Out of the fryer… into the restrictive covenant

The Simpsons episode ‘Lard of the Dance’, once cited by the New York Times, saw Homer try ‘…to make a quick buck selling grease’. The High Court in Belfast recently considered a case not dissimilar.

To set the scene, Rof Environmental (Rof) was in the used grease business. It was operated by the Defendant and his wife. In 2006, Rof was acquired by Agri Energy Ltd (Agri). The parties to that agreement were the Defendant, his wife and Agri. The Defendant continued to work in the business subject to a two-year non-compete clause. In 2010, Agri was acquired by the Plaintiff.

In 2011, the Plaintiff became aware of a rival company being operated by the Defendant’s wife – GreaseCo. Investigations revealed that GreaseCo had been trading since 2010 and was in direct competition with the Plaintiff. Further, it was claimed that the Defendant had used his position to direct the Plaintiff’s customers to GreaseCo and so he was dismissed for gross misconduct.

At trial, the Defendant appeared as a litigant in person. The trial judge, Madam Justice McBride, marshalled the issues to be considered into five questions (and answers):

[1] Did the defendant act in breach of the restrictive covenant and/or the covenants in the Service Agreement and/or in breach of his contract of employment?
… I am satisfied the defendant acted in breach …of the [Asset Purchase Agreement (APA)] and in breach of its duties under the Service Agreement and in breach of the implied terms of his employment.

[2] Was the restrictive covenant in the APA assigned by Agri to the plaintiff?
…I am satisfied that the benefit of the restrictive covenant was assigned by Agri to the plaintiff and the plaintiff is entitled to the benefit of it and to sue on it.

[3] Was the restrictive covenant in the APA and or the covenants in the Service Agreement superseded, waived or released by [an] email exchange…?
…I am satisfied that the restrictive covenant in the APA was not waived, released or removed as submitted by the defendant.

[4] Is the restrictive covenant unreasonably in restraint of trade as it is not necessary to protect the plaintiff’s legitimate interest?
…I do not find that it was in unreasonable restraint of trade. The term of 2 years was standard in the business.

[5] What damage has the plaintiff sustained?
…the loss sustained by the plaintiff due to the defendant’s breach is £40,855.

Judgement was entered for the Plaintiff.

This litigation was protracted, and it is conceivable that the costs implications for the Defendant may well exceed the award against him.

As previously noted: ‘…just because you can represent yourself doesn’t mean you should!’ With the benefit of representation, this is a case that might well have been resolved by way of Alternative Dispute Resolution such as mediation.

Even Homer has Lionel Hutz!

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