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Herbert Morris Ltd v Saxelby [1916] AC 688

Whether restraint of trade clause enforceable.

Facts:  

The plaintiffs, Herbert Morris Ltd, manufactured hoisting machinery. The defendant, Saxelby, was employed and trained by them as a specialized engineer. His contact contained a covenant that said if he left the company he would not work directly or indirectly on any similar businesses for seven years. When he left the company the plaintiffs sought an injunction to stop him working for a rival company.

Issues:

The defendant argued that the covenant was in restraint of trade as it restrained the defendant’s ability to make a livelihood. As a result he could not gain employment in a general engineering firm because his training was in one specialized branch of engineering. This made his specialized qualification a hindrance. Therefore, it was not in the public interest for it to be enforced. He also argued that Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535 should not be applied here as that decision referred to a business owner and not an employee.

Held:

The House of Lords held that it was in the public interest that someone was free to earn a living. The employer’s legitimate interests was confined to protecting its trade secrets and customers. This covenant went far beyond this and was trying to stop the defendant using his own skills and experience, even though these had been developed by working at the company. This could not be in the public interest. Lord Shaw stated (at 718):

“it is, justly interpreted, a claim to put him in such bondage as regard to his own labour that he must, for seven years of his life, become an exile”.

Therefore, the clause was unenforceable. 


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