Egon Zehnder Ltd v Tillman - [2019] UKSC 32

Trinity Term

[2019] UKSC 32

On appeal from: [2017] EWCA Civ 1054

JUDGMENT

Tillman (Respondent) v Egon Zehnder Ltd (Appellant)

before

Lady Hale, President

Lord Kerr
Lord Wilson
Lord Briggs
Lady Arden

JUDGMENT GIVEN ON

3 July 2019

Heard on 21 and 22 January 2019

Appellant Respondent

James Laddie QC	Daniel Oudkerk QC
Adam Solomon QC	Amy Rogers
(Instructed by Reynolds	(Instructed by Simmons &
Porter Chamberlain LLP	Simmons LLP)

(London))

LORD WILSON: (with whom Lady Hale, Lord Kerr, Lord Briggs and Lady

Arden agree)

Introduction

1. A company employs a business executive pursuant to a written agreement. Following the termination of her employment she wishes to become employed by a firm whose business is in competition with that of the company. The company contends that her proposed employment would breach a covenant in the agreement. She answers that the covenant is void at common law because part of it is in unreasonable restraint of trade. Before this court the company replies with three contentions, each of which she disputes.

Each of the company’s contentions raises an issue with a different hypothesis,

as follows:

(A) The hypothesis in Issue (A) is that the employee’s construction of the
part of the covenant alleged to be in unreasonable restraint of trade is correct. Here the company contends that the impugned part falls outside the doctrine
against restraint of trade (“the doctrine”) and that it is therefore irrelevant
that, had it fallen within the doctrine, it would have been in unreasonable
restraint of it.
(B) The hypothesis in Issue (B) is that the employee’s construction of the
impugned part is incorrect. Here the company contends that, upon a correct
construction of it, it is not in unreasonable restraint of trade.
(C) The hypothesis in Issue (C) is that, as in Issue (A), the employee’s
construction of the impugned part is correct; but that, contrary to the
company’s contention in Issue (A), it does fall within the doctrine. Here the
company contends that, although it is in unreasonable restraint of trade, the impugned part should be severed and removed from the remainder of the
covenant, which would therefore survive so as to prohibit the employee’s
entry into the proposed employment.

One can argue that Issue (B) is logically anterior to Issue (A). But, since Issue (A) purports to test the very boundaries of the doctrine, a balance of convenience favours consideration of it first.

3. I will explain why in my opinion the most difficult and important issue raised in the appeal is Issue (C): when part of a post-employment covenant is in unreasonable restraint of trade, in what circumstances should the court sever and remove it so as to leave the employee bound by the remainder of it?

The Facts

Egon Zehnder Ltd (“the company”), the appellant, is the UK subsidiary of a

Swiss company and part of a worldwide group which is in the business of specialist executive search and recruitment. The group has nine practice areas into one of which it…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] UKSC 32
Decision Date

CaseChat Overview and Summary

Egon Zehnder Ltd (Appellant) v Tillman (Respondent) was an appeal by the company against the decision of the Court of Appeal which had set aside the injunction which had been granted by the High Court. The company had employed Ms Tillman, a business executive, pursuant to a written agreement which contained post-employment restraints. Following the termination of her employment she proposed to become employed by a firm whose business was in competition with that of the company. The company contended that her proposed employment would breach a covenant in the agreement. She answered that the covenant was void at common law because part of it was in unreasonable restraint of trade. The company disputed this and raised three contentions, each of which she also disputed. The Supreme Court considered the issues in turn. First, it considered whether the word "interested" in the non-competition covenant fell outside the doctrine against restraint of trade. The court concluded that it did not. Second, it considered whether the word "interested" in the non-competition covenant could be construed so as not to prohibit Ms Tillman from holding shares in the businesses there specified. The court concluded that it could not. Third, it considered whether the word "interested" should be severed and removed from the remainder of the covenant so as to leave the employee bound by the remainder of it. The court concluded that it should be. The Supreme Court set aside the Court of Appeal's order and over-ruled the decision in Attwood v Lamont. It formally restored the injunction granted by Mann J, subject only to the removal of the words "or interested".

Orders