East England Schools CIC (t/a 4MYSCHOOLS) v Palmer & Anor

This action concerns restrictive covenants in the contract of employment of an employee of a recruitment consultancy. It raises for decision a number of issues concerning the validity of such covenants, including whether the increasing use by teachers and schools of social media and the internet means that the employer no longer has any protectable connection with its customers, and an interesting point about the effect on the enforceability of such covenants of restrictions on the acts which the ex-employee may take “as a shareholder” of a competing company.

The Claimant, East England Schools CIC (which trades as, and which I shall refer to as, “4myschools”) is a Community Interest Company which carries on business as a recruitment agency in the educational sector. Broadly, its business involves matching teacher applicants with schools that have vacancies, both for short-term placements of a day or so (to cover sickness and similar absences) and for longer-term positions. It employs 13 staff across all of its businesses, and had a turnover in 2012 of approximately £3.2m.

The First Defendant, Luci Palmer (“Ms Palmer”) was employed by 4myschools as a “Recruitment Consultant” at its Chelmsford offices, under a contract of employment dated 17 January 2011 (the “4myschools Contract”). Ms Palmer’s starting salary was £25,000 per annum plus commission. At 4myschools, Ms Palmer was primarily responsible for matching teachers with vacancies at secondary schools in Essex.

Clause 15 of the 4myschools Contract contained covenants not to solicit or to deal for a period of 6 months after the ending of her employment with the candidate teachers or client schools with whom Ms Palmer had dealt in her last 12 months at 4myschools. Those covenants were expressed to extend to actions carried out by Ms Palmer, not merely on her own account, but also “as principal, partner, shareholder, director, employee, consultant or in any other capacity whatsoever”.

Towards the end of 2012, Ms Palmer became disillusioned with her prospects at 4myschools. She therefore started to look for a new job. On 31 January 2013 she was offered a post by the Second Defendant, Sugarman Group Limited (“Sugarman Education”) as a “Senior Consultant”, at a higher salary than she was receiving at 4myschools. Sugarman Education is another educational sector recruitment agency. It operates from premises in the City of London Ms Palmer accepted the post offered by Sugarman Education by email dated 4th February 2013, and on 1st March 2013 she gave notice to 4myschools that she was leaving. Clause 11.1.2 of the 4myschools Contract required Ms Palmer to give 4 weeks’ notice to terminate her employment. Her employment with 4myschools therefore ended on Friday, 29^th March 2013.

On Tuesday 2 April 2013 (Monday 1 April was a Bank Holiday), Ms Palmer started work with Sugarman Education. Sugarman Education wished to develop its business in Essex, and so assigned Ms Palmer to work on building Sugarman Education’s business with secondary schools in Essex, the same area that she had covered for 4myschools.

Not long after Ms Palmer started work, 4myschools received information which led it to believe that Ms Palmer was breaking the terms of her restrictive covenants by soliciting and/or dealing with the candidate teachers and client schools with whom she had dealt while employed by 4myschools. On 30 April 2013, Field Fisher Waterhouse LLP (“FFW”), who are 4myschools’ solicitors, wrote letters both to Ms Palmer and to Sugarman Education. Those letters drew attention to Ms Palmer’s contractual obligations. The letter to Ms Palmer demanded that she sign an undertaking to comply with the terms of clause 15 of the 4myschools Contract, and provide a list of all teachers and schools that she had contacted in breach of those terms. The letter to Sugarman Education asked Sugarman Education to confirm whether any information confidential to 4myschools was on Sugarman Education’s systems or had been used by Sugarman Education since Ms Palmer had joined it.

In response, Ms Palmer (at Sugarman Education’s expense) and Sugarman Education each consulted solicitors. Ms Palmer instructed Bignalls Balderston Warren (“BBW”). Sugarman Education instructed Manches LLP (“Manches”, now Penningtons Manches LLP). BBW and Manches entered into correspondence with FFW. Eventually, under cover of emailed letters dated 24^th May 2013, BBW sent to FFW a form of undertaking signed by Mr Palmer (“the 24 May Undertakings”). The wording of the 24 May Undertakings did not follow the wording proposed by FFW on 30 April 2013. However, the undertakings which were contained in the 24 May Undertakings essentially mirrored the terms of sub-clauses 15.2.2, 15.2.3, 15.2.6 and 15.2.7 of the 4myschools Contract, with the addition of a 30-mile geographical restriction.

To reinforce the 24 May Undertakings, under cover of an email dated 31 May and a letter dated 3 June 2013, BBW sent to FFW a copy of an Affidavit sworn by Ms Palmer. In that Affidavit, she “state[d] unequivocally that I shall abide by the terms of the undertakings”. Under cover of a letter dated 13 June 2013, BBW also sent to FFW a copy of a Schedule which purported to show that, in the 4-week period beginning on 22 April 2013, Ms Palmer had placed candidates to fill 31 days of vacancies at 6 schools which were (in BBW’s words) “common clients of both 4myschools and Sugarman [Education]”.

Thereafter, 4MySchools received additional information which led it to believe that Ms Palmer had committed further breaches of her restrictive covenants, over and above those about which FFW had been informed by BBW. 4myschools therefore decided to bring High Court proceedings against Ms Palmer and Sugarman Education. On 8 July 2013 4myschools issued and served on BBW and Manches a Claim Form and an Application for an interim injunction. That Application came on for hearing on 12 July 2013 before Sharpe J, and was disposed of by a Consent Order under which Ms Palmer and Sugarman Education gave undertakings, against a cross-undertaking in damages given by 4MySchools. The order of Sharpe J contained directions for a speedy trial of the action, and it is that trial which has come before me for hearing.

The undertakings given by Ms Palmer and by Sugarman Education to Sharpe J lasted only for the balance of the 6-month period from the termination of Ms Palmer’s employment with 4myschools prescribed by clause 15 of the 4myschools Contract. Those undertakings accordingly expired on 29 September 2013, more than 2 months before the trial before me began. In practical terms, therefore, the central issue which I have to determine is whether, had an injunction been granted on 12 July 2013 in the terms of the undertakings then given by Ms Palmer and Sugarman Education, that injunction would have been “wrongly granted” (Footnote: ¹). Put in positive terms, I have to decide whether (on the facts as I now find them) Sharpe J should have granted an injunction to 4myschools, if undertakings had not been given by the Defendants. If so, I shall have to consider whether 4myschools is additionally entitled to an award of damages or to any other further relief. If not, I shall have to consider whether to order an enquiry under the cross-undertaking given by 4myschools as to the damage (if any) suffered by Mr Palmer and Sugarman Education by reason of the undertakings which they gave to Sharpe J.

In order to decide that central issue, and the other issues which arise in this action, I have to answer the following main questions:

In paragraph 5 of her Defence, Ms Palmer originally alleged that 4myschools had committed repudiatory breaches of the 4myschools Contract, which she had accepted by resigning, thereby discharging her from further compliance with her post-termination restrictive covenants (under the rule in General Billposting Co Ltd v Atkinson (Footnote: ²)). Ms Palmer also gave evidence supporting these allegations in her Second Affidavit and in her Witness Statement. Ms Palmer’s allegations were all strongly disputed by 4myschools. However, at the outset of the trial, Mr Brook indicated on behalf of Ms Palmer that this line of defence was no longer to be pursued. I therefore need say no more about it.

Paragraph 12 of the Particulars of Claim pleads that the undertakings sent to FFW by BBW on 24 May 2013 were given “[b]y way of .. contractual undertakings”: and paragraph 14 asserts that “the Undertakings were given in order to prevent .. the Claimant seeking interim injunctive relief and in an attempt to reduce any orders for costs in respect of which [Mr Palmer] might be liable”. Paragraph 15 of Ms Palmer’s Defence admits that she signed “contractual undertakings”, but avers that they were of no legal effect until released on 11^th July 2013 (by which time, proceedings had already been issued). Paragraph 12 of Sugarman Education’s Defence admits paragraph 12 of the Particulars of Claim, but avers that the undertakings were offered “in order to minimise costs and to bring the matter to a commercially sensible conclusion”, so that “no admissions were made or implied” by the giving of the undertakings.

The Statements of Case served on behalf of the Defendants therefore both admit that the 24 May Undertakings had contractual force. However, in the course of the trial, I indicated to Mr Solomon, who appeared for 4myschools, that I was in some doubt as to whether the evidence placed before me supported the conclusion of law that the written exchanges between the parties (both parties being agreed that all relevant communications were in writing) had created a legally binding contract. In particular, I was concerned as to whether the correspondence between BBW and FFW had given rise to any concluded agreement.

The relevant correspondence begins with FFW’s letter dated 30 April 2013 to Ms Palmer. That letter enclosed a form of undertaking to be signed by Ms Palmer, the opening words of which were:

I, Luci Palmer acknowledge that I am bound by post-termination restrictions, including non-solicitation obligations, contained in the contract of employment dated 17 January 2011 (“the Contract”).

In consideration for East England Schools CIC trading as 4myschools .. agreeing not to bring injunctive proceedings against me in the High Court of Justice, London, England for breach of the non-solicitation restrictions in the Contract, I hereby unequivocally and irrevocably undertake to 4myschools as follows ..

Had Ms Palmer signed that form and returned it to FFW, there can be little doubt that that would have amounted to an agreement between Ms Palmer and 4myschools which (subject to any issues of restraint of trade) would have been legally binding as a simple contract. The terms of that contract would then have precluded 4myschools from “bring[ing] injunctive proceedings .. for breach of the non-solicitation restrictions in the [4myschools] Contract” – something which 4myschools in fact did by issuing its Claim Form and Application Notice on 8 July 2013.

However, Ms Palmer did not sign FFW’s form of undertaking. Instead, BBW replied on Ms Palmer’s behalf on 9 May 2013, admitting two contacts “in a personal capacity” with individuals at schools “which are Clients of both 4myschools and Sugarman”, but denying any breaches of the restrictive covenants in the 4myschools Contract, and asserting that those covenants were, in any event, too widely drawn to be enforceable.

FFW’s reply, dated 15 May 2013, stated that, in view of evidence that had been obtained of breaches by Ms Palmer, “our client is no longer willing to accept undertakings directly from your client”. FFW enclosed a draft Claim Form “which will be issued by Friday 17 May”, and required the provision of undertakings by Ms Palmer to the Court, failing which an application for a “springboard” injunction would be made. BBW responded by email the same day, attempting to stave off proceedings as premature. However, by letter sent by email on 16 May 2013, FFW repeated their client’s intention to issue a claim, and to require undertakings to the Court in the form of a further draft Order. BBW’s response, sent on 17 May 2013, was that “our client does not agree to the undertakings and denies any liability to your client for breach”.

After some further exchanges of correspondence, on 21 May 2013 FFW wrote a lengthy letter to BBW, in the course of which they “offered a compromise .. in relation to the non-competition clause .. [to the effect that] an injunction based on clause 15.2.1 will not be pursued at the interim hearing ..”. BBW responded on the following day, 22 May 2013, saying that “Given your client’s new position .. in relation to the non-competition clause at 15.2.1, our client is willing to give suitable undertakings in your client’s favour pending resolution of the issue, which we expect to be without the need for any proceedings” (Footnote: ³). BBW’s letter invited FFW to prepare a revised draft of the undertakings to be given.

FFW’s response on 23 May 2013, however, stated again that “our client requires undertakings to be provided to the Court”. That letter enclosed a draft Order for an Injunction, and asked BBW to confirm that they were instructed to accept service of proceedings.

At 11.33 on 24 May 2013, BBW sent a holding reply by email to FFW, saying that they “anticipate being able to write to you with proposals that will hopefully dissuade your clients from proceeding with the immediate issue of proceedings ..”: and at 12.59 on 24 May 2013 BBW sent to FFW a letter in the following terms:

.. Without prejudice to her arguments as to the enforceability of those covenants which have been set out clearly and at length in our recent letters, our client is willing to offer undertakings in the form enclosed. We shall arrange for a signed copy to be forwarded to you, hopefully within the hour and would ask that this be held to our order pending your confirmation that your clients will not seek an order of costs in the proposed injunction proceedings based on any breaches of covenant that are alleged to have taken place to date. Clearly our client’s firm intention is to avoid such injunction proceedings being issued.

For the avoidance of doubt, this does not in any way limit your clients’ claim for costs should they decide to proceed with their proposed claim for damages, nor indeed would it limit your clients’ claim for costs should they make a future application consequent upon an alleged breach or breaches of the enclosed undertakings ..

The attached form of undertaking was in the following terms;

I, LUCINDA PALMER .. pursuant to my contract of employment with .. 4myschools (“the Company”) which was entered into on the 11^th January 2011 and terminated as a result of my resignation on the 29 March 2013 (“the Contract”)

HEREBY UNDERTAKE as follows:

I shall not, up to and including 29 September 2013, within 30 miles of any branch of the Company or any Group Company at which I worked in the 12 months ending on 29 March 2013, on my own account or on behalf of others, whether directly or indirectly and whether by myself, or through my servants or agents:

In competition with the Company or any Group Company canvass or solicit business or custom from any Client or Prospective Client in relation to Services;

In competition with the Company or any Group Company be concerned with the supply to any Client or Prospective Client of Services or otherwise deal with any Client or Prospective Client in relation to Services;

Canvass or solicit business or custom from any Candidate or Prospective Candidate In relation to Services;

Be concerned with the supply to any Candidate or Prospective Candidate of Services or otherwise deal with any Candidate or Prospective Candidate in relation to Services.

For the purposes of these undertakings the terms “Candidate”, “Client”, “Group Company”, “Prospective Candidate”, “Prospective Client” and “Services” shall have the meanings attributed to them in the Contract, a copy of which is annexed.

I understand that, if I breach any of the terms of this Undertaking the Company may issue proceedings against me without further notice seeking an Injunction, damages and costs. I have had the opportunity of taking independent legal advice before signing this undertaking.

A signed copy of the 24 May Undertakings was provided under cover of an email sent at 15.57 on 24 May 2013.

FFW, however, did not accept this offer. By letter dated 28 May 2013, they recorded receipt of the signed undertakings from BBW “which we confirm we are holding to your order”. However, they reiterated that

.. our client requires undertakings to be provided to the Court. In the event of further breaches of covenant by your client, a contractual remedy against your client is not acceptable .. Therefore, please confirm by return that your client consents to a court order reflecting the signed undertakings. If your client is not prepared to consent, please explain why? ..

FFW’s 28 May 2013 letter did, however, make a counter-offer to Ms Palmer:

Conditional upon your client’s agreement to a court order enshrining the undertakings .. our client is prepared to refrain from seeking a costs order from your client at this stage in relation to the proposed application for an injunction ..

By email sent at 14.58 on 28 May 2013, BBW requested clarification of FFW’s position on costs, to which FFW replied on 29 May 2013, enclosing an amended draft Order. A flurry of further correspondence between BBW and FFW then ensued, culminating in an email from BBW to FFW at 16.13 on 31 May 2013, which stated:

I attach the first affidavit of Luci Palmer, which is currently unsworn. Please hold the affidavit to our order on the same terms as set out in our letter of 24 May 2013 which enclosed the unsigned undertakings.

Our client has tried to speak with six or seven solicitors but has been unable to find someone who can see her to swear the affidavit today, largely due to holiday and solicitors’ attendance at Court. She is therefore going to arrange an appointment on Monday 3 June. I shall send you the sworn affidavit once I have received it.

The enclosed draft affidavit stated that it was made “in support of” the 24 May Undertakings, and exhibited a copy of them. It continued:

[I]t has been suggested that I might not abide by the terms of the Undertakings unless they are given to the Court. This will necessitate the issue of injunction proceedings in the High Court, with its attendant costs ..

.. In the light of the above, I wish to state unequivocally that I shall abide by the terms of the Undertakings. Indeed, my earnest wish is to avoid proceedings.

BBW sent a sworn copy of Ms Palmer’s First Affidavit to FFW on 3 June 2013, under cover of a letter which proposed a settlement meeting and which expressed the hope “that this matter can move forward in a conciliatory and constructive manner without the need for proceedings”. That letter also agreed to provide a Second Affidavit, to deal with “documents and confidential information”.

Following a response dated 5 June 2013 from FFW, complaining of the delay, BBW sent an email to FFW at 17.29 on 5 June 2013 in the following terms:

Please find attached our client’s sworn first and second Affidavits. Please hold these to our order pending your confirmation that your clients will not seek an order of costs in the proposed injunction proceedings based on any breaches of covenant that are alleged to have taken place to date. Please note that our client reserves her position in the event that the matter is litigated and understands that your client reserves its position also.

As I have already noted in paragraph 9 above, on 13 June 2013, BBW wrote to FFW enclosing a schedule of placements which Ms Palmer admitted making. That letter concluded

.. You will note immediately that the total gross (Footnote: ⁴) profit of the placements is £1,240, ie at the very bottom of the small claims track bracket. On any view, this sum cannot justify the bringing of High Court proceedings, particularly now that sensible resolution has been achieved regarding all other substantive issues ..

There then followed a 3-week period of silence between the parties, which was only broken by FFW’s letter dated 8 July 2013, which attached the Claim Form and Application for an Injunction.

BBW’s first letter dated 11 July 2013 in response protested that the decision to issue proceedings was “disproportionate and unnecessary”, and continued:

We understand that the First Defendant has notified you that she is prepared to re-affirm her commitment to her contractual undertakings of 24^th May 2013. Despite your failure to reply to the issue of these undertakings having been held to the “order of BBW”, she is now willing to offer them unconditionally. In the circumstances, this is a proportionate and adequate safeguard for your client

BBW’s second letter dated 11 July 2013 stated:

We confirm that we release the undertakings and affidavits which were sent to you on 24 May, 3 June and 5 June 2013.

We also confirm that our client is willing to give an undertaking to the court in the terms of paragraph 1 of your draft order.

FFW replied that same day:

You state that your client is willing to provide undertakings in the form of paragraph 1 of our draft order. However, so that the position is entirely clear, please send us by return a copy of the court order which your client is willing to have made against her by the court tomorrow, which we will consider ..

If your client consents to the undertakings sought in paragraph 1 of the draft order, our client is prepared to agree not to seek undertakings in relation to confidential information, and will instead rely on the content of your client’s second affidavit sworn on 5 June 2013.

Thereafter, the terms of the Orders to be made by Sharpe J were agreed between solicitors and counsel, and the Orders in fact made on 12 July 2013 were made by consent.

Doing the best that I can, I am unable to find in this correspondence any concluded agreement sufficient to amount to a simple contract between Ms Palmer and 4myschools, at least at any point prior to the parties’ eventual agreement on the terms of the Orders to be made by Sharpe J.

The declared intention of BBW in sending the 24 May Undertakings and Ms Palmer’s First Affidavit sworn on 3 June 2013 to FFW was to stave off proceedings: and, at least to some extent, they were successful in that endeavour, and obtained from FFW a degree of forbearance to sue. However, BBW do not seem to have turned their mind to the question of whether a Deed might have been a better legal format for what they intended to achieve than a mere signed document, or even an Affidavit. As for FFW, their focus was on obtaining undertakings to the Court. Their declared position at the time was that their client was not interested in a mere further contractual promise.

The 24 May Undertakings were expressly sent “to be held to our [ie BBW’s] order pending your confirmation that your clients will not seek an order of costs in the proposed injunction proceedings based on any breaches of covenant that are alleged to have taken place to date”. That same condition was attached to Ms Palmer’s Affidavit which was to be held “to our order on the same terms as set out in our letter of 24 May 2013”. FFW did not at any point meet that condition, or give the agreement sought. On the contrary, they continued to insist that any undertakings should be given, not just in writing, but to the Court, on the basis that “a [purely] contractual remedy against your client is not acceptable”. By the time that the condition imposed by BBW was released on 11 July 2013, proceedings had already been begun: and there was no specific counter-promise or performance either sought or given in return for that release, so as to turn what would otherwise simply be unilateral promises by Ms Palmer into a legally binding contract between her and 4myschools. Applying the conventional concepts, I find that there was no correspondence of offer and acceptance at any relevant point in the exchanges between the parties.

Mr Solomon submitted that BBW’s stipulation that the 24 May Undertakings should be held to BBW’s order “makes no sense in the context, especially in the light of the terms of the Affidavit”, and should therefore be disregarded. As to that, I accept that the concept of being “held to order” is more appropriate to those types of document – such as a deed or conveyance – which do not take effect until delivery. However, even in such cases, the legal concept of delivery does not simply mean “handed over” to the other party, but rather means an act done so as to evince an intention to be bound by the document (Footnote: ⁵). The focus, even in such cases, is on the manifested intention of the delivering party. Here, the intention of BBW - that the 24^th May Undertakings should not take effect as a contractual offer unless and until BBW said so – would have been plain to a reasonable recipient in FFW’s position, even though the legal concept that BBW employed to express that intention was arguably inapt.

For these reasons, I have come to the conclusion that the 24 May Undertakings are not enforceable in their own right as a separate contract.

That, however, does not necessarily mean that they are entirely irrelevant. The fact that undertakings in these terms were offered by Ms Palmer, voluntarily and with the benefit of legal advice, is a factor which could be taken into account, if appropriate, in considering the reasonableness of the similar restrictions contained in the 4myschools Contract.

I therefore turn to consider the enforceability of the restrictive covenants which were contained in clause 15 of the 4myschools Contract itself.

The relevant terms of the 4myschools Contract are the following:

15.

RESTRICTIONS

15.1

In this clause:-

15.1.1

"Candidate" means an applicant for permanent, temporary or contract employment (employment through a service company) who has at any time during the Relevant Period been registered with the Company or any Group Company and with whom the Employee was materially involved or had personal dealings during the Relevant Period;

15.1.2

"Client" means any person, firm, school, nursery, company or entity which has at any time during the Relevant Period been a client of the Company or any Group Company and with whom the Employee was materially involved or had personal dealings during the Relevant Period;

…

15.1.5

"Prospective Candidate" means any person, firm, company or entity who has at any time during the period of six months prior to the Termination Date been in negotiations with the Company or any Group Company about their availability for placement in permanent, temporary or contract employment and with whom during such period the Employee was materially involved or had personal dealings;

15.1.6

"Prospective Client" means any person, firm, school, nursery, company or entity which has at any time during the period of six months prior to the Termination Date been in negotiations with the Company or any Group Company for the supply of services and with whom during such period the Employee was materially involved or had personal dealings;

15.1.7

"Relevant Area" means within 30 miles of any branch of the Company or any Group Company at which the Employee worked in the Relevant Period;

15.1.8

"Relevant Period" means the period of 12 months ending on the Termination Date;

15.1.9

"Services" means services identical or similar to those being supplied by the Company or any Group Company at the Termination Date and with which the Employee was materially involved during the Relevant Period;

15.1.10

"Termination Date" means the date on which the Employee's employment terminates or, if she spends a period on garden leave immediately before the termination of her employment, such earlier date on which such garden leave commences;

15.2

The Employee covenants with the Company that she will not, save with the prior written consent of the Company, directly or indirectly, either alone or with or on behalf of any person, firm, company or entity and whether on her own account or as principal, partner, shareholder, director, employee, consultant or in any other capacity whatsoever:-

15.2.1

for six months following the Termination Date be engaged or concerned in any business supplying Services to schools, nurseries or teachers in the Relevant Area;

15.2.2

for six months following the Termination Date and in competition with the Company or any Group Company canvass or solicit business or custom from any Client or Prospective Client in relation to Services;

15.2.3

for six months following the Termination Date and in competition with the Company or any Group Company be concerned with the supply to any Client or Prospective Client of Services or otherwise deal with any Client or Prospective Client in relation to Services;

…

15.2.6

for six months following the Termination Date canvass or solicit business or custom from any Candidate or Prospective Candidate in relation to Services;

15.2.7

for six months following the Termination Date be concerned with the supply to any Candidate or Prospective Candidate of Services or otherwise deal with any Candidate or Prospective Candidate in relation to Services;

…

15.4

Each of the restrictions contained in this clause is an entirely separate and independent restriction, despite the fact that they may be contained in the same phrase, and if any part is found to be unenforceable the remainder will remain valid and enforceable.

The argument during the hearing before me was confined to sub-clauses 15.2.2, 15.2.3, 15.2.6 and 15.2.7, because those were the provisions of clause 15 which were reflected in the undertakings given to Sharpe J on 12 July 2013. I therefore deal in this judgment only with the enforceability of those 4 sub-clauses.

As is stated in Chitty on Contracts (Footnote: ⁶), all covenants in restraint of trade are prima facie unenforceable at common law, and are enforceable only if they are reasonable with reference to the interests of the parties concerned and of the public. Unless the unreasonable part can be severed by the removal of either part or the whole of the covenant in question, its inclusion renders the covenant or the entire contract unenforceable. The doctrine of restraint of trade is probably one of the oldest applications of the doctrine of public policy.

There was no dispute between the parties that these 4 covenants were prima facie in restraint of trade, or about the basic principles of law which I should apply in deciding whether these particular sub-clauses in this particular contract were “reasonable with reference to the interests of the parties concerned and of the public”. Both sides agreed that those principles were accurately stated by Sir Bernard Rix in his judgment in Coppage v Safety Net Security Limited (Footnote: ⁷), as follows:

(1)

Post-termination restraints are enforceable, if reasonable, but covenants in employment contracts are viewed more jealously than in other more commercial contracts, such as those between a seller and a buyer.

(2)

It is for the employer to show that a restraint is reasonable in the interests of the parties and in particular that it is designed for the protection of some proprietary interest of the employer for which the restraint is reasonably necessary.

(3)

Customer lists and other such information about customers fall within such proprietary interests.

(4)

Non-solicitation clauses are therefore more favourably looked upon than non-competition clauses, for an employer is not entitled to protect himself against mere competition on the part of a former employee.

(5)

The question of reasonableness has to be asked as of the outset of the contract, looking forwards, as a matter of the covenant's meaning, and not in the light of matters that have subsequently taken place (save to the extent that those throw any general light on what might have been fairly contemplated on a reasonable view of the clause's meaning).

(6)

In that context, the validity of a clause is not to be tested by hypothetical matters which could fall within the clause's meaning as a matter of language, if such matters would be improbable or fall outside the parties' contemplation.

(7)

Because of the difficulties of testing in the case of each customer, past or current, whether such a customer is likely to do business with the employer in the future, a clause which is reasonable in terms of space or time will be likely to be enforced. Moreover, it has been said that it is the customer whose future custom is uncertain that is 'the very class of case against which the covenant is designed to give protection ... the plaintiff does not need protection against customers who are faithful to him' (John Michael Design plc v Cooke [1987] 2 All ER 332, 334).

(8)

On the whole, cases in this area turn so much on their own facts that the citation of precedent is not of assistance.

Both sides were also agreed that the first question which I should consider is whether, looking at the matter as at January 2011 (which was when the 4myschools Contract was made), 4myschools had a relevant proprietary interest which these covenants were designed to protect.

In paragraph 6 of the Particulars of Claim, 4myschools identified the proprietary interest which these covenants were designed to protect as its:

.. [L]egitimate interests in its trade connection with its clients and candidates. By reasons of [Ms Palmer]’s employment with [4myschools], [Ms Palmer] had built up close relationships with [4myschools]’s clients and candidates which she would be able to take advantage of for her own benefit and for the benefit of her future employer upon termination of her employment with [4myschools]

The existence of this proprietary interest is denied by both of the Defendants. Ms Palmer asserts in her Defence (in paragraph 9 and elsewhere), that:

The nature of this dispute was amplified and clarified in the evidence given before me. Although (as one might expect) there was a considerable degree of common ground in the descriptions given by all of the witnesses of how business is done by companies like 4myschools and Sugarman Education, there were some (at least apparent) conflicts in the relevant factual evidence which I must resolve.

I therefore begin my consideration of that evidence by setting out my impressions of the witnesses. I have, of course, paid close attention to the demeanour of each witness when he or she has been giving their evidence. However, I must also test their evidence against all the other materials available to me. In that regard, I bear in mind the helpful observations of Robert Goff LJ (as he then was) in The Ocean Frost (Footnote: ⁸):

.. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses’ motives, and to the overall probabilities, can be of very great assistance to a Judge in ascertaining the truth ..

I also bear in mind the valuable observations on the fallibility of human memory made by Leggatt J in his very recent judgment in Gestmin SGPS SA v Credit Suisse (UK) Ltd (Footnote: ⁹).

The only witness to give relevant evidence on behalf of 4myschools was Mr Mark Payne. Mr Payne and his wife are, in practice, the principals of 4myschools. Mr Payne was a confident and careful witness, who did not duck difficult questions. My impression was that he was doing his best to give his evidence truthfully and to the best of his recollection, while also attempting to put the best “spin” on his company’s case that he could.

Ms Palmer gave evidence on her own behalf. She was very nervous, and I make full allowance for that. Unlike Mr Payne, however, she did have a tendency to avoid answering difficult questions. My impression was that she was trying to give her evidence truthfully, but was also trying to avoid saying anything which might help 4myschools. When questioned about why some of the answers given on her behalf in correspondence had been misleading, and why names which she knew to be those of teachers with whom she had dealt at 4myschools had been redacted in the copies provided on disclosure, she had a tendency to take refuge in blaming her “brief”. Her excuse, on too many occasions, for her lack of frankness was to say words to the effect of “I can only go with the legal advice I was given”. Any such advice would, of course, have been not just wrong, but improper: and, in my judgment, it is highly improbable that she received any such advice. I have to take those untruthful and evasive answers into account in my assessment of the reliability of her evidence overall.

The sole witness on behalf of Sugarman Education was its Managing Director, Mr Tim Wheeler. He was a combative witness, who made speeches, asked questions of counsel, and prefaced many of his answers with the disingenuous remark that “I am not trying to be difficult, but ..”. Even so, it seemed to me that he tried to give his evidence about the way that business is done in this sector of the market truthfully and to the best of his recollection – though, like Mr Payne, he also attempted to put the best “spin” on his company’s case that he could. However, unlike Mr Payne, he was not a careful witness. He exaggerated, and failed to give straight answers to a number of questions, particularly concerning the extent to which he was aware at the material times of the restrictions binding Ms Palmer.

The extracts from the witness statements served on behalf of the parties which are quoted in the following paragraphs of this judgment serve to give a flavour of the dispute on this point.

Mr Payne gave evidence to support 4myschools’ pleaded case as to the nature of the interest to be protected. According to Mr Payne:

.. It is correct that client information, and certain basic candidate information, is available within the public domain. Teacher candidates often register with more than one agency. However; the non-solicitation restrictive covenants do not seek to protect general information about clients and candidates but are concerned with protecting the close relationships with specific clients and candidates which are built up by consultants on behalf of the Claimant. A protected period of 6 months following the departure of a recruitment consultant is necessary to protect the trade connections between the Claimant and its clients and candidates and to enable the Claimant to have a reasonable chance of securing the future business and goodwill of its clients and candidates following the inevitable disruption to that relationship resulting from the departure of the relevant recruitment consultant from the business.

Ms Palmer was no exception to this and was engaged by the Claimant to take on responsibility for the management of the Claimant's existing client and candidate list for Essex secondary schools when another employee went on maternity leave. Ms Palmer's role for the Claimant was to manage and build the close business relationships with the Claimant's list of clients and candidates that she inherited when taking over the position of the recruitment consultant with sole responsibility for Essex secondary schools. Ms Palmer was the point of contact for Essex based candidates and schools, to ensure the Claimant's business was maintained and retained on an ongoing basis. .. [T]he main purpose of [Ms Palmer’s] employment [was to build up close relationships with clients/candidates] in order to maximise the Claimant's business with its customers: and the Claimant invested in individual training of Ms Palmer to enable her to better build rapport with key individuals at schools. She would regularly meet with and speak on the telephone to contacts at schools so she could understand their requirements and build close relationships. This was also true of the candidates where Ms Palmer interviewed each teacher face-to-face, registered them with Claimant, and then provided them with work. Ms Palmer says that her dealings with the Claimant's clients were limited to a small number of individuals at each client. I agree that this was the case. These were the key individuals with whom it was so important for the Claimant to build and maintain a relationship. Without them, there is no client relationship ..

Mr Payne did, however, accept in cross examination that, if Ms Palmer were ill, any of his team would answer the telephone to clients and candidates, and that “the business would get done” in Ms Palmer’s absence. He also accepted that, in at least one case (Moulsham School) where the documents might otherwise have suggested that Ms Palmer had a close relationship with the relevant supply manager, Ms Palmer had nevertheless been unable to secure that school’s business for Sugarman Education after leaving 4myschools.

By contrast, according to Mr Wheeler no such “close relationships” of the kind referred to by Mr Payne exist in this market:

.. The goodwill between an agency and a client school is of marginal value when the nature of the educational recruitment industry is properly considered. The key factor for a placement to take place is the quality and availability of candidates, not loyalty to any particular agency or consultant ..

.. The needs of schools outstrip the ability of the market, and certainly any one agency, to supply. The truth of the matter is that the real drivers of this market are the candidates, and they are in very short supply ..

No one agency will have the best candidate for every position and teaching roles have to be filled ..

As a public service, details of state schools are openly accessible to everyone .. all of the information relating to schools that is required to run an effective recruitment business is online or otherwise readily available to the public ..

.. Candidates also list their details on publicly available websites such as Linked In, CV Library, Jobs in Education, Total Jobs, and Reed ..

In summary, the open availability of school and candidate details, the number of agencies with which schools and candidates deal, the need for the schools to carry out their duties to their pupils and the desire of candidates to secure employment is such that the sense of loyalty or protectable goodwill that may be found in other fields does not arise in education recruitment as it once did. The advent of the internet has completely changed the working environment ..

Ms Palmer’s evidence supported that of Mr Wheeler. According to her:

.. [T]he education recruitment industry .. functions effectively on the basis of fluid, non-proprietary relationships between clients, candidates and agencies alike. It was my experience that none of the schools or candidates were loyal to any particular agency ..

.. Any particular relationship I built up with clients and candidates whilst working at [4myschools] was due simply to my inherent personal skills, rather than any advantage afforded to me by [4myschools]. I was not the only consultant building up such relationships with the schools ..

Further, my professional relationships with the clients and candidates were no deeper than those which subsist between the schools/candidates and every other consultant at the numerous agencies with which they deal .. [4myschools] continued to trade with these schools (in some cases, more than when I was the acting consultant) and candidates immediately after my departure.

However, Ms Palmer was obliged to admit in cross-examination that her job description at 4myschools included as part of her role to “Build relationships with new clients (schools) by visiting them in their premises to gain a thorough understanding of their needs”, to “Keep in touch with existing clients over the phone and by visiting them in their premises and search for new opportunities through recommendations”, and to “Build relationships with candidates and ensure they understand the “why” about 4myschools”. She also accepted that she had in fact carried out these tasks, and that Mr Jessop, one of her chosen referees for the position with Sugarman Education, had said in his reference for her that she “builds deep relationships with clients”.

In my judgment, Mr Wheeler’s description of the way in which the market in this sector now operates (and operated in 2011) was generally an accurate one. I find as a fact that the market is candidate-driven, that the number of vacancies exceeds the number of candidates, that much of the relevant information about teachers and schools is publicly available, that schools will generally use whichever agency can get them the best candidate at the right price when they need him or her, that candidates will usually sign up with multiple agencies, and will take the best offers that come in from time to time, and that there is therefore little loyalty owed either by schools or teachers to any particular consultant or to any particular agency.

Despite all that, I am satisfied that 4myschools did have a sufficient proprietary interest that it was entitled to seek to protect in the connections which Ms Palmer would be likely to make while employed by 4myschools with the schools and teachers with whom she dealt on 4myschools’ behalf.

My reasons for this conclusion (and my further relevant findings of fact) are as follows:

I next turn to consider whether the restrictions in these sub-paragraphs were wider than was reasonably necessary for the protection of the interest which I have identified above.

Mr Brook, on behalf of Ms Palmer and Sugarman Education, challenged the reasonableness of these restrictions on 3 grounds:

It was this third point which Mr Brook put at the forefront of his submission, so I shall deal with it first.

Mr Brook submitted that the opening words of clause 15.2:

The Employee covenants with the Company that she will not ..[do any of the acts specified in the following sub-paragraphs] directly or indirectly, either alone or with or on behalf of any person, firm, company or entity and whether on her own account or as principal, partner, shareholder, director, employee, consultant or in any other capacity whatsoever ..

mean, when properly construed, that Ms Palmer would be in breach of clause 15 merely (for example) by acquiring a small minority shareholding in a company which dealt with the same schools or teachers as she had dealt with at 4myschools, even if she played no active part in the business of that company. That, Mr Brook submitted, was plainly a wider restriction than could be justified for the protection of 4myschools’ legitimate interests.

In support of his argument on this point, Mr Brook drew my attention to the very recent unreported decision of Tugendhat J in White Digital Media Ltd v Weaver (Footnote: ¹¹). That case, which came before Tugendhat J on an application for an interim injunction, concerned the restrictive covenants in the contract of employment (Footnote: ¹²) of the Regional Director of Operations of a publisher of free electronic magazines. As in the present case, the covenants against soliciting or dealing with relevant customers were set out in individual sub-clauses, all of which were prefaced by the following words:

The Employee will not .. directly or indirectly and whether alone or in conjunction with or on behalf of any other person and whether as a principal, shareholder, director, employee, agent, consultant partner or otherwise ..

Tugendhat J decided that the restrictions in that case were wider than was reasonably necessary for the protection of the employer’s legitimate interests, and so refused the injunction application. One of his reasons for doing so was that the restrictions were capable of being infringed merely by the ex-employee owning a minority shareholding in a competing company.

[23] Mr Nicholls submits that a clause that restrains a person from being involved in a competing business as a shareholder or in any other capacity is unenforceable. He cites Scully (UK) Ltd v Lee [1998] IRLR 259 at paras 24-25. In that case the judge at first instance had held that a covenant was too wide in so far as it provided that the employee should not “carry on, assist in the carrying on or be engaged or otherwise interested in, whether as a shareholder, director, consultant, employee or self-employed person or in any other capacity . . . .”

[24] As the judge observed, the words of the covenant restricted the employee from being a minority shareholder in a company which fell within the description given in that covenant. But the judge went on to hold that that provision was trivial and that the covenant in question was enforceable.

[25] In allowing the appeal, Aldous LJ recorded that Counsel did not challenge the judge's conclusion that the clause went wider than was reasonable in so far as it restricted the employee from being interested as a shareholder or in any other capacity. The court held at paras 33, 53 and 56 that this unreasonable part of the restriction could not be severed from the rest.

[26] Mr Redmayne submitted that in Scully the mischief was that the restrictive covenant was not confined to carrying on a competing business: see para 26. In the present case there are the words “so as to compete”, which address that potential objection. So no question of severance arises.

[27] Mr Redmayne's submission is correct to the extent that the absence of words confining the restriction to a competing business was an issue in the case. But it does not meet the point made by Mr Nicholls. In my judgment the whole of cl 3 is unenforceable for the reason he advances.

Mr Brook submits that the words of the clause considered by Tugendhat J are materially similar to those of the clause in the 4myschools Contract which I have to consider, and that Tugendhat’s decision is therefore persuasive authority both for the construction of that clause and for the consequent conclusion of law for which Mr Brook contends.

So far as it is possible to tell from the judgment, the White Digital Media case was concerned, like the present case, with covenants against soliciting or dealing with the employer’s clients (or enticing away the employer’s staff). However, the observations of the Court of Appeal in the case of Scully (UK) Ltd v Lee (Footnote: ¹³) on which Tugendhat J relied were, by contrast, directed towards a rather different clause in the following terms, which directly prohibited the employee from being engaged in a competing business:

(c)

The employee shall not during the period of 12 months commencing with the termination of his employment hereunder carry on, assist in carrying on or be engaged or otherwise interested in, whether as a shareholder, director, consultant, employee or self-employed person or in any other capacity, within the United Kingdom, any business involving or including the manufacture supply installing modification servicing advertising or otherwise dealing in overspill prevention or tank gauging equipment or without prejudice to the foregoing any other business which competes with any business carried on by the company at the date of this agreement

There was also a provision in the contract considered in Scully (clause (d) (Footnote: ¹⁴)) which contained a prohibition against soliciting or dealing with clients. However, that clause, although it prohibited actions taken “directly or indirectly”, contained no reference to actions “as a shareholder, director, consultant, employee or self-employed person or in any other capacity”.

Scully was therefore concerned with provisions such as those to be found in sub-clause 15.2.1 in the present case, which in terms restrict the ability of the employee to be “engaged or concerned” in a competing business, even as a small minority shareholder. It is easy to see why such prohibitions will usually be held to be unreasonably wide. However, it would seem to follow that Tugendhat J must have considered that the non-solicitation and non-dealing provisions which he had to consider in White Digital Media had a similar practical effect, in that they could be infringed (inter alia) simply by the ex-employee owning a small minority shareholding. In my judgment, Mr Brook is therefore correct in his submission that the White Digital Media case directly supports his arguments, not merely on the issue of reasonableness but also on the issue of construction.

Mr Solomon, on behalf of 4myschools, did not dispute that a clause which prohibited Ms Palmer from owning a small minority shareholding in a competing business could be unreasonably wide. His submission was that that was not what the words of clause 15 (as applied to the covenants against soliciting or dealing in sub-clauses 15.2.2, 15.2.3, 15.2.6, 15.2.7) mean. In Mr Solomon’s submission, none of those sub-clauses would be infringed simply by Ms Palmer owning a small minority shareholding (for example) in Sugarman Education. Each requires some positive act of infringement – either soliciting or dealing – carried out either directly or indirectly by Ms Palmer.

In construing a restrictive covenant, the same principles of construction apply as to the construction of any other written term (Footnote: ¹⁵). The principles are those identified by Lord Hoffmann in Investors' Compensation Scheme v West Bromwich Building Society (Footnote: ¹⁶), as elucidated by the subsequent decisions of the House of Lords in Chartbrook Ltd v Persimmon Homes Ltd (Footnote: ¹⁷), of the Privy Council in AG of Belize v Belize Telecom Ltd (Footnote: ¹⁸)and of the Supreme Court in Rainy Sky SA v Kookmin Bank (Footnote: ¹⁹). They are too well-known to require repetition in this judgment.

In my judgment, Mr Solomon is right and Mr Brook’s contention is wrong in relation to sub-clauses 15.2.2 and 15.2.6.

Sub-clause 15.2.2 requires Ms Palmer not to “canvass or solicit business or custom from any Client or Prospective Client in relation to Services”. To infringe that provision would require a positive act of canvassing or soliciting by her. It not a stipulation that could be infringed by the mere ownership by her of a minority shareholding. The same is true of sub-clause 15.2.6, which requires Ms Palmer not to “canvass or solicit business or custom from any Candidate or Prospective Candidate in relation to Services”.

The requirement that Ms Palmer must not do any of the acts prohibited by these 2 sub-clauses “directly or indirectly, either alone or with or on behalf of any person, firm, company or entity and whether on her own account or as principal, partner, shareholder, director, employee, consultant or in any other capacity whatsoever” does not, in my judgment, undermine the fundamental requirement of these clauses, which is that Ms Palmer cannot be in breach unless she actually (whether directly or indirectly) herself canvasses or solicits.

However, the same is not true of sub-clauses 15.2.3 and 15.2.7. Sub clause 15.2.3, for example, requires Ms Palmer not to “be concerned with the supply to any Client or Prospective Client of Services or otherwise deal with any Client or Prospective Client in relation to Services”. That prohibition has 2 parts. The second part prohibits Ms Palmer from dealing with clients and potential clients. Like sub-clause 15.2.2, that part of sub-clause 15.2.3 requires a positive act by Ms Palmer before it can be infringed. However, the first part of sub-clause 15.2.3 requires Ms Palmer not to “be concerned (Footnote: ²⁰) with the supply to any Client or Prospective Client of Services”. It seems to me that it is perfectly possible for Ms Palmer to fall within a prohibition against “be[ing] concerned with” the supply of competing services simply by being a minority shareholder in a competing company. That, in my judgment, is the ordinary and natural meaning of the words of clause 15, when read as a whole, and is what a reasonable person with all the relevant background knowledge would have understood the parties to have meant.

The same considerations apply to sub-clause 15.2.7, which similarly requires Ms Palmer not to “be concerned²⁰ with the supply to any Candidate or Prospective Candidate of Services or otherwise deal with any Candidate or Prospective Candidate in relation to Services”.

I have considered whether I should adopt a narrower construction of sub-clauses 15.2.3 and 15.2.7, so as to interpret the prohibition against “being concerned with the supply of Services” as requiring some positive act of “dealing” with the Client or Candidate, either (a) on the Rainy Sky principlethat the court is entitled, where the language used by the parties may be construed in two different ways, to prefer the construction which is consistent with business common sense and to reject the other (Footnote: ²¹) and/or (b) on the basis that the court should, where two constructions are possible, adopt that construction which results in the validity of the clause, because the parties are to be deemed to have intended their bargain to be lawful and not to offend against the public interest (Footnote: ²²).

However, the Rainy Sky principle “does not elevate commercial common sense into an overriding criterion, still less does it subject the parties to the individual judge's own notions of what might have been the most sensible solution to the parties' conundrum" (Footnote: ²³): and I am not confident that such a narrower construction (even if open on the wording of the clause) would make better business sense from the employer’s point of view, but for the law relating to restraint of trade.

As for the principle that I should adopt the construction which validates the clause, that principle can only be applied where – having construed the covenant without regard to its legal consequences (Footnote: ²⁴) - there is an element of genuine ambiguity, which the application of the principle can help to resolve. As Simon Brown LJ observed in JA Mont (UK) Ltd v Mills (Footnote: ²⁵), “the court should not too urgently strive to find, within restrictive covenants ex facie too wide, implicit limitations such as alone could justify their imposition”. In the present case, there is no such genuine ambiguity.

That means that Mr Brook is right, and Mr Solomon’s contention is wrong in relation to sub-clauses 15.2.3 and 15.2.7. It follows that those clauses ought not to have been enforced by injunction (or by undertaking) according to their original terms. However, that is not the end of the matter.

First of all, the terms of sub-clause 15.4 of the 4myschools Contract would mean that, even if sub-clauses 15.2.3 and 15.2.7 were wholly unenforceable, that would not of itself make sub-clauses 15.2.2 and 15.2.6 also unenforceable.

Secondly, I must consider whether I can blue-pencil or sever the phrase 'be concerned with the supply to any Client or Prospective Client of Services or otherwise' from sub-clauses 15.2.3 and 15.2.7, so as to leave each of those sub-clauses simply as a valid prohibition against dealing.

The authorities on severance were considered and the relevant test was helpfully explained by Cox J in TFS Derivatives Ltd v Morgan (Footnote: ²⁶), as follows:

In Attwood v Lamont [1920] 3 KB 571 CA, Younger LJ stated that severance was only permissible where the covenant is not really a single covenant, but is, in effect, a combination of several distinct covenants. More recently, however, in the case of Sadler v Imperial Life Assurance Company of Canada Ltd [1988] IRLR 388 (High Court), the judge held, after reviewing the authorities, that a contract which contains an unenforceable provision nevertheless remains effective after removal by severance of that provision if the following conditions are satisfied:

'(1) The unenforceable provision is capable of being removed without the necessity of adding to or modifying the wording of what remains.

(2)

The remaining terms continue to be supported by adequate consideration.

(3)

The removal of the unenforceable provision does not so change the character of the contract that it becomes “not the sort of contract that the parties entered into at all”' (paragraph 19).

This approach was followed in the later case of Marshall v NM Financial Management Ltd [1996] IRLR 20 (High Court), in which the approach in Sadler was followed, but with the addition of a fourth condition, ie that the severance must be consistent with the public policy underlying the avoidance of the offending part.

In my judgment, each of those 4 tests is satisfied here. The phrase that I have identified can be removed as a whole from both sub-clauses, without any re-writing of any other part of the clause. The phrase to be removed has no effect on consideration, does not change the underlying character of the contract, and its removal is consistent with the underlying public policy.

It therefore seems to me that I can properly sever or blue pencil the phrase 'be concerned with the supply to any Client or Prospective Client of Services or otherwise' from each of sub-clauses 15.2.3 and 15.2.7, so as to leave each of those sub-clauses simply as a valid prohibition against dealing. Subject to Mr Brook’s two remaining points on reasonableness, that remainder of sub-clauses 15.2.3 and 15.2.7 could therefore be enforced – though it is to be noted that paragraphs 1(ii) and 1(iv) of the undertakings given to Sharpe J by Ms Palmer included undertakings based on the phrase which I have held can (and should) now be severed as unenforceable.

I can deal with Mr Brook’s two remaining points on reasonableness comparatively shortly.

Mr Brook first submitted that the prohibitions on soliciting or dealing with customers that Ms Palmer had dealt with at any time in the whole 12 months preceding the end of her employment by 4myschools encompassed an unreasonably wide number of clients and candidates, some of which might only have had a fleeting encounter with Mr Palmer more than 11 months’ previously. In that connection, Mr Brook again drew my attention to what he described as the “promiscuous” nature of the market, with its rapid turnover of personnel and often very short engagements.

I take all of those points, as well as all the evidence which I heard from Mr Wheeler and Ms Palmer about the market, fully into consideration. Nevertheless, in my judgment the 12 month period was a reasonable, if perhaps not perfectly accurate, way for 4myschools to identify the client and candidate base in relation to which it required and was entitled to protection.

Mr Brook’s second submission was that the nature of the market made the 6-month period for the restraints unreasonably long. In this connection, he drew my attention in particular to the speed with which Ms Palmer was effectively replaced by 4myschools.

Against these points, however, I have to take into account Mr Payne’s unchallenged evidence that the 13 weeks of school holidays each year mean that agencies such as 4myschools can trade with schools for only 39 weeks in the year (and that the first and last week of each term are also times in which effective contact is difficult). In my judgment it was not unreasonable for 4myschools to envisage that the covenant period would encompass a school holiday – perhaps even the long summer holiday. Moreover, I accept Mr Payne’s further evidence that relationships with schools and teachers take time to build up.

Weighing these matters up, I am satisfied that the 6 months periods adopted by 4myschools were, in all the circumstances of this particular case, reasonable with reference to the interests of the parties concerned and of the public.

It follows that, in my judgment

I have reached these conclusions without taking into account in 4myschools’ favour two additional factors urged on me by Mr Solomon:

Neither of these additional factors seems to me to be, in itself, of any great weight. Ms Palmer’s agreement to give the 24 May Undertakings was given in an attempt to stave off costly legal proceedings, and may therefore say little about the reasonableness (or otherwise) of including the original restrictions in her contract of employment. As for the fact that this is an industry standard form, I have already indicated that one sub-clause (15.2.1) copied from the model would be at risk (in another case) of being held to be unenforceable, and that 2 other sub-clauses (15.2.3 and 15.2.7) copied from the model are enforceable in the present case only after parts of those clauses have been severed.

By the end of the hearing, the parties had agreed lists covering the relevant period of (a) “Contacts with schools/candidates” made by Ms Palmer and/or Sugarman Education, and (b) “Placements made” by Ms Palmer and/or Sugarman Education. The information in these lists was taken from documents disclosed in the course of the action by Ms Palmer and Sugarman Education.

These lists show that, between 3^rd April and 28 May 2013, Ms Palmer had 107 contacts with Schools or Candidates which were in breach of the restrictions in the 4myschools Contract, which resulted in 33.5 days of placements, plus a further 20 days’ worth of placements in the period from 9 June to 30 June 2013, making 53.5 days in all.

Those lists also show 112 days’ worth of placements with Schools or Candidates within the scope of Ms Palmer’s restrictions, made by 2 other employees of Sugarman Education in the period from 26 May until 21 July 2013.

It was Ms Palmer’s and Sugarman Education’s case at trial that those placements by other Sugarman Education employees did not amount to breaches by Ms Palmer of her restrictions. Ms Palmer’s evidence was that, at or around the time when she signed the 24 May Undertakings, she was instructed by Sugarman Education not to deal with any candidates or schools within 30 miles of Chelmsford with whom she had dealt on behalf of 4myschools. Responsibility for Essex secondary schools was passed instead to other Sugarman Education employees, and Ms Palmer was directed to work on “securing placements and establishing trading relationships with new schools and candidates in Kent”.

However, on disclosure, 4 emails dated 10 June 2013 from Ms Palmer, one to each of these other Sugarman Education employees, were produced. Each email listed a series of secondary schools in Essex, with the name of the contact there, and asked (for example) “Can you please ring the following schools for me today, see if there is anything they need”, or “Can you please do me a favour a [sic] ring the following Essex schools for me”.

Ms Palmer sought to explain away those emails, by saying that it had been agreed by Sugarman Education that she would return to working with Essex schools as soon as her covenants had expired, so she was merely reminding her colleague to keep these schools “warm” for her pending her return. Mr Wheeler attempted to explain these emails on the basis that it was necessary (in order to preserve Sugarman Education’s reputation) for an explanation to be given to the schools in Essex that Ms Palmer was no longer to be acting as their consultant, and that Ms Palmer was simply telling her colleagues to make contact for that purpose.

These explanations are unconvincing, given the terms and timing of the emails. (If Ms Palmer’s evidence is to be believed, she had been relieved of her duties in relation to Essex schools some 17 day previously, and it is unlikely that there would have been no contact with these schools, and so no explanation already given, during that period).

In my judgment, these emails are sufficient evidence to demonstrate that Ms Palmer was continuing, albeit indirectly and through her colleagues, to infringe the restrictions to which she had agreed in the 4myschools Contract.

On 9 May 2013, BBW wrote on Ms Palmer’s behalf to FFW admitting that Ms Palmer “has had contact with two individuals at two schools .. but in a personal capacity”. The lists to which I have just referred show that that was simply a lie. Ms Palmer had by then contacted many more individuals at many more schools than the 2 which she was prepared for her solicitors to disclose, and in a business, not a personal capacity.

On 3 June 2013, BBW sent two letters. The first enclosed Ms Palmer’s First Affidavit, in which she re-iterated on oath her intention to abide by the 25 May Undertakings. The second sought to explain away a contact which had occurred between a Sugarman Education employee named Collette and Lisa Costa at Ramsey College in Essex as something in which Ms Palmer was not involved except by accident. However, the documents now obtained show that, on 10 June 2013, Ms Palmer emailed Collette, asking her specifically to contact Lisa Costa at Ramsey College “for me”.

On 13 June 2013, BBW sent to FFW a list of all placements made by Ms Palmer. That list ended with the week beginning 13 May 2013, thereby implying that Ms Palmer had been responsible for no more placements after that date. For the reasons explained above, it is now clear that Ms Palmer had continued, indirectly, to be responsible for many placements after that date. Moreover, as a result of the provision on the almost the last day of the trial of un-redacted copies of certain documents in the bundle, it became clear that Ms Palmer had herself been directly responsible for at least 20 days’ worth of placements (for a single candidate) after that date.

Against that background, it is clear that 4myschools was justified in taking the view in early July 2013 that, unless restrained, Ms Palmer threatened and intended to commit further breaches, despite the 24 May Undertakings.

Mr Brook did not dispute the calculation made by Mr Solomon, on the basis of the agreed lists of placements, which showed that 4myschools’ recoverable loss caused by Ms Palmer’s breaches of her restrictions (and therefore the compensatory damages payable by Ms Palmer to 4myschools) was at least £7,040.

Mr Solomon did not pursue his clients’ alternative pleaded claims for damages based upon the profit made by Ms Palmer (Footnote: ²⁷) or for what are sometimes called “negotiating” damages or “Wrotham Park (Footnote: ²⁸)” damages.

It is 4myschools’ case that Sugarman Education induced Ms Palmer’s breaches of her restrictive covenants. This is disputed by Sugarman Education. Sugarman Education’s case is that that it was unaware of the terms of Ms Palmer’s contract, and moved her to work on Kent area schools as soon as she gave the 24 May Undertakings.

The relevant legal principles in respect of this tort were re-stated by the House of Lords in OBG Ltd v Allan (Footnote: ²⁹). In order to be liable for inducing breach of contract:

.. You must know that you are procuring an act which, as a matter of law or construction of the contract, is a breach. You must actually realise that it will have this effect. Nor does it matter that you ought reasonably to have done so.

However, I accept Mr Solomon’s submissions that turning a blind eye to the terms of the contract would be enough for this purpose. The House of Lords in OBG cited with approval the statement to this effect in Emerald Construction Co Ltd v Lowthian (Footnote: ³⁰).

Even if they did not know the actual terms of the contract, but had the means of knowledge - which they deliberately disregarded - that would be enough. Like the man who turns a blind eye. So here, if the officers deliberately sought to get this contract terminated, heedless of its terms, regardless of whether it was terminated by breach or not, they would do wrong. For it is unlawful for a third person to procure a breach of contract knowingly, or recklessly, indifferent whether it is n breach or not.

So far as inducement is concerned, the question is:

.. did the Defendant's acts of encouragement, threat, persuasion and so forth have a sufficient causal connection with the breach by the contracting party to attract accessory liability .. (Footnote: ³¹)

If Sugarman Education’s words or acts were intended to cause, and did cause breach, they will be actionable whatever their form. It is not necessary, in order to establish intention, to show that there was a desire to injure:

.. It is necessary, for this purpose, to distinguish between ends, means and consequences. If someone knowingly causes a breach of contract, it does not normally matter that it is the means by which he intends to achieve some further end or even that he would rather have been able to achieve that end without causing a breach ... On the other hand, if the breach of contract is neither an end in itself nor a means to an end, but merely a foreseeable consequence, then in my opinion it cannot for this purpose be said to have been intended ..

Ms Palmer’s evidence was that she was

.. initially assigned to Essex as a result of my personal connection to and knowledge of the area .. At my induction, it was made very clear to me that .. I was not to rely upon knowledge that |I had acquired elsewhere ..

.. I did not specifically target [4myschools’] clients. Rather I contacted all schools in Essex for which Sugarman had the contact details on its database .. I simply started at the beginning of Sugarman’s database and worked my way through it .. As for candidates .. I looked for any potential candidates based, or prepared to work, in the relevant area ..

It was not Ms Palmer’s evidence that anyone at Sugarman instructed her, at any point prior to 24 May 2013, not to contact former candidates and clients of 4myschools.

Mr Wheeler’s evidence was that:

.. Sugarman did not instruct [Ms Palmer] to target schools she had dealt with whilst working for [4myschools]. She was assigned, and contacted all schools in Essex, irrespective of whether she had spoken to them previously or not ..

In answer to questions put to him by Mr Solomon in cross-examination, Mr Wheeler expanded on this evidence by saying that his initial instructions to Ms Palmer were to contact all schools and teachers in Essex.

It seems clear from this evidence Ms Palmer was acting on the direct instructions of her managers at Sugarman Education in contacting schools and teachers in Essex. I have already held that Ms Palmer’s actions in doing that were in breach of the 4myschools Contract. The issue of whether those breaches were procured by Sugarman Education therefore seems to me to turn on the question of whether Sugarman Education was aware of the restrictive covenants binding Ms Palmer.

As to that, Ms Palmer’s evidence, both in her Second Witness Statement, and orally at trial, was that she informed Nicky McCloy, who was responsible for Human Relations at Sugarman Education, of the restrictive covenants contained in the 4myschools Contract, and gave her a copy of that contract at the outset of her employment.

As I have already mentioned, on 30 April 2013, FFW sent letters by recorded delivery, both to Ms Palmer and to the Head of Human Resources at Sugarman Education (ie Nicky McCloy). The letter to Ms Palmer attached a copy of the 4myschools Contract: and both letters drew specific attention to the restrictions binding Ms Palmer.

Ms Palmer’s evidence in cross-examination was that she showed a copy of her letter to Ms McCloy immediately after she received it. Ms McCloy then showed the letter to Mr Wheeler, and they took a copy. Ms Palmer then discussed going to see a solicitor, and Mr Sugarman agreed to pay her costs. She chose BBW on the recommendation of another colleague at Sugarman Education, and went to see them. BBW then wrote their first letter on her behalf on 9th May 2013.

In paragraph 8 of its Defence, Sugarman Education had stated that it “was not aware of the terms of the purported restrictive covenants”: and Sugarman Education did not produce any copy of the 4myschools Contract in its disclosure. However, on the morning after Ms Palmer had given evidence, Mr Brook produced a copy of the 4myschools Contract, which he accepted (on instructions) had been in his clients’ possession, and should have been disclosed. Mr Brook also told me, again on instructions, that his clients now accepted that copies of both of the 30 April 2013 letters sent by FFW had been placed on Ms McCloy’s desk, and had been passed by her (after she returned from holiday) to Mr Sugarman (rather than to Mr Wheeler).

Mr Wheeler’s evidence about his own knowledge of Ms Palmer’s restrictive covenants was as follows:

.. When [Ms Palmer] first started working for Sugarman, I was not aware of the restrictions set out in her employment contact with [4myschools] ..

I am .. familiar with .. the reasonable restrictions to which new employees may be subject. I always ensure that the newly recruited employee and the company acts accordingly. For example, all new recruits are instructed during their induction to develop their prospect list from ‘cold’ or to expand upon work already completed by other Sugarman consultants ..

.. I have discovered in preparing for this litigation that Sugarman also contains onerous covenants in its contracts of employment for recruitment consultants. I was not previously aware of this ..

.. I do not regard such unreasonable restraints as legitimate in our industry and would not have given such clauses my attention. I have not reviewed a consultant’s contract, and have certainly never sought to enforce these covenants.

When asked about his knowledge of Ms Palmer’s contract, Mr Wheeler continued to deny knowledge of it, saying “I personally did not have sight of that contract”. However, he did accept that he was not aware of any recruitment consultant who was not subject to post-termination restrictive covenants – it was “always worth trying things on”.

Ms McCloy did not give evidence on behalf of Sugarman Education. Nor did Mr Sugarman himself give evidence, although he was in Court throughout most of the hearing.

Taking all this evidence into account, I am satisfied that Sugarman Education was from the start sufficiently aware of the restrictive covenants binding Ms Palmer to make Sugarman Education liable for procuring the breaches that she committed: and I so find as a fact.

By Mr Wheeler’s own admission, he was not aware of any recruitment consultant who was not subject to some form of restrictive covenant. In my judgment, he knew full well that Ms Palmer was likely to be subject to some form of post-termination restriction imposed by her contract with 4myschools on the schools and teachers that she was allowed to contact. However, instead of taking reasonable steps to make himself aware of the precise nature of those restrictions – something which he could easily have done, since Sugarman Education’s Human Resources department had a copy of the 4myschools Contract (provided by Ms Palmer herself) in its possession – he chose to give instructions to Ms Palmer which (as he must have realised) could well require her (and did in fact require her) to act in breach.

According to Lord Scott of Foscote in Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd (Footnote: ³²), an imputation of blind eye knowledge:

.. requires an amalgam of suspicion that certain facts may exist and a decision to refrain from taking any step to confirm their existence. Lord Blackburn in Jones v Gordon [1877] 2 App Cas 616 at 629 distinguished a person who was “honestly blundering and careless” from a person who

“refrained from asking questions, not because he was an honest blunderer or a stupid man, but because he thought in his own secret mind—I suspect there is something wrong, and if I ask questions and make farther inquiry, it will no longer be my suspecting it, but my knowing it, and then I shall not be able to recover”.

…

In summary, blind-eye knowledge requires, in my opinion, a suspicion that the relevant facts do exist and a deliberate decision to avoid confirming that they exist. But a warning should be sounded .. In my opinion, in order for there to be blind-eye knowledge, the suspicion must be firmly grounded and targeted on specific facts. The deliberate decision must be a decision to avoid obtaining confirmation of facts in whose existence the individual has good reason to believe ..

That, it seems to me, was precisely the position here. Having seen and heard him give evidence, I am satisfied that Mr Wheeler was neither an “honest blunderer”, nor stupid. On the contrary, he is a clever man with a forceful personality, who decided to take a commercial risk. In his own mind, he had formed the view that all schools and teachers in Essex were fair game in his line of business: and he was not going to let any legal niceties deter him from his intended course of action.

That conclusion makes it unnecessary for me to resolve the conflict between Ms Palmer’s evidence that Ms McCloy showed a copy of FFW’s 30^th April 2013 letter to Mr Wheeler, and Mr Wheeler’s own evidence, to the effect that everything was dealt with by Mr Sugarman personally, and that he (Mr Wheeler) never saw a copy of the 4myschools Contract. If I had resolved that conflict in Mr Wheeler’s favour, I would then have to decide the difficult legal issue of whether knowledge by Mr Sugarman of the details of the restrictions would be sufficient to make Sugarman Education liable for procuring Ms Palmer’s breaches of those restrictions though the instructions given by Mr Wheeler. Fortunately, it is unnecessary for me to explore that issue further.

However, were I to be wrong in my conclusion that Sugarman Education was liable for procuring Ms Palmer’s breaches from the start, I would unhesitatingly have held that it was liable for procuring the indirect breaches committed by Ms Palmer after she gave the 24 May Undertakings. By that point, no one in authority at Sugarman can have been in any doubt that Ms Palmer was subject to relevant restrictions. That was, after all, why they changed her primary duties to dealing with schools in Kent. It was the evidence both of Ms Palmer and of Mr Wheeler that the emails which Ms Palmer sent to her colleagues, asking them as a favour to contact schools “for me” – which I have found to be the cause of indirect breaches of those restrictions - were sent on the instructions of Linsey Sugarman and Mr Wheeler.

My conclusion in relation to procuring a breach of contract means that Sugarman Education is liable, jointly and severally with Ms Palmer, to pay compensatory damages to 4myschools.

However, 4myschools has also pleaded against Sugarman Education a claim for exemplary damages, on the basis that Sugarman Education has acted “with a cynical disregard for [4myschools’] rights .. calculat[ing] that the money to be made out of [its] wrongdoing will probably exceed the damages at risk” (Footnote: ³³).

Exemplary damages are rarely awarded. In my judgment, the essential factual requirement – that Sugarman Education made the cynical assessment that it would make more profit than it would have to pay in damages – is not here made out. There is simply no evidence that Sugarman Education thought that it would profit more than 4myschools would lose.

In his closing submissions, Mr Solomon wisely did not press this claim, observing that this may most sensibly be addressed as a matter to be taken into account in respect of costs. I will therefore say no more about it at this stage.

In the light of my findings, it seems to me that Sharpe J should (if undertakings had not been given) have granted an injunction to 4myschools, both against Ms Palmer and against Sugarman Education. However, that injunction should not have included any provision enforcing the covenants in sub-clauses 15.2.3 and 15.2.7 against being concerned in the supply of Services, which I have held to be unenforceable.

For the reasons set out above, I propose to make the following orders:

I invite counsel to agree a Minute of Order giving effect to this judgment. I will hear counsel on the issue of costs.