15 Jan 2019

Ideal Standard International SA and another v Herbert [2018] EWHC 3326

Facts

Mr Herbert was employed by Ideal Standard International BVBA, which was the main operating company in the Ideal Standard group. His employment contract did not contain any restrictive covenants. Several executives, including Mr Herbert, entered into a shareholders' agreement with the five group companies that owned the operating companies in the Group, and as a result held shares. The shareholders' agreement included a non-compete clause and stated that any waiver or election not to enforce any rights in the agreement had to be in writing and signed by or on behalf of the person granting the waiver. Mr Herbert was later dismissed and signed a settlement agreement, which stated that the parties would have no further obligations to each other and Mr Herbert waived his rights against all companies in the Group. Mr Herbert began work for a competitor and two companies sought an interim injunction to restrain him from competing. Mr Herbert argued that the non-compete clause had been discharged by the settlement agreement.

Decision

The High Court granted the injunction. The settlement agreement did not discharge the non-compete clause in the shareholders' agreement. The waiver had been made by Mr Herbert in favour of the companies, not the other way around. The settlement agreement had been signed on behalf of the employer, not the other companies in the group, and it did not contain any reference to the shareholders' agreement. As there was nothing in writing stating that the company had waived its rights under the shareholders' agreement, Mr Herbert's obligations had not been waived. The company had a legitimate interest to protect, there was a serious issue to be tried and damages were unlikely to be an adequate remedy.

Comment

This decision is a reminder to check all documents to which an employee is party carefully when the employee is offered a settlement agreement, as there may be clauses in other documents that are relevant. It is sensible to deal explicitly with restrictions contained in other documents in the settlement agreement in order to avoid any doubt.