- The judges in the Court of Appeal disagreed on whether the company had taken too long (approximately seven weeks) to seek the injunction from when it discovered that the employee was working for a competitor. This serves as a reminder that time is of the essence in injunction applications. The longer the delay, the harder it will be to persuade a court to grant the injunction.
- When considering injunction applications, courts usually have to consider, as one factor amongst others, whether damages would be an adequate remedy for both the claimant company if the injunction wasn't granted and for the individual employee if the injunction was granted but ultimately held to be unenforceable at trial. In this case, the court has said that damages will generally not be an adequate remedy for most individuals because of financial commitments such as mortgages and other bills. Therefore, it will be important for claimant companies to ensure that they obtain evidence on the individual employee's financial position and clarity on whether the new employer is willing to continue employing/paying them during the period of the restraint.
In more detail
The claimant company was in the business of designing, developing and selling facilities management software. The employee had a 12-month non-compete clause in his contract. In July 2021, he resigned and was placed on garden leave during his one-month notice period. The company asked who he was joining but received evasive answers. The company discovered on 2 September that he was working for a competitor. A letter of action was sent on 20 September, followed by correspondence between the parties' representatives. Ultimately, however, they could not reach a resolution and the company applied for an interim injunction on 22 October. The High Court dismissed the application and the company appealed.
Court of Appeal decision
The Court of Appeal found that the High Court had applied the wrong test when considering whether the non-compete was enforceable. It appeared that the judge had only taken one factor into account - the likely effect on the employee's employment prospects should the non-compete be enforced - when making his decision. That is a relevant factor but should not be considered exclusively. The High Court had failed to properly consider whether the company had a legitimate interest to protect and whether the non-compete goes no further than reasonably necessary to protect that interest.
However, given that there were only four months left to run on the non-compete by the time of the trial, the court considered that any damage to the company would already have been done, so it was not appropriate to grant the injunction.
Damages as an adequate remedy
On whether damages would be an adequate remedy for the employee should it later be found, at trial, that the non-compete was not enforceable, Bean LJ considered that this was an unrealistic argument. He noted that except in cases of very wealthy defendants, or where the claimant employer is offering paid garden leave for the whole period of the non-compete, this argument has no traction for ordinary people such as this employee, who has mortgage and childcare commitments. It wouldn't be surprising on the back of Bean LJ's comments to see more departing employees and their new employers trying to argue this point in future cases. Going forwards, evidence of the employee's financial standing and the willingness of the new employer to continue employing/paying the employee will be even more important.
Delay in making an application for an interim injunction
There was also a difference in view between Elisabeth Laing LJ and Bean LJ on the effect of delay by the company in making the application for the interim injunction. Elisabeth Laing LJ considered that it was reasonable for the company to withhold from taking action until it knew that the employee was working for the competitor and that it was also reasonable for the company to try to resolve the dispute before taking proceedings. However, Bean LJ considered that if the employee's new job posed as severe a threat to the company as it asserted, the damage would surely have been done within the first few days and almost certainly well before the almost two months it took the company to make its interim injunction application. The comments made by both judges are a reminder that time is of the essence in injunction applications. The longer the delay, the harder it will be to persuade a court to grant the injunction.
Planon Limited v. Gilligan (Court of Appeal)