Case No. KB-2025-003035 - [2025] EWHC 2654 (KB)

Mr Marchant and Mrs Hampton submitted that damages will be an adequate alternative remedy for any breach which a trial judge might determine to have been committed. They submitted that it is well established that in cases where the remaining restrictive period is particularly short at the stage of interim relief, the Court will have good reason to consider damages to be an adequate remedy. Their written submissions refer in general terms to Phoenix Partners Group LLP v Maurice Asoyag [2010] EWHC 846.

However, the Court of Appeal has recently held in Derma Med Limited v Ally [2024] EWCA Civ 175:

“75.

[A]s Mr Justice Constable had recognised in his judgment when granting the without notice injunction:

'27.  The Claimant points to the following factors which demonstrate that damages would not be adequate. First, it is likely to be problematic to identify and quantify the loss to the Claimant which is attributable to D1's wrongdoing. Whilst this may be less likely in respect of the use of the Zettle machine (although this might depend if it was being used for some legitimate purpose as well), this point clearly has force where, as here, the evidence suggests that cash has been taken. Second, the Claimants would face a number of evidential problems, including how to prove that the loss of a client was due to Dr Ally's misuse of Confidential Information or rather than for other reasons; and how to prove that the departure of a client was due to the Defendants' actions (and not something else). Knock-on consequential losses because even further difficulty. …'

76.

Although it is not a rule of law that damages can never be an adequate remedy for breach of a covenant not to compete, the cases have recognised that the factors identified by Mr Justice Constable generally mean that they are not”.

The Court of Appeal, at para 76, cited the judgment of Underhill LJ in Sunrise Brokers LLP v Rodgers [2014] EWCA Civ 1373, [2015] IRLR, para 57 which states:

“53.

… In a case of this kind there are evident and grave difficulties in assessing the loss which an employer may suffer from the employee taking work with a competitor; even where it is possible to identify clients who have transferred their business (which will not always be straightforward, particularly where the new employer is outside the jurisdiction) there may be real issues about causation and the related question of the length of the period for which the loss of the business could be said to be attributable to the employee’s breach. … There may be other intangible but real losses to the employer’s reputation. I do not say that there may not be particular cases in which relief should be refused on the basis that damages are adequate remedy –-Mr Craig referred us to Phoenix Partners Group LLP v Asoyag [2010] EWHC 846 (QB), [2010] IRLR 594 - but unless a specific case to that effect was explicitly advanced, the judge was in my view fully entitled to proceed on the assumption that injunctive relief was the appropriate remedy”.

The Court of Appeal went on to hold at para 77 as follows:

“Even more fundamentally, an injunction will generally be the appropriate remedy to enforce a lawful negative covenant on the straightforward basis that this is what the parties have bargained for. As it was put in D v P [2016] EWCA Civ 87, [2016] ICR:

‘15. The substantive effect of the defendant’s opposition to the claim for injunctive relief was to ask the court to release him from this contractual restraint so that he could be free to take up immediate employment with the very type of competitor in respect of whom the restraint was intended to apply. Had the claimant made an alternative claim for damages for breach of the restriction (which it did not), it might be said that he was not substantively seeking a total release from the restraint since he would or might still be exposed to a claim for damages for its breach. But in cases such as this damages are not what an employer wants. The damage potentially sufferable by a covenantee such as the claimant by a breach of the relevant restraint will usually be unquantifiable and will rarely, if ever, provide the covenantee with an adequate substitute for an injunction. That is what the judge said about a remedy in damages in this case.

16.

Why, therefore, in circumstances such as these, should the court's approach to the claimant's claim be other than one reflecting a firm recognition that the remedy to which it ought prima facie to be entitled is an injunction? As Lord Cairns LC said in his well-known dictum in Doherty v Allman (1878) 3 App Cas 709, at 720:

‘If parties, for valuable consideration, with their eyes open, contract that a particular thing shall not be done, all that a Court of Equity has to do is to say, by way of injunction, that which the parties have already said by way of covenant, that the thing shall not be done; and in such a case the injunction does nothing more than give the sanction of the process of the Court to that which already is the contract between the parties. It is not then a question of the balance of convenience or inconvenience, or of the amount of damage or of injury – it is the specific performance, by the Court, of that negative bargain which the parties have made, with their eyes open, between themselves’.

17.

That statement is bottomed in the recognition of a basic principle of which sight should not readily be lost, namely that contracting parties should ordinarily be held to their bargain, which is all that the claimant was asking for by claiming the injunction that it did.

18.

That said, I do not lose sight of the also basic principle that an injunction, like all equitable remedies, is a discretionary remedy which will not be granted as a matter of course. In his review of the authorities in Insurance Co v Lloyd’s Syndicate [1995] 1 Lloyd’s Rep 272, 276-277 (under the heading ‘The availability of a permanent injunction’) Colman J correctly recognised this in his conclusion that negative covenants will generally be enforced without proof of damage but that:

‘Although absence of damage to the plaintiff is not in general a bar to relief, there may be exceptional cases where the granting of an injunction would be so prejudicial to a defendant and cause him such hardship that it would be unconscionable for the plaintiff to be given injunctive relief if he could not prove damage. In such cases an injunction will be refused and the plaintiff will be awarded nominal damages’.’

78.

Although D v P was a case of a final injunction after a trial, and the adequacy of damages is a relevant consideration at the interim pre-trial stage when a court is considering the balance of convenience, it nevertheless remains the case that what an employer, or in the present case the purchaser of a business, has bargained for is not an uncertain and evidentially difficult remedy in damages, but the opportunity to develop its business free of competition from the defendant during the currency of the noncompete obligation. That factor has all the greater weight when a significant element of the value of the business is attributable to the reputation of the vendor himself, here Dr Ally”.

Applying the approach in Derma Med, I accept that the claimant faces the loss of longstanding clients which it has worked over many years to obtain. I do not therefore accept the specific submissions of the defendants that the assessment of damages is quantifiable in the sense that it would amount to a loss of a few months’ fees. That unrealistic submission fails to capture wider factors identified by Underhill LJ in the Sunrise case as recently adopted in Derma Med.

I conclude that damages are not an adequate remedy.