Enforceability of Restrictive Covenants

In Kynixa Limited v Hynes and others [2008] EWHC 1495 (QB), the Queen's Bench Division of the High Court considered the enforceability of restrictive covenants contained in a shareholder agreement. The High Court held that a widely drawn covenant in restraint of trade which bound the employees (who were shareholders) for 12 months after termination of their employment was reasonable and enforceable both in terms of its length and remit.

Mr Hynes, Ms Preston and Ms Smith were employees of Kynixa Limited. All three left the company to work for a separate organisation with which Kynixa Limited had dealings. However, none of the employees warned Kynixa Limited that this was their intention, so breaching their duty as senior employees to serve their employer with good faith and fidelity.

In addition, two of the employees were in breach of restrictive covenants in the shareholder agreement which were binding on them for 12 months after their employment terminated with Kynixa Limited. It was held that in all the circumstances, 12 months was a reasonable period and despite the restrictive covenants being very wide, they were reasonable and enforceable.