Monex Europe Ltd v Pothecary & Anor

A post-termination restraint is enforceable only so far as reasonably necessary to protect legitimate business interests. An employer cannot use a non-competition covenant merely to prevent competition. The court must construe the covenant, consider whether a narrower restraint would suffice, and assess reasonableness by reference to the circumstances when the contract was made. Where the claim will not be tried before the restraint expires, the interim-injunction court must take a wider view of the balance of convenience and consider the likely outcome at trial. A worldwide six-month restraint preventing former employees from working in a foreign-exchange business was unlikely to be justified where the confidential information and client connections were limited and rapidly degraded.

Monex sought an interim injunction against two former employees, Charles Pothecary and Guy Kaufman, to enforce six-month post-termination non-competition covenants. The defendants had joined Global Reach, a competitor, and had undertaken to comply with other restrictions, including non-solicitation and non-dealing provisions.

The substantive claim was unlikely to be tried before the restraints expired. The central issues were the proper construction of the non-competition covenant, whether it could be severed or corrected, whether it was a reasonable restraint of trade, and how those issues affected the interim application.

1. Interim-injunction approach. Because a speedy trial would not occur before the restraint expired, the court applied the qualification to the American Cyanamid test recognised in Lansing Linde Ltd v Kerr. The court therefore considered the likely prospects of success at trial as part of the wider balance of convenience.
2. Construction and severance. The covenant contained difficult and potentially incoherent wording concerning the capacity in which the defendants were restrained and the definition of the Territory. The court considered that Monex might establish at trial that a drafting error required correction, or that the words “interested in any capacity” could be severed under the principles discussed in Tillman v Egon Zehnder Ltd. It did not need to decide those issues finally.
3. Reasonableness. The covenant, on Monex’s construction, prevented the defendants from working in any capacity in a foreign-exchange business anywhere in the world for six months, reduced to five months after garden leave. Monex had legitimate interests in confidential information and client connection, but the evidence did not show that those interests required a worldwide restraint of that duration. The relevant information degraded quickly, and the client relationships could be maintained or rebuilt within a substantially shorter period.
4. Result. A more narrowly tailored restraint, by geography, currency or duration, might have protected Monex’s legitimate interests. The existing covenant was likely to be found unreasonably wide and unenforceable. Taking that assessment and the defendants’ undertakings into account, the balance of convenience favoured the defendants. The application for an interim injunction was dismissed.