Alan James Boydell v NZP Limited & Anor
[2023] EWCA Civ 373
Sparta Global Limited & Anor v Ben Hayes & Anor
25 January 2024
[2024] EWHC 100 (KB)
High Court
A former employee was sued by his former employer for breaking a restrictive contract. The employer wanted to stop him from working for a competitor, but the court decided the contract was unfair to the employee because it was signed under pressure. The court only let the employer uphold the parts of the agreement that protected them as much as their original agreement did.
Key Facts
- •Sparta Global Limited (Sparta) sought interim injunctive relief against former employee Ben Hayes (and his new employer, Kubrick Group Limited) based on post-termination restraints (PTRs) in his employment contract and an investment agreement (IA).
- •The IA contained wider restrictions than the employment contract, including a 12-month non-compete clause prohibiting Hayes from working for a competitor in any capacity.
- •Hayes offered undertakings to abide by the employment contract covenants but not the IA.
- •The trial was not expected before the IA covenants substantially expired.
- •Sparta argued the IA covenants were likely enforceable and necessary to prevent significant commercial damage.
- •Hayes argued the undertakings offered were sufficient, and the IA covenants were unreasonable and in restraint of trade.
Legal Principles
American Cyanamid test for interim injunctions: (1) serious question to be tried; (2) adequacy of damages; (3) balance of convenience.
American Cyanamid Co v Ethicon Ltd [1975] 1 All ER 504
Lansing Linde principle: where trial will not occur before covenant expiry, some assessment of merits is required.
Lansing Linde v Kerr [1991] 1 WLR 251
Test for validity of restrictive covenants: (1) legitimate business interest; (2) covenant construction; (3) restriction no wider than reasonably necessary.
TFS Derivatives Ltd v Morgan [2005] IRLR 246
Restrictive covenants are prima facie void unless reasonably necessary to protect legitimate business interests.
Herbert Morris Ltd v Saxelby [1916] 1 A.C. 688
Inequality of bargaining power is a significant factor in determining the reasonableness of restrictive covenants, especially in employment-related agreements.
Dwyer (UK Franchising) Ltd v Fredbar Ltd [2023] FSR 4
Outcomes
Application to enforce IA covenants against Hayes dismissed.
The court made a preliminary assessment of the merits, finding it unlikely the IA covenants would be deemed reasonable and enforceable at trial due to their breadth and the likely finding that the IA was more akin to an employment contract, given the inequality of bargaining power during its creation.
Applications to join Kubrick as second defendant and Condor as second claimant granted.
Kubrick did not object to being joined, and Condor consented.
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