Phoenix Partners Group Llp v Asoyag

On an interlocutory application concerning post-termination restraints, the court may assess the likely outcome at trial where the restraint will expire before trial. Enforceability is judged when the contract is made, but breach of a covenant using the present tense is assessed by reference to the defendant’s conduct and the employer’s business when the alleged breach occurs. A restraint must protect a legitimate proprietary interest and go no further than reasonably necessary. A non-compete covenant does not operate where the defendant’s new activity does not compete with the employer’s relevant business. Geographical restrictions must also be justified by the employer’s legitimate commercial interests.

Phoenix employed Maurice Asoyag as an equity derivatives broker. After resigning, he served three months’ garden leave and then joined GFI, where he brokered only the EuroStoxx index. Phoenix obtained an injunction restraining alleged breaches of six-month non-compete and customer restrictions and alleged misuse of confidential information.

The court reviewed the injunction because its duration meant that trial was unlikely before the restraints expired. The central questions were whether Asoyag’s work for GFI competed with the relevant parts of Phoenix’s business, whether he had breached the customer restrictions or duties of confidence, and whether the covenants were enforceable restraints of trade.

1. The injunction was discharged. Phoenix was unlikely to establish at trial any breach of the non-compete, customer restrictions or confidentiality obligations.
2. Where an interlocutory restraint will expire before trial, the court should consider whether the claimant is likely to establish an entitlement to relief at trial: Lansing Linde v Kerr [1991] ICR 428. The validity of a restrictive covenant is determined when the contract is made: Gledhow Autoparts Limited v Delaney [1965] 1 WLR 1366.
3. An employer must identify a legitimate business interest capable of protection. A restraint must be reasonable between the parties and in the public interest, and must provide no more than adequate protection: Stenhouse Australia Limited v Phillips [1974] AC 391; Office Angels Limited v Rainer Thomas & O’Connor [1991] IRLR 214.
4. Clause 12.2 used the present tense and therefore required competition to be assessed by reference to the employer’s business when the alleged conduct occurred. Phoenix had carried out no genuine EuroStoxx trading after 14 January 2010. Asoyag’s EuroStoxx broking for GFI was therefore unlikely to compete with Phoenix’s relevant business. The same conclusion defeated the alleged breach of clause 12.3.
5. The confidentiality allegations were unsupported. The emails and telephone information relied upon were adequately explained and did not disclose a serious issue to be tried.
6. The covenants were probably enforceable in duration and substantive scope, but the restrictions covering Israel, Hong Kong and North America were unlikely to be reasonable. Damages would also have been an adequate remedy for Phoenix, while continued restraint could cause Asoyag difficult-to-quantify loss. Phoenix’s failure to withdraw its confidentiality allegation did not, by itself, justify discharge for lack of full and frank disclosure, although its conduct was criticised.