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Company awarded £50,000 compensation from former director

Posted: 10th October 2012   In: Corporate Commercial

A company has been awarded £50,000 compensation from a former director after he breached a restrictive covenant preventing him setting up a rival business within a set period.

The case was brought by a security company against its former business development director. The director’s contract had contained a restrictive covenant stating that if he left, he would not set up a rival firm or solicit business from the security company’s current customers for a period of six months.

However, just one day after leaving the security company, the director incorporated a business of his own. Soon afterwards, five clients of the security company left for the director’s new business.

The director provided the court with affidavits from those customers saying that their decision to switch hadn’t been a result of his solicitation.

The court had to decide various issues including whether the restrictive covenant was reasonable and enforceable, and whether the company had suffered a loss because it had been breached.

The court held that the restrictive covenant was reasonable, well drafted, and unambiguous, and while it protected the company, it didn’t prevent the director from making a living. It said that the director was subject to a duty to avoid situations where he and his former employers would have conflicting interests.

It also held that evidence from the customers who switched companies was unreliable and wilfully inaccurate. There was no way they would have known about the director’s new business without him telling them.

The company was awarded £50,000 in damages for loss of earnings.

Please contact Sarah Liddiard if you would like more information about the issues raised in this article.