The claim was brought by Dare, a proprietary trading business operating in global energy markets, against two of its former senior traders who had separately resigned to go and work for its principal competitor which was opening a new Dubai office.
Both Mr Soliman and Mr Hikmet had 12-month notice periods, and 12-month non-compete, non-solicit, non-deal and non-poach PTRs. The PTRs were subject to a contractual garden leave set off clause.
There was an intense working environment at Dare. During his employment Mr Soliman had raised exhaustion and issues with his health. In November 2023 he resigned to join a new employer (Onyx) which was opening an office in Dubai, expecting that he would be placed on garden leave for the duration of his notice period. Instead, he was asked to work his notice and given a list of tasks to assist with handover of his work and knowledge and was later offered the option of continuing to trade on his desk. Mr Soliman was signed off as unfit for work due to a chronic condition which, according to his medical evidence, had flared up due to Dare’s request for him to work his notice period. While he was signed off sick, Mr Soliman travelled extensively and socialised including nights out. He refused Dare’s initial requests to see Occupational Health but later agreed to do so although Dare said by this stage it was too late.
Mr Hikmet resigned in February 2024, also to join Onyx in Dubai, having been frustrated when earlier plans for Dare to open a Dubai office had fallen through. There was no evidence of any collusion or solicitation between himself and Mr Soliman. Mr Hikmet was also asked by Dare to work his notice period, but he contended that this was a ruse and Dare had never intended to have him carry on trading following his resignation. With the assistance of his father who was a pharmacist, Mr Hikmet met with a GP who signed him off work with stress. Subsequent sick notes were issued by the GP at Mr Hikmet’s father’s request, without the GP seeing Mr Hikmet again. He did not return to work. He refused Dare’s initial requests to see Occupational Health but later agreed to do so although Dare again said by this stage it was too late. The Court found that prior to and during his notice period Mr Hikmet shared Dare’s confidential information with Onyx, gave it his views on colleagues at Dare and met up with brokers and a trader. He also went on various holidays.
In early July 2024 Dare summarily terminated Mr Soliman’s and Mr Hikmet’s employment. Approximately 15 other employees resigned after the defendants, many of whom then said they were too ill to work their notice periods.
Decision
Dare brought claims of breach of contract against Mr Soliman and Mr Hikmet in respect of their refusal to work their notice periods. At the heart of the case was a dispute over whether they were genuinely too ill to work, or whether their sickness absence had been contrived to avoid working their notice periods. Dare sought injunctive relief to enforce their PTRs and on a springboard basis to cancel out the advantage it said the Defendants had gained from their breaches, as well as restitutionary damages for unjust enrichment in respect of salary paid to them during their notice periods.
Breach of contract
The Court decided that whilst Mr Soliman was genuinely too ill to work his notice period, Mr Hikmet was not. Referring to the cases of Merseyrail Electrics 2002 Ltd v Taylor (Employment Appeal Tribunal, 18 May 2007) and Teinaz v Wandsworth London Borough Council [2002] ICR 1471, it noted the general legal position is that the Court ought not go behind medical evidence which supports an employee’s sickness absence unless there is contradictory medical evidence. It found:
- In the case of Mr Soliman, it was satisfied that the medical evidence from specialists and his treating physician was compelling and was not the result of Mr Soliman pulling the wool over their eyes. Further, given the nature of his condition, it was not inconsistent that he was too unwell to work but able to travel and socialise.
- In the case of Mr Hikmet, it was not satisfied that the medical evidence should be accepted. By contrast to Mr Soliman, there was no evidence of a pre-existing condition and the circumstances in which Mr Hikmet had been signed off by the GP found by his father were dubious.
As a result of the above findings on sickness absence, the Court found that Mr Soliman had not breached his contract other than by his initial refusals to see Occupational Health, in respect of which any damages would likely be nominal. However, it found that Mr Hikmet had breached his contract by refusing to work his notice period because he had in fact been well enough to work. It also found he was in breach because of the competitive activity he carried out during notice. It refused, however, to award any restitutionary damages for unjust enrichment in respect of Mr Hikmet’s receipt of pay, because Dare never believed he was ill and so there was no mistake of fact as Dare alleged.
PTRs
Both defendants argued that the PTRs were unenforceable as they did not protect legitimate business interests and further were too wide, alternatively that they should not be enforced as a matter of discretion. The Court rejected most arguments on enforceability but held that the 12-month duration was too long in respect of the non-solicit, non-deal and non-poach covenants, and thus those PTRs were not enforceable. By contrast, it found that 12 months was justified in respect of the non-compete covenant, due to Dare’s legitimate interest in protecting confidential information which had a shelf-life of at least 12 months. In a helpful finding for employers seeking to protect confidential information, the Court found that this included information which could be “dredged up from the recesses” of the Defendants’ memories when useful, even if it had not been consciously memorised.
However, the Court refused to enforce Mr Soliman’s non-compete covenant on the basis that he had been absent from work due to genuine illness since his resignation, and thus “in substance Dare has already enjoyed protection against competition for more than 12-months”. It rejected Dare’s arguments that this amounted to a “cheat’s charter” which would encourage a practice whereby employees assert that they are too sick to work, thereby not only avoiding working their notice periods but then also claiming that the Court should not enforce their restrictive covenants.
The Court did grant an injunction to enforce Mr Hikmet’s 12 month non-compete covenant. Unlike Mr Soliman, it found he was not genuinely ill and thus could have worked his notice period and, further, he had in fact engaged in competitive activity against Dare and so it could not be said that Dare had already enjoyed a period of protection against competition. Further, the contractual garden leave set-off clause did not apply because Mr Hikmet had never been placed on garden leave as Dare had instead asked him to work his notice period. The Court therefore rejected his argument that, applying Sunrise Brokers v Rodgers [2015] ICR 272 at [49], it should enforce a shorter period of restraint in light of the time Mr Hikmet had been away from the business.
Springboard relief
Dare argued that the Defendants had gained a springboard advantage by advantages that had been obtained by their new employer because of their wrongdoing, and that it should be granted an injunction to negate these. In particular, it argued that (i) both Defendants would be able to join Onyx sooner than otherwise would have been the case (i.e. if they had not been dismissed early due to their breaches); (ii) the Defendants would be able to start work for Onyx in a context in which Dare was much weakened due to the lack of work and handover by the Defendants during their notice periods; (iii) with respect to Mr Hikmet, he and Onyx would be able to benefit from his specific wrongdoing in the significant preparatory work designed to allow him to hit the ground running when he arrived in Dubai.
The Court refused to order any springboard relief in respect of Mr Soliman. Put simply, he had not been guilty of any ‘wrongdoing’ which had given him (or Onyx) any kind of springboard advantage. His only breach was not agreeing sooner to the request to see Occupational Health, from which no head-start was gained.
In respect of Mr Hikmet, it granted one month’s springboard relief to cancel out the advantage gained by his competitive activities but refused to order any springboard relief in respect of his breach of contract in refusing to work his notice period. In refusing to do so, the Court referred to the lack of authority for the application of springboard principles to this situation i.e. where the claimant relies primarily on disadvantage it will suffer, rather than an advantage gained by the defendant.
The Court explained that it considered it was “doubtful that the springboard doctrine could apply in these circumstances, as it is predicated on an employee taking an “unfair advantage” by his unlawful conduct. The main focus, therefore, is on the “actual advantage” gained by the wrongdoer, and the appropriate measure for the length of the springboard is the length of time that it would have taken the wrongdoer to obtain lawfully what he in fact achieved unlawfully, relative to the victim: see QBE Management Services Ltd at [284]-[285].” It was doubtful that the advantages identified by Dare were “the kinds of “unfair advantage” that the springboard doctrine should embrace. Nevertheless, even if they could in theory be treated as falling within the springboard doctrine, they do not justify injunctive relief on the present facts.”
Impact of the decision
It remains to be seen whether the Court’s decision not to enforce PTRs due to sickness absence will be treated as a ‘cheat’s charter’ as Dare submitted. Whilst a cynic might say that employees seeking to avoid covenants now have a blueprint for how to exploit sickness absence to do so, the decision also makes clear that the Court will need to be convinced that any alleged sickness was genuine (e.g. through the provision of cogent and contemporaneous medical evidence).
More broadly, the decision demonstrates that where an employee has been lawfully absent from work for a material period prior to termination, the Court may decline to enforce a PTR on the basis that the employer has already enjoyed a period of protection from competition. This will obviously not be the case where (as the Court found Mr Hikmet did) the employee competes in that period. Further, the Court did not need to resolve the debate about whether it could set-off the absence period to shorten a PTR period as per Sunrise Brokersv Rodgers (see above), or whether it was all or nothing and it could only enforce the PTR period in full or not at all.
With regard to springboard relief, the decision casts doubt on whether an employer will be able to obtain such relief where the breaches it relies upon are individual breaches of contract unrelated to competitive activity. It seems that in such circumstances, employers may struggle to show that the employee has taken the kind of ‘unfair advantage’ embraced by the springboard doctrine.
Adam Solomon K.C. and Matthew Sheridan represented Mr Soliman instructed by Farrer & Co.
Niran de Silva K.C. and Sophia Berry represented Mr Hikmet instructed by Fox Williams.
