Injunction Granted Against Leaving CEO

In the case of Elsevier Ltd v Munro the claimant company was an Anglo-Dutch publishing and information company which was part of The Elsevier Division, which was itself a collection of businesses operating internationally in over 20 countries generating very substantial revenues from the provision of books, journals and information services to a range of sectors including scientists, health practitioners, teachers and technology professionals. The defendant was a chartered accountant and had worked for companies within The Elsevier Division since 1995, rising to a senior level. Since 2009, he had been employed by the claimant, working most recently as chief financial officer (CFO).

On 11 April 2014, the defendant gave the claimant notice of resignation. He had received a job offer to join Cengage Learning Inc (Cengage) as its CFO. The defendant proposed to take up that offer after a period of transitional arrangements which he suggested, ending on 31 May 2014. The claimant objected to that proposal, relying on the requirement of the defendant's contract of employment that he give them 12 months' notice. After further exchanges, the defendant ceased working for Elsevier Research at the end of May 2014, claiming that his contract was at an end.

On 4 June 2014, the claimant issued proceedings, relying on the 12 month notice clause and contractual duties owed by the defendant during the period of his employment. The principal remedy sought was an injunction to restrain the claimant until 10 April 2015, from commencing employment with or providing services to Cengage or any other competitor and from breaching his duties of good faith, fidelity, trust and confidence. The defendant resisted the claim, asserting that he was entitled to move to Cengage as he had been constructively dismissed by the claimant, and was thus free of the contractual restraints on which it relied. Alternatively, the defendant argued that there should be no injunction, with the claimant left to a remedy in damages or only a limited injunction.

The two issues were:

  1. whether the defendant was still bound by his contract of employment, or had he been constructively dismissed; and
  2. whether the defendant was bound by his contract, should its terms be enforced by any, and if so what form of, injunction.

The court ruled against the employee:

The defendant had not been constructively dismissed by the claimant, nor had the claimant repudiated the defendant's contract of employment. The defendant decided that he wanted to leave the claimant's employment because he found the Cengage job on offer was more attractive. For the defendant to take the job with Cengage during the period of his notice would be a breach of his contract of employment. The defendant's contract prohibited him from working for a competitor of the claimant during his employment. Cengage was a competitor of the claimant, in respect of the claimant's businesses. If the defendant worked for Cengage during his notice period the claimant would suffer damage for which money compensation would not be an adequate remedy. That was enough to justify an injunction to prevent the defendant working for Cengage for the duration of the notice period. An additional justification was provided by the fact that the defendant retained in his memory confidential information learned by him whilst working for the claimant which was relevant to and of value to Cengage and the risk that such information would, during the notice period, be misused by Cengage to the detriment of the claimant. The defendant had not taken away confidential documents and it was not found that he would deliberately misuse the information he retained, but the risk of misuse and consequent damage were present and substantial.

An injunction was therefore granted.


Nick Barnett

Published on 29/08/2014

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