HEADLINE SUMMARY
The case of Planon Ltd v Gilligan [2022] EWCA Civ 642 highlights the importance of quick action when seeking to enforce strict covenants. In this case, the Court of Appeal refused to grant an injunction to enforce the 12-month non-compete clause with only four months left to run at the time of the appeal hearing.
BACKGROUND FACTS
In February 2015, Mr Gilligan began working at Planon Ltd (Planon), a company that specializes in developing and selling facility management software. Mr Gilligan’s employment contract contained a post -termination restriction that prevented him from working for any Planon competitor for 12 months.
Mr. Gilligan submitted his notice of resignation in July 2021 and ended his employment with Planon on 23 August 2021. On September 2, 2021, Mr. Gilligan began working for a competitor, ServiceNow, as Senior Solutions Sales Manager.
On 20 September 2021, Planon’s lawyers sent a letter of claim to Mr Gilligan requesting actions. Following the exchange of letters, Planon was not satisfied with the promises offered by Mr Gilligan and on 21 October 2021 Planon issued a Claim Form followed by an application for temporary injunctive relief on 22 October 2021. The application was heard on 5 November. 2021 and the judge refused to grant the injunction.
DECISION
Planon appealed and the Court of Appeal believed that, although the Judge erred in the manner in which he approached the enforcement of the restriction, the Judge’s decision not to grant the interim injunction should be upheld.
This case is interesting because the Court of Appeal upheld the Judge’s first-time decision, despite disagreeing with the manner in which the Judge reached that decision. The main factor considered by the first time Judge against the provision of an injunction was that if the non-competing covenant was enforced, Mr Gilligan would not be able to work for the period of detention. The Court of Appeal said there was no authority for this procedure and the Judge should instead consider whether the covenant was no more than reasonably necessary to protect Planon’s legitimate business interests.
The Court of Appeal also provided brief savings on the commonly disputed point that a temporary injunction should be granted, as damages would be an adequate remedy for the employee because the employer is in a position to compensate for the loss of wages under cross-undertaking in damages in case the interim injunction is found at trial to be wrongfully awarded.
Finally, the Court of Appeal believed it would be contrary to the balance of convenience to grant an injunction in any event, as it now has only four months left to run and most of the damage was caused to Planon as a result of what Mr Gilligan did. . the work on SeviceNow has already been done.
PRACTICAL IMPLICATIONS
Because the Court of Appeal’s comments regarding injuries do not necessarily be an adequate remedy for employees, employers must address this issue in correspondence prior to action with a former employee before seeking injunctive relief. It may happen that the new employer agrees to pay the former employee until the restriction ends.
In addition, the Court of Appeal’s comments about the delay are likely to have the most significant practical impact on claims involving breaches of strict covenants. In this case, it seems unfair to Planon that he only has four months left to run with the restriction on the time of the Court of Appeal hearing. That said, this case demonstrates the need for employers to act quickly once they learn that an employee has joined a competitor in breach of strict covenants. Action needs to be taken within days, not weeks, to avoid arguing that the injury has been done and thus the status quo allows the employee to continue with their new job. This does not ignore the need for correspondence prior to action, but employers must be prepared (including already having any necessary Board approval and having the appropriate funds) to push the button and issue a claim in case a satisfactory response is not received. from a former employee.
Addleshaw Goddard is recognized as a market -leading Business Protection Practice. Our team’s work focuses on advising organizations on team transitions and helping employers manage risks posed by employees, directors, shareholders and third parties that threaten their legitimate interests, by action to enforce employer rights and protect confidential information from securing activities or obtaining injunctive relief, in pursuing claims for damages/loss of profits.
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