Associated Foreign Exchange Ltd v International Foreign Exchange (UK) Ltd & Anor

An interim injunction to enforce a post-termination restrictive covenant may require the court to assess the claimant’s likely prospects of success where the covenant will expire before trial. A restraint is enforceable only where it protects a legitimate business interest and goes no further than reasonably necessary, assessed at the contract date and in the contractual and factual context then contemplated. In a fast-moving market, a 12-month non-solicitation period may be disproportionate where customer relationships and pricing information rapidly lose significance. Protection for potential customers requires particular justification, such as protracted negotiations or substantial investment. Where enforceability is likely to fail, an injunction should be refused.

Associated Foreign Exchange Ltd sought an interim injunction against its former account executive, Saeed Abbassi, and his new employer, International Foreign Exchange (UK) Ltd. The injunction was intended to restrain alleged breaches of a 12-month non-solicitation covenant and related obligations in Mr Abbassi’s employment contract.

The covenant covered customers and potential customers with whom Mr Abbassi had contact, and its period was reduced by garden leave. The parties accepted that the covenant would expire before the action could be tried. The central issues were enforceability, breach, alleged procurement by IFX, and whether equitable relief should be granted.

1. Interim approach. Because the covenant would expire before trial, the court had to consider the claimant’s likely prospects of success, not merely whether there was a serious issue to be tried. This reflected the approach in Lansing Linde Ltd v Kerr [1991] IRLR 80, adopted in Credit Suisse Asset Management Limited v Armstrong & Others [1996] ICR 882.
2. Enforceability. AFEX had legitimate interests capable of protection, including customer connections and knowledge of profitable customers which could assist targeted solicitation. The covenant nevertheless had to be no wider than reasonably necessary, judged at the date of contract, from the perspective of reasonable parties, and having regard to the contract as a whole and its anticipated factual setting. The court applied the approach discussed in TFS Derivatives Ltd v Morgan [2005] IRLR 246.
3. Mr Abbassi was not in a senior position. In the rapidly changing foreign exchange market, customer dealings, pricing and margins were unlikely to retain substantial value after a six-month period. The evidence did not establish that relationships ordinarily required many months to develop. A 12-month restriction was therefore likely to be held excessive, and any period beyond six months objectionable. Protection extending to potential customers was also likely to be unjustified on the evidence. The case was distinguishable from International Consulting Services (UK) Ltd v Hart [2000] IRLR 227.
4. Breach and procurement. Mr Abbassi was likely to be found to have solicited business from former customers. However, AFEX was unlikely to establish that IFX had procured or encouraged the breaches. IFX’s knowledge, financial interest and employment of Mr Abbassi did not alone justify that inference.
5. Relief. Delay would not independently have defeated relief. Damages would likely have been inadequate because solicitation and its effect on later trading would be difficult to prove. The balance of convenience would have favoured an injunction if enforceability had been likely. Since the covenant was likely unenforceable, the injunction was refused and the remaining undertakings were discharged.