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JISCBAILII_CASE_EMPLOYMENT
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Neutral Citation Number: [1986] EWCA Civ 9 |
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IN THE SUPREME COURT Of JUDICATURE
COURT OF APPEAL
ON APPEAL PROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(MR. JUSTICE EVANS)
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Royal Courts of Justice |
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7th November 1986 |
B e f o r e :
LORD JUSTICE LAVTON
LORD JUSTICE BALCOMBE
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EVENING STANDARD COMPANY LIMITED
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Appellant
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v
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PETER R. HENDERSON
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Respondent
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(Transcript of the Shorthand Notes of The Association of Official Shorthandwriters Limited, Room 392, Royal Courts of Justice, and 2 New Square, Lincoln's Inn, London, WC2A 3RU).
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MR. A. R. BOSWOOD Q.C. and MR. N. F. STADLEN (instructed by Messrs. Stanleys & Simpson North) appeared for the Appellant (Plaintiff).
MR. M. J. BRINDLE (instructed by Mr. A. P. F. Williamson) appeared for the Respondent (Defendant).
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HTML VERSION OF JUDGMENT
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Crown Copyright ©
(Revised)
LORD JUSTICE LAWTON: This is an appeal by the plaintiffs, Evening Standard Company Limited, against a judgment of Mr. Justice Evans delivered on 28 October 1986 whereby he refused the plaintiffs an interlocutory injunction to restrain the defendant, Mr. Peter Henderson, from working for any rival of theirs in the newspaper trade for a period of approximately ten months.
Mr. Henderson has been employed by the plaintiffs and their predecessors for about 17 years. He has been employed in the production room of the evening newspaper, which is nowadays known as the Standard. In 1979 he was appointed the Production Manager of the production room and he then entered into a written contract made on 3 April 1979. That contract provided that he should be employed as the Production Manager. Clause 4- of it was in these terms:
"This engagement is terminable on any day of the year on either side by 1 year previous notice in writing or payment of salary in lieu thereof. Notwithstanding the foregoing, the engagement will terminate automatically upon your reaching your 65th/60th birthday and no further notice to this effect need be served upon you."
There were provisions in the usual way about attendance, annual and statutory holidays and sickness. Then there was a provision for pension and life cover benefit which was in these terms:
"Pension Scheme provisions will be in accordance with the handbook and rules of the Express Newspapers Ltd. Management 'P' Pension Scheme, contributory membership of which is a condition of employment."
There was a provision about grievance and discipline procedure and the final provision of the contract was in these terms:
"In accordance with the usual terms of our service contracts, it is understood that your entire services are to be devoted to the interests of the Company, its Subsidiary and Associated Companies, or as the Directors may decide, and that on no account are you to engage in work outside, unless special permission has first been obtained for you to do so."
After his appointment as Production Manager the defendant went on working, and he has gone on working until today, 7 November 1986. During 1986 it became known that a rival publisher of newspapers, Mr. Robert Maxwell, was intending to start a company which would publish a new evening paper circulating in the London district. Later, the scheme for the publication of that new evening newspaper was expanded into a publication of a newspaper which would be issued at all hours and, in particular, during the afternoons and evenings. That newspaper, if it started, was likely to be a rival of the plaintiff newspaper. For some years now the plaintiffs' evening newspaper has been the only one circulating in the Greater London area. At the present time it has a circulation of about half a million copies a day. A large proportion of that circulation is sold to people on their way home from work. It is obvious that, if there is another evening newspaper in the London area, the plaintiffs are going to have their circulation cut down unless they take special steps to maintain it at its present level.
It is equally obvious that any new newspaper will require people of considerable experience to run it, particularly when it first starts. One of the problems of the production of evening newspapers is that there is a strict time schedule for all the printing operations. A Production Manager in an evening newspaper is the member of the staff who is responsible for seeing that the timetable is maintained. Maintaining the timetable necessarily requires a good deal of knowledge and experience of producing newspapers. Mr. Henderson (the defendant) has that experience. It seems obvious to me that the proposed newspaper would very much like to get the services of an experienced Production Manager such as Mr. Henderson. If that newspaper could get the services of Mr. Henderson when it started, it would benefit the new newspaper and injure the plaintiff company.
In September 1986 the defendant sent a letter to the plaintiffs, saying that he wished to terminate his contract on 7 November 1986. He was giving the plaintiffs two months notice instead of the 12 months notice which he was required to give pursuant to his contract. In fairness to him, he did say that he would go on working a little longer for the plaintiffs if it would enable them to find somebody to replace him. It became known very quickly after he had sent that letter that he was leaving in order to join the staff of the proposed rival newspaper. In other words, he was going to break his contract in order to take his skilled services to a rival.
On the face of it, that seems to be something which he was not entitled to do. It is also something which, on the face of it, will cause damage to the plaintiffs. But the damage would be very difficult to assess. That was the view of Mr. Justice Evans and it is my view.
As a consequence of these facts the plaintiffs decided to apply for an injunction to restrain the defendant from working for a rival newspaper during the period which his contract had to run. When they started to apply for an injunction they concentrated on that aspect of the matter which then appeared to them to be the most important, namely that the defendant, over his many years in the production department, had acquired what they called confidential information about the way they produced their newspaper. When the matter was examined before Mr. Justice Evans it was clear that in law there was no confidential information which the defendant had acquired. What he had acquired was, as a result of doing his job, considerable expertise which would be valuable to a rival newspaper, but which could not in law be classified as confidential information. Had there been in the possession of the defendant confidential information, the position which we have got to consider might have been different because often, in cases where there is confidential information and a breach of a contract of service, it is possible to grant an injunction. But that is not this case.
By the time this case got to this court it was accepted by the plaintiffs that they could not get an injunction against the defendant on the grounds they first thought they could. They had in mind, as one would expect from experienced counsel and solicitors, that there is a body of trite law which governs the sort of situation with which they were faced, namely that you cannot get an injunction against an employee under a contract of service to enforce a negative covenant if the consequences of that injunction would be to put the employee in the position that he would either have to go on working for his former employers or starve or be idle. Both words have been used in the past. It is not clear what is meant by being idle. The authority which is usually relied on in support of that trite law is the case of Warner Brothers Pictures, Incorporated v. Nelson (1937) 1 K.B. 209.
The plaintiffs had to consider carefully what they should do- They decided that one way out of their problem was to offer to pay the defendant his salary and other contractual benefits until such time as his notice, if it had been in proper form, would have run out. The reason they took up that attitude is this. The defendant, by his letter of September 1986, had repudiated his contract with them but they had not accepted the repudiation. It is now the law, so far as this court is concerned, that, where there is repudiation by one party of a contract of service which is not accepted by the other party, the other party can consider the contract still in existence. Mr. Boswood, on behalf of the plaintiffs, told us that is the present attitude of the plaintiffs. The defendant has repudiated his contract but they, for their part, still accept it as being in existence. Mr. Boswood said that, in those circumstances, the plaintiffs felt bound to perform the contract on their side, which would mean that they would have to pay his salary and provide him with the other contractual benefits to which he was entitled under his contract.
Therefore, what the plaintiffs did was, before Mr. Justice Evans, to give an undertaking that they would go on paying his salary. There seems to be some doubt as to whether they then said that they would go on making available the other contractual benefits. It matters not because in this court the undertaking has been clear, namely that they would give the defendant, until his contract lawfully expired, all his contractual benefits. But in the course of discussion in this case, as a result of a comment made by my brother, Lord Justice Balcombe, the plaintiffs went further. They said that they would also give an undertaking not to seek to claim any damages against the defendant for the period when he was not working for them. If they had been in a position to claim damages from him, their undertaking to pay his salary would have been of no value at all because they would have been able to say:
"As a result of your breach of contract and your not working for us, we have had to pay your salary. We claim it back by way of damages."
Another aspect of this matter which was offered by the plaintiffs, to my personal surprise, was that they would be willing to have the defendant working for them as their Production Manager in their production room. When Mr. Boswood said that, I felt it was an unrealistic offer because it seemed to me that the probabilities were that the relationship between the higher management of the plaintiffs and the defendant would be so bad that working together would be virtually impossible. To my surprise, I was told that the defendant has in fact been working as Production Manager, in some degree at any rate, ever since he sent in his letter of resignation until today. So it is not altogether impossible that the defendant, if he wanted job satisfaction, could go back to the Evening Standard tomorrow and do the job which he has been doing for the last seven years. That is the background of this case. I should refer to two matters which have been raised by Mr. Brindle on behalf of the defendant. When this case was before Mr. Justice Evans, counsel then appearing on behalf of the defendant conceded that he was in breach of contract. Before this court Mr. Brindle, on the defendant's behalf, withdrew that concession and said that the defendant does not accept that he is in breach of the contract. He submitted that there is an arguable case for the defendant that the numerous grievances which the defendant now says he has against the plaintiffs - for example, not getting proper salary rises, not being promoted when he should have been, not being given undertakings about the future and so on - all amounted to breaches of contract on behalf of the plaintiffs, I infer, to such a degree that they amounted to repudiation of the contract by the plaintiffs.
Mr. Brindle can argue that when this case comes on for trial, if it ever does. All I need say is, for the purposes of deciding whether we should apply Cyanamid principles, that is a somewhat fanciful view of this case. So far as Cyanamid principles are concerned, there is, in my judgment, no serious issue as to liability. There is a serious issue as to the appropriate remedy for the defendant's seeming clear breach of his contract.
What we have to ask ourselves is: What, in the circumstances of this case, is the balance of convenience? If the defendant leaves the employment of the plaintiffs today, as he says he intends to do, and takes himself off straightaway or very shortly to the rival newspaper, the plaintiffs, in my judgment, will undoubtedly suffer damage but, as I have already said and the judge at first instance found, it will be almost impossible to quantify that damage. It follows, on the face of it, that the defendant ought not, pending trial, to be allowed to do the very thing which his contract was intended to stop him doing, namely working for somebody else during the period of his contract. But that has got to be balanced against what I have said is the trite law. The injunction must not force the defendant to work for the plaintiffs and it must not reduce him, certainly, to a condition of starvation or to a condition of idleness, whatever that may mean on the authorities on this topic. But all that, in my judgment, is overcome by the fact that the plaintiffs have made the offer they have. The defendant can go back and work for them. If he elects not to go back (and it will be a matter entirely for his election: there will be nothing in the judgment which forces an election upon him) he can receive his salary and full contractual benefits under his contract until such time as his notice would have expired had it been for the proper period.
Thus it follows, in my judgment, at this stage as a matter of interlocutory proceeding, the balance of convenience is in favour of granting the kind of injunction asked for by the plaintiffs.
In coming to that conclusion I have had very much in mind that this is an interlocutory appeal. It was only too clear from the cases to which our attention was invited that, in this branch of the law, there are a number of problems which have got to be solved: what is meant, for example, by idleness as that term is used in the Warner Bros, case to which I have already referred. It seems, therefore, to me that this is very much a case where, as soon as possible, there should be an examination in depth as to how the law stands at the moment in the kind of situation with which we are confronted in this case.
The reason I say that is as follows. Nowadays, the need for skilled personnel is very great indeed, particularly in the manufacturing industries using sophisticated technology. There is a great temptation on employees, who have been bound by contract for a period to an employer, to break their contracts and go to other employers, usually for far higher salaries and, when they do (assuming that there is no question of confidential information), as the law stands at present, they can snap their fingers at their old employers because they can say: "You cannot obtain an injunction against me which will have the effect of forcing me either to come back and work out my notice or starve, and it is no good your talking through your lawyers about paying damages because in the real world damages are impossible to quantify". All the risk they are running in this kind of situation is that they will have to pay the costs of any legal proceedings.
This seems to me to he a most unsatisfactory situation in the world of master and servant. It is time that some court examined the matter fully. But an interlocutory appeal is not an occasion on which there should be an in depth examination of the law.
I would allow the appeal.
LORD JUSTICE BALCOMBE: I agree that this appeal should he allowed for the reasons given by my Lord but, since we are differing from the judge below, I would add a few words of my own.
In this court it has been accepted, as indeed it was below, that, unless and until the plaintiffs accept the defendant's repudiation of his contract, that contract continues. So the position is that the defendant wants to break his contract. Like my Lord, I do not think on the evidence that there is any serious issue as to liability. The only serious issue is as to remedy. On that, the cases about restraint of trade to which we were referred by Mr. Brindle are, in my judgment, irrelevant.
A case which did give me a moment's pause was the Court of Appeal decision of Whitwood Chemical Co. v. Hardman (1891) 2 Ch 416 but, in my judgment, that case is distinguishable from the present one for two reasons. First, in that case there was no negative restriction in the contract of employment as there is here and, secondly, the width of the injunction that was there sought.
Having regard to the undertakings which the plaintiffs have offered in this case, in my judgment, the learned judge was wrong in refusing the injunction. But, if it had been material, I would have gone further. I am inclined to accept the alternative ground of the appeal raised by the plaintiffs, namely that the evidence before the learned judge was not such as to indicate that there was no alternative employment at all, even in some other field, open to the defendant. To that extent, I would have followed the case of Warner Bros, v. Nelson (1937) 1 K.B. 209 to which my Lord has referred. In the event, it becomes unnecessary to decide that point. I, too, would allow this appeal.
Order: Appeal allowed with costs. Each side to pay their own costs of the hearing before Mr. Justice Evans. Leave to appeal to the House of Lords refused.
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