Spotlight On Recent Covenant Cases

There has been a glut of cases on restrictive covenants in the last few months which appears to indicate that the current economic climate means companies are more prepared to take action to try to enforce these to protect their businesses. We report on three of them.

Non-solicitation

Towry EJ Ltd v Bennett and ors is a case which involved financial advisers who moved to a competitor following the acquisition of their employer by Towry. Although it had no primary evidence of solicitation Towry brought proceedings on the basis that the "tidal wave" of clients (over 400) moving to the competitor meant that solicitation by its former employees must have taken place.

However, the High Court dismissed the claims on the basis there was no evidence of solicitation which it confirmed must involve some form of persuasion taking place. The competitor was in a strong position to defend the claim as a result of taking precautions such as seeking legal advice at an early stage, using a script to explain the impact and nature of restrictive covenants to the individuals during the recruitment process and paying for each...