Evrythng Ltd v Cyrus Gilbert-Rolfe

On an application for an interim injunction enforcing a post-employment non-competition covenant, the court must apply the American Cyanamid principles. The serious-issue threshold is low and normally does not require a definitive determination of enforceability. At the balance-of-convenience stage, however, the court may form a preliminary view of the merits, particularly where the restraint may substantially expire before trial.

The employer’s loss from misuse of confidential information may be difficult to quantify, but damages may also be inadequate for an employee who would lose work and income if restrained. The court must assess the risk of irremediable harm overall. Where the covenant’s applicability or enforceability is genuinely doubtful, an expedited trial and narrower protective undertakings may be preferable to interim enforcement of a non-compete.

Evrythng sought an interim injunction requiring Cyrus Gilbert-Rolfe, its former Chief Revenue Officer, to comply with a 12-month non-competition covenant in his Executive Service Agreement. He had begun consultancy work for Kezzler, a competitor, after his employment ended.

The parties had subsequently entered into a Restrictive Covenant Agreement containing different and more extensive restrictions. Evrythng relied only on the employment agreement for the interim application. Mr Gilbert-Rolfe argued that the later agreement may have superseded the earlier covenants and that the non-compete was wider than reasonably necessary.

The central issues were whether there was a serious issue to be tried as to the applicability and enforceability of the covenant, whether damages were adequate, and where the balance of convenience lay.

1. Application refused. The court declined to grant the interim non-competition injunction, but ordered an expedited trial and indicated that protective injunctions reflecting the undertakings already given would be granted if suitable undertakings to the court could not be agreed.
2. The court applied the principles in American Cyanamid Co v Ethicon Ltd: a serious issue to be tried, inadequacy of damages, and the balance of convenience. The serious-issue test is not demanding. It ordinarily excludes only claims that are frivolous, vexatious or demonstrably bad. The court should not finally determine enforceability at the interlocutory stage, although it may make a preliminary merits assessment when considering the balance of convenience.
3. There was a significant doubt whether the later Restrictive Covenant Agreement superseded or replaced the earlier employment covenants during the overlapping period. The court was not persuaded that the later agreement could be disregarded for want of consideration. The replacement equity awards might have provided value, and the agreement had been executed as a deed. The incompatibility between the two sets of restrictions meant that their relationship required determination at trial.
4. The employment non-compete was arguably enforceable, but its 12-month duration, broad geographical reach, and limited practical effect of its functional exception raised substantial issues. The employer had not yet fully explained why the covenant’s particular scope and duration were reasonably necessary, although its evidence concerning confidential information, sales cycles and customer relationships provided an arguable basis.
5. Damages were unlikely to be adequate for Evrythng because misuse of confidential information and loss of business could be difficult to police and quantify. Damages might also be inadequate for Mr Gilbert-Rolfe because an injunction could deprive him of his only income and have severe consequences for him and his family.
6. The balance of justice did not favour interim enforcement. The risk to Evrythng was mitigated by contractual undertakings, proposed court undertakings, Kezzler’s notice of the restrictions, and an expedited trial. The injunction would otherwise create a substantial risk of unemployment before the covenant’s likely enforceability had been determined.

First-instance decision. No earlier appellate decision was stated in the judgment.