Dr Alan Boydell appeals against a decision of His Honour Judge Auerbach, sitting as a Judge of the High Court, to grant interlocutory injunctions against him pending a trial which we are told is listed to be heard between 19 and 29 June 2023. The judge himself granted permission to appeal to this court on certain grounds which raise what I regard as the main point in the case; on other grounds Dr Boydell seeks permission to appeal which the judge refused. By a Respondent’s Notice the Claimant companies seek permission to cross-appeal on one aspect of the judgment below.

The business of the First Claimant (“NZP”) is in a niche area of the pharmaceutical industry described in summary as the development, production and sale of bile acid derivatives for sale to pharmaceutical companies for use by them in their products. It is part of the ICE Pharma Group of companies. Its ultimate holding company is the Second Claimant. Dr Boydell is a former employee of NZP. Following his notice of resignation, given in October 2022, his employment ended on 25 January 2023. At that time he was Head of Commercial - Speciality Products, a position he had held since early 2021 although he had worked for NZP for some years before. He stated his intention to join Zellbios GmbH, which is part of the Axplora Group, to head their “bile acid business.”

The claim was issued on 24 January 2023. The Claimants sought to enforce two sets of restrictive covenants. One set, contained in a variation to the Appellant’s employment contract, ran for one year from the termination of his employment. The other set, contained in a shareholder’s agreement ran for two years. The judge granted an interim injnnction enforcing the one year covenants in the employment contract until the trial, with some modifications to which I will come later. He refused to enforce the two year restrictions in the shareholder’s agreement; the Claimant companies have not sought to appeal against that aspect of his decision.

When proceedings were issued the Defendant gave a written undertaking to abide by the covenants pending determination of the Claimants’ application for an interim injunction. The parties sought a hearing on 6 February 2023 but the court was unable to accommodate them. The hearing was listed for and took place on 23 February 2023. The judge gave his decision orally the following day. It was no mean feat to have produced a judgment of such high quality so promptly.

The most important clause of the employment contract for present purposes is clause 3.1, which provided as follows:

Further clauses provided:

I have recited clause 3.5, which is a form of words commonly inserted into covenants of this kind; but Ms Stone rightly did not rely on it. Such clauses are rarely worth the paper they used to be written on, or the digital equivalent. Clause 3.6 was not referred to in argument and does not appear to be relevant.

I gratefully adopt the summary of the material points of the claimants’ evidence given by the judge at paragraphs 19-22 of his judgment:-

The main battle in this case was over clause 3.1. The judge granted an injunction after severing some words from the clause. The Appellant’s skeleton argument helpfully sets out the clause showing what was severed and what remained. The order was that the defendant, pending trial of the claim, must not:-

The judge also granted injunctions to enforce the non-solicitation and non-dealing provisions of clause 3.2.

The judge was asked to grant Dr Boydell permission to appeal on numerous grounds. He gave permission on four of these:-

The judge refused permission to appeal on the following further grounds:-

As commonly happens in this type of case, the Claimants argued before the judge, and argue before us, that all they needed to show on the merits was a serious question to be tried. They rely on observations to that effect by Elisabeth Laing and Nugee LJJ in the recent case of Planon v Gilligan [2022] IRLR 684, citing what Nugee LJ described as the “seminal decision” in American Cyanamid v Ethicon [1975] AC 396.

American Cyanamid v Ethicon was indeed a seminal decision, but Lord Diplock’s speech is neither a statute nor a biblical text, and should not be read as if it were either. The Cyanamid case itself was a large and complex patent claim. The interlocutory injunction which was the subject of appeal to this court (where the hearing lasted eight days) and the House of Lords (where it took a mere three days) had been granted in the High Court on 30 July 1973. The case did not come to trial until the autumn of 1977, and the trial lasted some 100 working days (see [1979] RPC 215). It is one thing to say in a case of such complexity and duration that on an interlocutory injunction application the court should not go beyond asking whether there is a serious question to be tried. But in an employment case of far more limited scope it may be unjust to stop at that: and it should always be remembered that the statutory test for the grant of an injunction is whether it is just and convenient. Hence the decision of this court in Lansing Linde v Kerr [1991] 1 WLR 251 that where it will not be possible to hold a trial until the period of the covenant has expired, or substantially expired, it is permissible for the judge to form at least a preliminary view of the claimant’s prospects of success, and to factor that in at the “balance of convenience” stage of the analysis.

In Planon v Gilligan there was no difficulty about what the covenants meant (unlike those in the present case, they used quite standard wording), nor any issue of severance. A different approach is applicable where the issue is the interpretation of the contract. In Arbuthnot Fund Managers Lyd v Rawlings [2003] EWCA Civ 518, Chadwick LJ said:-

Indeed, in the present case the judge noted at paragraph 28 of his judgment that:-

The judge went on to sound a note of caution in relation to the matter of construction. He said:-

At paragraph 18 of his judgment he had said:

I agree with this approach. If the court, even making the assumption that any disputes of fact would be resolved at trial in the Claimants’ favour, concludes that on its proper construction (with any permissible severance – see below) the relevant clause is plainly unenforceable, it should say so. In such a case it cannot be said that there is a serious issue to be tried.

There is a degree of factual dispute in this case but it is relatively limited. Clearly Dr Boydell had extensive knowledge of NZP’s confidential information protectable after the termination of his employment in accordance with the principles set out in Faccenda Chicken Ltd v Fowler [1987] Ch 117. It is not contended otherwise, although there is a dispute as to whether he had access to protectable confidential information right across the group of companies headed by the Second Claimant. This case may, therefore, be distinguished from those in which there is a genuine factual dispute as to whether the claimants have any trade secrets or commercially confidential information capable of protection after the defendant has left their employment; or cases where there is a serious issue as to whether the employers have repudiated the contract so as to be precluded from relying on any restrictive covenants (General Billposting v Atkinson [1909] AC 118).

Mr Nicholls KC accepted that his appeal could only succeed if it is plain and obvious that the covenants are unenforceable. His case before the judge and before us was, he said, in the nature of a strike out application. I agree with him that this is the proper approach in a case of this kind.

The interpretation of contracts is not a question of the exercise of a discretion. I do not think it is necessary to cite the many familiar authorities usefully summarized in Sir Kim Lewison’s magisterial book The Interpretation of Contracts. It is well established that the words of a contract should be interpreted in their natural and ordinary sense, in the context of the facts known to both parties at the time the contract was concluded, unless there is good reason to adopt a different meaning. As Lord Carnwath said in Lambeth LBC v Secretary of State for Local Communities and Government [2019] UKSC 33; [2019] 1 WLR 4317:-

The next point is that it has long been established as a principle of construing restrictive covenants in employment or similar cases that, as Salmon LJ said in Home Counties Dairies Ltd v Skilton [1970] 1 WLR 526:-

The next point is derived from Egon Zehnder Ltd v Tillman [2019] UKSC 32; [2020] AC 154, to which I shall return shortly on the issue of severance. Lord Wilson JSC referred at paragraph 38 to what he described as “the validity principle”:-

At paragraph 42 he answered this question as follows:-

He ended paragraph 42 by saying that the test was whether each of the alternative constructions was realistic. So if there are two alternative realistic constructions, the parties are deemed to have meant to enter into a valid agreement rather than an invalid one. But, if there is only one realistic construction, then that must be followed however disastrous the consequences for one of the parties – see for example Arnold v Britton [2015] UKSC 36; [2015] AC 1619.

In Egon Zehnder v Tillman the Supreme Court resolved the conflict between the decisions of this court in Goldsoll v Goldman [1915] 1 Ch 292 and Atwood v Lamont [1920] 3 KB 571, which had caused a measure of uncertainty in the law for almost exactly a century. The latter case, in which this court had held that severance of words in a restrictive covenant was only permissible if the part to be severed was of trivial importance or merely technical, was overruled. Lord Wilson JSC said, however, at paragraph 82 that “the courts must continue to adopt a cautious approach to the severance of post-employment restraints”. The “blue pencil” test requiring that the unenforceable provision is capable of being removed without the necessity of adding to or modifying the words of what remains, is still good law. There is a second criterion concerning adequate consideration for the remaining terms which Lord Wilson said can be ignored in the usual situation. The crucial third criterion, set out at paragraph 87 of his judgment, is:-

Although Ms Stone valiantly attempted to persuade us otherwise, it seems to me clear that as originally drafted clause 3.1 prohibits Dr Boydell from being involved in any activity for the benefit of any third party that carries out any business activity that would compete with the business activity carried out by NZP or by any other company in the group. This broad construction is emphasised by the final sentence of the clause, which lists a number of companies “which are to be considered as competitors”.

I turn next to the severance carried out by the judge. The deletion of the references to “activities relating to the supply chain” or to “the manufacturing or use of bile from various animals” appears to me, as it did to the judge, to cover a very peripheral part of the covenant: it would, I think, have been severable even in the days of Attwood v Lamont. The main point made by Mr Nicholls in his attack on the clause concerns the reference to other companies in the group and can be expressed as follows. NZP may be a highly specialised business, but other companies in the group are less specialized. One of these, for example, produces some general pharmaceutical products such as nasal sprays. On a proper construction of the clause as drafted the Defendant is therefore prohibited for 12 months from working for any company which sells pharmaceutical products including nasal sprays. Mr Nicholls did not name them, but presumably this would include large chains such as Boots or Superdrug. This goes far beyond what is reasonably necessary to protect the Claimants’ legitimate interests: therefore the offending words cannot be severed under the principles laid down in Egon Zehnder v Tillman; and thus the whole clause fails.

In my view this is a construction of the clause which falls within the principle of Home Counties Dairies v Skilton. If at the time of signing the “Variation of Employment Agreement” which introduced the covenants into Dr Boydell’s contract the parties had been asked by the hypothetical officious bystander whether after leaving NZP he would be able to go to work for Boots or Superdrug, I am confident that both parties would have said “of course he would”. The whole burden of the clause is directed to the specialist activities of NZP, which it lists at some length. The judge was entitled, at least at the interim injunction stage, to sever the words from the clause and grant an injunction on a more limited basis. There is a serious question to be tried as to whether other group companies have significant areas of business which are wholly distinct from the activities carried out by NZP. I would, however, refuse Ms Stone’s application for permission to cross-appeal against the judge’s decision to sever the relevant words from clause 3.1.

Mr Nicholls submits that a restraint on being involved in any capacity with any third party which competes with the former employer’s business, whether or not it was in the same field of activity as when the employee was working for the claimants is plainly too wide in principle. He referred to the decision of this court in Wincanton Ltd v Cranny [2000] IRLR 716. In that case the claimant company sought to enforce a 12 month covenant which prohibited the defendant from being engaged, concerned or interested “in any business of whatever kind within the United Kingdom which is wholly or partly in competition with any business carried on by the company ...”. Simon Brown LJ said of this clause:-

I do not think that Wincanton v Cranny will bear the weight which Mr Nicholls put on it. Wincanton Ltd was described in the judgment as the second largest haulier in the UK. It was a subsidiary of Unigate plc, a large and well-known public company. Wincanton’s business was concerned not merely with distribution but with logistics. Although Mr Cranny held a very senior position at Wincanton, namely as European Operations Manager, it seems to me a very severe restriction that an employee should be excluded from every aspect of haulage or logistics businesses throughout the country for 12 months after leaving.

Decisions in this field are highly fact-sensitive. Where the employer is, for example, a large public company covering a variety of fields of business activity it may be very difficult to justify a covenant against competition of the kind we have in clause 3.1 even on the basis of a senior employee’s knowledge of the company’s commercial secrets. But this is far less obvious where the company, as is the case with NZP, has a highly specialised or niche business. It may be unrealistic, as Ms Stone argues, to think that if Dr Boydell were to move immediately to Zellbios or to one of the direct competitors listed in the clause he could somehow be insulated from activities which compete with those of NZP. The case is a very long way from, for example, Ashcourt Rowan Financial Planning v Hall [2013] IRLR 637 where the effect of the restriction was to exclude the defendant altogether from the financial services sector.

Another of Mr Nicholls’ criticisms of the clause was that the clause extends to involvement with “related animal products”, without limiting those to products in which NZP dealt. But the natural construction of this phrase, in my view, is “animal products related to bile”, which remains prima facie a very specialised field of business activity.

I therefore take the view that it is not plain and obvious that clause 3.1 was incapable of severance; nor that, as severed by the judge, it was nevertheless too wide to be enforceable.

Mr Nicholls challenges the enforceability of both the non-soliciting clause and the non-dealing clause. As to the first of these, clause 3.2(a), Mr Nicholls submits that its wording is unusual because it only relates to solicitation of customers to cease or reduce their business with the Claimants rather than positively to give their business to the Defendant’s new employer. Like the judge, I cannot see that there is anything wrong with a clause in this form. The other objection to clause 3.2(a) is that it could apply to any business which the solicited customer might want to do even if unconnected with the defendant’s former field of activity. I agree with the judge that this objection is in the category of being fanciful in terms of what the parties would have had in contemplation. It is unrealistic to suppose that customers of a business as specialised as NZP might have been concerned with the supply of completely unrelated products.

The objection to the non-dealing clause is similar. It is said that it restricts the defendant from approaching customers in relation to products completely unrelated to Dr Boydell’s former field of activity. This would indeed, as the judge said, have been “absurdly wide”, but it too falls fairly and squarely within the Skilton principle. I would therefore refuse permission to appeal against the judge’s decision to include both the non-solicitation and non-dealing clauses in the injunction which he granted.

This potential ground of appeal did not feature in Mr Nicholls’ oral argument and it can be dealt with shortly. In accordance with Clause 3.4 of the contract the Claimants have from the start offered to pay Dr Boydell his full salary during any period prior to trial during which he is restrained by injunction from joining his new employer. There is no evidence that in this situation he would suffer any financial loss. Conversely, the inadequacy of damages to the Claimants, if they are refused an interlocutory injunction but succeed at trial on liability, is entirely obvious.

In those circumstances, strictly speaking, one never reaches the “balance of convenience” stage of the American Cyanamid analysis; or, putting it another way, the balance of convenience obviously favours the grant of an injunction until trial. Mr Nicholls did not dispute that if his arguments on “no serious question to be tried” were to be rejected, he could not succeed on the balance of convenience.

A further ground on which Dr Boydell sought permission to appeal was that of delay. It was submitted that the Claimants knew in November 2021 that he intended to join Zellbios as soon as his notice period expired but nevertheless delayed until the expiry of that notice period before issuing proceedings.

Reliance is placed on observations of mine in Planon Ltd v Gilligan. In that case Mr Gilligan. who was alleged to be in possession of trade secrets of his old employer, started with the new employer on 1 September 2021. The claimants discovered this the following day, yet it was not until some seven weeks later that the hearing in the Chancery Division of their application for an injunction took place. Mr Gilligan had been in post with the new employer throughout this period, during which, as I pointed out, any trade secrets would surely have been lost. By the time the case reached this court that period had become seven months.

In the present case, when Dr Boydell first informed the Claimants of his intentions there was a period from 17 November to 14 December 2022 during which the parties were in negotiation to see whether a compromise could be reached. In January there was open correspondence, including a request from Dr Boydell’s solicitors for more time in which to respond. Dr Boydell had not started work for the new employer when proceedings were issued, and gave an interim undertaking not to do so for the brief period until a hearing on notice of the injunction application could take place.

As the judge put it:-

We did not find it necessary to hear from Ms Stone in answer to the application for permission to appeal on the question of delay, and I would refuse such permission.

I would dismiss the appeal.

I agree.

I also agree.