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High Court Injunction

Plaintiff claims damages not adequate remedy where loss of salary

High Court Injunction – Plaintiff claims damages not adequate remedy where loss of salary


In the recent High court case of Octavio Hernandez v Vodafone Ireland Limited [2013 1496P] delivered on 21st February 2013, Justice Laffoy was asked to consider an application for interlocutory injunctions restraining the defendant, (the plaintiff’s former employer) from (a) actively preventing the plaintiff from engaging in a new employment contract with Telefonica Ireland Limited (02), and (b) interfering with the plaintiff’s new contract of employment with 02. The plaintiff also sought an order and declaration that Clause 9.3 of “the purported contract” between the plaintiff and the defendant dated 27th October, 2005 was void and unenforceable.

We have referred extensively to extracts of the decision available on the courts website which is attached to the link above.

Background and Contract of Employment

The plaintiff commenced employment with the Defendant in October 2005 and remained until January 2013. He was initially retained by the defendant as a Business Case Analyst and ultimately became an Enterprise Roaming Proposition Manager. The plaintiff’s terms of employment were set out in a contract of employment dated 27th October, 2005. The key clauses for the purposes of the interlocutory application included the following:

Clause 9.3

“You shall not, without the prior written consent of Vodafone, within 6 months after the termination of your employment with Vodafone howsoever caused, whether directly or indirectly and whether alone or with any other person, either as principal, shareholder, director, employee, agent, consultant or otherwise, work or be engaged or interested in . . . any business or commercial activity in Ireland which competes or conflicts (or is likely to compete or conflict) with any business interest or commercial activity of Vodafone.”

Clause 9.4

“You will not, without the prior written consent of Vodafone, within 6 months after the termination of your employment with Vodafone howsoever caused, directly or indirectly and whether alone or with any other person, solicit or entice away or attempt or cause others to solicit or entice away from Vodafone any person who shall have been an employee, customer, or agent of Vodafone in the 6 months immediately preceding the termination of your employment.

Clause 10, which was headed “Confidentiality” contained detailed provisions protecting and restricting disclosure by the plaintiff of information obtained during his employment relating to any aspect of the defendant’s business, which could be reasonably regarded as being of a confidential nature.

Clause 13.1 whereby the plaintiff was required to give not less than 1 month’s notice of termination of his employment (subject to the proviso that the parties could agree to pay in lieu of notice).

By letter dated 20th December, 2012, the plaintiff was offered the role of Business Product Manager, with a commencement date of 21st January, 2013. The terms of employment contained post-termination restrictions for six months in relation to –

  • carrying on or participating in any business in the Republic of Ireland which provides mobile telephony services in Ireland, and
  • procuring or seeking to procure or solicit orders from or do business with any person who had been at any time during the period of two years immediately preceding the cessation of his employment a customer of 02; and
  • soliciting the services of or engaging or attempting to engage any person who was an employee of 02 at any time during that two-year period.

The plaintiff then decided to leave the defendant’s employment and informed his Line Manger on 24th December, 2012. By letter dated 4th January, 2013, the Company wrote to the plaintiff informing him of the following matters:

  • That his resignation was accepted. However, he was required to provide at least one month’s notice in writing of the termination of his employment under the Contract, so that his employment would terminate on 24th January, 2013, which was referred to as the “Termination Date”. He would not be required to attend at the offices of the defendant in the period up to the Termination Date, but he would be paid his normal salary for the duration of the notice period.
  • Referring to Clause 9 of the Contract, he was advised that he was prohibited from taking up his role with 02 until a period of six months from the Termination Date had expired and he was informed that he was “restricted from taking up any role with 02 until after 24th July, 2013”.
  • He was also reminded of the contents of Clause 10 of the Contract.

On the same day, 4th January, 2013, the solicitor for the defendant wrote directly to 02 informing 02 that the plaintiff would remain an employee of the defendant until 24th January 2013. It was pointed out that the plaintiff would continue to be bound by, inter alia, “a strict six month non-compete and non-solicitation provision and a comprehensive confidentiality clause”. In the final paragraph of the letter the defendant sought undertakings from 02 and it was provided that:

“in the event that such undertakings are requested and not provided and he commences employment with 02 in breach of his contract or we discover that he has disclosed Confidential Information . . . to 02 we will apply for an injunction restraining him from breaching his contract and we will join 02 as being on notice of this breach.”

Ultimately agreement was reached between Vodafone and 02 that the plaintiff would not commence working with 02 before 1st May, 2013 and that the defendant would release him from the restrictions in his contract as of that date.

Legal Issues

Counsel for the plaintiff made it clear that the plaintiff accepted that he was bound by the non-solicit restriction contained in Clause 9.4 of the Contract and the confidentiality restrictions contained in Clause 10 of the Contract. Counsel for the defendant submitted that the defendant would co-operate in procuring an early trial as to the issue of the enforceability of the non-compete clause. The Defendant also contended that damages would be an adequate remedy for the plaintiff, having regard to the fact that, in the light of the arrangement between the defendant and 02, in reality the measure of damages was the plaintiff’s lost salary for three months.

Counsel for the plaintiff submitted that it was open to the Court to determine that Clause 9.3 was void and unenforceable and cited the cases of:

(a) Murgitroyd & Co. Ltd. v. Purdy [2005] 3 I.R. 12; and (b) Net Affinity Ltd. v. Conaghan & Anor. [2012] 23 ELR 11

In the case of Murgitroyd & Co. Ltd. v. Purdy [2005] IEHC 110] the plaintiff company was engaged in the provision of intellectual property services. The defendant was employed by the plaintiff as a European patent agent under a written service agreement which contained a non-competition clause which provided that the defendant would not work within the Republic of Ireland for a period of twelve months following determination of his employment on his own account and in competition with the plaintiff company. The defendant left the plaintiff’s employment and immediately commenced practising. The first procedural step in the proceedings was an application for an interlocutory injunction in which judgment was given by Clarke J. on 14th April, 2005.

In reviewing the Murgitroyd case, Justice Laffoy determined that in the current circumstances, damages would not be an adequate remedy for the Plaintiff but noted that the issue in respect of the balance of convenience was more difficult. On balance Justice Laffoy concluded that the balance of convenience would not favour the grant of an interlocutory injunction in respect of non competition provided that this aspect of the matter could be made ready for trial in a very short period of time.

In the Murgitroyd case, Clarke J. concluded, on the facts, that a geographical restriction based upon the jurisdiction of the Irish state was not unreasonable having regard to the way in which the business (patent attorneys) operated in Ireland and he was also satisfied that the period of twelve months was not unreasonable. He continued

“However, it is also clear that a more restrictive view is taken of covenants by employees than is taken of covenants given on sale of a business. Covenants against competition by former employees are never reasonable as such. They may be upheld only where the employee might obtain such personal knowledge of, and influence over, the customers of his employer as would enable him, if competition were allowed, to take advantage of his employer’s trade connection. . . .

In those circumstances Justice Laffoy concluded that the prohibition in this case on all competition was too wide. A prohibition on dealing with (in addition to soliciting of) customers of the plaintiff would, in her view, have been reasonable and sufficient to meet any legitimate requirements of the plaintiff. The wider prohibition which restricts dealing with those who might be, but are not, such customers was excessive.

Justice Laffoy also looked at the case of Net Affinity v. Conaghan & Anor. Herethe plaintiff was the former employer and the first defendant was the former employee, who had entered into a non-compete clause. The new employer was the second defendant. The plaintiff was a company engaged in the provision of internet booking engines for Irish hotels, as well as the facilitating of digital and social media marketing for such hotels. The first defendant had been employed by the plaintiff as Head of Client Development, which the plaintiff claimed was a pivotal role, and she was responsible for engaging directly with the plaintiff’s clients. The second defendant was a competitor of the plaintiff, engaged in the provision of similar services to the hotel market, albeit operating on a larger scale. The non-compete clause in the contract of employment which the first defendant had entered into with the plaintiff was part of a provision dealing with confidentiality and non-solicitation and it restricted the first defendant from setting up, consulting, contracting or working on a part-time basis for any individual or company providing services similar to the plaintiff’s services “for a period of 12 months after termination of contract”, but without prescribing any territorial limitation.

The outcome of the application for an interlocutory injunction was that Dunne J restrained both the defendants from approaching, soliciting or dealing with any existing customers of the plaintiff for a period of twelve months, but refused to restrain the first defendant from taking up employment with the second defendant for such period on the ground that the non-compete clause was void and unenforceable as it contained no geographical limitation and it prohibited the first named defendant from engaging in any employment which involved services similar to that of her former employer. In her judgment Dunne J., having stated that she had no issue with a period of twelve months, went on to consider the fact that the scope of the restriction was not limited geographically and she stated:

“[The first defendant] is completely precluded by the clause from working for any individual or company that provides or plans to provide services similar to that which is provided by Net Affinity. To my mind, the clause at issue in this case is far too wide to protect the legitimate requirements of Net Affinity. It is a clause which does in fact prohibit all competition by Ms. Conaghan in the area of services provided by Net Affinity. As has been made clear in the judgment of Clarke J. in the case of Murgitroyd and Company Limited v. Purdy such a clause is too wide. In those circumstances, I have come to the conclusion that the non-compete clause is void and unenforceable.

Justice Laffoy noted that in light of the stance adopted by the defendant, as was the case in the Murgitroyd case, that it was not open to the Court to determine the issue as to the enforceability of the non-compete clause in the Contract at this juncture but the Court could consider whether the plaintiff was entitled to interlocutory injunctions in the terms sought pending the trial of the action.

Plaintiff’s entitlement to interlocutory injunctions

Justice Laffoy noted that the position adopted by the defendant in this case i.e. that it was not interfering with the plaintiff’s contractual arrangements with 02, that it has not done anything wrong, and that it is merely enforcing its contractual rights, was, to “put it mildly, utterly naive”.

Justice Laffoy noted that the crux of the matter was that, in reliance on the non-compete clause, which may or may not be enforceable, the defendant has created the situation in consequence of which the plaintiff is not able to take up his employment with 02 until 1st May, 2013 and will lose in excess of three month’s salary. If the non-compete clause is unenforceable, the defendant has done wrong in preventing the plaintiff taking up his employment with 02 on the 24th January, 2013, resulting in him being unemployed and without an income for three months. It is on the basis of the plaintiff’s contention that the defendant has committed such a wrong, that the plaintiff’s entitlement to an interlocutory injunction falls to be considered.

Factors in granting an interlocutory Injunction

1. Has the plaintiff established that there is a fair issue to be tried?

Justice Laffoy noted that she had “absolutely no doubt” that the plaintiff had established that there was a fair issue to be tried that, by its actions, the defendant has wrongfully prevented him taking up his employment with 02 as of 24th January, 2013. The issue turns on whether Clause 9.3 of the Contract is enforceable which would be determined in due course.

2. Whether damages would be an adequate remedy for the plaintiff

Justice Laffoy noted that on the basis of the facts averred to by the plaintiff in his grounding affidavit, it was of crucial importance to the plaintiff and his family that he had a continuing source of income and on that basis, Justice Laffoy was satisfied that he has made out a strong case that damages would not be an adequate remedy.

3. Where the balance of convenience lies

Justice Laffoy noted that the actions of the defendant created the situation in which the plaintiff found himself, which was distressful for him and his family and that the balance of convenience lay in favour of granting the injunction.

Order

Subject to the defendant giving an undertaking on oath to the Court to comply with Clause 9.4 and Clause 10 of the Contract, and on the basis of the undertaking as to damages which the plaintiff had given to the Court in his grounding affidavit, Justice Laffoy granted orders for injunctive relief in the terms sought pending the trial of the action.