The High Court has considered whether two restrictive covenants given by an individual seller in a share purchase agreement were enforceable.
The case involved hairdressers who have been a rich source of jurisprudence in this area. The covenants in question were, first, a covenant not for two years to canvass, solicit, entice or employ several named employees and, secondly, a covenant of the same duration not within a two mile radius of any existing salon to be engaged or interested in any business similar to or competitive with the purchaser's business.
The court held that the seller had breached both covenants. She had formed a new company to operate, and it had begun to operate, a hairdressing salon on the same street as one of the target's existing salons. This put her in breach of the non-compete covenant. Two of the named employees had been employed at one of the target's salons, and the judge inferred that the company had in relevant part acted through the seller. That was enough to put her in breach of the non-solicitation and non-employment covenant. She had also breached that covenant by signing an agreement "for and on behalf of" the new company retaining another of the named employees as a consultant to manage the new salon and be its chief stylist.