Willow Oak Developments Ltd. (t/a Windsor Recruitment) v Silverwood & Ors [2006] EWCA Civ 660

[2006] EWCA Civ 660Case No A2/2005/2463
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
BURTON P presiding
UKEAT/0339/05/DA
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 25 th May 2006
Before
LORD JUSTICE BUXTONLORD JUSTICE NEUBERGERSIR MARTIN NOURSE
Between
WILLOW OAK DEVELOPMENTS LTD T/A WINDSOR RECRUITMENTAppellantSILVERWOOD AND OTHERSRespondent
Miss Helen Mountfield (instructed by Gaby Hardwick Solicitors) for AppellantMr David Jones (instructed by Messrs Chadwick Lawrence) for RespondentsHearing Hearing dates : 9 May 2006
Judgment

Summary of Issues

[1]The respondents were dismissed for refusing to accept variations of their contracts of employment that imposed new and more demanding post-employment covenants. It is not disputed that in principle an employer who finds himself in the position of these employers, faced with the widespread “poaching” of staff by a competitor, is entitled to protect himself within the limits that the law of contract allows, and that employees must accept reasonable steps to that end, as part of their duty of co-operation with their employer. However, in the present case the ET considered that the covenants proposed and the means of offering them to the employees had not been reasonable; the employees were therefore not obliged to accept them; and thus could not be fairly dismissed for that non-acceptance.[2]The ET held, first, that the covenants had been so unreasonable that the refusal to accept them could not be a “reason of a kind such as to justify dismissal” under section 98(1)(b) of the Employment Rights Act 1996; so the dismissal could not in any event be fair. Second, if they were wrong on that point, the ET went on to hold that the employer had acted unreasonably in treating the failure to accept the covenants as a sufficient reason for the dismissal, which was therefore unfair under section 98(4) of the 1996 Act.[3]The EAT (Burton P presiding) reversed the ET on the first point, holding that the employer’s reason for dismissal did fall within section 98(1). It however held [EAT §34] that the ET had been entitled to find the dismissal unfair on the second, section 98(4), point. It then went on to hold that even if it was wrong in that conclusion the matter should not be remitted to the ET, because the result in any different or future ET would be the same. All three of those conclusions are disputed before us.

The employer and its business

[4]This is best described in the words of the ET, §§ 8.1-8.2 of its Determination: The respondent company, Willow Oak Developments Ltd, trades as Windsor Recruitment. It started as in business dealing generally in staff recruitment, but very quickly specialised in the supply of agency workers for the health and associated services. It is part of the HH Group, which also specialises in human resources staff recruitment. It has ten branches, in Darlington, Leeds, Manchester, Liverpool, Birmingham, Coventry, Bristol, Crawley, Brighton and London; a large training centre in York; and an administration centre in Sussex. In each branch there is a manager, an administrator and consultants. There are approximately 50 consultants in total. The consultants in turn specialise, either in child-care, general care or nursing and social care. There are a number of managers, specialising either in training, accounts, franchises, compliance and marketing. There are two operations directors one of whom is Mr Watson. Between July and November 2003, the respondent proposed to expand its business from eight branches with a turnover of £14 million per annum to 100 branches across the country with a turnover of up to £164 million per annum. This was to be achieved either by way of direct growth, or by franchising. We accept that the NHS tendering framework agreement is crucial to the respondent’s continued success in the industry. We also accept that some form of restraint of trade, restricting staff from competition after ceasing employment, would be necessary in order for the respondent to achieve it’s objectives.[5]The claimant employees worked at the Leeds branch as “consultants” in the health care sector, responsible for recruitment and placing of staff in health care posts, including in the NHS.

The covenants

[6]In 2003 and 2004 two senior employees of Windsor Recruitment, one in Birmingham and one in Bristol, left and set up rival and, it would seem, largely mimicking businesses. They took with them a significant number of other employees, with the loss to Windsor of much client and candidate information, leading to a reduction in Windsor’s business. The manager of the Leeds branch was approached by one of the new businesses, managed by Windsor’s former managing director, and invited to join and to bring his team with him. He refused, but Windsor decided that it had to take action to protect itself against further attacks.[7]The de facto directors of Windsor held a meeting in early 2004 at which they decided that all staff would be asked to sign detailed restrictive covenants, and that any who refused to do so would be dismissed. The ET was critical of the fact that no minutes were kept of that meeting; and also that no formal notification of the decision was given to the staff. Indeed, as we will see, the fact that the sanction for failure to sign was to be dismissal was not conveyed to the employees until they were actually dismissed.[8]The terms of the covenants, and the concerns that the ET had about them, are of some importance in this case. These can most conveniently be taken from §§ 8.15-8.16 of the ET’s Determination: We find that the document each claimant was requested to sign referred at several places to “the company” or “the group” or “the employer” without anywhere defining what those three terms referred to. We note that clause 1.5 refers to other employees being required to accept restrictions which were similar to those set out in that document. The Claimants have no criticism of clause 2 relating to confidentiality during employment. Clause 3 , however, is in the following terms:
“The Employee will not at any time during his employment and for a period of [12] months after the termination of his employment, seek to entice, persuade, solicit or employ, or provide any work, whether directly or indirectly, through any company firm, person or other entity, or for the benefit thereof, or agree to provide any such work to any person who was for the period of [6] months employed or engaged by the Company and who by reason of his employment is likely to be in a position to solicit or deal with Customers or Suppliers of the Company or cause harm to the business which is in competition with the Company or Group.”
We accept [the Solicitor for the employees’] representations that on the face of it that appears to be still a draft document, given the square brackets. However, we also note that that clause is extremely widely drawn. Its effect would be to place an employee in breach of the agreement if she provided work or employed any person who had ever been, for a period of six months, employed or engaged by “the company” and who, by reason of his employment, was likely to be in a position described in that clause. Given that the respondent was proposing greatly to expand the business, we are not satisfied that that clause is reasonable and would in fact be enforceable. Neither are we satisfied that it was reasonable to insist at such short notice that the claimants should accept that term. Although we can well understand the need to restrain employees from soliciting persons they had worked with or who had worked for them, or within a geographical area of where the claimants themselves actually worked, we have had no evidence to justify seeking to restrict them from being involved with persons who may have worked for the respondent for six months at some distant time in the past, albeit at the other end of the country. We do not therefore consider it to be reasonable to insist on that terms acceptance then or at any subsequent time. We accept the respondent’s interpretation of clause 4. It sought to prevent employees, for a period of six months after the termination of employment, in respect of any business which is or is likely to be wholly or partly in competition with the business of the employer, and which has any office situated within a ten-mile radius of any office of the employer at the date of termination of the employment, from doing in any manner any of the acts set out in clauses 4.1.1 to 4.1.3, which are: “4.1.1 The employee shall not hold any position as director, officer, employee, consultant, partner, principal or agent, which is the same as or similar to the position that he had when he was an employee of the Company, or which, will or may involve him using confidential information in order to fulfil the duties of that position. 4.1.2 The Employee shall not have any direct or indirect control or ownership of any shares or debentures, whether jointly or alone in any such business, save for investment purposes. 4.1.3 The employee shall not give any financial assistance whether directly or indirectly to any such business." officer, employee, consultant, partner, principal or agent, which is the same as or similar to the position that he had when he was an employee of the Company, or which, will or may involve him using confidential information in order to fulfil the duties of that position. 4.1.2 The Employee shall not have any direct or indirect control or ownership of any shares or debentures, whether jointly or alone in any such business, save for investment purposes. 4.1.3 The employee shall not give any financial assistance whether directly or indirectly to any such business." Again, we are concerned that this clause is drafted extremely widely in the context of the respondent’s intention to expand, and the fact that it would restrict the claimants from doing any of the forbidden acts in respect of any business having an office within a ten-mile radius of any office of the employer. We can see the need for a restriction in respect of persons the claimant has come into contact with and areas she has worked in, but not, as this could be, potentially countrywide. The reference to “any business which is or is likely to be wholly or partly in competition” is also extremely wide. It does not restrict the claimant simply from competing in respect of the healthcare sector, but, depending on the interpretation of employer, company and group, could restrict them from competing in the human resources fields, in respect of which they have no experience with the respondent or in any other field which the respondent or any potential competitor is likely to branch out into in the future, whether or not the claimant has any direct knowledge or experience of those fields.

The process of dismissal

[9]What follows is taken from unchallenged findings of the ET.[10]On 19 May 2004 Mr Watson attended at the Leeds office, without prior warning, and in his own phrase handed copies of the covenants to each employee as one might deal out a pack of cards. He told each employee that they had thirty minutes in which to consider whether to sign. The ET accepted the claimants’ evidence that he was very abrupt and irritated. The staff concerned said that they wished time to consider the clauses, and were permitted to take the document home to obtain advice. On 24 May 2004 the branch manager asked Mr Watson if the employees could have a further seven days to consider the covenants. He told her, without authority, that if the documents were not signed by 25 May the consultants would lose their commission. The only clause then causing concern was clause 4, but Mr Watson’s position was described as “all or nothing”.[11]On 28 May all of the staff were called in to see Mr Watson. He produced a letter that purported to explain the proposed covenants, though not in entirely accurate terms. While the tone of the letter was conciliatory, Mr Watson’s body language was aggressive and intimidating, as was his verbal language. When Ms Silverwood asked if she could see him later in the day as she was very busy he replied:
“I couldn’t give a shit, you are in next”, and when he met her he said that the consultants were “silly girls playing unions”
. Another employee was told that if she did not sign the company might have to “force the issue”; though it is to be noted that dismissal itself was still not threatened. The consultants were told that Mr Watson would discuss any concerns, failing which the contracts had to be signed and returned within seven days; but the ET accepted that the consultants, because of the way in which they had been treated, had lost trust in what the employer was telling them, and they genuinely believed that any grievance that they raised would not be dealt with fairly.[12]By 4 June only seven of the 26 consultants had signed and returned the covenants. On that day all of those who had not signed were called in to see Mr Watson and were dismissed by him. None of them had been given formal (or, it would seem, any) warning that the sanction for non-compliance was dismissal, or that the meeting was a disciplinary or dismissal hearing. The demeaning and hostile attitude of the employer continued even in the act of dismissal, Ms Silverwood being told that the dismissal was happening because she was “ignorant enough” not to have read the contract properly.[13]At the dismissal meeting the consultants were given documents offering them “alternative employment”, the offer to remain open to 18 June. The ET found that this offer was confusing, as not being, or at least not clearly being, an offer of reinstatement on terms as opposed to an offer of a new and different post. The employer also stated as a fait accompli that all of them were being placed on garden leave for the remainder of their notice period. Some faint attempt was made before us to suggest that this gave the employees a further fortnight’s reflection; but the unclarity of what the employer had in mind, together with the total breakdown of trust between the parties, meant in reality that the decision to dismiss taken and communicated on 4 June was final.

A reason justifying dismissal: section 98(1)

[14]The ET said, at its §19, that Although the respondent’s need to impose tighter restrictive covenants on all staff could be some other substantial reason which could potentially justify dismissal, it would only be a fair reason for dismissal if the restrictive covenants sought to be imposed were themselves fair and reasonable from the employer’s point of view. 15. We readily accept that, in the circumstances faced by [the respondent], it was reasonable for it to invite the three appellants to sign up to contracts containing a reasonable restraint clause. A similar point was considered in Irwin [1973] ICR 535, in which it was held that the employee's refusal to sign up to a new contract containing a reasonable restraint was a potentially fair reason for his dismissal. The problem in the present case, however, is that the tribunal's finding was that the proposed restraint was wider than was necessary for [the respondent's] protection. Any such restraint, had it been imposed, would probably have been void and unenforceable as an illegal restraint of trade. The finding of the tribunal is that it was the appellant's refusal to sign up to the new agreements which was the reason for their dismissal: and that it was this refusal which was claimed by [the respondent] to be a potentially fair reason for their dismissal for the purposes of s98(1)(b). In the closing paragraph of the judgment of the Irwin case, Sir John Brightman left open the question of whether it is open to an employer to assert his employee's refusal to sign up to an unreasonable restraint as being a potentially fair reason for his dismissal. In our view, the question answers itself. We consider it was unreasonable of [the respondent] to ask the appellant to sign up to a restraint which was unreasonably wide and which purported to impose an unreasonable fetter on their future trading activities. We do not accept that such a refusal can amount to a potentially fair reason for dismissal, since we do not understand how an employer can assert as such a reason the fact that the employee refused to sign up to unreasonable terms of employment.[15]The EAT in the present case disagreed with that approach, which disqualifies any unreasonable covenant from counting as a reason that comes within the terms of section 98(1). I respectfully agree. The clue to this issue is that the question asked by section 98(1) is whether the employer’s reason is of a kind such as to justify the dismissal. That language clearly indicates that the question is whether the reason falls within a category of reason that is not excluded by law as a ground for dismissal; or, as Burton P put it slightly differently in Scott v Richardson [EATS/0074/04, 26 April 2005, unreported], whether the reason for which the dismissal took place could be a substantial other reason. Accordingly, if the reason is whimsical or capricious or dishonest (see per Lord McDonald in Harper v NCB [1980] IRLR 260[8]), or is based on an inadmissible ground such as race or sex, then it will be excluded by section 98(1). But if, as in our case, the category into which the reason falls, an employee’s refusal to accept covenants proposed by the employer for the protection of his legitimate interests, is one that can in law form a ground for dismissal, then it is necessary to proceed to the second stage of considering whether the employer has, under section 98(4)(a), acted reasonably or unreasonably in treating that reason as a sufficient reason for dismissing the employee.[16]Not only does this approach best follow the language of the statute, but also it accords with fairness and practicality. As Miss Mountfield pointed out, it is not easy to determine in advance whether a term in a contract will be unreasonable in all respects and in all circumstances, to the extent that an employer could never, by whatsoever procedure and under whatsoever circumstances, treat failure to accept it as a reason for dismissal. Fairness to both parties is best achieved by looking at the terms of the proposed contract in all the circumstances of the dismissal, as section 98(4) provides and requires. Mr Jones sought to counter that objection by arguing that although it might apply in the case of most contractual terms, restrictive covenants were different, in that they were regarded as at least potentially unenforceable or, in a somewhat loose use of the word, unlawful. But all that that tells us is that, quite unusually, the common law has recognised restrictive covenants as a type of clause to which, for public policy reasons, the doctrine of freedom of contract does not apply in all its rigour. That means that the court may intervene by refusing to enforce an (in theory) freely bargained-for term. But the possibility that the covenant, if agreed, might not be enforced as a matter of contract is at best only one factor in the determination of whether the process of negotiation and bargaining, and the sanction imposed by the employer, are reasonable.[17]I would therefore uphold the EAT’s conclusion that the ET’s first reason for finding in favour of the employees was not open to it. That makes it necessary to go on to the ET’s second finding, addressing the section 98(4) question, that the dismissals were not fair in any event.

The ET’s finding that the dismissals were unfair

[18]The ET expressed its conclusion in §24 of its Determination, in terms that were exhaustively discussed before us. It said: If we had found that the dismissal was for some other substantial reason, we would have had to consider whether the dismissal nevertheless was fair in all of the circumstances. The procedure used would have been highly relevant. The difficulty is not simply a lack of prior consultation, although consultation would have been helpful from the claimants’ point of view; but the fact that they were asked to sign these documents within 30 minutes of first being given them, in a busy working environment, without any proper opportunity to read and understand them. This is a complex document which the respondent’s lawyers clearly spent some time drafting, and which we have spent a considerable amount of time interpreting. It was not reasonable to ask anyone to sign it in such circumstances. That unreasonableness set the tone for all the future discussions. The claimants were not warned that a failure to agree to the new terms would or may result in dismissal. We would have found the dismissals procedurally unfair.[19]The EAT in its §34 accepted that conclusion. It said: We are therefore satisfied that the Tribunal was entitled to find that the dismissal was fair, but for its alternative, not its principal, reason.[20]Miss Mountfield criticised that finding on a number of grounds. As developed before us, in somewhat different terms from the formal Grounds and skeleton argument, I can summarise them as follows: i) The “alternative reason” was not truly alternative to the, incorrect, ground adopted under section 98(1)(b), because the ET did not succeed in putting that first and erroneous conclusion out of its mind when addressing the second issue. ii) Even if that were not so, it is impossible to tell from the ET’s §24, or at all, what view it took of the extent and seriousness of the unreasonableness of the covenants once it had assumed, hypothetically, that they did not fall foul of the section 98(1)(b) test. Such a finding was an essential element in the balancing of the employer’s conduct against the employees’ reaction to it, on which the issue of fairness of dismissal must turn. Since it cannot be known how and on what assumptions the ET struck that balance, its determination cannot stand. iii) Further and in any event, the ET’s conclusion was unreasonable or irrational, in particular because it concentrated on what happened on 18 May, and gave no weight to the further period of consideration of over a fortnight that was in the event afforded to the employees. I consider these complaints in turn.

A genuinely independent reason?

[21]This is largely or entirely a matter of construing the terms of the ET’s Determination. Mr Jones made the important point that although the ET did not specifically turn to the alternative ground until its §24, earlier in the Determination it had set out a great deal of the history of the dealings between the parties, as summarised in §§ 10-13 above. That could only be relevant to the second issue, of fairness of the dismissal. It was in that context that the EAT was entirely satisfied that the criticism, which was put to them in terms of onus of proof, was incorrect. It said at its § 33.2: Ms Mountfield submits that the Tribunal has applied the wrong onus of proof. She does not specifically suggest that there is any incorrect wording in the Judgment, but she submits that, because the approach wrongly adopted by the Tribunal led to the Respondents' failing at the first stage, at which the onus is upon them, it is likely that the Tribunal brought a mindset to bear on its subordinate consideration of s98(4) which would be affected by the erroneous application of that onus. We are wholly unpersuaded by this. We only have to point to two important passages of the Judgment of the Tribunal, which in each case is plainly addressing s98(4), and doing so correctly:
"If, however, we do accept that there was some other substantial reason, then we have to consider the factors in section 98(4), one of which is the procedure used, which is also subject to a band of reasonable responses test. If the procedure used was outside of that band, then the dismissal are unfair" (para 14). "
If we had found that the dismissal was for some other substantial reason, we would have had to consider whether the dismissal was nevertheless fair in all of the circumstances" (para 24, first sentence).[22]I respectfully agree with that conclusion. Any fair reading of the ET’s Determination shows in the passages cited, and elsewhere, that the ET was well aware of the difference between the two questions that it was asked, and put its conclusion on section 98(1)(b) out of its mind when it turned to section 98(4). I would venture to add that I reach that result for myself, but I would in any event be reluctant on a question such as this to differ from the judgement of the President of the Employment Appeal Tribunal. He sees determinations of Employment Tribunals on a daily basis, and is uniquely well-placed to judge whether those determinations do properly address the questions in issue.

Was the ET’s second finding infected by its first finding?

[23]As put to the EAT, this argument drew upon the decision of the EAT in Scott v Richardson, cited in §15 above. There, as in our case, the tribunal incorrectly found that a reason for dismissal based on failure to accept changes in contractual terms fell foul of section 98(1)(b). But the ET also went on to consider whether the dismissal for that reason was fair in any event. That latter process involved what Miss Mountfield called the “Catamaran” balancing act, after Catamaran Cruisers v Williams [1994] IRLR 386[28], where the EAT explained that in a case of a refusal to accept a change in contractual terms case the tribunal has to weigh the business reasons for imposing the changes against the advantage and disadvantage of them for the employees. But the EAT in Scott held that failure to put the first test out of the ET’s mind fatally flawed the, in any event perfunctory, consideration of the second test. The EAT, per Burton P, said in its §30: We are satisfied that it is not possible to conclude that there has in law been a correct balancing act carried out in those circumstances; and that after the incorrect approach in law to the first test, fatally infected and flawed, the very briefly approached fallback argument on reasonableness was not, and, indeed, in the circumstances could not have been, adequately carried out by this Tribunal.[24]Miss Mountfield said that ours was such a case. But the judge who decided Scott said that it was not. Burton P said at § 36.2(a) that in our case, unlike in Scott, there was “a separate and unflawed independent and sufficient conclusion as to the unfairness of the procedure”.[25]I respectfully agree. That is a complete answer to this point as I at least originally understood it to be. But in the course of argument a different, and more cogent, complaint emerged, or at least was discerned by the court. Mr Jones in turn displayed considerable resource in dealing with it. That was the issue that I have attempted to summarise in §20(ii) above. The question was whether the dismissal was fair in all the circumstances; that is, the Catamaran balancing act. But we do not know what the ET’s view was of one of the most important circumstances, the extent of the unreasonableness of the covenants, since for this, section 98(4), purpose the ET must be taken to have withdrawn from the specific findings of unreasonableness, set out above, that it made for the purposes of its conclusion on section 98(1). The ET, when starting again for the purposes of section 98(4), could have made a new finding of what, on that assumption, it held as to the unreasonableness of the covenants, but it did not do so. Miss Mountfield pointed out that the EAT itself had, in her view correctly, analysed in its §24 the possible impact of the reasonableness of the covenants at the stage of considering fairness of dismissal. The alternatives were:24.1 If the proposed covenant appears to the tribunal to be plainly unreasonable and (where relevant) was being put forward as all or nothing, or not severable, then it may make it all the easier for a tribunal to conclude that there was unfairness.24.2 If the proposed contract or covenant or covenants is/are arguably unenforceable (and/or severable) then there will be the greater need to consider the approach of the employer, in particular the amount of time given to consider the proposals and the opportunity given, if appropriate, for legal advice.24.3 If the covenant is plainly reasonable, then, of course, before a dismissal can be justified there will still need to be consideration of the fairness of the procedure, but the tribunal may well be able to be satisfied that the dismissal was fair. It was not known, Miss Mountfield said, which of these alternatives the ET had adopted.[26]Mr Jones however argued that none of those issues arose, because the ET had been clear that, if it had to travel beyond section 98(1)(b), the first question for it was whether the procedure adopted by the employer had been fair; and it had found that it was not. For that argument Mr Jones cited two passages earlier in its Determination where the ET set out its task: [§4] The issues are, therefore, whether the respondent genuinely believed that there was [a need for covenants to protect the business]; if so, whether dismissal for failure to agree to the new restrictive covenant was within a band of reasonable responses; and if so whether the respondent followed an appropriate procedure. [§14] If, however, we do accept that there was some other substantial reason, then we have to consider the factors in section 98(4), one of which is the procedure used, which is also subject to a band of reasonable responses test. If the procedure used was outside of that band, then the dismissals are unfair.[27]That was the approach adopted by the ET in the analysis in its §24. It concluded, as we have seen, by saying that on the alternative approach it would have found the dismissals procedurally unfair. That it would appear was also the understanding of the EAT, when it distinguished Scott (see §24 above) on the basis that in our case there had been an independent conclusion as to the unfairness of the procedure. In truth, therefore, this case is not a “Catamaran” case at all. In such a case the balance of interests between employer and employee that the covenants create will be taken into account together with the procedure adopted by the employer when he sought to introduce the covenants: see the account of the EAT set out in §25 above. But in the present case the ET clearly found the procedure to have been so unfair that it concluded that the dismissals that followed from the procedure would have been unfair whether or not the covenants themselves were reasonable.[28]I therefore agree with the EAT that the ET’s alternative conclusion can properly stand independently of its finding on the section 98(1)(b) issue.

Did the ET properly assess the fairness of the procedure?

[29]The argument is that even if the ET’s conclusion was wholly about procedure, it erred by concentrating only on the events of 18 May, and the 30 minutes then given to the employees to sign the covenants. The longer subsequent period put the matter in a different light. But on a fair reading the ET did review the whole of the period, and made significant findings, already set out, about what happened during it. Having done that, it would have been otiose to repeat it all in §24. It found that the unreasonableness of the way in which the covenants were introduced on 18 May set the tone for all the future discussions, a finding that was manifestly open to it; and, most importantly, it also found that there had been no warning that failure to agree to the new terms would or might result in dismissal. That last fact alone justified, indeed made inevitable, a finding that the dismissals had been procedurally unfair. The ET’s conclusion cannot be impugned.[30]That makes it unnecessary for the determination of the appeal to go on to review the EAT’s further conclusion that, even if it was wrong in upholding the ET, remission would not be appropriate. I will however briefly consider that question.

Would remission have been appropriate?

[31]The EAT accepted Miss Mountfield’s submission that remission could only be withheld if it was clear what the result would be on such remission: see O’Kelly v Trust House Forte [1984] QB 90, cited by the EAT at its §35. In particular, the EAT cannot add to the findings or conclusions of the ET any view of its own, not to be found within the original ET decision, since so to do would be to usurp the position of the ET as an industrial jury.[32]In this case the EAT said, at its §36.2(b): This is not a case in which the same, or a different, tribunal on remission would be likely to find that the proposed covenants were plainly reasonable. Once the tribunal is deterred by our judgment, in accordance with Ms Mountfield's submissions, from making a determination as to the enforceability of the covenants, the inevitable result in our judgment would be that there would be a finding that these covenants were arguably unenforceable for the reasons set out in this Tribunal's judgment. That factor has been fully filtered into the balancing act in fact carried out by this Tribunal in paragraph 24 of its Judgment, for the purposes of its alternative conclusion.[33]As to the first of those points, and without going into detail about the covenants, I would agree that a finding that they were arguably unreasonable is unavoidable. Covenant 3 is very difficult to construe and, in its latter part, incomprehensible. Miss Mountfield suggested that the prima facie exorbitant reach of covenant 4, limiting the employee in respect of employment in the area of any office of the group irrespective of where she herself had worked, might be saved by reading down of the type favoured by this court in Littlewoods v Harris [1977] 1 WLR 1472. But the limits of the latter process are, at best, controversial, and indeed turn on the exclusion from the literal terms of the clause of situations that were unlikely or improbable to arise in the case of the particular employee: in Mr Harris’s case, going to Australia where part of the total business which was in terms affected by the clause was carried on. The doctrine’s application in our case, to employees in comparatively modest positions who might well move to other parts of the country, would be a matter of some difficulty. Certainly, it could not said to render the unreasonableness of clause 4 unarguable.[34]The second limb of the EAT’s conclusion appeals to the actual decision of this ET, which on the hypothetical presumption on which this argument turns may not be relevant. I however have little difficulty in holding that a remission to this or another tribunal would produce the same result, based solely on the findings of the present ET. The aggressively insulting way in which the employer chose to conduct the negotiations, and the failure to give any warning as to imminent dismissal, make that conclusion also inevitable.[35]I would therefore reject all of the criticisms made of the EAT, and accordingly dismiss the appeal.[36]I agree.

Sir Martin Nourse:

[37]I also agree.

Cited in 12 later judgments

and 3 more of the most senior