Sparta Global Ltd & Anor v Hayes & Anor [2024] EWHC 100 (KB) (25 January 2024)

Sparta Global Ltd & Anor v Hayes & Anor [2024] EWHC 100 (KB) (25 January 2024)

The court found that, on a preliminary assessment, the restrictive covenants in the Investment Agreement are likely to be held unenforceable at trial as an unreasonable restraint of trade. The IA was more akin to an employment contract than a commercial shareholder agreement, with clear inequality of bargaining power, lack of negotiation, and excessive breadth and duration of restrictions. The balance of convenience strongly favoured the defendant, as the claimants would have adequate protection from the undertakings given under the employment contract, and enforcement of the IA covenants would likely cause disproportionate harm to Mr Hayes.

Citation
[2024] EWHC 100 (KB)
Parties
Claimant: Sparta Global Limited; Claimant: Condor Topco Limited; Defendant: Ben Hayes; Defendant: Kubrick Group Limited
Jurisdiction
England and Wales
Judgment Date
25 January 2024
Procedural Posture
Interim Injunction Application in Employment/restrictive Covenant Dispute / Interim Application Before Trial
Outcome
Interim injunction to enforce the Investment Agreement covenants refused; undertakings under the employment contract accepted as sufficient interim protection.
Legal Topics
Interim Injunctions, Post Termination Restraints, Non Compete Clauses, Non Solicitation Clauses, Restraint of Trade, Shareholder Agreements, Balance of Convenience, Adequacy of Damages
Employment Law Contract Law Restrictive Covenants Interim Injunctions Post Termination Restraints Non Compete Clauses Non Solicitation Clauses Restraint of Trade +3 more

Case Brief

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Parties

Sparta Global Limited

Claimant

Condor Topco Limited

Claimant

Ben Hayes

Defendant

Kubrick Group Limited

Defendant

Procedural Posture

Interim Injunction Application in Employment/restrictive Covenant Dispute / Interim Application Before Trial

Legal Issues

  1. 1 Whether the restrictive covenants in the Investment Agreement (IA) are enforceable on an interim basis against a former employee pending trial
  2. 2 Whether the IA covenants amount to an unreasonable and unlawful restraint of trade
  3. 3 Whether the balance of convenience favours granting the interim injunction sought by the claimants

Ratio Decidendi

The court found that, on a preliminary assessment, the restrictive covenants in the Investment Agreement are likely to be held unenforceable at trial as an unreasonable restraint of trade. The IA was more akin to an employment contract than a commercial shareholder agreement, with clear inequality of bargaining power, lack of negotiation, and excessive breadth and duration of restrictions. The balance of convenience strongly favoured the defendant, as the claimants would have adequate protection from the undertakings given under the employment contract, and enforcement of the IA covenants would likely cause disproportionate harm to Mr Hayes.

Court Disposition

Interim injunction to enforce the Investment Agreement covenants refused; undertakings under the employment contract accepted as sufficient interim protection.

Orders

  • Application to enforce IA covenants refused
  • Defendant's undertakings under employment contract accepted