Merlin Financial Consultants Ltd v Cooper

This litigation concerns the interpretation and enforceability of two agreements relating to the Defendant’s employment by the Claimant as a financial adviser. The first is described as “The Goodwill Agreement”, and the second as “The Contract of Employment”. Both contained clauses designed to place restrictions on the Defendant both during and after the termination of his employment.

A good financial adviser is likely to develop a close relationship of trust and confidence with the clients he advises. Both he and his employers depend for their income on the commissions and fees that he generates. If he sets up his own business or moves to a different firm, the clients may choose to follow him. Hence, the concern of an employer to seek to protect its financial interest against that eventuality.

Merlin Financial Consultants Ltd. (“Merlin”), as the name implies, carry on business providing financial and investment advice to the general public. Their services are regulated by the Financial Conduct Authority (formerly the Financial Services Authority). Jonathan Cooper was employed by them from April 2008 until November 2012, when he left to set up his own business with another of the Claimant’s former employees.

Mr Cooper has over 23 years experience in the financial services industry. Prior to joining Merlin, he had worked over the years for a number of similar companies and built up a significant client base. He is dyslexic. Merlin knew this in engaging him and was aware that he would need support in producing reports etc.

In this case, the Claimant claims damages, put at £211,460.13, for breach of the restrictions in the two agreements referred to. The Defendant denies liability and counterclaims for outstanding remuneration.

One of the attractions to Merlin of employing Mr Cooper was his client base. At a meeting on the 11^th December 2007, there was discussion about making him a capital payment as an incentive to join the firm. On the 18^th December 2007, Merlin’s managing director, Peter Biggin, wrote to him to say that in principle they were prepared to pay him a capital sum for the goodwill arising from the transfer of his clients’ funds.

Mr. Cooper e-mailed Mr Biggin on the 9^th January 2008 accepting Merlin’s offer of employment with a view to starting in April.

The Goodwill Agreement, in draft, was sent for Mr Cooper’s approval on the 14^th March. He signed and returned it, without alteration, no later than the 26^th March, and Mr Biggin signed it on behalf of Merlin on the 28^th March.

The salient provisions of the agreement are as follows:-

“Recitals

A.

The Vendor is a Registered Individual and has been practising as an Independent Financial Adviser for a number of years. He has built up personal goodwill with clients who have invested funds into investment products and who are presently advised by the Vendor.

B.

The Vendor has agreed to sell and the Purchaser has agreed to purchase the goodwill arising from these clients and the right to receive future income arising from the sale of investment products.

It is hereby agreed:

2.

Sale of Goodwill

The Vendor shall sell and the Purchaser shall buy with effect from the transfer date such right title and interest as the Vendor has in the goodwill with the intention that the purchaser shall from the transfer date own such goodwill.

3.

Consideration

3.1

The price to be paid by the Purchaser for the goodwill shall be an amount in cash for each quarter of the Earn Out Period which is equivalent to 0.167% of the relevant funds under management that have been transferred to the purchaser in that quarter.

3.2

For the avoidance of doubt, it is expected that the relevant funds will total £30 million by the end of the transfer period.

7.

Restrictive Covenants

7.1

For the purpose of assuring to the Purchaser the full benefit of the goodwill and in consideration of the Purchaser agreeing to buy the goodwill on the terms of the agreement, the Vendor undertakes to the Purchaser that he will not during the restricted period (as defined below) in any part of the United Kingdom, without the prior written consent of the Purchaser, whether directly or indirectly or whether alone or in conjunction with, or on behalf of, any other person and whether as principal, shareholder, director, employee, agent, consultant, partner or otherwise:-

7.1.1

be engaged, concerned or interested in, or provide financial support or management services or technical, commercial or professional advice to any other business which supplies goods and/or services which are competitive with or of the type supplied by the Purchaser; provided that this restriction does not apply to prevent the Vendor from holding shares or other securities in any company which are quoted, listed or otherwise dealt in on a recognised stock exchange or other securities market and which confer not more than 3 per cent of the votes which could be cast at a general meeting of such company;

Where “restricted period” shall mean the period from the date hereof to the later of (i) four years following completion and (ii) one year from the termination of the Vendor’s employment with the Purchaser.”

Although the agreement, as drafted, dealt specifically with restrictive covenants in clause 7 it remained silent as to any power to claw back the payment were Mr Cooper to leave Merlin. It is apparent from the contemporaneous documents that this omission was known to Mr Biggin before he signed the agreement (a feature of the case to which I will return later).

A year later the omission was dealt with in a side letter signed by both Mr Biggin and Mr Cooper. The salient part of that letter reads as follows:-

“We have both agreed that a further paragraph should have been included under clause 7 of the agreement which deals with Restrictive Covenants. We have further agreed that rather than change the agreement itself, this amendment to our arrangements can be dealt with in correspondence which is recognised by both parties and will be kept and treated as an integral part of the agreement.

This letter confirms that the agreement should have stated under clause 7 that, if your employment with Merlin Financial Consultants Limited were to be terminated (for whatever reason) and the income arising from the clients concerned does not remain with Merlin, then there would be an appropriate repayment of the consideration paid to you. The calculation of any repayment would follow the basis laid down in clause 3.1 of the agreement. This obligation only lasts for four years from commencement of your employment, i.e. it ceases on 29 April 2012.”

The term “clients” is defined in the agreement as meaning the persons listed in Schedule 1. It so happens that the word appears in the recitals and the side letter, but not in the body of the agreement itself.

No Schedule 1 to the agreement was ever produced in documentary form, but, that notwithstanding, pursuant to the Goodwill Agreement, and under the formula provided in clause 3, Mr Cooper received a capital payment of £43,420 (the figure was less that £50,000 because the value of the funds was less than £30 million).

As he did not leave Merlin until after the 29^th April 2012, the claw back provision in the side letter never came into play.

Mr Cooper was sent a copy of Merlin’s standard contract of employment under cover of a letter of the 19^th November 2007. This pre-dated the discussions about a capital payment and the goodwill agreement.

The date of commencement of his employment was the 29^th April 2008, therefore post-dating the Goodwill Agreement.

The employment contract was not signed and dated until the 20^th June 2008. It included provisions as to the employee’s duty of fidelity, and restrictive covenants on the employee’s activities in competition with Merlin during the period of employment and for six months thereafter.

Unless I were to hold that clause 7 is unenforceable, its relevance to the issues in the case is more evidential than legal, as the Goodwill Agreement is the primary document relied on by the Claimant. I do not, therefore, propose to recite the relevant parts of the agreement here verbatim at this stage.

It is important to note, though, that the restrictive covenants in the contract draw a distinction which does not appear in the Goodwill Agreement between “company clients” and “executive clients” – defined as clients other than those introduced by Merlin to the employee. These executive clients, Merlin undertook not to approach other than for regulatory requirements, and no restriction was imposed on the employee taking them with him when he left.

This is the fundamental respect in which the restrictions on Mr Cooper were more onerous under the Goodwill Agreement than under his contract of employment.

Mr Cooper took his first steps towards leaving Merlin in April/May 2012, at around the fourth anniversary of joining the company and the end of the claw back provision in the side letter.

By the 6^th May 2012, he had decided to set up a limited company to provide financial advice with a former employee of Merlin, Howard Tingley. The company was incorporated under the name of “Tingley and Cooper” (TCL) on the 9^th May, with Mr Cooper as a director and sole shareholder.

Significant changes in the regulation of the financial services industry were due to be introduced at the beginning of 2013. To meet the new requirements, Mr Cooper had to pass certain exams, and Merlin was considering how to support him to do this and to provide for the risk that he might fail. One option under consideration was to provide him with a ‘buddy’; a suitably qualified person to work alongside him. At a meeting with Mr Biggin, on Monday, the 14^th May, Mr Cooper said that he did not want to pursue this option. He did not disclose the steps he had already taken, but hinted at them (as he had on an earlier occasion), saying that he would consider selling his clients or setting up on his own. In a file note made three days later, Mr. Biggin records that he had said to Mr Cooper that they would need to check over the wording of their agreement with him. Mr Biggin made the note after checking the Goodwill Agreement. He notes that the end date for the claw back provision had just expired, and continues – “The agreement does contain other covenants that we will need to have checked, if given Jonathan’s odd behaviour on Monday, he decides to leave”.

Merlin applied for and was successful in obtaining a six month extension for Mr Cooper to sit the exams but otherwise his position remained unresolved during the summer and as the date for the changes in the regulations approached.

Then, at a meeting on the 10^th October, Mr Cooper informed Mr Biggin that he was going to leave. No date was fixed for his departure. He was not put on gardening leave and he was allowed to continue dealing with his clients, as Mr Biggin’s note of the meeting records, because this was in the clients’ best interests.

Mr Cooper handed in his letter of resignation on the 2^nd November, stating that he wished to leave four weeks later, on the 30^th November.

On the 7^th November, Mr Biggin wrote to him to remind him of his obligations under both the Goodwill Agreement and the Contract of Employment. The opening paragraph of the letter stated –

“During your notice period, you will be required to attend work as normal. Please can you refrain from informing any clients about your resignation until we have agreed the content of any such communication with you.”

Mr Cooper replied by e-mail on the 9^th, stating that his arrangements with Merlin had always been that his clients were separated from Merlin clients and that he intended to continue to be in contact with his own clients. He made no reference to the provisions of clause 7 of the Goodwill Agreement, but did make specific reference to the side letter, pointing out that the claw back provision had expired on the 29^th April 2012.

By the time he received Mr Biggin’s letter, Mr Cooper had already made arrangements to see one of his existing clients on the 9^th, and on the 8^th he emailed the client to tell him that the meeting would be “at our new shiny offices” in central London. Documents that have been disclosed establish that other client meetings took place in November and December 2012.

On the same day, the 9^th November, Mr Biggin wrote again to Mr Cooper setting out Merlin’s position. The letter expressly stated –

“there is still an obligation upon you not to be involved in a competing business for one year following termination of your employment, unless you have received express written consent from the Company to release you from this restriction.”

It ended –

“Please can you confirm that you have understood the contents of this letter and that you will continue to act in accordance with your obligations to the Company…”

Following receipt of this letter, Mr Cooper consulted Child & Child, and supplied them with copies of both the Goodwill Agreement and the contract of employment. On the 15^th November his solicitors wrote to Merlin challenging the validity of clause 7.

If the provision is enforceable, and had Mr. Cooper complied with his obligations under it, he would not have been able to have any association with TCL until the 1^st December 2013 and would not have been able to solicit the business of or deal with the clients before that date.

Merlin puts its case on the basis that if the Defendant had complied with his contractual obligations, the clients with whom he had been dealing would have remained with it, at least for the year following his departure.

The losses have been calculated on the revenue figures of the business generated by the Defendant in 2011/12 less an amount for expenses (the commission that would have been paid to any replacement for Mr Cooper and employer’s national insurance contributions).

In making its calculations the Claimant has limited its claim to the period of two years following departure. For this period it has made the assumption that it would have retained all the clients in the first year and 70% of them in the second.

Calculated on this basis, the claim is quantified at £211,460.13.

By way of counterclaim, the Defendant sues for unpaid wages, fees and commission, and holiday pay, quantified in the Amended Defence and Counterclaim at approximately £37,000. It is conceded that he is entitled to £19,788.22 representing retained commission for November 2012 and the balance on his Loan Account, but the Claimant seeks to set off this figure against its own claim.

In compliance with a case management order the parties produced an agreed list of issues for trial. These included allegations relied on by the Defendant of mistake, non est factum, and fraudulent misrepresentation. During the hearing, in the light of the evidence, the issues have narrowed, the allegations of mistake and non est factum abandoned, and the scope of the allegation of fraudulent misrepresentation considerably reduced.

The issues on the claim that remain are as follows:-

Until the trial, it had been a fundamental plank of the Defendant’s case that he had not read the Goodwill Agreement before signing it, and that this was because of his dyslexia and problems reading and understanding documents.

In Part 18 responses, on the 16^th April 2013, to which a signed statement of truth is attached, he said –

“The Defendant is severely dyslexic and admits that he did not read either the Goodwill Agreement or his Contract of Employment before signing the same. His concentration in reading dense text is limited.”

That is also what his expert witness on dyslexia, Professor McLoughlin, says he told him when he saw the Defendant on the 24^th July 2013 for the purpose of his report. In the experts’ joint statement, Professor McLoughlin was at pains to make the point “that although Mr Cooper had the opportunity to read the documents, he didn’t. Mr Cooper has learned to read what he needs to read as a Financial Adviser, but that (sic) he has an aversion to reading and a reluctance to admit this.”

The Part 18 responses were drafted by his counsel, Miss Platt. She, no doubt, would have ensured that they were accurately worded and accorded with his instructions.

In evidence, when Mr Cooper was asked by Mr Forshaw about the Goodwill Agreement, the questions and answers went as follows:-

Q When you received this document did you read it?

A I did read it, yes.

Asked about the Part 18 reply –

A Well that statement obviously contradicts what I have just said?

Q Why did you sign that statement of truth if it wasn’t correct?

A Because, erm – clearly there’s a mistake. I’ve made a mistake.

Asked about the meeting with Professor McLoughlin –

Q Did you tell Professor McLoughlin that you hadn’t read the documents?

A Erm, I can’t remember.

Q Because if you had told him that, that wouldn’t be true on the basis of the evidence you have given here today, would it?

A As I say, I can’t remember?

I then gave Mr Cooper, a further opportunity to consider the point –

Q Let’s look at it another way round. If Mr McLoughlin had asked you: “Did you read the goodwill agreement”, what would you have said?

A I would have said yes.

It was in the light of that evidence that Miss Platt, realistically, abandoned the allegations of mistake, and non est factum in her closing submissions. She also abandoned four of the six allegations of misrepresentation contained in the amended defence and counterclaim. The two remaining allegations are:-

To assess the possible significance of those statements, it is necessary to put them into context.

The sequence of events is as follows:-

In closing submissions, Mr Forshaw said that the credibility of the Defendant was a fundamental issue in the case; it was not just that he had misled everyone by claiming that he had not read the Goodwill agreement, when the truth was that he had read it, but that he had been generally evasive in giving evidence – giving long and rambling responses that failed to answer the question that had been put, responding to questions with questions of his own as a means of avoiding them, and behaving in an inappropriately argumentative and disputational manner.

Making every possible allowance for the pressures of being in the witness box for a lengthy time, regrettably, I feel bound to say that there is considerable force in the submission. I did not find Mr Cooper to be a credible or reliable witness. Time after time he had to be brought back to the question. Still he did not answer it. Frequently, he responded to Mr Forshaw, by trying to turn the tables and ask him questions. He, also, demonstrated vehement hostility to Merlin. There were repeated references to the Goodwill Agreement as a “Venus Fly Trap” and accusations against witnesses of lies and fabrication. The impression one was left with was that Mr Cooper’s feelings had seriously clouded his judgment.

Mr Cooper placed considerable stress on his dyslexia both in his pleaded case and in his evidence. There is no doubt that he is dyslexic and that he has a significant problem with reading speed and comprehension, as the experts who have assessed him agree in their joint statement. What Professor McLoughlin said in his 2003 report, when litigation was not in contemplation, about his literacy skills, is, though, worthy of note: -

“He read prose accurately at the Professional level, the highest level of reading. He did read slowly and made some pronunciation errors. He was therefore rated at being at the Instructional stage. Nevertheless the Professional level is the highest level of reading and should ensure that Jonathan can study and work at an advanced level. He also scored at the Instructional stage of the Professional level on a test of silent reading (140 words per minute) was well below an expected level (250 words per minute).”

And in the conclusion –

“Jonathan is of average verbal and non-verbal ability. He is dyslexic, having difficulty processing aurally presented and symbolic material in working memory. Although he has done quite well, developing some of his skills to an advanced level, he is experiencing residual problems in areas such as silent reading speed/comprehension as well as in written expression and spelling. He will find it difficult to check his own work accurately and other skills such as note taking will be demanding.”

It is very much to his credit, that notwithstanding his disability, Mr Cooper has been able to develop a successful career as a financial adviser, and to manage substantial funds on behalf of his clients. It is all too easy, though, to overplay the relevance of his dyslexia to the facts of this case.

At the end of his evidence, after Miss Platt had finished her re-examination, Mr Cooper said that there was more that he wished to have the opportunity to say. Although, Mr Forshaw objected, I said that I would not prevent him from saying something, although how far I allowed him to go would depend on what he had to say.

He then took me to a series of documents concerning the regulation of financial advisers. The exercise proved of interest in a way that Mr Cooper may not have intended. In carrying it out, what he demonstrated was a detailed knowledge of the provisions and a facility with the fine print of technical documents. It is such knowledge that a good financial adviser has to acquire.

My conclusions and findings on this aspect of the case are as follows:-

Accordingly, I find against the Defendant on the issue of misrepresentation.

Whilst not formally abandoning these points, Miss Platt did not press them in her closing submissions.

As to the absence of the schedule, that cannot render the agreement unenforceable – it was performed by payment of the amount due under the agreement. That payment was calculated by an agreed formula, for which Schedule 1 had been intended, to formally record all the relevant clients, but which, in the event, was not necessary for this purpose.

There, plainly, was consideration for the payment to Mr Cooper – the purchase of the goodwill in the clients, who became clients of Merlin. The argument seems to be as to the adequacy of the consideration, but it is a well-established principle that the Court is not concerned with the adequacy of the consideration save to the extent that it may be a relevant factor in deciding whether a restraint clause was reasonable or not.

Miss Platt invites me to approach the question of whether or not clause 7 is enforceable from the standpoint that it forms part of an arrangement to provide the Defendant with employment rather than as an intrinsic part of a business agreement to acquire the goodwill in the Defendant’s client base.

It has long been recognised that the law distinguishes between covenants in employment contracts and covenants in business sale agreements. The fundamental reason for this distinction is the differences that may exist in the nature of the relationship and bargaining power between the parties.

I have been referred specifically to the cases of Office Angels Ltd v Rainer Thomas & O’Connor [1991] IRLR 214 (C.A.), Allied Dunbar (Frank Weisinger) Ltd v Weisinger [1988] IRLR 60 (Ch.D), Beckett Investment Management Group Ltd v Hall [2007] EWCA Civ 613, Cavendish Square Holdings BV v Makdessi [2012] EWHC 3582 (Comm), and Croesus Financial Services Ltd v Bradshaw & Bradshaw [2013] EWHC 3685 (QB)

From the cases it is possible to derive a number of principles:-

These principles are set out in more detail in the case of Cavendish v Makdessi , in which Burton J. reviews many of the earlier authorities.

Miss Platt relies on the Office Angels case in which a restraint in an employment contract restricting the defendants from engaging in the business of an employment agency within a specified area for a period of six months was held unenforceable by the Court of Appeal, overturning the decision at first instance. The court said that if a covenant between an employer and an employee designed to prevent competition by the employee after termination of the contract of employment is to be upheld as valid, it must be shown that there is some advantage or asset in the business which can properly be regarded as the employer’s property and which it would be unjust to allow the employee to appropriate for his own purpose. Although the agency did have a legitimate interest to protect, the restriction was held to be too widely drawn.

Since the Office Angels case there has been a number of cases concerning the financial services industry. Beckett is one such case. Maurice Kay L.J., giving the judgment of the Court of Appeal, began his judgment with these general observations:-

“Any financial services company relies on employees to attract and retain a client base. If those employees who deal directly with clients leave the company to set up on their own account or go to work for a rival company, it is not unnatural that, one way or another, sooner or later, the clients will follow them. Although they have been the clients of the company rather than of its employees, from the clients’ point of view it may well be the personal relationship with an individual financial adviser in which they have particular trust and confidence. A tension therefore arises between the interest of the company in protecting its client base in the event that one or more of its employees depart and the interests of such employees who wish for the freedom to develop their careers elsewhere. The clients are not captive. In this situation it is inevitable that employers include in contracts of employment clauses which seek to limit the ability of employees to take their client base with them.”

In that case the Court of Appeal upheld covenants which restrained the defendants for twelve months after the termination of employment from supplying advice to any client of the company of a type provided by it in the ordinary course of business.

The recent case of Croesus before Mrs Justice Simler, as recently as November last year, is another. In that case there were post-termination restrictions lasting twelve months prohibiting the defendants from soliciting and dealing with former clients and the misuse of confidential information. Simler J. said at paragraph 99 of her judgment:-

“Any period of fixed duration bears an element of arbitrariness (as the Court of Appeal held in Beckett above) but having regard to the evidence about the strength of the relationship between the adviser and the client, the pattern of contact and the fact that 12 months appears to be an industry standard, in my judgment 12 months was reasonable both for non-solicitation and non-dealing having regard to the interests of the parties and the interests of the public in this case.”

Turning to the facts of this case – I have no doubt that Merlin had a legitimate interest to protect. Mr Cooper had an important asset which Merlin was keen to acquire and secure for itself; namely, his existing bank of clients and the income stream generated by their funds under management. This enabled him to seek more advantageous terms than Merlin generally offered employees under their standard contract of employment. In return for the capital payment to acquire his client base they wanted protection were he to leave and try to take his clients with him.

At the time the Goodwill Agreement was made, it was envisaged that Mr Cooper would receive under it £50,000 and that he would be introducing £30 million worth of funds under management. The fact that the figures turned out to be somewhat less does not affect the matter. Read in conjunction with the side letter, the covenants sought to impose three restrictions – first, claw back in the event that the Defendant left within four years, secondly, non-competition for a period of four years from the completion of the Goodwill Agreement where he to leave the Claimant’s employment at any time during that period, and, thirdly, non-competition for 12 months from leaving at any time thereafter.

Miss Platt’s main line of attack against clause 7 is that it is too widely drafted as it applies to any part of the United Kingdom. She submits that Merlin’s clients are predominantly in London and South East of England, and that it has few clients outside this geographical area.

The financial services market is, though, a single geographical market, as Millett J. observed in the Allied Dunbar case (see paragraph 27 of the judgment). That observation is even more true today, in an age of electronic communication, than it was when it was made in 1988.

Millett J. also considered the objections to a covenant against competition as opposed to a non-dealing covenant, and observed that the problem of the latter lies in its enforcement, and its dependence on the honest co-operation of the covenantor.

In my judgment the Goodwill Agreement was a bargain, fairly entered into, between parties who were of comparable bargaining power. Merlin had a legitimate interest to protect, and the restrictions imposed on Mr Cooper for one year after leaving Merlin’s employment were reasonable between the parties and in the public interest.

When Mr Cooper left to start his own business with Mr Tingley, he took the clients, he regarded as his own with him. Merlin wrote to them inviting them to stay, but without success. A few replied. Their letters are included in the bundle. Essentially they say that they had been with Mr Cooper a number of years and wished to stay with him.

The way the claim is calculated is set out in the Amended Schedule of Loss. It has been calculated by reference to the Defendant’s projected recurring income for 2012/13 - £204,849.00. From the figures, receipts and expenses have been deducted. The expenses have been calculated by reference to the commission and national insurance that would have been payable to someone employed to replace Mr Cooper. The calculations produce a figure of £115,933.50. The whole of this sum is claimed for year 1. For year 2, i.e. after the restriction in clause 7 would have expired, 70% is claimed. Nothing is claimed beyond that. The total comes to £211.460.14.

In cross-examination of the Claimant’s witnesses and in closing submissions, Miss Platt sought to suggest that Merlin could have done more to mitigate its loss. Things that she suggested could have been done were to take away his lap top and mobile phone, putting him on gardening leave, applying for an injunction to prevent him communicating with clients and informing them of his intentions, and writing to clients before he left setting out the position and Mr Cooper’s contractual obligations.

The duty to mitigate is a duty to take such steps as are reasonable, but what is reasonable has to depend on the particular circumstances of the case.

Prior to the 2^nd November 2012 no date had been set for Mr Cooper’s departure. In his letter of the 7^th November 2012, Mr Biggin informed Mr Cooper that he would be required to attend work as normal until the date of his departure, and asked him not to inform clients of his resignation. It is apparent from the file note of the discussion between Mr Biggin and Mr Cooper, of the 10^th October, when Mr Cooper said that he had decided to leave and set up his own business that the best interests of the clients was an important consideration for Merlin. He was allowed to continue seeing clients on Merlin premises.

In my view the approach adopted by Merlin was a perfectly reasonable one. It is unlikely that any of the courses of action suggested by Miss Platt would have proved beneficial and mitigated the damage done to Merlin. Had Mr Cooper been put on gardening leave after the meeting on the 10^th October 2012, arrangements would have had to be put in place to ensure that the clients he dealt with were properly looked after. That might easily have served to exacerbate an already difficult situation and caused damage to any residual relationship between Merlin and the clients It is clear from what Mr Cooper did after the 2^nd November that he did not intend to abide by the terms of the Goodwill Agreement. The course that Merlin took of writing to clients and inviting them to stay, but not of taking active steps to prevent Mr Cooper continuing to act for them and instead suing him for breach of contract instead was a proper and reasonable one to take in the circumstances.

I do, though, have two reservations on the way the loss has been calculated. First, it assumes that had Mr Cooper honoured his contractual obligations, all the clients would have stayed with Merlin for the first year; i.e. until the restriction on setting up his own business ceased. I do not agree with the premise on which this assumption is based. Some of the clients may have left any way, because their only connection with Merlin had been through the Defendant, and there was someone else they would prefer to establish a new relationship with; in other words it was the right time to make the change. Some of the clients, though, were family or close personal friends. They may have taken a stronger line, because of their relationship with Defendant, and may have taken the view that, if they could not have him to act for them, the last firm they wanted to be with was the Claimant.

To some extent, it is a speculative exercise, but one has to do the best one can on the information available. In my judgment it is unlikely that more than 70% of the clients would have stayed for the first year.

My second reservation concerns the second part of the claim, and follows on from the first. Of those that chose to stay, some might have stayed indefinitely, but others would have been likely to move back to Mr Cooper once the opportunity to do so arose. Merlin recognises this in the way the second part of the claim is calculated. It is likely that there would have been a significant further loss of clients in the second year. I propose to reduce this part of the claim to 40% to reflect that.

The figures in the Amended Schedule of Loss will require adjustment to take account of these reductions. As it may not be a simple exercise of cutting the final figures from 100% to 70%, and 70% to 40%, I am going to invite counsel to do the calculations and agree the figures. The starting point for each year is the projected recurring income figure of £204,849.00 less 30% in year 1 and 60% in year 2.

I can deal with this shortly.

It is agreed that Mr Cooper is entitled to £19,788.22.

The balance of his claim relates to accrued holiday entitlement and commission payments after he left the Claimant’s employment for December 2012 and January 2013.

No evidence has been put before the court to support a claim for unpaid holiday entitlement. As to the claim for payments falling due after he ceased to work for the Claimant, the claim is not supported by the terms of the contract of employment, and Mr Cooper by his conduct was in clear breach of contract. He did not serve out his notice period. Within days of his resignation he was carrying on business from his new offices. He was, therefore, not entitled to any further remuneration; see Miles v Wakefield Metropolitan District Council [1987] I.C.R. 368 (H.L.)

The sensible course, in my view, would be to set off the figure of £19,788.22 against the claim, reducing the amount of the judgment debt accordingly.