Intercall Conferencing Services Ltd v Steer

In deciding whether to grant an interim injunction enforcing post-termination restraints, the court should consider: the meaning of the covenant; the employer’s legitimate business interest; the employee’s exposure to confidential information; the extent to which the information is likely to be remembered; the risk of breach; whether the restraint is no wider than reasonably necessary; and the discretionary balance of convenience.

A non-competition clause may be reasonable even where the employee will work in a different capacity, if confidential information could be used or disclosed in that role. A real risk of inadvertent disclosure may justify protection. The court must also consider the adequacy of the undertaking in damages and the competing prejudice to the parties.

The claimant sought interim injunctions against its former employee. The relief would restrain him from working for named competitors, including Premiere Global Services Inc., until 18 August 2007 or trial, and would protect the claimant’s confidential information.

The defendant accepted that he owed duties of confidentiality and offered an undertaking not to breach them. He disputed the non-competition restraint, contending that it was too wide, that his proposed training role would not compete with the claimant, and that there was no real risk of disclosure.

The court therefore had to decide whether interim relief was appropriate before a final determination following evidence and cross-examination.

1. The application was granted. The court ordered a speedy trial and directed the parties to seek agreement on the precise terms of the order. Until trial or agreement, an undertaking as to confidentiality alone was insufficient.

2. Following the approach in TFS Derivatives Limited v Morgan [2005] IRLR 246, the court first construed the covenant, then considered whether the claimant had a legitimate business interest requiring protection, whether the restraint was reasonably necessary, and finally whether injunctive relief should be granted in the exercise of discretion. Severance was permissible only if it would not change the sense of the contract.

3. The claimant’s customer details, billing information, sales responses, salary and commission information, pricing, proposed deals, budgets, sales incentives and operational material were confidential information in which it had a legitimate interest. The defendant had been exposed to that information, particularly while acting as Head of Direct Sales, and was likely to recall significant elements of it. The evidence showed a real risk of inadvertent breach.

4. The six-month non-competition clause was neither too wide nor too vague. The absence of a territorial limit did not make it unreasonable where the businesses operated in the United Kingdom and Europe. The defendant’s proposed role was not decisive: confidentiality could be endangered even in a training role. The reasoning in Thomas v Farr plc [2007] EWCA Civ 118 supported using a non-competition clause where confidential information is difficult to identify precisely.

5. Applying the principles in American Cyanamid [1975] AC 396, the balance of convenience favoured relief. Potential loss of customers or employees was difficult to quantify, whereas the defendant’s loss was readily calculable and covered by the undertaking as to damages. The claimant’s planned infrastructure changes did not justify shortening the restraint before trial.