Facts

Dare International (Dare) is a proprietary trading business operating in the global energy markets. It brought proceedings in the High Court against two of its two former senior traders, Stephen Soliman and Ashley Hikmet for damages for breach of contract and fiduciary duty, and sought injunctive relief to enforce their post termination restrictions (PTRs). The defendants had both resigned from Dare to join a competitor, Onyx Capital Management Limited (Onyx). Soliman's and Hikmet's employment contracts included post-termination restraints of 12 months, with the possibility of the restraint period being reduced according to the terms of a garden leave clause.

Soliman and Hikmet resigned from Dare in November 2023 and February 2024, respectively, and had 12 month notice periods. During his employment Mr Soliman had raised exhaustion and issues with his health. When he resigned he expected that he would be placed on garden leave for the duration of his notice period. Instead, he was asked to work his notice. Shortly after his resignation, Soliman was signed off sick due to a flare-up of an existing chronic condition. 

Mr Hikmet was also asked to work his notice but he did not return to work after 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 and related insomnia. Subsequent sick notes were issued by the GP without seeing Mr Hikmet again; the information about Mr Hikmet's condition being conveyed to the GP by Mr Hikmet's father.

During their sickness absence, both defendants went on numerous holidays and socialised. 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. Despite requests from Dare to do so, Soliman and Hikmet both initially refused to attend any occupational health assessment. Dare terminated both defendants' employment on 11 July 2024 and paid them in lieu of their unexpired notice. 

Dare brought claims of breach of contract against Mr Soliman and Mr Hikmet in respect of their refusal to work their notice periods. Dare alleged that neither defendant was genuinely too sick to work and instead this was an attempt to avoid working their notice periods. Dare also sought an injunction to enforce their PTRs together with a springboard injunction (an injunction to prevent a former employee who has used confidential information to their own advantage from gaining a head start in competition with their former employer), as well as damages in respect of salary paid to them during their notice periods.

Both defendants argued that their 12 month non-compete covenants were unenforceable - as drafted they were too broad. In the alternative, the defendants submitted that if the court found the PTRs to be enforceable, they should exercise their discretion to refuse an injunction because both defendants had been absent from work, so that Dare had already enjoyed the benefit of the protection.

The Court held that:

• The 12 month non-compete covenants were enforceable, being no wider than reasonably necessary to protect Dare’s confidential information, which had a shelf-life of at least 12 months.
• The court did not consider that a 12-month restraint was reasonable for the non-solicit, non-deal, and non-poaching of employees restrictions and therefore those PTRs were not enforceable.
• Mr Soliman's absence from work was genuinely due to sickness.
• Injunctive relief should be refused in relation to Mr Soliman because (by reason of his long period of sick absence, followed by the interim undertakings which he gave to the Court pending judgment) by the time judgment was given Dare had already had the benefit of protection equivalent to that provided by the 12 month non-compete covenant. Whilst he did breach his contract, in that he initially refused to attend the occupational health assessment, he had not been guilty of any ‘wrongdoing’ which had given him (or Onyx) any kind of competitive advantage. As such a springboard injunction was not appropriate.
• By contrast, the Court did not accept that Mr Hikmet had been genuinely sick and therefore he had breached his contract of employment by refusing to work his notice period. He had also breached various contractual and fiduciary duties owed to Dare, in that during his notice period he had carried out preparatory work for Onyx, met with brokers and had disclosed confidential information to Onyx. As a result, Dare had not been afforded the protection that it would be expected to enjoy during the 12-month duration of Mr Hikmet’s non-compete covenant.
• An injunction was granted against Mr Hikmet to enforce the non-compete covenant for the full 12-month period (until 11 July 2025). The Court also granted a further month’s springboard relief in response to the advantage gained by Mr Hikmet's competitive activities. As such Mr Hikmet is restrained from taking up employment with Onyx until 11 August 2025.

What this means for employers

This case highlights that when an employee has been lawfully absent from a business prior to the termination of their employment, the court may not enforce the PTRs if it considers the business has been sufficiently protected during such time. This will obviously not be the case where the employee breaches their PTRs and competes during that period.

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 during the hearing. Their concern was that it would encourage a practice where employees would assert that they were 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. However, the decision does emphasise that the Court will thoroughly examine any alleged sickness to establish whether it is genuine (and the individual would need to provide valid contemporaneous medical evidence) so this is something that employers should also thoroughly test, by requesting evidence and where appropriate asking the employees to be assessed by occupational health.

Dare International Ltd v (1) Stephen Soliman (2) Ashley Hikmet