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25-09-2014

In Prophet plc v Huggett [2014] EWCA Civ 1013, the Court of Appeal considered whether the High Court should have enforced a 12-month non-compete restriction which, due to a drafting mistake offered the employer no protection.

Prophet was a software developer.  Mr Huggett was its sales manager. He was responsible for developing new business and managing account relationships with Prophet's customers.  His employment contract contained a non-compete restriction for a period of 12 months which essentially prevented him from joining a competitor who sold Prophet's products.

Mr Huggett resigned and joined a direct competitor. The High Court initially upheld an injunction enforcing the non-compete restriction.  Read literally the restriction would not protect Prophet at all because no competitor would ever be able to sell Prophet products as Prophet only sold these themselves.  However, in a departure from usual practice the High Court took the view that the clause did not give effect to the parties' intentions and something had gone wrong in its drafting and therefore amended the restriction to give it commercial sense.  Mr Huggett appealed.

The Court of Appeal allowed the appeal holding that whilst the Court should generally interpret an ambiguous clause in such a way as to provide a commercially sensible solution, in this case the clause was not ambiguous. It was just badly drafted. Whoever drafted the clause had simply not thought matters through sufficiently.

Here are tips on post-termination restrictions.

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