FINALY RENTOKIL (CEYLON) LTD. V. A. VIVEKANTHAN

059-SLLR-SLLR-1995-2-FINALY-RENTOKIL-CEYLON-LTD.-V.-A.-VIVEKANTHAN.pdf


346
Sri Lanka Law Reports
[1995] 2 Sri LR.
FINLAY RENTOKIL (CEYLON) LTD.
v.
A. VIVEKANANTHAN
COURT OF APPEALS. N. SILVA. J. (P/CA)
R. B. RANARAJA, J.
A. 839/94CA/LA 265/95
C. COLOMBO NO. 4109/SPL.MAY 08.1995.
Contracts – Letter of Appointment was it accepted – Contracts in Restraint ofTrade – Prima Facie void – Justifiable Restrictions.
Petitioner instituted action against the Respondent alleging that it appointed theRespondent as a Pest Control Supervisor; it was pleaded that the Respondenthaving left the services of the Petitioner engaged in the marketing, sale or supplyof products or services for purposes contrary to clause 15(h) of the Letter ofAppointment. An application for an interim injunction was refused by the DistrictCourt.
Held:
The original of the document accepting the terms of employment has beenmisplaced. Ex facie the Petitioner cannot maintain the action as presentlyconstituted. There is no prima facie proof that the Respondent was appointed on1.2.94.
Petitioner has not placed sufficient material before Court to satisfy that theRespondent was using trade secrets or canvassing customers of the Petitioner toits detriment.
There is also no material to conclude that the restraint on the Respondent isreasonable or it is not too restrictive of the activities restrained.
There is no evidence that the Respondent could earn a living through anyother means except the experience that he has gained after working for thePetitioner.
’Courts have long maintained that an injunction will not be allowed against anemployee if the consequences of that injunction would be to put the employee ina position that he could have to go on working for her former employer or starve".
CA
Finlay Rentokil (Ceylon) Ltd. v. A. Vivekananthan (Ranaraja, J.)
347
Cases referred to:
Petrofina (GB) Ltd., v. Martin -1966 1 All ER 126.
Attwood v. Lamot (1920) 3 KB 571.
Herbert Morris v. Saxe/by-(1916) 1 AC 688 at 710.
McEllistrim v. Ballymacelligot Co-operative Agricultural & Dairy Society Ltd.,-(1919) AC at 548 at 571, 572.
Foster & Sons Ltd., v. Suggef-(1919)35TLR87.
Faccenda Chicken Ltd., v. Fowler-1987 CH 117.
Littlewood’s Organization Ltd., v. Harris (1978) 1 All ER 1026.
Lansing Linde Ltd., v. Kerr (1991) 1CR 428.
Hinton & Higgs (UK) Ltd., v. Murphy & Valentine (1989) 1RLR 519.
Mason v. Provident Clothing & Supply Co. Ltd., 1913 AC 724 at 742.
Marion White Ltd., v. Francis (1972) 3 AER 857.
Esso Petroleum Co., Ltd., v. Harper's Garage (Stourport) Ltd. (1967) 1 All ER699.
Hentley Garments Ltd. v. Fernando (1980) 2 SLR 145 at 155.
Warner Bros. Pictures Inc. v. Nelson (1937) 1 KB 209.
APPLICATION in Revision from the Order of the District Court of Colombo.
Romesh de Silva PC. with P. Kumarasinghe for Petitioner.
N. S. A. Goonetilleke, PC. with N. Mahendra for Respondent.
Curadvvult.
June 07, 1995.
RANARAJA, J.
The Petitioner instituted action against the Respondent on 27.7.94,alleging that it appointed the respondent as a Pest Control Supervisorin the Staff Officer Grade with effect from 1.2.94 by letter ofappointment marked “F" dated 31.1.85. (para 13 of the plaint), andthat the respondent having left the services of the Petitioner, acted inBreach of Clause.15(h) of the letter of appointment “F”. Clause 15(h)reads;
"You shall not during the period of three years next following thetermination of your employment howsoever the same may be
348
Sri Lanka Law Reports
[1995] 2 Sri L.R.
determined either on your own account or as an employee or onbehalf of any other person, Firm or Company engage or beconcerned directly or indirectly, or be interested (save as aminority shareholder in or a debenture holder of a LimitedLiability Company) in the marketing, sale or supply of productsor services for like purposes.”
The petitioner prayed for an enjoining order preventing therespondent, his servants, agents and those holding under andthrough him from engaging in or being concerned directly orindirectly or being interested (save as a minority shareholder in or adebenture holder of a Limited Liability Company) in dealing withand/or being involved in and/or in the marketing, sale or supply ofproducts or services similar to that of the nature of and/or in the fieldof and/or related to pest control and/or in the field and/or business ofpest control till the end of January 1997.
An enjoining order as prayed for was issued on the respondent.The respondent filed objections denying that that he ever signedletter of appointment “F” accepting clause 15(h). He moved that theenjoining order be dissolved. Both parties tendered their writtensubmissions after, which the District Judge discharged the enjoiningorder and refused the petitioner’s application for an interim injunctionon the same terms as the enjoining order. This application in revisionis from that order.
A greater part of the submissions on behalf of the petitioner in thisCourt was focussed on the question whether the respondent in factsigned document “F“ accepting the terms of employment containedtherein. The original of this document has allegedly been misplacedor is missing. Thus the petitioner relied solely on other documentaryevidence to support the averment that the respondent signeddocument "F” containing clause 15(h) accepting the appointmentwith effect from 1.2.85. Document “F” states that the respondent wasappointed with effect from 1.2.85. This is contrary to the pleadings inparagraph 13 of the plaint, which gives the date of appointment as
The respondent has denied signing the document referred toin the plaint in his objections. Ex facie, the petitioner cannot maintain
CA
Finlay Rentokil (Ceylon) Ltd. v. A. Vivekananthan ( Ranaraja, J.)
349
the action as presently constituted on the first cause of action. Sincethe enjoining order/interim injunction have been sought in the plaint,and there is no prima facie proof that the respondent was appointedon 1.2.94, the District Court has correctly dissolved the enjoiningorder and refused to grant an interim injunction.
Learned President’s Counsel moving on to the second cause ofaction submitted that on general law and on principles of equity,apart from the contractual agreement between the respondent andthe petitioner, the latter is entitled to the injunction sought, and thatthe general law seems to have found its way into the Code ofintellectual Property Act No. 52 of 1972, specifically Section 142. ThatSection however deals with acts of unfair competition and not withrestraint of trade.
A contract in restraint of trade is one in which a party agrees withthe other party to restrict his liberty in the future to carry on his trade,with other persons not parties to the contract in such manner as hechooses. Lord Diplock in Petrofina (GB) Ltd., v. Martin 0). A contractof this class is prime facie void, but it becomes binding upon proofthat the restriction is justifiable in the circumstances as beingreasonable from the point of view of the parties themselves and alsoof the community. Attwood v. Lamot<2).
Generally an employer cannot prevent an ex-employee fromcompeting with him, nor from using the knowledge, skill andexperience gained during the employment. Herbert Morris v.Saxelby{3). Public policy requires that every man shall be at liberty towork for himself and shall not be at liberty to deprive himself or thestate of his labour, skill or talent by any contract that he enters into.Lord Finlay in McEllistrim v. Ballymacelligot Co-operative Agricultural& Dairy Society Ltd.(4). Besides, in contracts of service the parties arenot in an equally strong position and the employee will find it difficultto resist the imposition of terms favourable to the employer. Thus if anemployee agree that after leaving his employment, he will not workfor a competitor, the courts will rarely enforce such an agreement,Herbert Morris (supra), because the employee will be forced either towork for his former employer or to starve. However an employee
350
Sri Lanka Law Reports
[1995] 2 Sri LR.
owes a duty of fidelity to his employer during his period of contract ofemployment. An employer in certain circumstances may haveproprietary interests that need to be protected by a restrictivecovenant in the employment agreement such as not to discloseconfidential information on trade secrets, Foster & Sons Ltd., v.Sugget<5), Faccenda Chicken Ltd. v. Fowler™, detailed knowledge ofthe working of a business, Littlewood's Organization Ltd., v. Harris m,customers and business connections, Lansing Linde Ltd. v. Kerr<8).But the legitimate interests of the employer will only be protectedwithin proper limits as to the period of time and geographical area,Hinton & Higgs (UK) Ltd. v. Murphy & Valentine(9) and the activitiescovered by the restraints, Mason v. Provident Clothing & Supply Co.,Ltd.m. If the covenant is too restrictive it will be totally void and theCourts will not enforce any part of it. It is to be noted that thejudgment in Marion White Ltd. v. Francis (,1 cited by learnedPresident's Counsel does not appear to have been followed in anysubsequent decisions, presumably because that decision goesagainst the grain of previously established principles.
The Court has first to decide whether the contract is so restrictiveof the employee's liberty and therefore void. If the covenant is foundto be void Court should proceed to decide whether the covenant canbe justified as being reasonable in the interests of both parties andthe public. If Court finds it to be reasonable, the contract is valid.Esso Petroleum Co. Ltd. v. Harper’s Garage (Stourport) Ltd. oa. Theonus of proving reasonableness of the covenants is on the employer.Hentley Garments Ltd. v. Fernando(,3).
A director of the petitioner Company, C. L. K. P. Jayasuriya hasfiled an affidavit affirming to the fact that the respondent is activelyengaged in United Professionals (Pvt) Ltd. incorporated for thepurpose of carrying on the business of pest control. He also averredthat several complaints have been received that the respondent hasbeen canvassing the customers of the petitioner for UnitedProfessionals (Pvt) Ltd. Apart from the affidavit of the Director, noother affidavit from a customer has been filed to substantiate thisclaim. It is also to be noted that the respondent had resigned fromUnited Professionals (Pvt) Ltd. on the enjoining order being issued.
CA
Finlay Rentokil (Ceylon) Ltd. v. A. Vivekananthan ( Ranaraja, J.)
3S1
The petitioner submits that it trained the respondent. It is not deniedthat the respondent was sent to Singapore and Malaysia for a periodof 12 days training. The respondent upon his return to the Islandserved the petitioner for over three years as agreed upon before hewas sent on training. What is of importance is that the petitioner hasnot placed sufficient material before Court to satisfy it that therespondent was using trade secrets or canvassing customers of thepetitioner to its detriment. Similarly, there is no material to concludethat the restraint on the respondent is reasonable in respect of thearea within which he could work or its duration or it is not toorestrictive of the activities restrained. Nor has the petitioner placedany evidence before Court that the respondent could earn a livingthrough any other means except the experience that he has gainedafter working for the petitioner. Courts have long maintained that aninjunction will not be allowed against an employee if theconsequences of that he would have to go on working for his formeremployer or starve. Warner Bros. Pictures Inc. v. Nelson(,4>.
Thus the petitioner has not established a prima facie arguablecase to obtain the injunctive relief prayed for. This application inrevision is accordingly dismissed with costs.
S. N. SILVA, J. -1 agree.
Application dismissed.