Wale Igbintade
The Court of Appeal, Lagos Division, has reaffirmed that employers cannot enforce unreasonable post-employment restrictive covenants to prevent former employees from earning a living, dismissing an appeal by MTN Nigeria Communications Limited against a judgment awarding N5.1 million in compensation to its former Procurement Manager, Mr. Theodore Nwabueze Ikpa.
In a unanimous judgment delivered by Justice Danlami Zama Senchi in Appeal No. CA/LAG/CV/319/2021, the appellate court upheld the June 13, 2018 judgment of the National Industrial Court, Lagos Division, delivered by Justice A. N. Ubaka in Suit No. NICN/LA/05/2016, holding that the post-employment restraint clause imposed on Ikpa was unreasonable and unlawfully prevented him from securing alternative employment.
The appeal stemmed from the termination of Ikpa’s employment as Procurement Manager in December 2008.
Ikpa, through his counsel, Adetunji Adedoyin-Adeniyi, challenged his dismissal, contending that MTN failed to give him the mandatory one month’s notice or salary in lieu of notice.
He also argued that the restrictive covenant contained in his contract effectively prevented him from securing another job until he attained retirement age.
Before the National Industrial Court, Ikpa sought declarations that his termination was unlawful, payment of his salaries up to his retirement in October 2010, payment of his retirement benefits, or alternatively, N10 million in damages for the restraint of trade clause.
Although the trial court dismissed most of his claims, it held that the four-year restrictive covenant was unreasonable and awarded him N5,101,674 as compensation, in addition to N100,000 as costs.
Aggrieved by the decision, MTN, through its counsel, Solomon Mbadiwe, appealed, arguing that the National Industrial Court lacked jurisdiction to entertain Ikpa’s alternative claim.
The telecommunications company also maintained that the restraint clause was reasonable and enforceable because it protected its legitimate business interests, including confidential information and trade secrets.
It argued that Ikpa voluntarily accepted the covenant, failed to prove that he suffered any actual loss, and that the compensation awarded by the trial court was excessive.
MTN further contended that there was no evidence that it prevented Ikpa from securing another job after the termination of his employment.
In response, Ikpa argued that the four-year restrictive covenant effectively shut him out of the labour market.
He relied on evidence showing that MTN had previously sued former employees for breaching similar restraint clauses, creating a genuine fear of litigation among prospective employers and making it practically impossible for him to obtain alternative employment.
Resolving all four issues against MTN, Justice Senchi held that the National Industrial Court properly assumed jurisdiction and correctly evaluated the evidence before it.
The appellate court found that Ikpa gave direct evidence that he was unable to secure employment during the restraint period because prospective employers declined to engage him after learning of the restrictive covenant.
The court noted that his testimony was neither challenged during cross-examination nor contradicted by MTN.
“The law is settled that uncontroverted evidence which is not inherently incredible ought to be accepted and acted upon by the court,” Justice Senchi held, adding that MTN failed to produce any evidence showing that Ikpa obtained employment or failed to pursue available opportunities during the restraint period.
The court also rejected MTN’s argument that Ikpa ought to have produced rejection letters or other documentary evidence from prospective employers, holding that sworn testimony adopted in court and tested under cross-examination constitutes credible evidence and does not require documentary corroboration where it remains unchallenged.
It further held that Ikpa’s inability to tender rejection letters did not render his evidence unreliable.
According to the court, Exhibit T18, which showed that MTN had previously instituted legal proceedings against former employees over similar restrictive covenants, although not directly involving Ikpa, corroborated his claim that prospective employers were reluctant to hire him because of the likelihood of litigation.
The Court of Appeal consequently held that the National Industrial Court was right to conclude that Ikpa suffered hardship arising from the unlawful restraint and was entitled to compensation.
Rejecting MTN’s challenge to the damages awarded, the court held that the finding of compensable loss was firmly supported by the uncontroverted evidence before the trial court.
Justice Senchi also reiterated the settled principle that appellate courts will not lightly interfere with awards of general damages unless they are shown to be manifestly excessive or inadequate, or where the trial court acted on wrong legal principles or misapprehended the facts.
On the issue of costs, the court held that the National Industrial Court properly exercised its discretion, stressing that costs ordinarily follow the event and are intended to compensate a successful litigant rather than punish the unsuccessful party.
Having found no merit in any of MTN’s grounds of appeal, the Court of Appeal dismissed the appeal in its entirety, affirmed the judgment of the National Industrial Court, and awarded an additional N500,000 in costs against MTN in favour of Ikpa.
The two other members of the panel, Justice Boloukuromo Moses Ugo and Justice Paul Hamed Bassi, concurred with the lead judgment.
Justice Ugo held that Justice Senchi’s reasoning and conclusions reflected his own and adopted the judgment in its entirety, including the consequential orders as to costs.
Justice Bassi also agreed that the appeal was devoid of merit, affirmed the judgment of the National Industrial Court, and endorsed the order awarding costs in favour of Ikpa.