No Interim Injunction To Enforce Covenant Where Unreasonable Delay, Even Where New Job Not Yet Started

• Published date: 23 January 2024
• Subject Matter: Employment and HR, Litigation, Mediation & Arbitration, Employee Rights/ Labour Relations, Trials & Appeals & Compensation
• Law Firm: Herbert Smith Freehills
• Author: Ms Anna Henderson

Unreasonable delay can defeat an application for an interim injunction to enforce a restrictive covenant even if the individual has not yet started working at a competitor. However, the delay does not disentitle the original employer to a speedy trial.

In Jump Trading International v Couture, the High Court held that there was a serious issue to be tried as to whether an unusual non-compete covenant was enforceable, but refused an interim injunction due to the unreasonable delay. The covenant provided that the employer could specify the duration, up to a maximum of 12 months, by giving notice of this within 20 days of termination. Mr Couture had given 12 months' notice of resignation in March 2022; Jump immediately put him on garden leave and notified him that it was imposing a 12 month non-compete restriction at the end of the garden leave period. Mr Couture's prospective new employer, Veriton, obtained legal advice that the covenant was unenforceable and in July Mr Couture informed Jump of his intentions to move there at the end of his garden leave. Without prejudice negotiations to try and resolve the dispute lasted until November 2022 when Mr Couture made clear that he intended to join Veriton in April 2023 but would be spending a minimum of 12 months writing software (and so would not be trading in competition with Jump).

Jump only took action to try and enforce the covenant four months later, in April; it had no explanation for this delay and the Court held this was sufficient reason to refuse interim relief. The Court noted that, had Jump issued proceedings sooner, it was likely that the matter could have been resolved by exercising the arbitration clause in the contract or by an expedited trial before Mr Couture started work at the competitor, without the need for interim relief. In refusing permission to appeal this decision, the Court of Appeal rejected the contention that prior unreasonable delay should not deprive a party of interim relief as long as the proceedings were issued before the employee started the new job and a speedy trial could be arranged. The judge had been entitled to find that the delay was unreasonable and made it unjust to grant interim relief. This was not affected by Jump's offer to pay the other side's costs of the interim hearing and Jump had "greatly overpitched" the impact on its business of allowing Mr Couture to start work, given he had already served 12 months' garden leave. On the other hand, the Court of Appeal...