The High Court has temporarily restrained two former employees of European Paint Importers Ltd and their new competing business from dealing with customers of their former employer pending trial.
The application arose after John O’Callaghan and Patrick O’Mahony left the plaintiff company and established Complete Coatings Ltd, which competed directly in the heavy-duty coatings and industrial paint market.
Their employment contracts contained a one-year restrictive covenant. It prohibited them from seeking orders from, or doing business with, customers who had dealt with European Paint Importers during the year before their employment ended.
The defendants disputed the meaning of that clause. They argued it prohibited only actively seeking business, meaning they could accept orders voluntarily placed by former customers. The plaintiff argued the clause also prevented them from doing business with those customers even where no solicitation occurred.
The defendants admitted that they had already approached existing customers of the plaintiff seeking orders. They said they had been unaware of the restriction at the time and later offered an undertaking not to solicit further business.
Mr Justice Peart held that the previous solicitation created a practical problem. It would no longer be possible to determine whether future orders arrived independently or resulted from the earlier approaches. Damages would therefore be impossible to calculate reliably.
The judge said his provisional view was that the narrower interpretation of the covenant might ultimately be correct at trial. However, that issue had not been finally decided.
For the period before trial, the court found that the balance favoured the plaintiff. The defendants were restrained from both seeking orders from and doing business with customers who had dealt with European Paint Importers during the relevant one-year period, whether or not any particular order was solicited.