Litigation Recent Decisions 11/06/96

Garden clauses and covenants in restraint of trade

Credit Suisse Asset Management v Armstrong & ors (1996)

CA (Neill LJ, Morritt LJ and Hutchison LJ) 15/5/96.

Summary: Garden clauses and covenants in restraint of trade discussed in an application by employees to discharge an interlocutory injunction restraining them from working for a competitor of the plaintiff.

Credit Suisse Asset Management, the plaintiff, provides investment services to both private individuals and institutions. Until the termination of their employment, the 10 defendants were employees of the plaintiff, working in the plaintiff's private clients' division. The sixth defendant was a marketing officer. The other defendants were fund managers. The contract of Mr Knowles, one of the fund managers, ended on 23/11/95 while the contracts of all the other defendants terminated in February 1996. In the summer of 1995, senior management sought to introduce changes in the system of work which the defendants became unhappy about and on 9/8/95 they gave in their notice. They were all placed on 'garden leave' which meant that they continued to be employed but were not required to undertake any duties in regard to fund management. When it became obvious to the plaintiff that the defendants were seeking employment with a company operating in direct competition to the plaintiff, the plaintiff sought to rely on the duty of confidence owed by each defendant during the remainder of his employment and also on the restrictive covenants which restricted the defendants' activities for a period after termination of employment. As the matter could not be resolved amicably, the plaintiff sought damages and injunctive relief. Interlocutory injunctions were granted by David Steele QC and the defendants appealed against his order.