Those Who Don’t Jump Will Never Fly
There are two striking elements to the Court of Appeal’s decision in the case ofJump Trading International v Couture.
First, the case is an important challenge to the ubiquitous urban myth that a court will never uphold a restrictive covenant which lasts over 12 months. In fact, the reality is that the maximum period of restraint is fact sensitive and must be determined by reference to the employer’s legitimate interests, as the Jump Trading case neatly illustrates.
Mr Couture was employed by Jump Trading as a quantitative researcher in algorithmic trading. He was a senior employee who was on a 12- month notice period. When he resigned on 30 March 2022, Jump Trading exercised its contractual right to place him on garden leave. They also informed him that they would expect him to abide by the terms of his restrictive covenant which included a 12-month non-compete provision which started to run after the 12-month notice period expired (with no off-setting for time spent on garden leave).
"The first issue to be considered by the Court was whether the covenant was potentially enforceable. The Court recognised that the period of restraint was unusually long, but did not find that this was fatal to the enforceability of the covenant."
Mr Couture objected to this, believing the aggregate 2-year period of restraint to be unreasonable. On 12 July 2022, he informed Jump Trading that he would be joining a competitor when his notice period expired . There was an initial flurry of correspondence, with Jump Trading asserting that Mr Couture would be in breach of covenant if he joined a competitor. This culminated in a ‘final’ letter on the matter from Mr Couture in November 2022 where he made his intentions clear and repeated that he did not believe that he would be in breach.
Nothing then happened until 6 March 2023, when Jump Trading replied to Mr Couture’s previous letter to reiterate their view that he would be in breach if he joined a competitor. Jump Trading then applied for an injunction to prevent Mr Couture from working for the competitor. The proceedings were served on 14 April 2023, by which time Mr Couture had already started working for the competitor.
The first issue to be considered by the Court was whether the covenant was potentially enforceable. The Court recognised that the period of restraint was unusually long, but did not find that this was fatal to the enforceability of the covenant. Rather, they determined that the matter was fact specific and gave rise to a serious issue to be tried (which is one of the factors to be considered when deciding whether to grant an injunction). It is noteworthy that Jump Trading asserted that the confidential information surrounding the algorithms had a shelf life of 2 years. This would obviously need to be tested and evidence adduced, but if the argument held up then it would certainly seem to be possible that the 2-year restraint may be upheld at a full trial.
"This will leave businesses such as Jump Trading extremely vulnerable to their ‘secret sauce’ falling into the hands of their competitors. What do you think?"
Secondly, the case is illuminating in terms of the Court’s approach to the issue of delay in injunction cases. It seems that Jump Trading were in no hurry to push the button on legal proceedings. This is perhaps understandable in circumstances where Mr Couture remained their employee and was on garden leave. However, the Court described the delay as “stark”, highlighting that Jump Trading had first become aware of Mr Couture’s plans in July 2022. Indeed, the Court noted that it would have been open to Jump Trading to issue proceedings, get a speedy trial and have a final determination of the matter before Mr Couture started working for the competitor had they acted sooner. This would have done away with the need for an injunction application altogether. For this reason, the application failed (and an appeal to the Court of Appeal was unsuccessful).
Ultimately, this was a case where Jump Trading needed to jump to legal proceedings much more quickly. Their failure to do so meant that their case against Mr Couture never really took flight.
As ever, we’re interested in our readers’ views on this case, especially in the light of the government’s announcement that non-compete covenants are to be capped at 3 months post-termination. This will leave businesses such as Jump Trading extremely vulnerable to their ‘secret sauce’ falling into the hands of their competitors. What do you think?