Post-termination restrictions

20 Sep 2012

Can a 6 month prohibition against soliciting any customer be valid? In Safetynet Security Limited v Coppage the Mercantile Court said yes. 

Mr Coppage was the Business Development Director of Safetynet Security limited. He joined the company in July 2008 and left in April 2012. The evidence was that he played an important role in developing the company’s business and many customers saw him as the face of the business. 

Mr Coppage’s contract contained a simple restriction against soliciting any of Safetynet’s customers for a period of 6 months after the termination of his employment “if the purpose of the approach is to solicit business which could have been undertaken by us”.

The court identified the following principles for testing the reasonableness of restrictions against canvassing:

– look at the construction of the restriction to ascertain their pure meaning; 

– consider the object of the restriction – in this case the protection of the employer’s customer base and goodwill;

– construe the restriction in its context and having regard to the facts prevailing when the contract was made.

The Court decided the restriction was clear and limited. It rejected the argument that it should have been limited to those customers with whom Mr Coppage had had dealings in the last 12 months of his employment finding that this would not have given the company adequate protection. This was because of Mr Coppage’s central role in the business.

Our view:

At first sight this is a surprising decision. The restriction was not limited to customers with whom Mr Coppage had had dealings and its purpose seems to have come perilously close to preventing competition. However, it is a useful reminder that these cases are always fact sensitive. In particular, the context was of a senior individual whose role was integral to the success of a relatively small business. It is also significant that the court clearly took a dim view of the employee describing his evidence as “unhelpful and closed in his manner”.