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Status: Positive or Neutral Judicial Treatment

*688 Herbert Morris, Limited Appellants v Saxelby Respondent.


House of Lords
8 February 1916
[1916] 1 A.C. 688
Lord Atkinson, Lord Shaw of Dunfermline, Lord Parker of Waddington, and Lord Sumner.
1916 Feb. 8
Restraint of TradeSpecial Branch of Engineering BusinessEmployer and ServantRestraint for
Seven Years extending to United KingdomReasonableness.
In determining whether a covenant in restraint of trade is enforceable, a covenant exacted by the
purchaser from the vendor on a sale of the goodwill of a business stands on a different footing from a
covenant exacted by an employer against his employee; and semble in the latter case a covenant
against competition per se will not be enforced.
The plaintiff company were the leading manufacturers of hoisting machinery in the United Kingdom,
and the defendant had been in the company's employment as draughtsman and otherwise from the
time he left school. After several years' service the defendant was engaged by the company as
engineer for two years certain and thereafter, subject to four months' notice on either side, upon the
terms of an agreement which contained a covenant by the defendant with the company that he would
not during a period of seven years from his ceasing to be employed by the company, either in the
United Kingdom of Great Britain or Ireland, carry on either as principal, agent, *689 servant, or
otherwise, alone or jointly or in connection with any other person, firm, or company, or be concerned
or assist, directly or indirectly, whether for reward or otherwise, in the sale or manufacture of pulley
blocks, hand overhead runways, electric overhead runways, or hand overhead travelling cranes:
Held, that the covenant was wider than was required for the protection of the plaintiff company and
was not enforceable.
Decision of the Court of Appeal [1915] 2 Ch. 57 affirmed.
APPEAL from an order of the Court of Appeal affirming a judgment of Sargant J.
1
The appellants were the plaintiffs and the respondent was the defendant in an action to enforce a
covenant in restraint of trade, and the sole question at issue was as to the enforceability of the
covenant.
The appellants carried on the business of engineers, their special and main line of business being the
manufacture and sale of lifting machinery, particularly pulley blocks, runways, and travelling cranes,
for which they had acquired a great reputation. Their head office and works were at Loughborough,
and they had branch offices in London, Manchester, Birmingham, Glasgow, Cardiff, Leeds,
Newcastle, and Sheffield. They had no branch office but employed a traveller in Ireland. They were
the largest makers of lifting machinery in the United Kingdom. The appellants had devoted much time
and money to collecting and tabulating information of various kinds for use in their business. In
particular they got out and arranged a large number of charts called E charts, which gave details of
their manufacture and particulars of the strengths of the materials employed, and contained a large
amount of technical information as the result of experiments made by the appellants and their
employees. They also had drawings called L sheets, comprising tables and curves indicating the
strength and composition of the materials required for any particular job. All these documents were
treated as confidential, and though they were handed out from time to time to the appellants'
employees, stringent precautions were taken to ensure their return.
The respondent on leaving school entered into the employment of the appellants in February, 1901,
as a junior draughtsman, *690 being then aged fifteen. In 1906 he became leading draughtsman in
the department of pulley blocks, hand overhead travelling cranes, and hand overhead runways. In
1908 he was appointed resident engineer at the appellants' Cardiff branch, and in 1909 he became
their manager and resident engineer in London. In 1910 he was sent back to Loughborough, where
he took charge of departments connected with the sale of pulley blocks and with Admiralty contracts.
Page1
On March 17, 1911, he entered into an agreement with the appellants whereby he was to be
employed from February 7, 1911, as an engineer for two years certain, and thereafter subject to four
weeks' notice on either side, at a salary of 3l. 17s. 6d. per week. And the agreement contained the
following clauses:
6. The employee shall not during his employment nor at any time afterwards divulge
nor communicate to any person corporation or firm any information which he may
receive or obtain in relation to the company,s affairs and customers and all instructions
drawings notes and memoranda made by the employee or which may come into his
possession while engaged as aforesaid shall be the exclusive property of the company.
7. In consideration of the agreement hereinbefore contained the employee covenants
and agrees with the company their successors and assigns that he will not at any time
during a period of seven years from the date of his ceasing to be employed by the
company whether under this agreement or otherwise howsoever either in the United
Kingdom of Great Britain or Ireland carry on either as principal agent servant or
otherwise alone or jointly or in connection with any other person firm or company or be
concerned or assist directly or indirectly whether for reward or otherwise in the sale or
manufacture of pulley blocks hand overhead runways electric overhead runways hand
overhead travelling cranes or any part thereof or be concerned or assist as aforesaid in
any business connected with such sale or manufacture.
These clauses were substantially a repetition of clauses contained in an agreement of July 16, 1906,
which the respondent was required by the appellants to sign immediately on his attaining the age of
twenty-one, when he was employed as leading draughtsman, except that the clause restricting the
respondent *691 from carrying on trade in competition with the appellants did not include in the
prohibited articles electric overhead runways.
The respondent left the appellants' service on April 19, 1913. During the last six months of his service
he attempted to obtain employment in various engineering firms which did not compete with the
appellants, but having failed in these efforts, in May, 1913, he entered into the employment of Messrs.
Derome, who carried on the business of engineers and manufacturers of lifting machinery at Bavay in
France. On February 28, 1914, he left Messrs. Derome and entered into the employment of Vaughan
& Sons, Limited, of Manchester, who were manufacturers of lifting machinery and competitors in trade
of the appellants.
Thereupon the appellants commenced this action against the respondent claiming injunctions
restraining him from committing breaches of clauses 6 and 7 of the agreement of March 17, 1911. At
the trial, however, the appellants abandoned their claim under clause 6, and they did not claim to
enforce the last words of clause 7 or any part thereof or be concerned as aforesaid in any business
connected with such sale or manufacture.
Sargant J. dismissed the action. The learned judge said that from the point of view of the employers
alone he was not prepared to hold that the covenant was unreasonable as regards either time or
space, having regard to the very special character of the work, and if the question were one between
a vendor and purchaser he would feel compelled to give effect to it; but he held that it was
unreasonable to the defendant and prejudicial to the public and was therefore not enforceable. This
decision was affirmed by the Court of Appeal by a majority (Lord Cozens-Hardy M.R. and Joyce J.,
Phillimore L.J. dissenting).
1915. Nov. 4, 5, 8, 22, 23. Sir Robert Finlay, K.C. and A. J. Walter, K.C. (with them Kerly, K.C.), for
the appellants. The sole test of the enforceability of a covenant in restraint of trade is whether, looking
at all the circumstances of the case,the nature of the covenantee's business and the character of
the employmentthe restriction is reasonably required for the protection of the covenantee. In the
special circumstances of the present case the covenant in question is not too wide. The covenant is
so limited as *692 to the prohibited articles as that it would not prevent the respondent from obtaining
any kind of general engineering employment. If the restriction is reasonably required for the protection
of the appellants it is not contrary to public policy. The authorities establish the following
propositions:1. Inasmuch as the object of the restraint is the protection of property, a restraint which
is not wider than is reasonably necessary for that purpose will be enforced. 2. Owing to the changing
conditions of modern commerce and the greater facilities of modern locomotion, a larger restraint
than formerly may now be held good. 3. No distinction can be drawn between vendor and purchaser
Page2
and master and servant, except in so far as there may be a personal equity in the servant in cases of
oppression. 4. No distinction can be drawn between what has been called the objective and the
subjective knowledge of the covenantor; the covenant applies to all forms of competition whether as
regards secret information or as regards skill acquired in the employer's service. 5. Possibly a
restraint which is likely to create a pernicious monopoly may be held bad on public policy
notwithstanding that it is reasonable in the interests of the parties. That question, however, does not
arise in the present case. As to the authorities: the law laid down by Parker C.J. in Mitchel v.
Reynolds
2
has been relaxed in modern times in various respects, and in particular as regards the
questions of adequacy of consideration and onus of proof. So also the statement of Best C.J. in
Homer v. Ashford
3
that any covenant which binds a person not to employ his talents, his industry, or
his capital in any useful undertaking in the kingdom would be void no longer holds good because the
increased facilities for commercial intercourse existing at the present time may render necessary a
restraint extending over the whole kingdom. In Hitchcock v. Coker
4
Tindal C.J. upheld a covenant
imposing upon a servant a restraint unlimited in point of time, and the ground of the decision was that
it was necessary for the protection of the master's property. In Mallan v. May
5
, which was also a case
of master and servant, Parke B. says that the test is *693 what is required for the reasonable
protection of the party with whom the contract is made. He there deals both with the sale of the
goodwill of a business and with the relation of master and servant, and he draws no distinction
between the two cases. He also puts the objective and subjective elements of the knowledge
acquired by the servant in his master's employment on exactly the same footing. In Tallis v. Tallis
6
,
where a very wide restriction was upheld, Lord Campbell shows how Mitchel v. Reynolds
7
has been
modified by subsequent decisions, and in that case the Court threw on the defendant the burden of
proving that the restraint was larger than was required for the protection of the plaintiff. The law as to
the onus of proof in the case of partial restraints was stated in the same way by Fry J., relying on the
dictum of Jessel M.R. in Printing and Numerical Registering Co. v. Sampson
8
as to the danger of
interfering with freedom of contract, in Rousillon v. Rousillon
9
, by Lindley L.J. in Mills v. Dunham
10
,
and by Chitty J. in Badische Anilin and Soda Fabrik v. Schott, Segner & Co.
11
Rousillon v. Rousillon
12 is also an authority for the proposition that there is no absolute rule of law that a covenant unlimited
in point of space is void. This view was approved by the Court of Appeal and the House of Lords in
Maxim Nordenfelt Guns and Ammunition Co. v. Nordenfelt
13
, where a covenant unlimited in point of
space and practically unlimited in point of time was enforced. Lord Macnaghten in his well-known
definition says that it is a sufficient justification for the covenant if the restriction is reasonable in the
interests of the parties concerned and reasonable in the interests of the public. But a covenant which
does not go beyond the reasonable protection of the covenantee is really for the interest of the
covenantor also, for otherwise there would be less employment for possible workmen. Nor would
such a covenant be bad on the ground of public policy, except possibly for the reason suggested by
Bowen L.J. in the Court below, that it might be an incident of a scheme for establishing a pernicious
monopoly. The true test is that laid down *694 by Lord Campbell in Tallis v. Tallis
14
which is adopted
by Lord Macnaghten. The principle of the Nordenfelt Case
15
was applied to a contract of service in E.
Underwood & Son v. Barker
16
, where a covenant restraining the servant for twelve months from
carrying on a rival business in the United Kingdom or is France, Belgium, Holland, or Canada was
held good, at any rate so far as the United Kingdom was concerned, and in Haynes v. Doman
17
,
where the covenant was limited in point of space but was unlimited in point of time. In the latter case
both Stirling J. and Lindley M.R. stated that the real reason for exacting these covenants was to
prevent the disclosure of the secrets of the plaintiff's business to his trade rivals, inasmuch as the
prohibition against disclosing trade secrets was practically worthless without the restriction against
entering the employment of rivals. In Sir W. C. Leng & Co. v. Andrews
18
, which was a case of a
newspaper business in which the defendant was employed as a reporter, a restriction containing a
space limit of twenty miles but no time limit was held unenforceable because there was no real
danger to be protected against; but the dictum of Farwell L.J. that the doctrine stated by Lord
Macnaghten does not mean that an employer can prevent an employee from using in his trade the
skill and knowledge which he has acquired from his employer, but is limited to the revealing of trade
secrets, is opposed to the whole current of authority and was not necessary for the decision of the
case. The true view is that an employer is entitled to be protected against the use in a rival firm of the
special skill and knowledge acquired by his employee in his employment, subject always to the
question of reasonableness. In Attorney-General of the Commonwealth of Australia v. Adelaide
Steamship Co.
19
Lord Parker of Waddington sums up the law on the subject of restraint of trade.
Mason v. Provident Clothing and Supply Co.
20
contains a dictum of Lord Haldane on the question of
onus which appears to be at variance with the earlier authorities; but it is not necessary in this case to
argue the question of onus, because the appellants *695 have the finding of Sargant J. in their favour
that the restriction was not more than was reasonably required for their protection. The only passage
Page3
which the appellants ask to have considered is that in which Lord Shaw draws a distinction between
objective and subjective knowledge. It is submitted that there is no justification in the authorities for
any such distinction. In Eastes v. Russ
21
it was held that the restriction was wider than was
reasonably necessary for the plaintiff's protection, but the general principle of that case is not
inconsistent with the appellants' argument. In the course of his employment the respondent acquired
a knowledge of the appellants' highly specialized system of conducting business and had access to
technical information of a confidential character which the appellants had spent much money in
collecting, and the covenant may be supported on the trade secrets principle. The term trade
secrets is not limited to secret processes, but extends to any information of a confidential character
which is peculiar to the employer's business. At the present time it is just as much a part of public
policy that a man should abide by his contract as that he should have the right to work. On the facts
found by Sargant J. the appellants are entitled to judgment.
Romer, K.C. , and Sheldon, for the respondent. On the evidence the real object of this covenant is to
restrain competition and nothing else. That will not be protected. All that is protected is the filching of
the employer's property such as trade secrets or customers, connection. Here the employer is
seeking to restrain the employee from enjoying something which is the property of the latter, namely,
the chance of earning his livelihood by the exercise of the very trade which he has entered the
employer's service to learn. The respondent cannot obtain employment in a general engineering firm
because his training has been exclusively in one special branch. His special qualification is a
hindrance to him. It cannot be for the public interest to enforce such a covenant. The case presented
by the employer is exactly the same as in Mason v. Provident Clothing and Supply Co.
22
and is
enforced by the same arguments. It is said that in considering what is necessary for the protection of
the covenantee's *696 business the interest of the public may be wholly disregarded. But it is on
public policy that these covenants are upheld just as much as it is on public policy that they are upset.
In all these cases the interest of the public is to be considered. This point is important for the purpose
of displacing the appellants' argument that there is no difference between the case of vendor and
purchaser and employer and employee and no difference between objective and subjective
knowledge. Lord Macnaghten aptly states the true proposition in the Nordenfelt Case.
23
In
considering the interest of the public two conflicting principles have to be regardedsanctity of
contract and freedom of trade. It is clear that the public must have a much greater interest in
upholding a covenant in restraint of trade as between vendor and purchaser, who are on an equal
footing, than as between employer and employee, who are not. Again, it may well be in the public
interest that such a covenant should be upheld when the object is to restrain the revelation of a secret
process or the canvassing of customers; but how can it be in the public interest to restrain a man from
carrying on the only trade which he knows? The only authority opposed to this view is the dictum of
Parke B. in Mallan v. May
24
, but his reasoning does not hold good at the present time. Where these
covenants are upheld they are upheld solely in the public interest, and if there is no reason for
upholding them they are bad, because the public interest is in favour of unrestricted trade. All the
cases cited in which these covenants have been enforced are founded on the idea that the thing to be
protected is part of the goodwill of the business. None of them support the proposition that
competition per se can be restrained. In Ward v. Byrne
25
, where the restriction was held to be too
wide, Lord Abinger, in stating the object of these covenants, recognizes the right of every man to be
free to earn his livelihood in the exercise of any lawful employment. Where, as in this case, the
employee is taking away nothing that belongs to the employer the public have a direct interest in
having the covenant upset. In the Nordenfelt Case
26
the decision turned on the fact that the covenant
was entered into in connection with the sale of the goodwill of a *697 business, and it is inconceivable
that the decision would have been the same if the question had been between employer and
employee. Both Lord Herschell and Lord Macnaghten take this distinction. The same distinction is
drawn by Lord Haldane in Mason v. Provident Clothing and Supply Co.
27
and by Phillimore L.J. in
Eastes v. Russ.
28
The principle for which the respondent contends is that stated by Farwell L.J. in Sir
W. C. Leng & Co. v. Andrews
29
, approved by Lord Shaw in Mason's Case
30
, namely, that it is not for
the public interest that an employer should be allowed to prevent a former employee from carrying on
business in competition with him when all that the employee takes with him is the skill and knowledge
acquired in his employer's service.
Kerly, K.C., in view of the fact that the hearing of the appeal had been interrupted and that both his
learned leaders were engaged at the time in the Privy Council, was allowed, as a matter of grace, to
reply.
The House took time for consideration.
1916. Feb. 8. LORD ATKINSON.
Page4
My Lords, this is an appeal from an order of the Court of Appeal, dated the 31st day of March, 1915,
affirming the judgment of Sargant J., dated the 30th day of October, 1914, and dismissing the action
with costs. The appellants are the plaintiffs, and the respondent is the defendant. The action out of
which the appeal arises was brought to restrain the respondent, a former servant of the appellants,
(1.) from being concerned in the sale or manufacture of pulley blocks, hand overhead runways,
electric overhead runways, hand overhead travelling cranes, or any part thereof, and (2.) from
divulging or using confidential information acquired by him whilst in the service of the appellants.
This claim is based upon two covenants contained in an agreement under seal or indenture dated
March 17, 1911, executed by the appellants and respondent, under which the respondent was to be
employed for a period of two years certain from February 7, 1911, and thereafter subject to four
weeks' notice on either side, at a *698 salary of 3l. 17s. 6d. per week. [His Lordship read clauses 6
and 7 of the agreement.]
It will be observed that there is no clause in covenant No. 6 prohibiting the using of information, as
distinct from the divulging or communicating of it, and Joyce J. points out that nothing but an express
provision against using the information would justify such an injunction as is claimed. The matter,
though to a great extent immaterial, since the appellants admit they cannot establish that any breach
of this covenant was committed by the respondent, or even threatened, is not without some
significance inasmuch as it tends to show that what the appellants desired from the first was that the
respondent should be restrained from using in the service of some other employer that skill and
knowledge which he had acquired by the exercise of his own mental faculties on what he had seen,
heard, and had experience of in the employment of the appellants themselves.
The appellants, feeling obviously the difficulty of defending the clause at the end of the seventh
covenant running in these words, or any part thereof, or be concerned as aforesaid in any business
connected with such sale or manufacture, have consented to treat the covenant for the purposes of
their action as if these words had been deleted, and are willing to take an injunction confined to what
is prohibited by the remainder of the covenant.
The defence of the respondent is in effect this, that the restrictions imposed on him by this indenture
go far beyond anything reasonably necessary for the protection of the plaintiffs in their trade or
business, are oppressive to him, and that, being in restraint of trade, either the entire agreement, or at
all events covenant No. 7, is not binding upon him.
By the word oppressive I take it that it is not meant that the respondent was induced to enter into
this agreement by fraud, misrepresentation, deceit, or forced to enter into it by such duress as would
entitle him in a Court of Equity to have it set aside whether it referred to his trade or not, but
oppressive in the sense that it would, if enforced, deprive him for a lengthened period of the power
of employing, in any part of the United Kingdom, that mechanical and technical skill and knowledge
which, as I have said, his own industry, observation, and intelligence have enabled him *699 to
acquire in the very specialized manufacturing business of the appellants, thus forcing him to begin life
afresh, as it were, and depriving him of the means of supporting himself and his family.
If that is what is meant, then such oppression, if it existed, does not concern him alone. The general
public suffer with him, for it is in the public interest that a man should be free to exercise his skill and
experience to the best advantage for the benefit of himself and of all those who desire to employ him.
And, in cases like the present, the public interest in respect of such restrictions and the interest of the
covenantor if they are not conterminous certainly overlap.
It is quite true, as the Master of the Rolls points out, that, as things now are, two principles or views of
public policy come into conflict in such cases as this, namely, freedom of trade and freedom of
contract. While the community is vitally interested in trade being free, it is also vitally interested in
people being free to contract and being held to their contracts.
The facts are all before the House, so one need not be troubled with the question upon whose
shoulders, those of the covenantor or those of the covenantee, the burden of proof rests.
I think it has been generally assumed that the law upon this subject of the validity or invalidity of
contracts in restraint of trade has been authoritatively determined by the decision of this House in the
Nordenfelt Case
31
, as it is, for the sake of brevity, commonly called, and that it is laid down in the
clearest and most happily selected language in the oft-quoted passage of the judgment of Lord
Macnaghten, so that it is, I think, no longer necessary to refer to the earlier authorities. The passage
runs thus:
Page5
The true view at the present time, I think, is this: The public have an interest in every
person's carrying on his trade freely: so has the individual. All interference with
individual liberty of action in trading, and all restraints of trade of themselves, if there is
nothing more, are contrary to public policy, and therefore void. That is the general rule.
But there are exceptions: restraints of trade and interference with individual liberty of
action may be justified by the special circumstances of a particular case. It is a sufficient
justification, and indeed it is the only justification, if the restriction *700 is
reasonablereasonable, that is, in reference to the interest of the parties concerned
and reasonable in reference to the interest of the public, so framed and so guarded as
to afford adequate protection to the party in whose favour it is imposed, while at the
same time it is in no way injurious to the public. That, I think, is the fair result of all the
authorities.
It will be observed that Lord Macnaghten uses the plural, parties concerned, in the earlier portion of
this passage, meaning, apparently, to include both the covenantor and covenantee, while in the latter
portion of the passage he merely speaks of protection being given to the covenantee, which does
not injure the public. But in the opening lines of the passage he had already said that the individual
(here the covenantor), as well as the public, have an interest in freedom of trading.
If it be assumed, as I think it must be, that no person has an abstract right to be protected against
competition per se in his trade or business, then the meaning of the entire passage would appear to
me to be this. If the restraint affords to the person in whose favour it is imposed nothing more than
reasonable protection against something which he is entitled to be protected against, then as
between the parties concerned the restraint is to be held to be reasonable in reference to their
respective interests, but notwithstanding this the restraint may still be held to be injurious to the public
and therefore void; the onus of establishing to the satisfaction of the judge who tries the case facts
and circumstances which show that the restraint is of the reasonable character above mentioned
resting upon the person alleging that it is of that character, and the onus of showing that,
notwithstanding that it is of that character, it is nevertheless injurious to the public and therefore void,
resting, in like manner, on the party alleging the latter.
In the case of Leather Cloth Co. v. Lorsont
32
, a case, no doubt, of the sale of the goodwill of a
business, I find James V.-C. also used the phrase not unreasonable for the protection of the parties,
meaning both covenantor and covenantee. Dealing with the contention that a general restraint of
trade throughout the United Kingdom is bad on the face of it, he says:
I do not read *701 the cases as having laid down that unrebuttable presumption. . All
the cases, when they come to be examined, seem to establish this principle, that all
restraints upon trade are bad as being in violation of public policy, unless they are
natural, and not unreasonable for the protection of the parties in dealing legally with
some subject matter of contract. The principle is this: Public policy requires that every
man shall be at liberty to work for himself, and shall not be at liberty to deprive himself or
the State of his labour, skill, or talent, by any contract that he enters into. On the other
hand, public policy requires that when a man has by skill or by any other means
obtained something which he wants to sell, he should be at liberty to sell it in the most
advantageous way in the market; and in order to enable him to sell it advantageously in
the market it is necessary that he should be able to preclude himself from entering into
competition with the purchaser. In such a case the same public policy that enables him
to do that does not restrain him from alienating that which he wants to alienate, and,
therefore, enables him to enter into any stipulation however restrictive it is, provided that
restriction in the judgment of the Court is not unreasonable, having regard to the subject
matter of the contract.
These considerations in themselves differentiate, in my opinion, the case of the sale of goodwill from
the case of master and servant or employer and employee. The vendor in the former case would in
the absence of some restrictive covenant be entitled to set up in the same line of business as he sold
in competition with the purchaser, though he could not solicit his own old customers. The possibility of
such competition would necessarily depreciate the value of the goodwill. The covenant excluding it
necessarily enhances that value, and presumably the price demanded and paid, and, therefore, all
those restrictions on trading are permissible which are necessary at once to secure that the vendor
Page6
shall get the highest price for what he has to sell and that the purchaser shall get all he has paid for.
Restrictions on freedom of trading are in both classes of case imposed, no doubt, with the common
object of protecting property. But the resemblance between them, I think, ends there.
In all cases such as this, one has to ask oneself what are the interests of the employer that are to be
protected, and against what is he entitled to have them protected.
*702
He is undoubtedly entitled to have his interest in his tirade secrets protected, such as secret
processes of manufacture which may be of vast value. And that protection may be secured by
restraining the employee from divulging these secrets or putting them to his own use. He is also
entitled not to have his old customers by solicitation or such other means enticed away from him. But
freedom from all competition per se apart from both these things, however lucrative it might be to him,
he is not entitled to be protected against. He must be prepared to encounter that even at the hands of
a former employee.
I now turn to the facts to endeavour to ascertain what it is in reality that the appellants seek to be
protected against. They are very successful manufacturers of the class of machinery already
mentioned. They have specialized in itstandardizing many parts common to different types of
machines. Though they make some other machinery, this kind constitutes three-fourths of their
output. In this manufacture they appear to be the premier firm in England. Their business is very
extended. Their head offices are at Loughborough. They have branch offices at London, Manchester,
Birmingham, Leeds, Sheffield, Newcastle, Cardiff, and Glasgow. They have a traveller in Ireland, but
no office. Their regular and apparently principal customers, as appears from the evidence of their
managing director, Mr. H. Morris, are the Admiralty, the War Office, the Government Ordnance
Factory, numerous foreign and colonial Governments, railway companies both at home and abroad,
and, more recently, the Aircraft Department and the torpedo factories. No other customers are
named. And there is nothing to show that the respondent ever came into personal relations with any
of the officers of these departments or undertakings, or that through his acquaintance or personal
influence with any of them he might be able to divert their custom from the appellants to any other
firm.
There is, I think, no danger whatsoever of anything of that kind. The enticing away of customers is,
therefore, really out of the question and may, I think, be put aside. In addition, the appellants have
thoroughly organized their business, both on the manufacturing and commercial side of it. They have
got up and arranged in an elaborate, careful, and systematic manner a large number of *703 charts,
called E charts. These give details of manufacture, charts of strength of materials, and facts
ascertained by experience in the carrying on of their various works. They have also drawings, called L
sheets, comprising tables and plotted curves, indicating the composition and dimensions suitable for
particular jobs. They have drawings of special machines, and elaborate indices of the cost of every
piece of machinery turned out by them, as well as minute tabulated details of every job obtained or
tendered for. They have kept records of the instructions sent out from time to time as to the method of
doing various kinds of work. In addition, they have on the commercial side collected and tabulated
information as to the requirements of existing customers and probable requirements of prospective
ones, so as to keep a record of the work done for the first class, and to determine what kind of
advertisements they should send to the second.
All the documents are highly confidential. They are handed out from time to time to the employees;
but it is always seen to that they are traced and returned. The information they contain is so detailed
and minute that it would be impossible for any employee to carry it away in his head. He might retain
the recollection of the general character and principle of the elaborate scheme of organization, but no
more. Sargant J. has found all these facts. But this tabulated information is not in the nature of a trade
secret, such as a secret process of manufacture. The sheets, cards, and formulae and other
documents of the kind described are private and confidential documents, the property of the
appellants. Clause 6 rightly and fully protects them against a disclosure of them. A breach of that
covenant has not been proved or even threatened.
It is claimed, however, by the appellants that this organization and general method of business are
trade secrets which the respondent is not entitled either to divulge to another, or use his knowledge of
them in the service of any persons other than themselves.
The respondent cannot, however, get rid of the impressions left upon his mind by his experience on
the appellants' works; they are part of himself; and in my view he violates no obligation express or
Page7
implied arising from the relation in which he stood to the appellants by using in the service of some
persons other than them *704 the general knowledge he has acquired of their scheme of organization
and methods of business.
It is moreover, in my view, perfectly clear upon the evidence of their managing director reported at pp.
31 and 32 of the appendix that the danger against which the appellants desired to be protected is
neither the enticing away of customers, nor the divulgence or use and employment of any trade
secret. It is this, that the respondent would carry away and might put to use in the establishment of
their trade rivals the superior skill and knowledge he, the respondent, has by his talent acquired in
their works, raise the character of the output of those rivals, improve their methods, and thereby make
them more formidable competitors of the appellants in their trade.
That, I think, is plain, and every word of the able and convincing judgment of Farwell L.J. in Sir W. C.
Leng & Co. v. Andrews
33
applies. After quoting the passage from the judgment of Lord Macnaghten
which I have already quoted, the Lord Justice said:
The argument which has been addressed to us on behalf of the respondents does not
bring the case within that doctrine. That doctrine does not mean that an employer can
prevent his employee from using the skill and knowledge in his trade or profession
which he has learnt in the course of his employment by means of directions or
instructions from the employer. That information and that additional skill he is entitled to
use for the benefit of himself and the benefit of the public who gain the advantage of his
having had such admirable instruction. The case in which the Court interferes for the
purpose of protection is where use is made, not of the skill which the man may have
acquired, but of the secrets of the trade or profession which he had no right to reveal to
any one elsematters which depend to some extent on good faith. A good deal has
been said about organization. The evidence is singularly scanty in regard to details
upon the exact meaning of that word in the present case; but I apprehend that a man
who goes into an office is entitled to make use in any other office, whether his own or
that of another employer, of the knowledge which he has acquired in the former of
details of office organization, such as the establishment of one department with a chief
or head and grades of subordinates under him, the desirability of establishing local
centres of information in various towns and *705 villages round about Sheffield, and the
like. To acquire the knowledge of the reasonable mode of general organization and
management of a business of this kind, and to make use of such knowledge, cannot be
regarded as a breach of confidence in revealing anything acquired by reason of a
person having been in any particular service, although the person may have learnt it in
the course of being taught his trade; but it would be a breach of confidence to reveal
trade secrets, such as prices, &c., or any secret process or things of a nature which the
man was not entitled to reveal.
I think that passage is thoroughly sound. It was contended that it was open to the respondent even if
restrained by the injunction asked for to earn his living as a general engineer.
To answer that it is only necessary to consider what was his training. He was twenty-nine years of
age last July. In February, 1901, he, at the age of fifteen or sixteen years, entered the appellants'
employment as a junior draughtsman. Before he reached twenty-one years of age he had become
leading draughtsman in a department dealing with pulley blocks, hand overhead runways, and hand
overhead travelling cranes; but not up to then with electric overhead runways. His salary was 50s. per
week. His work had been confined to this special branch of manufacture. He had no experience of
any other. Yet immediately on coming of age he was required to sign an agreement dated July 16,
1906, containing a prohibitive clause similar to that now sued upon, save that electric overhead
runways are not mentioned in it.
Thus before ever he had acquired that varied knowledge and experience of the different branches of
the appellants' business, the possession of which by him is now urged as the justification for the
covenants relied on, he was similarly bound. This fact strongly suggests that what really prompted to
the making of this agreement of July, 1906, was the fear that the respondent's skill as a draughtsman
might be put at the service of a rival in trade.
From March, 1908, to February, 1909, he was at the appellants' establishment in Cardiff as resident
engineer, so that up to this his knowledge and experience was confined to the engineering side of this
Page8
specialized business. In February, 1909, he was transferred to London to manage the selling branch
of the business. In 1910 he was sent to Loughborough to take charge of the selling *706 department
in connection with the sale of pulley-block and Admiralty contracts. He continued there till he left the
appellants' employment in April, 1913. Thus his whole engineering training was connected with the
manufacture of these four special machines and their component parts.
He says he has tried to get employment as a general engineer and has failed, and he was therefore
obliged, being unable to live in France, to take service with one of the appellants' rivals.
I doubt very much if with his want of experience of any kind of engineering other than the one he will
ever, or at least for a length of time, be able to obtain employment as a general engineer. This would
at all events appear certain, that he can only employ his skill and training to the most advantage both
to the community and himself by engaging in that class of business in which he has passed his whole
working life.
On the whole, therefore, I am of opinion that this agreement, binding for a period of seven years, and
applying to the whole of the three kingdoms, is not, having regard to all the circumstances of the
case, reasonable in reference to the respective interests of the parties concerned, and is prejudicial to
the interests of the public. I accordingly think that the order appealed from was right and should be
affirmed, and this appeal should be dismissed with costs.
LORD PARKER OF WADDINGTON.
34
My Lords, in the case of Nordenfelt v. Maxim Nordenfelt Co.
35
Lord Macnaghten considered most if
not all of the prior cases relating to contracts in restraint of trade and came to certain conclusions. I
had to consider them in the case of Attorney-General of the Commonwealth of Australia v. Adelaide
Steamship Co.
36
, and I adhere to everything I then said. As I read Lord Macnaghten's judgment, he
was of opinion that all restraints on trade of themselves, if there is nothing more, are contrary to public
policy, and therefore void. It is not that such restraints must of themselves necessarily operate to the
public injury, but that it is against the policy of the common law to enforce them except in cases where
there are special circumstances *707 to justify them. The onus of proving such special circumstances
must, of course, rest on the party alleging them. When once they are proved, it is a question of law for
the decision of the judge whether they do or do not justify the restraint. There is no question of onus
one way or another.
It will be observed that in Lord Macnaghten's opinion two conditions must be fulfilled if the restraint is
to be held valid. First, it must be reasonable in the interests of the contracting parties, and, secondly,
it must be reasonable in the interests of the public. In the case of each condition he lays down a test
of reasonableness. To be reasonable in the interests of the parties the restraint must afford adequate
protection to the party in whose favour it is imposed; to be reasonable in the interests of the public it
must be in no way injurious to the public.
With regard to the former test, I think it clear that what is meant is that for a restraint to be reasonable
in the interests of the parties it must afford no more than adequate protection to the party in whose
favour it is imposed. So conceived the test appears to me to be valid both as regards the covenantor
and covenantee, for though in one sense no doubt it is contrary to the interests of the covenantor to
subject himself to any restraint, still it may be for his advantage to be able so to subject himself in
cases where, if he could not do so, he would lose other advantages, such as the possibility of
obtaining the best terms on the sale of an existing business or the possibility of obtaining employment
or training under competent employers. As long as the restraint to which he subjects himself is no
wider than is required for the adequate protection of the person in whose favour it is created, it is in
his interest to be able to bind himself for the sake of the indirect advantages he may obtain by so
doing. It was at one time thought that, in order to ascertain whether a restraint were reasonable in the
interests of the covenantor, the Court ought to weigh the advantages accruing to the covenantor
under the contract against the disadvantages imposed upon him by the restraint, but any such
process has long since been rejected as impracticable. The Court no longer considers the adequacy
of the consideration in any particular case. If it be reasonable that a covenantee should, for his own
protection, ask for a restraint, it is in my opinion equally reasonable that the *708 covenantor should
be able to subject himself to this restraint. The test of reasonableness is the same in both cases.
It was suggested in argument that the interests of the public ought to be considered and weighed in
determining whether a restraint is reasonable in the interests of the parties. I dissent from this view. It
would, indeed, entirely destroy the value of Lord Macnaghten's tests of reasonableness. The first
Page9
question in every case is whether the restraint is reasonable in the interests of the parties. If it is not,
the restraint is bad. If it is, it may still be shown that it is injurious to the public, though, as I pointed out
in the case referred to, the onus of so showing would lie on the party alleging it.
My Lords, it appears to me that Lord Macnaghten's statement of the law requires amplification in
another respect. If the restraint is to secure no more than adequate protection to the party in whose
favour it is imposed, it becomes necessary to consider in each particular case what it is for which and
what it is against which protection is required. Otherwise it would be impossible to pass any opinion
on the adequacy of the protection.
In the Nordenfelt Case
37
that which it was required to protect was the goodwill of a business
transferred by the covenantor to the covenantee, and that against which protection was sought was
competition by the covenantor throughout the area in which such business was carried on. Under the
particular circumstances of the case a world-wide covenant against competition was held no more
than adequate for the purchaser's protection. It was argued before your Lordships that no distinction
can be drawn between the position of the purchaser of the goodwill of a business taking such a
covenant from his vendor and the case of the owner of a business taking such a covenant from his
servant or apprentice. In both cases it was said that the property to be protected was the same and
the dangers to be guarded against the same. I am of opinion that this argument cannot be accepted.
The distinction between the two cases is, I think, quite clear, and is recognized both by Lord
Macnaghten and Lord Herschell in the Nordenfelt Case.
38
The goodwill of a business is immune from
the danger of the owner exercising his personal knowledge and skill to its detriment, and *709 if the
purchaser is to take over such goodwill with all its advantages it must, in his hands, remain similarly
immune. Without, therefore, a covenant on the part of the vendor against competition, a purchaser
would not get what he is contracting to buy, nor could the vendor give what he is intending to sell. The
covenant against competition is, therefore, reasonable if confined to the area within which it would in
all probability enure to the injury of the purchaser.
It is quite different in the case of an employer taking such a covenant from his employee or
apprentice. The goodwill of his business is, under the conditions in which we live, necessarily subject
to the competition of all persons (including the servant or apprentice) who choose to engage in a
similar trade. The employer in such a case is not endeavouring to protect what he has, but to gain a
special advantage which he could not otherwise secure. I cannot find any case in which a covenant
against competition by a servant or apprentice has, as such, ever been upheld by the Court.
Wherever such covenants have been upheld it has been on the ground, not that the servant or
apprentice would, by reason of his employment or training, obtain the skill and knowledge necessary
to equip him as a possible competitor in the trade, but that he might obtain such personal knowledge
of and influence over the customers of his employer, or such an acquaintance with his employer's
trade secrets as would enable him, if competition were allowed, to take advantage of his employer's
trade connection or utilize information confidentially obtained.
As might be expected, where the cases are so numerous, it is not impossible to find dicta pointing to
a contrary conclusion. I refer in especial to what was said by Parke B. in Mallan v. May
39
, but even
here it is to be observed that counsel in argument supported the validity of the covenant, on the
ground that it was no more than was necessary to prevent the defendant from availing himself of the
knowledge he had acquired in the plaintiff's service to interfere with the plaintiff's customers. If a
covenant restraining competition by an employee were in itself reasonable, it is difficult to see why the
Court has considered in almost every case whether such covenant could be justified as no more than
sufficient to protect trade connection and trade secrets.
*710
The point did not arise for actual decision until Sir W. C. Leng & Co. v. Andrews.
40
In that case the
covenantor was a newspaper reporter. He did not in the course of his employment come across the
covenantee's customers, nor was he entrusted by his employers with any confidential information
whatever. The effect of the covenant, therefore, was merely to prevent him using his personal skill
and knowledge within the limited area mentioned in the covenant; in other words, it was merely to
preclude competition. In these circumstances it was unanimously held that the covenant was bad.
In Mason v. Provident Clothing and Supply Co.
41
it was argued, apparently for the first time in this
class of case, that an employer might reasonably say I will not have the skill and knowledge acquired
in my employment imparted to my trade rivals, and that the validity of the restraint did not depend
upon personal contact with the employer's customers, but upon the fact that the employee gained that
general knowledge which put him into a position to compete with his master and made him a source
Page10
of danger, against which the master was entitled to protect himself.
This argument was rejected by your Lordships' House, and the restraint in question was held bad, as
being wider than was necessary to protect the employer from injury by misuse of the employee's
acquaintance with customers or knowledge of trade secrets. In fact the reason, and the only reason,
for upholding such a restraint on the part of an employee is that the employer has some proprietary
right, whether in the nature of trade connection or in the nature of trade secrets, for the protection of
which such a restraint ishaving regard to the duties of the employeereasonably necessary. Such
a restraint has, so far as I know, never been upheld, if directed only to the prevention of competition
or against the use of the personal skill and knowledge acquired by the employee in his employer's
business.
My Lords, it remains to apply what I have said to the particular circumstances of the present case. Mr.
Herbert Morris, the managing director of the plaintiff company, very candidly admitted that the real
object of the plaintiff company in imposing the restraint was to preclude competition on the part of the
defendant after he *711 had left the company's employment. The company objected, he said, to skill
and knowledge acquired in its service being put at the disposition of any trade rival, and the skill and
knowledge he referred to was the general skill and knowledge which an employee of any ability must
necessarily obtain as opposed to knowledge of any matter and skill in any process in which the
company could be said to have any property at all. To use Lord Shaw's metaphor in Mason v.
Provident Clothing and Supply Co.
42
, it was subjective as opposed to objective skill and
knowledge; or, to use the expression of Joyce J. in this case, it was skill and knowledge which were
his own, and in no sense the plaintiffs' property. As directed against competition or against the use of
this skill and knowledge, I am clearly of opinion that the restraint was in no way required for the
plaintiffs' protection, and therefore unreasonable and bad in law.
An attempt was, however, made in argument to justify the restraint on the ground that it was no more
than adequate for the protection of the plaintiffs' trade connection and trade secrets. I am of opinion
that this attempt completely failed. With regard to the plaintiffs' connection, there is little or no
evidence that the defendant ever came into personal contact with the plaintiffs' customers. For a
period, it is true, he was manager of the London branch of the plaintiffs' business, and for another
period sales manager at Loughborough. With the exception of these periods he was employed
entirely in the engineering department. Had the restraint been confined to London and Loughborough
and a reasonable area round each of these centres, it might possibly have been supported as
reasonably necessary to protect the plaintiffs' connection, but a restraint extending over the United
Kingdom was obviously too wide in this respect.
With regard to trade secrets, I am not satisfied that the defendant was entrusted with any trade secret
in the proper sense of the word at all. Mr. Walter boldly argued that the expression trade secrets
ought to be extended so as to include everything which Mr. Morris claimed to be peculiar to the
plaintiffs' method of carrying on their business.
I will assume that the matters referred to by Mr. Walter are in *712 fact peculiar to the plaintiffs'
business, though I can hardly regard Mr. Morris's uncorroborated evidence as very satisfactory proof
that the practices in question were unknown to other firms. Still, the manner in which Sargant J. dealt
with this part of the case appears to me to be unanswerable. Though the defendant had access to the
E charts, the L sheets, the drawings of special machines, the costs index, and other documents, all of
which may be considered confidential, these documents were far too detailed for the defendant to
carry away the contents thereof in his head. All that he could carry away was the general method and
character of the scheme of organization practised by the plaintiff company. Such scheme and method
can hardly be regarded as a trade secret. The same applies to the plaintiff company's system of
standardizing mechanical apparatus capable of being used in more than one class of machine. The
nearest approach that I can find in the evidence to anything in the nature of a trade secret is the
mention of certain formulae, said to be based on the plaintiffs' experience, and to be more trustworthy
than Molesworth's formulae for similar purposes.
During the course of the argument your Lordships asked for but failed to obtain these formulae, and
therefore I am unable to judge whether they are such that the defendant could carry them in his
memory. I therefore cannot attach any great importance to them. It would be a point of some difficulty
whether the possession by an employee of a single trade secret would justify a restraint as wide as
that in the present case, but under the circumstances I do not consider that this point really arises.
In my opinion the case falls within your Lordships' decision in Mason v. Provident Clothing and Supply
Page11
Co.
43
The appeal therefore fails.
LORD SUMNER.
My Lords, I have had the advantage of reading and considering the judgment of my noble and
learned friend which I have just read to your Lordships and I entirely agree with it.
LORD SHAW OF DUNFERMLINE.
44
My Lords, the facts of this case have been stated with such clearness and completeness in the
*713 speeches to which your Lordships have just listened, that I do not again resume them.
I am humbly of opinion that the judgments of Sargant J. andin the Court of Appealof Lord
Cozens-Hardy M.R. and Joyce J. are well founded both upon authority and in principle. So satisfied,
indeed, is my mind with these judgments that I should feel well content with a simple concurrence
therein. But the dissent of Phillimore L.J. and the heavy assault delivered upon certain opinions
recently deliverednotably in Mason v. Provident Clothing Co.
45
and upon certain principles laid
down, or rather reaffirmed, in that and the Adelaide Steamship Case
46
which principles I thought
and still think to be familiar and soundthese things induce me to make the following statement.
I humbly think that this case is covered by the authority of Mason.
47
The circumstances were not
remotely analogous, and the principles in issue were the same. It binds this House, and I see no
cause whatsoever for looking upon it as not satisfactory to the reason. All that was argued upon it
was to the effect that certain observations made in the course of the judgments were merely dicta and
were erroneous. These observations were two in number, and they went to the root of the judgment.
Nor were they erroneous. The first was that there does run through this part of the law a real
distinction between cases of contracts for the sale of a business on the one hand, and, on the other,
cases of contracts of service.
My Lords, I do not repeat what I ventured to say to this House on that subject in Mason's Case.
48
When a business is sold, the vendor, who, it may be, has inherited it or built it up, seeks to realize this
piece of property, and obtains a purchaser upon a condition without which the whole transaction
would be valueless. He sells, he himself agreeing not to compete; and the law upholds such a
bargain, and declines to permit a vendor to derogate from his own grant. Public interest cannot be
invoked to render such a bargain nugatory: to do so would be to use public interest for the destruction
of property. Nothing could be a more sure deterrent to commercial energy and activity than a principle
that its *714 accumulated results could not be transferred save under conditions which would make its
buyer insecure.
In the case of restraints upon the opportunity to a workman to earn his livelihood a different set of
considerations comes into play. No actual thing is sold or handed over by a present to a future
possessor. The contract is an embargo upon the energy and activities and labour of a citizen; and the
public interest coincides with his own in preventing him, on the one hand, from being deprived of the
opportunity of earning his living, and in preventing the public, on the other, from being deprived of the
work and service of a useful member of society. In this latter case there is not a something already
realized, made over to and for the use of another; but there is a something to be created, developed,
and rendered to the individual advantage of the worker and to the use of the community at large. It is
much too late in the day to attempt an attack upon a principle of distinction so plain.
The other observation in Mason
49
which was challenged was that applicable to agreements in
restraint of the action of employees who left one service for another, or set up in business for
themselves. Trade secrets, the names of customers, all such things which in sound philosophical
language are denominated objective knowledgethese may not be given away by a servant; they are
his master's property, and there is no rule of public interest which prevents a transfer of them against
the master's will being restrained. On the other hand, a man's aptitudes, his skill, his dexterity, his
manual or mental abilityall those things which in sound philosophical language are not objective,
but subjectivethey may and they ought not to be relinquished by a servant; they are not his master's
property; they are his own property; they are himself. There is no public interest which compels the
rendering of those things dormant or sterile or unavailing; on the contrary, the right to use and to
expand his powers is advantageous to every citizen, and may be highly so for the country at large.
This distinction, which was also questioned in argument, is just as plain as the other.
An excellent concrete example of the latter point may be found in the present case. The second head
of the injunction claimed is from divulging or communicating . information as to *715 the customers
Page12
or affairs of the plaintiff company and from otherwise divulging or using such information. This is
purely objective, and it was with exact correctness made the subject of a separate claim. As it turns
out there is no ground for it in fact; it was entirely given up at your Lordships' bar.
But the subjective side appears in this way. The first injunction claimed is an injunction restraining W.
Saxelby for a period of seven years from entering the service of Messrs. Vaughan & Sons, and from
carrying on in the United Kingdom either as principal, agent, servant or otherwise, alone or jointly or
in connection with any other person, firm, or company, or being concerned or assisting directly or
indirectly, whether for reward or otherwise, in the sale or manufacture of four or five pieces of
machinery named. This echoes correctly the agreement of the parties, and the basis of the restraint
claimed is that the servant has become, during the seven years passed in the master's service, a
clever, well-instructed, and capable man.
My Lords, the question is, can such a voluntary restraint be enforced by law? Observe its scope. In
time, it is for seven years of a man's working life. In space, it is over the entire United Kingdom. In
subject-matter, it is directly or indirectly and it is wholly, for that time and in that space, subversive of
the way of life to which the servant's past special training has led up.
This question is legitimate, and it is legitimately so put. For in my view, my Lords, when such an
agreed restraint is made the basis of a claim for injunction, (1.) it is not enough to table the
agreement; (2.) facts and circumstances must be set forth which would warrant the law being
invoked, and the statement of these facts and circumstances must set out the specialties affecting the
relations of parties, or the particular necessities of the case, so as to overcome the presumption
which the law makes in favour of the free disposal of one's own labour; (3.) if such facts and
circumstances be relevantly set forth, the onus of proof is upon the party averring them to satisfy the
Court of their sufficiency to overcome the presumption; while (4.) as the time of restriction lengthens,
or the space of its operation extends, the weight of that onus grows. Subject to these conditions and
within these limits, a case may be made out for restraining that general freedom of trade to which
*716 the public interest leans, in favour of the particular freedom of contract which it may be
established it was not inconsistent with the general interest to maintain.
Furthermore, my Lords, I may be allowed to allude to what I think is a misapprehension upon this
topic of the public interest, and the interest of the contracting parties. It is too apt to be supposed that
these things are in collision or antagonism; and ground is thought to be obtained for this opinion in the
well-known sentences of Lord Macnaghten in the Nordenfelt Case.
50
It is because the law is the
protector of freedom both of contract and of trade that it has to adjust the bounds of each. It is well
settled that the law will not sustain a covenant of the kind here in question when its provisions go
beyond those necessary for the protection of the interest of the covenantee. The interest of the
covenantor has also to be considered, and Lord Macnaghten's words specifically referred to the
interest of both parties. But the interest of the covenantor entirely equates, in kind although not in
degree, with the interest of the public; and he can only be successful in pleading his own interest if he
is able to establish that the restraint upon him is of a kind and type which, if general, would be
injurious to society at large. It is thus that the apparent conflict is reconciled, and an adjustment of all
the interests concerned is secured.
The delicacy of the operation of law in settling the bounds of either freedom has been long familiar. In
these cases, as I have pointed out, there are two freedoms to be consideredone the freedom of
trade and the other the freedom of contract: and to that I will now again venture to add that it is a
mistake to think that public interest is only concerned with one; it is concerned with both. It may be,
and probably is, that jurisprudence has reflected the evolution of economic thought by accentuating at
one period freedom of trade, and at another freedom of contract; but the stage of balance and
reconciliation which has now been definitely reached is, it may be observed, in truth a reversion to,
and a restatement of, the perennial problem set forth in the penetrating judgment of Lord Macclesfield
in Mitchel v. Reynolds
51
, in which, speaking more than two centuries ago, he says:
The revelations of the books upon these contracts seeming to disagree, I will
*717 endeavour to state the law upon this head, and to reconcile the jarring opinions.
My Lords, in my opinion Mitchel v. Reynolds
52
still remains, among all the decisions, the most
outstanding and helpful authority. Lord Macclesfield states the principle in a form which seems to fit
and rule many very modern conditions, and many developments of commerce and of contract:
The true reasons of the distinction upon which the judgments in these cases of
Page13
voluntary restraints are founded, are, 1st, the mischief which may arise from them, 1st to
the party, by the loss of his livelihood, and the subsistence of his family; 2ndly, to the
public by depriving it of an useful member.
Another reason is, the great abuses these voluntary restraints are liable to; as for
instance, from corporations, who are perpetually labouring for exclusive advantages in
trade, and to reduce it into as few hands as possible; as likewise from masters, who are
apt to give their apprentices much vexation on this account, and to use many indirect
practices to procure such bonds from them, lest they should prejudice them in their
custom, when they come to set up for themselves.
These principles, my Lords, are far-reaching and enlightened. In my opinion they may have been now
and again in the course of these two centuries obscured; they have never been lost.
When they are applied in the present instance, the case is simplicity itself. It is admitted that on the
objective side nothing has been done amiss. I do not see that there were any trade secrets; it there
were any, they have not been given away. It is not suggested that they will be, and this is the case
also with information about customers, &c.; in fact, the whole of that claim for injunction has been
abandoned. As to what remains, namely, the claim against Mr. Saxelby setting up or assisting in a
business which does the special engineering work in which he was trained, this is rested upon the
likelihood that his own abilities, skill, and knowledge would be of advantage to himself or others as
competitors in manufacture and trade. So rested, it is an audacious claim, whether regarded from the
point of view of the parties or of the public.
From the point of view of the appellants it is, plainly put, a claim against competition per se, a claim to
cripple rivals in trade by the *718 denial to them of a supply of all skilled labour which has had the
advantage of being performed under the appellants, and accordingly pro tanto to compel them to
seek for labour in a foreign market.
From the point of view of the respondent it is, justly interpreted, a claim to put him in such a bondage
in regard to his own labour that, if he seek to find employment or advancement elsewhere, he must,
for seven years of his life, become an exile.
From the point of view of the public one would have thought that it was at least not inconsistent with
the public interest to let knowledge grow from more to more. And under modern conditions, both of
society and of trade, it would appear to be in accord with the public interest to open and not to shut
the markets of these islands to the skilled labour and the commercial and industrial abilities of its
inhabitants, to further and not to obstruct for these les carrires ouvertes. All such considerations are
shut down under an appeal to enforce this restraint, and I am humbly of opinion that its enforcement
cannot be compelled by law.
I agree that the appeal should be dismissed.
Representation
Solicitors for appellants: Ward, Perks & Terry . Solicitors for respondent: Pettiver & Pearkes .
Order of the Court of Appeal affirmed and appeal dismissed with costs. Lords' Journals, February 8,
1916.
1. [1915] 2 Ch. 57.
2. (1711) 1 P. Wms. 181; 1 Sm. L. C. (12th ed.) 458.
3. (1825) 3 Bing. 322, 326.
4. (1837) 6 Ad. & E. 438.
5. (1843) 11 M. & W. 653.
6. (1853) 1 E. & B. 391, 410412.
7. 1 P. Wms. 181; 1 Sm. L. C. (12th ed.) 458.
8. (1875) L. R. 19 Eq. 462, 465.
9. (1880) 14 Ch. D. 351.
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10. [1891] 1 Ch. 576, 586.
11. [1892] 3 Ch. 447.
12. (1880) 14 Ch. D. 351.
13. [1893] 1 Ch. 630; [1894] A. C. 535.
14. 1 E. & B. 391.
15. [1894] A. C. 535.
16. [1899] 1 Ch. 300.
17. [1899] 2 Ch. 13.
18. [1909] 1 Ch. 763.
19. [1913] A. C. 781, 794796.
20. [1913] A. C. 724, 733, 740741.
21. [1914] 1 Ch. 468.
22. [1913] A. C. 724.
23. [1894] A. C. 535, 565.
24. 11 M. & W. 653, 666.
25. (1839) 5 M. & W. 548, 560.
26. [1894] A. C. 535.
27. [1913] A. C. 724, 731.
28. [1914] 1 Ch. 468, 490.
29. [1909] 1 Ch. 763, 773.
30. [1913] A. C. 724, 740.
31. [1894] A. C. 535, 565.
32. (1869) L. R. 9 Eq. 345, 353.
33. [1909] 1 Ch. 763, 773.
34. Read by Lord Sumner.
35. [1894] A. C. 535.
36. [1913] A. C. 781.
37. [1894] A. C. 535.
38. [1894] A. C. 535.
39. 11 M. & W. 653.
40. [1909] 1 Ch. 763.
41. [1913] A. C. 724.
42. [1913] A. C. 724.
43. [1913] A. C. 724.
44. Read by Lord Atkinson.
45. [1913] A. C. 724.
46. [1913] A. C. 781.
47. [1913] A. C. 724.
48. [1913] A. C. 724.
49. [1913] A. C. 724.
50. [1894] A. C. 535.
51. 1 P. Wms. 181, 189.
52. 1 P. Wms. 181, 190.
(c) Incorporated Council of Law Reporting for England & Wales
2010 Sweet & Maxwell
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