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Estate agency protects its business against former director

Posted: 27th April 2016   In: Corporate Commercial

An estate agency has been granted a court injunction to help it protect its business against competition from a former director.

The case involved a director who had worked for the agency since 2000. In 2013, he was granted shares on condition that he entered into a non-solicitation and non-dealing covenant.

The key part of the deed was that the director would not work as an estate agent or solicit clients "within the geographic area in which the agency operated” for a six-month period after the termination of his employment.

The director resigned in 2015 and assured the agency that although he was joining a rival firm, he would not begin work until the covenant expired after six months. However, it then emerged that he began working from his new employer immediately.

The rival firm told the agency that the director had merely been conducting a review of its business and would not take up a senior role involving strategy and sales until the covenant expired.

The agency was not convinced and sought a court injunction to enforce the covenant. The director submitted that the covenant was unenforceable because the restriction relating to the geographic area wasn’t defined clearly enough. He also claimed that the agency knew he would carry out certain tasks for the new employer yet there had been a substantial delay in it taking any action.

The court ruled in favour of the agency. It was satisfied that there was a serious issue to be tried. If the director were allowed to continue working for the rival firm, the agency could suffer significant loss that could not be remedied by the award of damages later.

An interim injunction was granted to enforce the covenant until the issues could be dealt with fully at trial. The judge directed that a hearing should take place within two weeks.

Please contact Sing Li if you would like more information about the issues raised in this article or any aspect of restrictive covenants.

Posted by: Sing Li
Corporate Commercial
Luton Office