“Court Of Appeal Upholds ₦5.1m Award Against MTN Over Unreasonable Non-Compete Clause” — Says Four-Year Post-Employment Restriction Was Restraint Of Trade

The Lagos Division of the Court of Appeal has dismissed an appeal filed by MTN Nigeria Communications Limited and upheld the ₦5.1 million compensation awarded to its former Procurement Manager, Mr. Theodore Nwabueze Ikpa, over an unreasonable post-employment restraint of trade clause.

The appellate court, in a unanimous judgment delivered by a three-member panel led by Justice Danlami Zama Senchi, with Justices Boloukuromo Moses Ugo and Paul Ahmed Bassi concurring, affirmed the judgment of the National Industrial Court, Lagos, delivered on June 13, 2018.

The dispute arose from the termination of Ikpa’s employment in December 2008. Following the termination, Ikpa, through his counsel, Adetunji Adedoyin-Adeniyi, approached the National Industrial Court, alleging that MTN failed to give him one month’s notice or salary in lieu of notice.

He also challenged a four-year restrictive covenant contained in his employment contract, arguing that the clause prevented him from securing alternative employment until he reached retirement age.

The former MTN Procurement Manager sought salaries up to his retirement in October 2010 and retirement benefits or, in the alternative, ₦10 million as damages for restraint of trade.

The National Industrial Court dismissed most of his claims but held that the four-year non-compete clause was unreasonable. The court consequently awarded him ₦5,101,674 as compensation and ₦100,000 as costs.

Dissatisfied, MTN, through its lawyer, Solomon Mbadiwe, filed an appeal on four grounds. The company argued that the lower court lacked jurisdiction to entertain the alternative claim and that the restraint clause was reasonable and necessary to protect its confidential information and trade secrets.

MTN also contended that Ikpa failed to prove actual loss, voluntarily complied with the clause, and did not show that the company prevented him from getting another job.

Ikpa, however, maintained that the clause effectively rendered him unemployable. He relied on evidence that MTN had a history of suing former employees who breached similar clauses, thereby allegedly creating fear among prospective employers.

Delivering the lead judgment, Justice Senchi rejected all the grounds of appeal and held that the National Industrial Court properly exercised jurisdiction over the employment dispute.

The Court of Appeal also held that the trial court correctly evaluated the evidence before it and was right to find that the four-year restriction was unreasonable and amounted to a restraint of trade.

The appellate court further held that there was no reason to interfere with the cost awarded by the lower court, noting that costs follow events.

Having found the appeal lacking in merit, the Court of Appeal affirmed the judgment of the National Industrial Court in its entirety and awarded an additional ₦500,000 as costs against MTN Nigeria in favour of Ikpa.

Justice Bassi also agreed with the lead judgment, stating, “I am in complete agreement with His Lordship that this appeal is devoid of merit. I also dismiss the same and affirm the judgment of the lower court in Suit No. NICN/LA/05/2016, delivered on the 13th day of June 2018.”

Justice Bassi also agreed with the lead judgment, stating, “I am in complete agreement with His Lordship that this appeal is devoid of merit. I also dismiss the same and affirm the judgment of the lower court in Suit No. NICN/LA/05/2016, delivered on the 13th day of June 2018.”