Tradition Financial Services Ltd v Andrea Gamberoni and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Foskett |
| Judgment Date | 12 April 2017 |
| Neutral Citation | [2017] EWHC 768 (QB) |
| Docket Number | Case No: HQ17X00155 |
| Court | Queen's Bench Division |
| Date | 12 April 2017 |
[2017] EWHC 768 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon Mr Justice Foskett
Case No: HQ17X00155
Daniel Oudkerk QC and Amy Rogers (instructed by Mayer Brown International LLP) for the Claimant
Jonathan Cohen QC and Craig Rajgopaul (instructed by Reed Smith LLP) for the Defendants
Hearing dates: 13, 14, 15, 16 and 20 March 2017
Introduction
The reality is that this is a dispute between two inter-dealer brokers. The Claimant (C) and the 2 nd and 3 rd Defendants (D2 and D3) are inter-dealer brokers.
The 1 st Defendant (D1) worked for C until towards the end of October 2016, but is now employed by D2 (which is part of the D3 group). The principal issue is whether he is entitled to work for D2 before the end of a "non-compete" clause in the contract of employment between him and C which, if lawful, would preclude him from doing so until 1 May 2017. There are other issues connected with the basis upon which he might work for D2 in the meantime if the non-compete clause was held to be invalid. Hereafter I will refer to the defendants other than D1 as 'D'.
An inter-dealer broker ('IDB') acts as an intermediary between major dealers to broker or facilitate inter-dealer trades. One of the markets in which C and D are involved is the energy (or power) market where the supply of energy (e.g. electricity) is traded. An IDB in this field brokers deals in energy and energy-related physical and derivative products (including electricity) and exchange-traded futures and options.
Where a client approaches an IDB, any party with which that client becomes linked contractually following the introduction by the broker is known as the "counterparty". The effectiveness of an IDB depends to a large extent on what is termed the "liquidity" of its position. This was described by Mr Michael Anderson (see paragraph 33 below) as "how easily a broker can find a counterparty for a particular transaction". The greater the number of potential counterparties that at any one time an IDB can contact at the largest spread of prices, the greater its liquidity.
In Tullett Prebon Plc v BGC Brokers LP & Ors [2010] EWHC 484 (QB), Jack J, during a lengthy case, had an unrivalled opportunity to gain an understanding of the way in which the IDB world operates. I will not extend this judgment by repeating it, but [11] – [20] of his judgment is, in my respectful view, a very helpful and lucid account of the way this world functions. He refers to the concept of "liquidity" in [12] and the way that a "desk" operates in [12] – [15]. One matter not dealt with in that case (because it was not a case dealing with energy or power brokers) is what I will call for this purpose "the Trayport facility". I will refer to its potential relevance later (see paragraphs 25–31).
D1, who is an Italian national, was assigned as a "Junior Broker" to C's "Italian power desk" (also known as the "Italian/Iberian power desk") although that did not confine him exclusively to trading in Italian power products. On 1 July 2016 he gave C notice under his contract and told them that in due course he would be going to work for D. The focus of the case is on the question of when and in what circumstances he could lawfully commence working for D.
In circumstances to which I will refer, D1 started working for D on the European Power Desk on 3 January 2017, no notice of his intention to do so having been given to C. When C discovered the position a few days later, certain limited undertakings were given on behalf of D1 in correspondence which were not acceptable to C and an application for an interim injunction was made on 13 January 2017 which came before Soole J on 20 January 2017. That application was resolved on the basis of wider undertakings than previously given and that there would be an expedited trial.
It was the expedited trial that came on before me commencing on 13 March 2017.
D's primary case is that a post-termination restriction ('PTR') of three months' duration would have been all that was reasonably necessary for the protection of any legitimate interests that C might have and that there are, in any event, other features of the PTRs in the contract that render them unenforceable. If, contrary to those positions, the PTRs are prima facie enforceable, it is argued that the court's discretionary jurisdiction should be exercised to enable D1 to start work again for D2 immediately.
The contractual position
There is a much wider narrative to this case than merely the contractual position as between C and D1, but it is that contractual position that needs to be set out first.
As from 25 September 2013 D1 was employed by C as a trainee broker. The contract under which he was appointed a "Junior Broker" and which is material to this case was dated 20 October 2014, the "effective date" of the contract being 1 November 2014. Subject to the relevant termination provisions (see paragraphs 13 and 14 below), the contract was for an "Initial Term" of two years and was then automatically renewable for successive one-year periods ("Subsequent Terms") thereafter unless either party gave notice as follows:
"Either party may terminate this Contract by giving written notice … to the other, to be received between 90 and 120 days prior to the expiration of the Initial Term or any Subsequent Term. Provided due notice is given in that time period, the written notice will expire on the last day of the Term applicable when notice is given …."
There were various provisions requiring D1 to devote his time loyally to C and the following provisions concerning confidentiality and company property:
"4.1. During the course of your employment you will have access to and be entrusted with confidential information relating to the business of [C] and its Group companies. This may include but not be limited to details of corporate strategy, business development, business methods and processes, database systems, revenue flows, current planned transactions, names of clients, customers and terms of business.
4.2 You may not during your employment (except in the proper performance of your duties) or after its termination use or disclose such information to any person, firm or company not authorised to know it. This will not prevent you using or disclosing information if ordered to do so by a court of law or if authorised by [C] or if such information has become public knowledge otherwise than by unauthorised disclosure.
4.3 Before the end or upon the termination of your employment you should deliver up to [C] (or as it may direct) all original and copy materials, equipment, documents and other property belonging to [C] or its Group companies and which are in your possession or under your control. You may not nor may any person on your behalf retain copies of any documents or other copiable property. You will if requested provide [C] with a signed statement confirming your compliance with this section."
The PTRs, which are the central feature of the present dispute, were as follows:
"14.1 You agree that during your employment and for the periods set out below after its termination (but, if you are suspended for a period in excess of three months during which you are not required to attend for work pursuant to clause 12.5(b), the period of the covenant in clause 14.1(a) shall be reduced by one day for each day of suspension in excess of three months), you will not (except with [C's] prior written consent) directly or indirectly do or attempt to do any of the following:
(a) for 6 months undertake, carry on or be employed, engaged or interested in any capacity in either any business activity which is competitive with Relevant Business within the Territory, or any business activity an objective or anticipated result of which is to compete with Relevant Business within the Territory;
(b) for 6 months entice, induce or encourage a Client to transfer or remove custom from [C] or any Group company;
(c) for 6 months solicit or accept business from a Client for the supply of Competitive Services;
(d) for 6 months give advice or provide services with a view to assisting or enabling another person, company or other business entity to solicit business from a Client for the supply of Competitive Services;
(e) for 6 months entice, induce or encourage an Employee to leave or seek to leave his or her position with [C] or any Group company for the purpose of being involved in or concerned with the supply of Competitive Services or a business which competes with Relevant Business or which plans to compete with Relevant Business, regardless of whether or not that Employee acts in breach of his or her contract of employment with [C] or any Group company by so doing; or
(f) for 6 months employ, engage or work with an Employee for the purpose of the supply of Competitive Services.
14.2 For the purpose of this clause 14:
(a) "Client" means a person:
(i) who at any time during the Relevant Period was a client of [C] or any Group company (whether or not goods or services were actually provided during such period) or to whom at the expiry of the Relevant Period, [C] or any Group company was actively and directly seeking to supply goods or services, in either case for the purpose of Relevant Business; and
(ii) with whom you or an Employee engaged in Relevant Business reporting directly to you had dealings at any time during the Relevant Period or about whom you or such an Employee were in possession of confidential information in the performance of your or their...
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