Uzor Holding Limited v Tommy Fordham & Anor

The court considered an application for an interim injunction in a derivative claim brought by Uzor Holding Limited to enforce post-termination restrictive covenants in clause 13 of Mr Fordham’s service agreement. The judge applied the American Cyanamid principles and restraint of trade law: firstly whether there was a serious issue to be tried; secondly whether damages would be an adequate remedy; and thirdly the balance of convenience. The judge made a preliminary construction of the covenants (including clause 13.2(a)–(e)), accepted that confidentiality and trade connections were legitimate interests capable of protection and, applying Egon Zehnder principles, considered severance where appropriate.

Key factual/legal findings were: clause 13.2(a)–(d) were, in principle, enforceable; clause 13.2(e) (in its literal form) was not justifiable and would be ineffective as drafted; the clothing brand Condition was unlikely to be in competition with MFL but CTRNE (the trainer brand) was a competitor in respect of premium trainers; there was a real risk of breach. On the balance of convenience the judge declined to grant an injunction enforcing the all-embracing non-competition covenant but granted interim injunctive relief restraining solicitation and dealings with customers/sales agents and the poaching of MFL employees, with cross-undertakings to extend to MAHL.

Background and parties

• Claimant/applicant: Uzor Holding Limited (BVI company, shareholder in Mallet. Footwear Limited).
• First defendant/respondent: Mr Tommy Fordham (also known as Tommy Mallet).
• Second defendant: Mallet. Footwear Limited (MFL).
• Nature of proceedings: derivative claim by Uzor against Mr Fordham seeking, inter alia, interim injunctions to enforce post-termination restrictive covenants in Mr Fordham’s service agreement (clause 13).

Procedural posture

First-stage permission for the derivative claim was granted; Uzor applied for an interim injunction. The hearing was expedited and listed in April 2024. The interim application was determined at first instance by the Deputy Judge.

Issues framed

1. Whether there was a serious issue to be tried on the enforceability and alleged breach of the post-termination restrictions (clause 13.2(a)–(e)).
2. Whether damages would be an adequate remedy for either party.
3. Where the balance of convenience lay, in particular whether to grant an injunction enforcing the non-competition covenant or more limited relief (non-solicitation, non-dealing, anti-poaching).

Court’s reasoning and conclusions

• The judge undertook a preliminary construction of clause 13, noting definitions (Restricted Business, Restricted Territory, Prior Period) and the limiting provision in clause 13.3 (restrictions only bite against business carried on by MFL at the termination date).
• The judge held that clause 13.2(a)–(d) were, in principle, enforceable: a non-compete could be justified to protect confidential information and trade connections, severance being available for problematic wording (eg the word "indirect"). Clause 13.2(e) (the prohibition on employing a 'Key Person' described as "an employee") could not be justified in its literal form; the prohibition on poaching nevertheless attracted protection as a legitimate interest but required construction.
• The judge formed a preliminary view that Condition (clothing) was not competing with MFL as at the termination date, but CTRNE (a luxury trainer brand) was sufficiently similar in design, price band and market positioning to be a competitor.
• On adequacy of damages and balance of convenience the judge found difficulty quantifying losses on either side. Significant factors against a full non-compete injunction were: the early stage of CTRNE, the serious risk that injunctive relief would put CTRNE (and the funding provided by Mr Fordham) out of business, delay by Uzor in taking steps, and limited steps taken by MFL to protect trade connections after resignation. Conversely, limited injunctive relief to protect MFL’s trade connections and workforce posed less irremediable prejudice to the defendants.
• Accordingly the judge refused to grant an injunction enforcing the all-embracing non-competition covenant but granted interim injunctions restraining solicitation and dealing with customers and sales agents and restraining poaching of employees; the cross-undertaking in damages was to extend to MAHL (CTRNE’s holding company). The judge invited the parties to agree the detailed form of order.

Wider context: the judgment emphasised that in cases where the restriction period will expire before trial, the court should give a considered, but not extensive, preliminary view of the merits and that the balance of convenience must aim to avoid the greater risk of irremediable prejudice.

The application was allowed in part. The court found a serious issue to be tried on enforceability and breach of the post-termination restrictions, and formed preliminary views that clauses 13.2(a)–(d) were enforceable and that CTRNE competed with MFL but Condition did not. The judge refused to grant an interim injunction enforcing the broad non-competition covenant (clause 13.2(a)) because that would likely cause greater and potentially irremediable prejudice to the defendants/CTRNE than any likely harm to MFL, but granted interim injunctions restraining solicitation and dealings with customers/sales agents and restraining poaching of employees, with cross-undertakings to extend to MAHL; parties were invited to agree the precise form of order.