12-Month Non-Competition Restriction Enforceable Against Financial Adviser

In Merlin Financial Consultants v Cooper the High Court upheld a UK-wide 12- month non-competition restriction in a "good-will agreement" under which the employee had received payment for clients he bought with him on joining. When Mr Cooper resigned and set up his own business taking clients with him, Merlin brought a claim for breach of contract seeking damages for the loss of profit from those clients for two years after his resignation. The High Court held the clause was enforceable as the agreement was more in the nature of a business sale agreement which the parties had entered into with equal bargaining power. It found there was a legitimate interest to protect and awarded loss of profit for 70% in the first year and 30% in the second.

Key Points

The Court referred to previous decisions supporting a financial services "industry standard" of 12 month restrictions to protect strong client relationships. The Court did not consider the geographic area...