Eville & Jones (Group) Ltd & Anor v Aldiss & Ors

Factual and Procedural Background

The claim form was issued on 12 March 2021. The Claimants sought interim relief which was considered by HHJ Bird on 22 March 2021, resulting in various orders mainly against the First Defendant ("Dr Aldiss"), who gave further undertakings. The Claimants discontinued claims against the Second and Third Defendants in July 2021 without costs order. The Fourth Defendant ("Company B") entered creditors' voluntary liquidation in August 2021.

Dr Aldiss was employed by the Second Claimant as Joint Managing Director until his summary dismissal on 17 August 2022 and was responsible for day-to-day business operations. The First Claimant is the holding company for the Second Claimant; collectively referred to as the Claimants. Their business provides veterinary services including export certification and inspection across the UK. Dr Aldiss signed a shareholders' agreement on 31 October 2018 containing restrictive covenants which expired on 29 April 2022, following cessation of his shareholding on 30 October 2020.

The Claimants allege that following his dismissal, Dr Aldiss breached several restrictive covenants by competing with their business, soliciting clients, poaching staff, misusing confidential information, and entering into an unlawful means conspiracy with Company B. The restrictive covenants are detailed in clause 11 of the shareholders' agreement and include prohibitions on competition, solicitation of customers and employees, and misuse of confidential information during specified periods.

Legal Issues Presented

1. Whether summary judgment should be entered against the First Defendant on the grounds that there is no real prospect of success in defending the claim regarding liability under paragraphs 64-67 of the Amended Particulars of Claim.
2. Whether the restrictive covenants in the shareholders' agreement are enforceable as reasonable restraints of trade.
3. Whether the First Defendant breached the restrictive covenants and the equitable duty of confidence.
4. Whether a conditional order should be made under CPR 24.6 requiring payment into court or provision of security.

Arguments of the Parties

Claimants' Arguments

• The restrictive covenants are reasonable and enforceable because they protect legitimate business interests, including confidential information, client relationships, and employee connections.
• The covenants are mutual and apply to all shareholders, which supports their enforceability.
• Dr Aldiss was a senior employee with access to sensitive information such as customer identities, contracts, employee details, and strategic plans.
• The 18-month restriction period is reasonable given the long-term nature of relevant contracts, such as a three-year contract with a major client.
• Dr Aldiss breached the covenants by competing with the Claimants' business through involvement with Company B and Hallmark, soliciting clients and employees, and misusing confidential information.
• Dr Aldiss provided false and misleading evidence to the court and associates.
• There is a public interest in enforcing undertakings given to avoid litigation.
• The First Defendant has no real prospect of successfully defending the claims on liability.

First Defendant's Arguments

• The restrictive covenants are unenforceable because they prevent him from earning a living for 18 months, and he signed the agreement without opportunity or advice, while suffering from personal difficulties.
• The shareholders' agreement was not negotiated between commercial parties acting independently; there was an inequality of bargaining power similar to an employment contract.
• No justification has been provided for the necessity of a non-competition clause in addition to non-solicitation and confidentiality clauses.
• The 18-month duration is unreasonable and can only be properly assessed after trial.
• The Claimants have not demonstrated that the businesses of Hallmark and the Claimants are competitive; they may be complementary or unrelated.
• There are significant factual disputes about the nature of Company B and Hallmark’s businesses and Dr Aldiss's involvement.
• The allegations rely on disputed facts and inferences, making summary judgment inappropriate without cross-examination and disclosure.
• Dr Aldiss did not receive remuneration from Company B or Hallmark in relation to the disputed activities.

Table of Precedents Cited

Court's Reasoning and Analysis

The court first clarified the test for summary judgment under CPR Part 24.2, requiring no real prospect of success in defending the claim and no other compelling reason for trial. The court applied established authorities to interpret this test, emphasizing avoidance of mini-trials and the need for a realistic, not fanciful, prospect of success.

Regarding enforceability of the restrictive covenants, the court acknowledged they are prima facie restraints of trade and thus unenforceable unless reasonable. The court found that the covenants protect legitimate interests such as confidential information and business goodwill, and that the 18-month duration was reasonable considering the long-term contracts held by the Claimants. The mutual nature of the restrictions and the seniority and knowledge of the First Defendant supported enforceability.

The court rejected personal circumstances and lack of legal advice as sufficient to undermine enforceability, noting the First Defendant was a sophisticated commercial operator who voluntarily signed the agreement.

On the issue of breach, the court found that there were significant factual disputes involving the nature of the businesses, the First Defendant’s role, and the competitive landscape. The evidence included disputed documents and conflicting witness statements. The court held that these disputes required full trial procedures including disclosure and cross-examination and could not be resolved summarily without undertaking a mini-trial.

Regarding the application for a conditional order requiring payment into court, the court concluded that while the defence might be weak, it was not improbable enough to warrant such an order, particularly given the unresolved factual issues and the need to avoid premature merits assessment.

Holding and Implications

The court GRANTED SUMMARY JUDGMENT against the First Defendant ("Dr Aldiss") on the issue of the enforceability and reasonableness of the restrictive covenants in the shareholders' agreement, concluding he has no real prospect of successfully defending that issue and there is no other compelling reason for trial on that point.

However, the court DECLINED SUMMARY JUDGMENT on the question of whether the First Defendant breached those covenants and related equitable duties, due to the existence of substantial factual disputes requiring trial procedures.

The court also DECLINED TO MAKE A CONDITIONAL ORDER requiring payment into court or security for costs.

The direct effect is that the First Defendant is found bound by the restrictive covenants, but the factual allegations of breach remain to be determined at trial. No new legal precedent was established beyond application of existing principles to the facts of this case.