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Restrictive Covenants

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Thanks to Paul Smith of Broadway House Chambers for preparing this case summary.

No principle of law here, but an interesting example of a restrictive covenant case - Romero Insurance Brokers v Templeton in the High Court.

The employee's contract included a clause that for a period of 12 months following termination he would not procure orders from, or do business with, a client of the employer with whom he had dealt within the last 6 months of his employment. Sir Raymond Jack reviewed the case law relating to business interests and what might be reasonably necessary to protect them. On the facts, he concluded that the covenant was reasonably necessary in the context of the insurance industry, where renewals usually take place annually, and granted Romero an injunction to enforce it.

The decision to grant an injunction was based, in part, upon the failure of the employee's contention that he had been constructively dismissed. Whilst the judgment does not expressly state that an employer who has repudiated an employee's contract will not be able to enforce restrictive covenants contained within it, it hints that this may be the case. The decision therefore adds flavour to this ongoing debate (read the Supreme Court judgment of Lord Wilson in Societe Generale v Geys, at paragraph 68)