The Mauritian Court re-affirms the principles governing restrictive covenants in employment contracts.
Nabridas Ltd v Martin Coombes & Ors is a decision from the Supreme Court (Commercial Division) which clarifies the validity and scope of a restrictive covenant in an employment contract. Furthermore, it ruled on the issue of "contrepartie financière" (payment of financial compensation at the date of termination of employment) and whether such a provision would affect the validity of a restrictive covenant.
The Respondent in the case was employed as a sales representative of swimming pools and other related equipment and products at the Applicant from 20 March 2017 until his resignation on 13 October 2018. Under his contract of employment the Respondent would be barred from working for any company that is a direct competitor of the Applicant for a period of two (2) years following the termination of his employment with the Applicant. The Respondent however took up employment at the Co-Respondent which is engaged in the same line of business and is a direct competitor of the Applicant before the end of the two (2) year period.
The Applicant therefore applied to the Court for an injunction seeking to enforce the covenant which would subsequently terminate the Respondent's employment at the Co-Respondent.
The Court used the guideline established in the case of Corporate and Chancery Group Ltd v Tegally & Ors in deciding whether the restrictive covenant is enforceable:
- It is restricted in time and space;
- It is not too wide in scope as to prevent the employees from earning a living;
- Its maintenance is fundamental to protect the legitimate interest of the business of the employer.
The Applicant contended that the application must be decided on its specific circumstances bearing in mind the local market, inasmuch as the scope of the covenant could not be too wide since Mauritius is a small market. On the other hand, both the Respondent and Co-Respondent took the stand that the restrictive covenant was so wide in scope that it was abusive and prevented free competition.
Furthermore, the Applicant asserted the need to enforce the restrictive covenant in order to protect its legitimate interests, which is exacerbated by the risk that the Respondent may poach the Applicant's clients. The Court stated that the law does not allow a company to acquire a private right over its clients nor is there a provision in the law that stops an ex-employee from competing with his former employer and make use of contacts established during previous employment to divert clients to a new employer. It must be highlighted that, in the present case, the Respondent gave an undertaking that he would never poach any of the Applicant's clients in the course of his employment with the Co-Respondent nor would he would he act in any manner that may lead to unfair trading by sharing confidential information.
The Applicant further contended that the Respondent had acquired sensitive and confidential information in the course of his employment and needs to be restricted from making use of it. The Respondent submitted that he did not occupy any strategic post and that he did not acquire any trade secret, intellectual property or sensitive information during his employment that the Applicant would need to protect.
The Court ruled that an employee can make use of the know-how, skills and experience which he has acquired in the course of his employment with the ex-employer provided that he does not breach any secrets of trade.
In deciding whether to grant an interlocutory injunction, the Court proceeded to consider whether there is a serious question to be tried and where the balance of convenience lies.
The Court found no difficulty in determining that there are indeed serious questions to be tried such as the applicable scope of the restrictive covenant and the protection of the Applicant's legitimate business interests.
The Court subsequently considered the balance of convenience by weighing the competing interests of the parties in order to make a decision that would cause the least irremediable prejudice to either party.
After carrying out a balancing exercise, the Court held that it would decline the Applicant's request for an injunction on the grounds that the Respondent's interest to earn his livelihood far outweighed the Applicant's concerns regarding the protection of its business interests. The more so that there was no evidence of instances where the Respondent had attempted to or had successfully diverted clients from the Applicant to the Co-Respondent's business.
Lastly, the undertaking given by the Respondent provided adequate protection to the Applicant concerning any potential poaching of clients.
The Court also took the opportunity to analyse our law with regards to the "contrepartie financière" which the Respondent had invoked as an additional condition for the validity of a restrictive covenant. After a diligent review of Mauritian jurisprudence, the Court concluded that, despite the fact that a "contrepartie financière" would undoubtedly render the enforcement of a restrictive covenant more just and equitable since it provides financial security to the employee during the period in which he is prevented from working under the terms of the restrictive covenant, the addition of a "contrepartie financière" as a pre-condition to the validity of a restrictive covenant may not be readily imported into Mauritian law in the absence of any legislation giving it effect.
By Yohann Rajahbalee (Yohann.email@example.com)
***Please note that the above should in no way be construed as legal advice and is merely an analysis of case law. Should you require legal advice on employment related matters please contact firstname.lastname@example.org ***