Home Counties Dairies Ltd v Skilton

Home Counties Dairies Ltd v Skilton [1970] 1 WLR 526

Restrictive covenant enforced protection to which employer entitled and thus enforceable

Facts

In an employment contract between a dairy company and dairyman, it was agreed that the employee, within one year of termination of his employment contract, would not “serve or sell milk or dairy produce to … any person who at any time during the last six months of his employment shall have been a customer of the employer and served by the employee in the course of his employment.” The employee left the service of his employer and entered the employment of another dairy company.

Issues

In an action to enforce this clause by injunction the judge held that the reference to “dairy produce” prevented the respondent from entering the employment of a grocer who sold dairy products. Therefore, the clause went beyond the protection of the goodwill of the employer’s business and was void. The plaintiff appealed to the Court of Appeal.

Decision/Outcome

The appeal was allowed. The contract must be read in context. Its intention was clearly to protect against an employee who engaged with a rival dairy business and it clearly did not intend to prevent an employee from joining a grocery business generally. The agreement merely enforced the protection to which the employer was entitled and, accordingly, was enforceable. Furthermore, the restriction on the employee serving customers whom he had served during the last six months of his employment with the former employer was intended only to protect the employer’s trade connection and, in the circumstances, was no longer than was necessary for the protection of the employer.