The Court of Appeal's decision in Hanover Insurance Brokers Ltd and Christchurch Insurance Brokers Ltd v Schapiro [1994] IRLR 82 will provide encouragement for employers seeking to enforce widely drafted restrictive covenants against the solicitation of clients by ex-employees.

In turn, the judgment should make former employees - and their lawyers - more wary of flouting covenants which may previously have been considered unenforceable.Their Lordships had four principal points to consider: the correct approach to adopt to the construction of covenants which were ex facie too wide to be enforceable; whether a distinction should be drawn between clients introduced by an employee when he began employment, as opposed to those introduced during employment; whether restrictions should only apply to those whom the employee knew to be clients during his employment or with whom he had had dealings; and the meaning of the words 'endeavouring to take away'.The facts of Hanover are straightforward.

The business of the first plaintiff, HIB, was sold in June 1993 to the second plaintiff.

The defendants were all employees of HIB - the first three defendants were also directors - and resigned from HIB with effect from shortly after the sale.

The plaintiffs alleged that the defendants were attempting to solicit clients and employees of the business both before and after they left employment.

There were restrictive covenants in a ll their contracts of employment preventing such solicitation.The plaintiffs obtained ex parte injunctions on 6 July, which the defendants sought to discharge before the Honourable Mr Justice Latham on 2 August and subsequently before the Court of Appeal on 18 and 19 August.-- Construction.

The Court of Appeal took a much more liberal approach to the question of construction than a differently constituted Court of Appeal in JA Mont (UK) Ltd v Mills [1993] IRLR 172.

In Hanover, Lord Justice Dillon and Lord Justice Nolan agreed with the approach taken by Latham J at first instance, holding that it was at least arguable that by adopting a purposive construction, a restrictive covenant which was apparently too wide to be enforceable could be given a narrower meaning to reflect what must have been the intention of the parties, thereby rendering it enforceable.

In contrast, Lord Justice Brown in Mont said that as a matter of policy, courts should not urgently strive to find, within restrictive covenants ex facie too wide, implicit limitations to justify their imposition.The plaintiffs sought to persuade the court to adopt a purposive construction because of differences between the wording of the restrictive covenants in the first and second defendants' contracts and those in the contracts of the third and fourth defendants.

In the former, the covenants were expressed to be for the protection of the employer, HIB.

In the latter, the wording was wider and covered Hanover Acceptances Ltd and/or its subsidiaries.

(Hanover Acceptances Ltd was the parent company of HIB.)The third and fourth defendants argued that because the clauses attempted to prevent solicitation of clients of HIB's parent company and/or its subsidiaries - the activities of which were described by Latham J as ranging from 'banking to beefburgers' - this was an attempt to gain far wider protection than was legitimate and therefore the clause was unenforceable.However, both Latham J and the Court of Appeal were prepared to take a robust approach to the interpretation of the clause.

Latham J agreed with the arguments put forward by the plaintiffs that this was a clear example of inept drafting - although not on the part of the writer - which could be cured by sensible construction.

He accepted that the true intention of the parties could only have been to prevent the employees from soliciting insurance broking clients and, since HIB was the only company carrying out any substantial degree of insurance broking business within the Hanover Group, it could only have been the clients of HIB which the parties intended to protect.In the Court of Appeal, counsel for the defendants conceded that the word 'business' in the covenants must refer to insurance brokerage business.

Their Lordships described this concession as plainly right 'in the light of the current approach of the court in construing restrictive covenants on employees as indicated in cases such as Home Counties Dairies Ltd v Skilton [1971] WLR 526' (per Dillon LJ).

Therefore, it must follow that the clients who could not be canvassed or solicited must be limited to those who had been clients for insurance broking services.His Lordship accepted the plaintiffs' argument that this case was similar to Littlewoods Organisation Ltd v Harris [1987] 1 WLR 1472.

There, the majority of the Court of Appeal had adopted a construction of a clause referring to 'Great Universal Stores Ltd or any company subsidiary thereto...', which limited it to that part of the business for which the plaintiffs were reasonably entitled to protection.

The references to other companies within the group for which the employer was not entitled to claim protection did not render the clause unenforceable.

Nolan LJ considered that the difference in approach between Littlewoods and Mont should be reconciled by a full court at a final hearing, not on an appeal against an interlocutory injunction.-- Protection of clients introduced by an employee at the commencement of employment.

On behalf of the first defendant, the former chairman of HIB, the argument was advanced that he should not be prevented from soliciting those clients whom he had brought to HIB when he began his employment - relying on M&S Drapers (A Firm) v Reynolds [1957] 1 WLR 9.

In that case, a collector salesman brought with him to M&S Drapers the connections with customers which he had built up in previous employment.

He entered into a restrictive covenant that he would not for five years after termination of employment canvass or solicit customers upon whom he had called during his employment with the firm.

The clause was held to be unenforceable.

In the view of Dillon LJ, much turned on the unreasonable length of the restriction 'which undoubtedly justified the actual decision'.His Lordship also regarded the case as distinguishable on the facts from Hanover because the salesman's connections had been regarded by the court as the tools of his trade of which he could not reasonably be deprived when he left service.

His Lordship agreed with a distinction drawn in M&S Drapers itself where Denning LJ observed that 'a managing director can look after himself.

A traveller is not so well placed to do so.

The law must protect him.' In Hanover, the first defendant was at least as well placed as a managing director.

He had originally been employed by HIB precisely for the reason that he would bring with him a substantial number of clients and contacts and he had been remunerated on that basis.

Accordingly, the court rejected the first defendant's argument.-- Whether contact with clients is necessary to justify a restrictive covenant.

On behalf of the third and fourth defendants, it was argued that the restraint on canvassing clients was too wide because it was not limited to those of whom they had knowledge or with whom they had had dealings.

Dillon LJ had to reconcile two decisions of the Court of Appeal which at first sight appeared inconsistent.In GW Plowman & Son Ltd v Ash [1964] 1 WLR 568, the defendant was a sales representative who was restrained for two years from termination from soliciting any farmer or market gardener who had been a customer of his employers at any time during his employment.

The court rejected the argument that the clause was too wide because it was not confined to customers known to the defendant.

The court followed observations of Lawrence LJ in Gilford Motor Co Ltd v Horne [1933] Ch 935 that the covenant was not invalidated by the possibility that the person under the restriction might innocently and inadvertently breach the injunction by canvassing a person whom he had not realised had been a customer at the relevant time; the defendant could easily ask any potential customer whether he had been a customer of the plaintiffs.

If he had, the defendant should not attempt to solicit his business.However, in Marley Tile Co v Johnson [1982] IRLR 75, the Court of Appeal held that a covenant against soliciting and dealing with customers was too wide to be enforceable.

On the facts, it was found that the defendant could not possibly have known of, or come into contact with, mo re than a small percentage of the 2500 customers of his employers.

However, Dillon LJ pointed out that in Marley Tile, the wording of the covenant would have prevented the defendant from engaging in activities which were different from those which he was employed to do and, importantly, that it was a restriction against dealing as well as against canvassing and soliciting.The message of Marley Tile was that every case must be dealt with on its facts and therefore it did not in any way impair the authority of Plowman v Ash.

Dillon LJ pointed out that this point had not been taken in the court below and that there was little or no evidence before the court as to how many of HIB's 2000 clients the third and fourth defendants knew or had had contact with.

Therefore, it would not be right to decide the point on the interlocutory appeal.A recently reported decision of Vinelott J in Austin Knight (UK) Ltd v Hinds [1994] FSR 52 considers this question further.

Although no reference was made in that case to Marley Tile, Vinelott J distinguished Plowman v Ash and held that the restrictive covenant was unreasonably wide in so far as it purported to prevent the defendant from approaching or, on one construction, dealing at all with the former customers of the plaintiff with whom the defendant had had no contact during her employment.It is important to note that Vinelott J had before him detailed evidence of the extent of the defendant's contacts with her employer's clients, which showed that she dealt with only one third of the clients of her branch.

In Hanover, their Lordships had before them no such evidence.-- The meaning of the words 'endeavouring to take away'.

The defendants sought to argue that the words 'endeavouring to take away' added nothing to the non-solicitation covenants and only served to make their meaning uncertain.

Dillon LJ dealt with the point shortly and agreed with leading counsel for the plaintiffs that the words were intended to prevent 'active seeking out' of HIB's clients; with that clarification, the words were included in the injunction.Although only being asked to decide whether or not there was an arguable case in relation to each of the points identified above, the principal result of the Court of Appeal's judgment is to give support to the more flexible and liberal approach that was adopted by the Court of Appeal in Littlewoods, rather than, in the words of Nolan LJ, the 'unsympathetic approach' adopted in Mont towards the construction of restrictive covenants of excessive width.Whilst Dillon and Nolan LJJ confined their considerations to the construction point, it is clear from Hanover that a restrictive clause can be upheld either because 'on its true construction it provides reasonable protection for the employer, or can be made to do so by the simple deletion (the blue pencil test) of a word or words' (per Latham J, quoting Megaw LJ in Littlewoods).The lesson of Hanover is that a purposive approach should be adopted to arrive at the true construction of a restrictive covenant within the context of the agreement as a whole and to reflect the true intention of the parties.

This is perhaps at odds with the previously accepted principle that any ambiguity or uncertainty in a clause should be construed against the party seeking to enforce it - the contra proferentem rule.

The Court of Appeal was clearly prepared to be much more sympathetic to the employer in its approach to construction than was the court in Mont.The aim must still clearly be for the drafting of restrictive covenants to be unambig uous and accurate, but employers may well now be more inclined to embark on litigation to protect their interests based on clauses which previously they might have been advised stood little or no chance of being enforced.

Lawyers advising employees should now be rather more circumspect and wary of advising that widely drafted clauses can be ignored with impunity.