been named.[19]Accordingly, there is nothing, in my judgment, in point 3 to absolve Mr. Rose or Mr. Knowles from their obligations. 4. The point here is that there is nothing in the restriction for 12 months in the service agreements on canvassing or soliciting of customers for the purposes of insurance broking to limit the restriction to customers who Mr. Rose and Mr. Knowles knew to be customers of HIB during the last 12 months of their respective employments with HIB.[20]This point is not taken on behalf of Mr. Schapiro or Mr. Anscombe because it is accepted that it is at least clearly arguable that as chairman and managing director of HIB each had full knowledge of every aspect of HIB's business and activities.[21]The validity of the point depends on the reconciliation of two decisions of this Court. The first is G.W. Plowman & Son Ltd. v Ash [1964] 1 WLR 568 decided by Harman, Davies and Russell LLJ. In that case the plaintiff employers carried on business in and around Spalding in Lincolnshire as corn and agricultural merchants and animal feeding stuff manufacturers. The defendant was one of five sales representatives acting for the plaintiffs in South Lincolnshire and the surrounding area. His service agreement contained a restriction for a period of two years from the termination of his employment on his soliciting any farmer or market gardener who should, at any time during the employment of the defendant, have been a customer of the employers. So far as material for the present case this Court held that that restriction was not too wide and therefore void because it was not confined to customers known to the defendant. The Court followed observations of Lawrence LJ in Gilford Motor Co. v. Horne [1933] Ch 935 at 964 to the effect that the covenant was not invalidated by the possibility that the person under the restriction might innocently and inadvertently breach the injunction by canvassing a person whom he had not realised had been a customer at the relevant time. The Court also pointed out that as the nature of the trade involved the defendant in going round and calling on farmers and market gardeners, the defendant could easily extricate himself from his difficulties, such as they were, by asking any farmer or market gardener he called on whether he had been a customer of the plaintiffs at the relevant time.[22]The other decision of this Court is Marley Tile Co. v Johnson [1982] IRLR 75 decided by Denning MR and Eveleigh and Templeman LLJ. In that case the employers were the well known roofing and tiling firm, Marley Tiles. The area within which the restrictions imposed, including a restriction on canvassing soliciting or dealing with customers, were to apply was to the whole of Devon and Cornwall and within that area the plaintiffs had 2,500 customers. The covenant against soliciting was, as I have indicated, also a covenant against dealing. Denning MR regarded the defendant as a "small" man in a small way of business in South West Cornwall and he seems to have regarded the case as a David and Goliath situation. He said at page 77:
"In these circumstances, it seems to me that it would be quite wrong to restrain Mr. Johnson from having any dealings with any of the 2500 customers in this large area. It goes beyond all bounds. Mr. Johnson cannot possibly have known of or come into contact with more than a small percentage of them. Even if it were 15 or 16%, most of those would be in south west Cornwall. Mr. Johnson would be restrained from dealing for a whole year with those 2500. Taking the size of the area, the number of customers, the class of products - because Marley have many lines other than roofing and tiling - it seems to me that the covenant is too wide to be reasonable."
[23]Taking the size of the area, the number of customers, the class of products - because Marley have many lines other than roofing and tiling - it seems to me that the covenant is too wide to be reasonable."[24]Eveleigh LJ said at paragraph 21:
"In so far as that is concerned - and, bearing in mind the hour I will not say what I had intended to say on these subjects - suffice it to say that I regard the two clauses relied upon, 10(a) and 10(c), as too wide; and I will deal with it again, in view of the hour, compendiously by saying that it in effect prevents the defendant from dealing as a manager of a timber yard or a builder's merchant with products which might be used for purposes far removed from that of roofing - for example, aluminium nails, which are a substantial part of the business, and timber ranging from 25mm by 50mm downwards. Thus it would be - to advert only to 10(c) - that, if a greengrocer's shop had been re-roofed by the plaintiff, the defendant, in the management of a small "do-it-yourself" shop, could no sell 25mm by 50mm timber to be used for vegetable and fruit racks in the greengrocer's shop. It seems to me that is much too wide, and for the reasons stated by my Lord I would allow this appeal."
[25]Templeman LJ said in paragraph 22:
"In the absence of any evidence that the defendant had a substantial influence over this massive 2500 customers, I agree that on the present evidence there is no justification for protecting the plaintiffs against the competition of the defendant, particularly having regard to the fact that the consequences will simply be to condemn him to unemployment for 12 months."
[26]From the nature of the business of the employer and of the products, as to which the defendant was restricted by a covenant which was a covenant against dealing as well as against canvassing and soliciting, this was a very different case from the present case. Its message is that every case must be dealt with on its facts. It does not in any way impair the authority of Plowman v Ash .[27]In the present case we know that the total of HIB;s insurance broking customers was 2,000 in the year before the termination of the defendants' employment with HIB. We do not know how many of those customers were known to Mr. Rose or Mr. Knowles or had had any contact with either of them. We were indeed invited to admit fresh evidence by affidavit as to Mr. Rose and Mr. Knowles knowledge of customers. But we refused to admit that evidence because the affidavits came at a very late stage and admission of them would have required an adjournment which, on the state of the lists, would have to have been until October to enable HIB to answer the affidavits. We know that this point 4 is not relied on by Mr. Schapiro or Mr. Anscombe because they were chairman and managing director of HIB: compare Gilford Motor Co. v Horne already mentioned. We also know that Mr. Rose was a director of HIB, but we do not know on what factual basis a distinction is drawn by the defendants between his position and that of Mr. Schapiro and Mr. Anscombe. Also, as I have already indicated, we have no information at all about Mr. Knowles. In these circumstances, and as point 4 was not taken in the court below, it would not, in my judgment, be right for us to decide the point on this interlocutory appeal. Indeed, we do not have enough information to decide it; in particular, information about how the insurance broking business was carried on and what as a practical matter the positions of Mr. Rose and Mr. Knowles were. For the foregoing reasons I would dismiss both the defendant's appeal and the plaintiff's cross-appeal. LORD JUSTICE NOLAN : I agree and wish to add only a short judgment of my own. General Approach[28]The employments of the first three defendants with the plaintiffs came to an end at or about the end of June of this year. The employment of the fourth defendant, Mr. Knowles, came to an end of 27th July. The trial of the action is not expected to take place until November or December. It follow that if and in so far as the interlocutory injunctions are upheld the plaintiff will have succeeded in respect of one third or more, or in Mr. Knowles' case one quarter or more, of the 12 month period for which the covenants run, even if the plaintiff fails at the trial. Conversely, if the interlocutory injunctions are set aside and the plaintiff succeeds at the trial it will have lost irretrievably a substantial part of the benefit of the covenant. It is not suggested that either the plaintiff or the defendants can be adequately compensated in damages for any loss suffered in the mean time. It must, I think, be assumed that the first three or four months of the 12 month period are at least as important to the parties as any of the later months. For these three or four months or more the interlocutory decision is effectively the final decision. This is a factor which, as it seems to me, must be taken into account in striking the interlocutory balance. It is one of the practical realities of the matter. This is not a case like Lansing Linde v Kerr [1991] 1 WLR 251 in which no trial was expected to take place until the 12 month period had almost expired. There is not, therefore, the same need as there was in that case for the court to take account of the plaintiff's prospects of success at the interlocutory stage. The time factor, given the time scale such as that of the present case, must none the less carry some weight in its own right. Having said that, I must add at once however that I have not found it a decisive factor in the particular balance which we have to strike. The words "endeavour to take away the business"[29]I am unable to accept the defendants' submission that these words must necessarily be struck out for want of clarity or for ambiguity. They are simple English words which any businessman should have been able to understand without difficulty. Mr. Sorota concedes that they should not be taken to rule out dealings between the defendants and customers of the plaintiff but merely to prevent the defendants from approaching such customers with a view to doing insurance broking business with them. For my part, I would have taken the same view without the aid of the concession. I accept that argument might arise over, for example, the wording of advertisements by the defendants. I do not accept that this court should be expected to anticipate and forestall such arguments by exegesis or paraphrase of the words in question. Everything would depend upon the nature and the content of the particular advertisement. No-one would be better placed than the defendants themselves to know what it is designed to achieve. The First Defendant's Separate Ground of Appeal[30]There is no dispute about the importance of the part played by Mr. Schapiro in building up the business of the plaintiffs during the six years for which he served as its chairman. His departure from the service of the plaintiff must have inflicted upon it a loss of corresponding magnitude and one which the restrictive covenants, included in his successive contracts of employments since 1986, must have anticipated and attempted to limit. His case is comparable to that of Mr. Reynolds, the travelling salesman in M & S Drapers v Reynolds [1957] 1 WLR 9 in that both men brought to their employments the benefit of valuable customers, but the two cases are by no means on all fours. I have in mind the distinction drawn by Hodgson LJ at page 13 of the report and by Denning LJ at page 19 between the inhibiting effect of such a covenant upon a travelling salesman as compared with its effect on a managing director. I bear in mind also the fact that the covenant in that case was to last for five years. There is a serious issue here to try in the present case. The Separate Grounds of Appeal of the Third and Fourth Defendants.[31]I have found the question of construction the most difficult point in the case. At first sight, if one approaches it without predispositions as to its legality or illegality, the covenant in the agreements of the third and fourth defendants is for the protection of the Hanover Acceptances Group and all its businesses. As such, it is plainly and irremediably unlawful. But Mr. McGregor accepts that in its context the covenant must be construed as if business meant only insurance broking business. If that is right then the objection to the clause largely falls away. I agree with Mr. Sorota's submission that if "business" means only insurance broking business then "customer" must mean only insurance broking customers. One is not, therefore, contemplating a monolithic group but only such member or members of it as are concerned with insurance broking. At the hearing below, and in the skeleton arguments put before us, it was evidently assumed that Hanover Insurance Brokers Ltd. was the only company concerned. In the course of argument before us reference was also made to the Group's Isle of Man insurance broking company and to the Chesterfield Management Ltd, a subsidiary of HIB whose principal activity, nominally at least, is insurance broking. The third and fourth defendants were not, however, employed by the Isle of Man company and nothing is known of their involvement, if any, with the Chesterfield Management Ltd. In these circumstances, it seems to be arguable to say no more that the covenant, entered into, as it was, between the third and fourth defendants on the one hand, and HIB alone on the other, should be construed as applying only to the business and to the customers of that company.[32]In urging us to take the contrary view, Mr. McGregor relied heavily on the recent decision of this Court in J. A. Mont (UK) Ltd v Mills [1993] IRLR 172. The facts of that case are plainly distinguishable, but I would accept that there is an apparent difference between the unsympathetic approach there adopted towards the construction of restrictive covenants of excessive width and the more flexible and supportive approach adopted by Denning MR and, although less explicitly, by Megaw LJ in Littlewoods Organisation Ltd, v Harris [1987] 1 WLR 1472. If this difference is to be reconciled or resolved, however, this should be done by a full court at a final hearing. Of the new point sought to be taken in this Court by the third and fourth defendants to the effect that the covenant could only properly operate in respect of customers of HIB known to them, I would simply say in agreement with Dillon LJ that this is not a point which can properly be taken for the first time on appeal. It raises a question of law depending on the answer to a disputed question of fact as the extent of their acquaintance with customers. The defendants did not seek to raise the point below and should not be allowed to raise it now. The Cross Appeal[33]I agree with the judgment of Dillon LJ and have nothing to add. As I have indicated, I concur in the order proposed.

ORDER

appeal and cross appeal dismissed with costs in each case in any event. The first defendant, Mr. Schapiro, was Chairman of HIB and consultant to it. The second defendant, Mr. Anscombe, was Managing Director. The third defendant, Mr. Rose, was a director and was concerned with pensions in the life assurance department. The fourth defendant, Mr. Knowles, was not a director and was concerned in some capacity not disclosed in the evidence in management. The total staff, including directors, of HIB amounted to 41 people. Each of the defendants had a service agreement with HIB which contained provisions restricting the defendant's activities during the 12 months after the termination of his employment. This action was brought to enforce those restrictions during the relevant 12 month periods. The writ was issued on 6th July 1993. In effect, the four defendants are seeking to carry on a business of insurance brokers through some other company and the plaintiffs assert that they are acting in breach of the restrictions. The service agreements of the four defendants, though substantially similar, are not identical and in consequence the issues arising on this appeal are not the same in respect of all defendants. ORDER: appeal and cross appeal dismissed with costs in each case in any event.

Cited in 6 later judgments