This article examines the landmark decision of the Nigerian Court of Appeal in La Casera Company PLC v Mr. Prahlad Kottappurath Gangadharam (2025), which represents a significant development in the jurisprudence on restraint of trade clauses in employment contracts. The Court’s nuanced approach in partially upholding a five-year non-compete clause while declaring a perpetual restraint void demonstrates a sophisticated understanding of the competing interests between employer protection and employee rights. This decision establishes important precedents for the enforceability of restraint clauses, emphasising the necessity of temporal limitations, legitimate business interests, and compliance with international human rights standards. The judgment provides crucial guidance for legal practitioners and companies on drafting enforceable restraint clauses while respecting Constitutional and International Law principles.
Introduction
The tension between an employer’s legitimate need to protect confidential information and trade secrets against an employee’s fundamental right to earn a living has long been a source of legal complexity in Nigerian employment law. Restraint of trade clauses, designed to prevent former employees from competing with their previous employers or joining competitors, must navigate the delicate balance between protecting genuine business interests and avoiding oppressive restrictions that unduly limit an individual’s economic freedom.
The Court of Appeal’s decision in La Casera Company PLC v Mr. Prahlad Kottappurath Gangadharam provides significant clarification on this area of law, establishing important parameters for the enforceability of such clauses.
History of the Principle on Restraint of Trade and the Legal Framework
The Common Law position is that contracts in restraint of trade are against public policy and therefore prima facie void. This is to the effect that, as a matter of general principle, covenants in restraint of trade are not enforceable. This principle was laid out explicitly by Lord Macclesfield in the English case of Mitchell v Reynolds, stating that all contracts, whether parole or under seal, whether by bond, covenant, or promise, with or without consideration, which are in general restraint of trade or of any particular avocation or profession, are absolutely void because they are against public policy and oppressive on individual industry.
However, under this case, there seemed to be a distinction between general restraint and limited restraint, especially where the limitation referred to time, space, or persons. Usually, as was the application of the doctrine in this case, general restraints are held to be unreasonable, while limited restraints are regarded as valid and duly enforced.
However, with the case of Nordenfelt v The Maxim Nordenfelt Guns and Ammunitions Co., the modern law principle of restraint of trade was birthed, giving way to the restrictive interpretation under Common Law. The House of Lords in this case held that “all covenants in restraint of trade are void as being contrary to public policy in the absence of special circumstances justifying them.” The Court in Maxim Nordenfelt’s case applied the doctrine of severance (which seeks to excise an invalid restraint clause from the valid). Here, the special circumstance that resulted in some parts of the restrictive covenant being declared reasonable and valid was that it protected the interest sold. From this case, there was a clear distinction established between general and partial restraint of trade clauses, which has received various qualifications and further interpretations with the passage of time.
The legal framework governing restraint of trade clauses in Nigeria derives from multiple sources, creating a complex web of principles that courts must navigate. At Common Law, as was stated above, restraint of trade clauses are prima facie void and unenforceable, as established in Nordenfelt v The Maxim Nordenfelt Guns and Ammunitions Co. and Herbert Morris Ltd v Saxelby. The foundational principle, as articulated in Horner v Graves, holds that “a man is entitled to exercise any lawful trade or calling as when he wills, and the law has always guarded jealously any interference with trade.”
However, Nigerian courts have recognised that such clauses may be enforceable where they satisfy the reasonableness test established in Common Law jurisprudence. The Supreme Court in Andreas I. Koumoulis v Leventis Motors Ltd held that covenants will be enforced where they afford adequate protection to the covenantee and are reasonable in the interest of the parties. This position reflected the earlier positions of the Nigerian courts on the issue of restraint of trade clauses in cases such as Leontaritis v Nigerian Textile Mills Ltd.
The constitutional dimension, however, adds another layer of complexity. Section 35 of the Constitution of the Federal Republic of Nigeria 1999 (as amended) guarantees the right to personal liberty, which encompasses freedom to engage in lawful activities, including entering into contracts. Additionally, Nigeria’s ratification of the International Covenant on Economic, Social and Cultural Rights (ICESCR) in 1993 introduces Article 6(1), which recognises “the right to work, which includes the right of everyone to the opportunity to gain his living by work which he freely chooses or accepts.”
The Case of La Casera Company v Prahlad Kottappurath Gangadharam
The case originated from an employment dispute between La Casera Company PLC and its former Chief Operating Officer, Mr. Prahlad Kottappurath Gangadharam. Mr. Prahlad held the most senior operational position at La Casera, with responsibilities including day-to-day operations, strategic planning, and supervision of multiple department heads across finance, logistics, manufacturing, and sales. His employment contract contained Clause 23, a restraint of trade provision with two segments: “a five-year prohibition on working in the same or similar field in Nigeria after termination, and a perpetual ban on working for competing beverage companies after the initial five-year period.”
Mr. Prahlad resigned from La Casera on November 27, 2012, and subsequently joined a direct competitor to La Casera as a New Business Development Manager before the five-year restriction period expired. La Casera filed a suit at the National Industrial Court in October 2013, seeking declarations of breach, injunctive relief, as well as damages. The company presented evidence including meeting minutes showing Mr. Prahlad’s involvement in strategic planning, organisational charts demonstrating his supervisory authority, and testimony suggesting that the competitor’s reintroduction of a drink shortly after his employment there was connected to confidential information he possessed.
Mr. Prahlad filed a counterclaim challenging Clause 23 as unreasonable, oppressive, and contrary to public policy, specifically arguing it violated the International Covenant on Economic, Social and Cultural Rights. The National Industrial Court ruled entirely in his favour on March 17, 2016, dismissing La Casera’s claims and declaring Clause 23 null and void. The Court found insufficient evidence of similar job descriptions between the companies, inadequate proof of trade secrets being compromised, and concluded that La Casera had failed to establish any legitimate interest requiring protection.
Dissatisfied with this outcome, La Casera appealed to the Court of Appeal, raising fourteen grounds condensed into three main issues inviting the Court of Appeal to consider whether La Casera had legitimate interests to protect and whether the restraint of trade agreement was illegal and unreasonable. The appeal was heard by a three-member panel of the Lagos Division of the Court of Appeal, with Justice Ngozika Uwazurunonye Okaisabor (J.C.A.) delivering the lead judgment that would ultimately establish new precedents for restraint of trade jurisprudence in Nigeria.
The Court of Appeal in La Casera’s case (supra) explicitly considered the constitutional and international law principles governing the principle of restraint of trade, marking a significant development in how Nigerian courts approach restraint of trade cases, which for the most part have placed major emphasis on the protection of the rights of the restrained party without much focus being given to the rights of the party seeking to restrain. The Court referenced the provisions of Sections 254(c)(2) and 254(i)(f) of the Constitution and the decision in Maduka v Microsoft Nig. Ltd & Ors, demonstrating the growing influence of international human rights standards in domestic employment law.
Conclusion
The La Casera decision represents a watershed moment in Nigerian restraint of trade jurisprudence, establishing a framework that balances employer protection with employee rights while incorporating international human rights standards. The Court’s nuanced approach of analysing restraint clauses segment by segment allows for more precise judicial intervention, upholding reasonable restrictions while striking down excessive provisions.
Key takeaways for practitioners include the absolute necessity of temporal limitations, the requirement for concrete evidence of legitimate business interests, and the importance of proportionality between restrictions and protected interests. The decision also emphasises that Nigerian courts will not enforce restraints that merely prevent competition or that violate fundamental rights to work and earn a living.
The integration of the ICESCR intoemployment analysis signals a broader trend towards incorporating international human rights standards in Nigerian jurisprudence. This development requires practitioners to consider not only domestic precedents but also international law principles when advising on restraint clauses.
For employers, the decision provides a roadmap for creating enforceable restraint clauses while respecting employee rights. For employees, it offers protection against oppressive restrictions while acknowledging the legitimate needs of employers to protect genuine business interests.
The La Casera decision thus establishes a balanced framework that serves the interests of justice while promoting both commercial and economic certainty and individual freedom in Nigeria’s evolving employment law landscape.
Davies is a Partner, Dispute Resolution & Arbitration department of Pinheiro LP, while Tokede is Junior Associate
Dispute Resolution department
