Derma Med Limited & Anor v Dr Zack Ally & Ors

The first failure found by the judge concerned the making of the application without notice. The judge put it this way:

’18. … First, although it was logical to seek orders for preservation of devices and imaging orders without notice on the basis that notice of the application might prompt Dr Ally to destroy the evidence before it could be secured, the same logic did not apply to the orders restraining him from competing with Derma Med or from misusing confidential information. To date, in my judgment, no good reason has been identified for seeking those orders without notice. In my judgment, there was a duty to ensure that the judge was aware of that difference between the rationale for the different parts of the order and the fact that making the non-compete and confidentiality orders without notice was unusual to say the least.’

The judge referred to a passage in the textbook by Bloch & Brearley, Employment Covenants and Confidential Information (4^th Ed) at para 14.34:

‘Occasionally, the applicant will decide to seek some of the proposed relief without notice and the balance of the relief on notice, eg a confidentiality injunction and injunction restraining destruction of confidential or proprietary documents without notice followed up by a with notice application for delivery up of confidential or proprietary documents and interim enforcement of restrictive covenants … Making only certain elements of an application on a without notice basis is often a more proportionate and reasonable way to proceed than to seek the entirety of the relief without notice.’ (Underlining added).

Although the claimants’ skeleton argument before Mr Justice Constable had referred to this paragraph, it did not refer specifically to the words which I have underlined, which the judge considered would have alerted Mr Justice Constable to the lack of any reason to order enforcement of the restrictive covenants without notice to the defendants.

For the claimants, Mr Thomas Grant KC (who did not appear below) submitted that it was obvious to Mr Justice Constable that the application to him was being made without notice and that the claimants had drawn his attention to the cases making clear that this is an exceptional course for which good reason is required. He submitted that the claimants had given an explanation for seeking the injunction to restrain competition and to prevent a misuse of confidential information without notice, namely that Dr Ally should be held to his agreement not to compete at the earliest opportunity and before further damage was inflicted on Derma Med’s business. Accordingly, Mr Grant submitted that this should not be regarded as a failure of disclosure at all: the claimants had identified the test which they had to meet in order to obtain an injunction without notice, and the basis on which they said that they satisfied that test. Alternatively, if it was a failure, the judge was wrong to regard it as culpable and serious in circumstances where Dr Ally had not advanced any reason at the return date hearing why such an order should not be made against him.

For the defendants, Mr Adam Solomon KC emphasised the exceptional nature of a without notice application and the need for a clear justification for making such an application, confining the relief sought to that which can be justified as an exception to the basic principle of justice that an order should not be made against a party without giving him an opportunity to be heard. He cited the explanation given by Mr Justice Hoffmann in Re First Express Ltd [1992] BCLC 824, 828:

‘It is a basic principle of justice that an order should not be made against a party without giving him an opportunity to be heard. The only exception is when two conditions are satisfied. First, that giving him such an opportunity appears likely to cause injustice to the applicant, by reason either of the delay involved or the action that it appears likely which the respondent or others would take before the order can be made. Secondly, when the court is satisfied that any damage which the respondent may suffer through having to comply with the order is compensatable under the cross-undertaking or that the risk of uncompensatable loss is clearly outweighed by the risk of injustice to the applicant if the order is not made.’

Mr Solomon submitted, in effect, that the claimants ought to have told Mr Justice Constable that there was no justification for seeking without notice relief so far as the non-compete injunction was concerned and that their failure to draw the words which I have underlined from paragraph 14.34 of Bloch & Brearley to Mr Justice Constable’s attention was ‘extraordinary’, ‘culpable’, ‘significant’ and ‘cavalier’.

It is obvious that the claimants made a conscientious effort to comply with their duty of full and frank disclosure. As Mr Solomon accepted, they drew Mr Justice Constable’s attention to the requirement that a without notice application should not be made without a very good reason, citing a passage from the judgment of this court in Moat Housing Group-South Ltd v Harris [2005] EWCA Civ 287, [2006] QB 606 at [63]:

‘As a matter of principle no order should be made in civil or family proceedings without notice to the other side unless there is a very good reason for departing from the general rule that notice must be given. Needless to say, the more intrusive the order, the stronger must be the reasons for the departure. It is one thing to restrain a defendant from what would in any event be anti-social behaviour for a short time until a hearing can be arranged at which both sides can be heard. It is quite another thing to make a “without notice” order directing defendants to leave their home immediately and banning them from re-entering a large part of the area where they live.’

Having identified the test, the claimants then made a submission that they satisfied that test. The submission was, in effect, twofold: (1) that a without notice application was not only justified but necessary so far as the orders relating to Dr Ally’s devices and electronic accounts were concerned because of the real danger that, if given notice, he would take steps to destroy evidence; and (2) that a non-compete injunction without notice was justified for a short period until the return date because Dr Ally’s breaches of his obligation not to compete were already causing damage to Derma Med’s business which ought to be stopped without further delay. The first part of that submission was not challenged by the defendants. In my view the second part of the submission was a matter for Mr Justice Constable to evaluate. Some judges might have taken the view that notice of the application for the non-compete order ought to have been given, so that the application had to be made in two stages. Other judges could reasonably have considered that the delay inherent in requiring notice to be given when a without notice application was clearly justified in relation to the devices and electronic accounts, and when there would be a return date within a relatively short period in any event, would cause injustice to the claimants which could not be compensated by an award of damages – i.e. that this was the situation contemplated by Mr Justice Hoffmann in Re First Express Ltd in which an application without notice would be justified. It is evident that Mr Justice Constable took the latter view. He gave a careful judgment in which he set out in detail the principles applicable to the making of without notice orders, including the citation from Moat Housing which I have set out above, and was clearly alive to the need for such orders to be justified. He expressly took account of the fact that the restrictions would only apply for a short period until the return date, at which the defendants could be represented, and contemplated that the enforceability of the restraints, if challenged, could be finally decided in short order at a speedy trial. He recognised the evidential difficulties which the claimants would face in seeking to recover damages. I shall return to this point.

In these circumstances it seems to me that the defendants’ complaint is not so much that there was a failure of full and frank disclosure by the claimants, but that Mr Justice Constable was wrong to take the view which he did. The complaint of non-disclosure essentially comes down to the fact that the claimants did not tell Mr Justice Constable that according to a leading textbook it was often more proportionate and reasonable to seek to enforce a restrictive covenant by making an application in two stages than to seek the entirety of the relief in a single without notice application. In my judgment, however, there is nothing in this complaint. It is clear that Mr Justice Constable was aware of the need for a without notice application to be justified and took the view that it was. The fact that a textbook suggests that a different course will ‘occasionally’ or even ‘often’ be appropriate carries relatively little weight.

In my judgment, therefore, Mr Justice Bourne was wrong to characterise this as a failure of full and frank disclosure by the claimants, let alone a significant or culpable failure.

The second failure identified by the judge concerned the letter dated 31^st May 2023 suspending Dr Ally pending an investigation, which I have set out at [14] above. The judge said:

‘20. I also consider that the judge should have been shown the letter dated 31 May 2023, telling Dr Ally that the claimants wished to investigate allegations that he had taken cash payments, not properly responded to sales leads, failed to keep proper clinical records and ignored a client complaint and been disloyal by soliciting other senior employees to leave the business. That too would have led the judge to ask why it was thought necessary to restrain competition without notice.’

Mr Grant pointed out that although Mr Justice Constable had not been shown the suspension letter, he had been shown other correspondence, such as the claimants’ solicitors’ letter dated 13^th June 2023 referred to at [16] above, in which the claimants had expressed concerns that Dr Ally was divulging confidential information and enticing suppliers and employees away from Derma Med, together with the defendants’ solicitors’ reply dated 16^th June 2023 in which the claimants’ concerns had been characterised as paranoia (see also at [16] above). The claimants’ skeleton argument on the without notice application expressly drew attention to the point that the existence of correspondence between represented parties ‘is normally an indication that a “without notice” application is not justified’ (the claimants’ underlining), while going on to submit that this was not an important factor in the present case. In these circumstances, Mr Grant submitted that the suspension letter would have added little or nothing to the material to which Mr Justice Constable was referred.

Mr Solomon submitted that what was said in the suspension letter was critically different from the material which Mr Justice Constable was shown. That was because the suspension letter included allegations that Dr Ally had taken cash payments for treatments provided to clients and had failed to pass sales leads to Derma Med. Thus the claimants had made Dr Ally aware of the allegations against him and therefore had no justification for seeking without notice relief on the basis that to give notice would enable him to destroy evidence.

It is true that the suspension letter was somewhat more explicit than the letter dated 13^th June 2023 which was shown to Mr Justice Constable, in that it referred to Dr Ally having taken cash payments from patients. However, the letter dated 13^th June 2023 did identify a number of serious complaints against Dr Ally and expressly reserved the right to seek ‘urgent injunctive relief’ if the requested undertakings were not forthcoming. Accordingly it was expressly drawn to the attention of Mr Justice Constable that there had been correspondence between the parties in which Dr Ally was notified of complaints against him, including that he was engaged in setting up a competing business using Derma Med’s confidential information, and that an urgent application to the court for an injunction was a real possibility; the claimants also identified to Mr Justice Constable that this might be a reason not to proceed without notice. In these circumstances I accept the submission by Mr Grant that the suspension letter added little or nothing of substance and that there was no failure of full and frank disclosure by the claimants in this respect.

In any event I consider that the defendants’ submission misses the real point. An important justification for making the application without notice was the relatively recent discovery by the claimants that, despite the October Re-Set, Dr Ally had been systematically deleting direct messages (or ‘DMs’) sent to the ZA account, had changed the email address associated with the account so that emails from clients and potential clients went directly to him, had set up a separate ‘Zettle’ card machine account to enable him to take payments from clients, and had falsely told clients that Derma Med’s Zettle reader was not working as a pretext to have them pay in cash. These matters fully justified the application without notice for orders to preserve evidence. As I have already explained, it was then a matter for Mr Justice Constable to decide, applying the principles set out in authorities such as the Moat Housing case, whether it was appropriate to make the further orders without notice to the defendants. The limited further information in the suspension letter was not material to that decision.

Again, therefore, I consider that Mr Justice Bourne was wrong to characterise the failure to draw the attention of Mr Justice Constable to the terms of the suspension letter as a failure of full and frank disclosure, let alone a serious or culpable one.

The order which the claimants obtained from Mr Justice Constable required the defendants to ‘keep confidential all Confidential Information (as defined in Schedule B) and not use it either for their own benefit or for the benefit of third parties’. Schedule B defined ‘Confidential Information’ as follows:

‘all confidential or proprietary information (however recorded, preserved or disclosed) including but not limited to:

(i)

any information that would reasonably be regarded as confidential relating to the Business, affairs, customers, clients, suppliers, plans, intentions, or market opportunities of the Company or of the Second Applicant or the Second Applicant’s Group, all the operations, processes, product information, know-how, designs, trade secrets or software of the Business, the Company or of the Second Applicant or the Second Applicant’s Group; or

(ii)

any information or analysis derived from Confidential Information.’ (Underlining added.)

There was then an exception for information to which the definition did not apply.

The definition in Schedule B, including the words which I have underlined, tracked the definition of ‘Confidential Information’ in the sale and purchase agreement. However, the defendants submitted that the inclusion of the underlined words rendered the order uncertain and too wide. The judge said this:

‘21. A further failure has been accepted by Mr Siddall KC today. He appeared for the claimants below. He represents them again today, leading Tim Matthewson. The definition of confidential information, which was used in all of the operative provisions of the injunction other than the non-compete injunction, was hopelessly wide. It used the phrase ‘including but not limited to’, which was disapproved in Caterpillar Logistics Services (UK) v de Crean [2012] EWCA Civ 156, [2012] IRLR 410 at paragraph 68. It depended on a judgment being made as to what was reasonably regarded as confidential. And it extended far too widely to any information relating to the business affairs and customers of Derma Med or the Athena Group. There was a failure to draw the judge’s attention to the unsuitability of that provision or the authorities which were relevant to it. Mr Siddle has today accepted that he fell into error in that regard.’

Mr Grant accepted that the terms of the injunction were too broad and ill-defined. He submitted, however, that seeking an injunction in these terms did not amount to a failure of full and frank disclosure in circumstances where the definition of ‘Confidential Information’ in the order was taken from the parties’ agreement and sought to do no more than enforce by injunction the contractual promises which Dr Ally had made; and where Mr Justice Constable had been taken through the language of the injunction and was satisfied that it was appropriate. Indeed, he had commented in his judgment that ‘the restraint against misuse of Confidential Information appears narrowly drawn’. Mr Grant pointed out also that the width of the injunction appeared to have caused Dr Ally no prejudice, and that the complaint had only emerged with any clarity in the defendants’ skeleton argument for the return date hearing.

Mr Solomon submitted that it had been conceded by the claimants before Mr Justice Bourne that there had been a failure of full and frank disclosure in this respect and that the claimants should not be permitted to resile from this concession. In any event, the concession was correct and the injunction sought was indeed ‘hopelessly wide’, as explained by Lord Justice Stanley Burnton in the Caterpillar case:

‘68. I add that the form of interim relief sought by CLS is hopelessly wide and vague. It does not specify the confidential information to be the subject of restriction with any certainty, but simply describes it as “all or any confidential information acquired by the respondent during her employment with [CLS] in whatever form”. Paragraph 10 of CLS’s Particulars of Claim does attempt to identify some of the confidential information it seeks to protect. I say some, because the allegation is that the respondent had access to the identified information “in particular, but not limited to” the listed information. …’

I would accept that, whatever the terms of the parties’ agreement, an injunction should not have been sought in terms which left uncertain the scope of the information which it was sought to protect. In particular, the words ‘including but not limited to’ are indeed too wide as they do not enable the defendant to understand the full scope of the information which he is restrained from using or divulging, while the words ‘that would reasonably be regarded as confidential’ require an exercise of judgment on which views may well differ, leaving the defendant at risk of contempt proceedings if he gets the judgment wrong.

As Mr Nicholas Siddall KC, counsel then appearing for the claimants, expressly accepted that there had been a want of full and frank disclosure in failing to draw the attention of Mr Justice Constable to the problems inherent in the use of these words, together with the consistent requirement in the authorities that ‘any injunction must be capable of being framed with sufficient precision so as to enable a person injuncted to know what it is he is to be prevented from doing’ (Lawrence David Ltd v Ashton [1989] IRLR 22 at [34]), I would not permit the claimants to resile from that concession. I need not decide whether it was correct. However, I regard Mr Siddall’s frank acceptance of the point once it was clearly raised as a point in the claimants’ favour rather than the reverse.

There is, moreover, considerable force in Mr Grant’s point that once the problem was clearly explained, it was accepted by the claimants, and that the width of the injunction had caused no prejudice to the defendants in the meanwhile. Although Mr Solomon submitted that the width of the definition of ‘Confidential Information’ had infected other provisions of the order made by Mr Justice Constable because of the way that those other provisions referred to Confidential Information, that was a matter which, if it had caused any real as distinct from theoretical problem, could easily have been sorted out. The fact that it was only raised so late, in the defendants’ skeleton argument for the return date hearing, suggests that it was something of an afterthought. Indeed, Dr Ally had indicated that he was prepared to offer suitable undertakings as to confidentiality, although he had never specified the terms in which he was prepared to do so and in the event no such undertakings were given.

Accordingly, while I would hold that this was a failure of full and frank disclosure, it was clearly not deliberate and was of relatively limited significance. A sense of proportion was needed.

The final criticism of the claimants’ disclosure upheld by the judge concerned the withholding of the final instalment of the first Earn-Out Payment. The judge said this:

‘22. I also consider that the judge’s attention should have been drawn to the fact that the first claimant had failed to pay a large sum due to Dr Ally under the SPA and was not suggesting that it had any defence to liability other than a possible set-off, which on the face of it was barred by a term of the contract. Whether or not the claimants should at that point have anticipated that the defendant would purport to repudiate the SPA, causing restrictive covenants potentially to fall away, and should have drawn that possibility to the judge’s attention is more debatable. But where discretionary remedies were being sought, and in a case where a picture was being painted of unlawful conduct by Dr Ally, I consider fairness demanded that the court be told about that non-payment.’

Mr Grant submitted that the claimants did draw to Mr Justice Constable’s attention the fact that Dr Ally’s position was that Athena owed him substantial sums of money under the sale and purchase agreement, so that Mr Justice Bourne’s real criticism was that the claimants did not explain that their only defence to the defendants’ demands for the balance of the Earn-Out Payments was a set-off defence which was barred by the terms of the sale and purchase agreement. As to this, Mr Grant submitted that this was an invalid criticism in two respects. The first was that the claimants had other defences as a result of Dr Ally’s own breaches of the sale and purchase agreement. The second was that, on its true construction, the ‘no set-off’ clause in the sale and purchase agreement did not apply. The important point, therefore, was that the claimants did bring to Mr Justice Constable’s attention the fact that the defendants’ case was that Athena was in default under the sale and purchase agreement, but they were not obliged to concede that point when (at least arguably) they did have a defence.

Mr Solomon submitted that the claimants had never explained that they had failed to pay the Earn-Out instalment despite admitting, in their letter dated 13^th April 2023 that ‘the conditions in respect of the Earn Out have been met’ and that the only reasons given for not making the payment were a defence of set-off and the need for a short-term cash injection (see at [15] above).

In my judgment the claimants failed to disclose to Mr Justice Constable, and Mr Grant was unable to suggest otherwise, any of the following matters: (1) that they had accepted in correspondence that the conditions entitling the defendants to the Earn Out payment had been satisfied; (2) that the sale and purchase agreement contained a ‘no set-off’ clause which, at least arguably, precluded any defence of set-off; and (3) that the claimants had so far indicated no other defence to a claim for the final instalment of the Earn Out payment. Those matters ought to have been disclosed, as on the face of things, the claimants were withholding some £633,000 which was due to the defendants. It would then have been open to the claimants to advance whatever arguments they saw fit to explain why, on a true analysis and contrary to what they appeared to have accepted, the payment was not in fact due, or they were entitled to set it off against their claim against the defendants despite the ‘no set-off’ clause in the sale and purchase agreement.

I consider, therefore, that the judge was entitled to regard this as a culpable, albeit not deliberate, failure of disclosure by the claimants.

Mr Solomon submitted that there were other failures of disclosure by the claimants, but as I read the judgment (see at [23] above), Mr Justice Bourne expressly declined to reach any conclusion about these and there is no Respondents’ Notice in this regard. I therefore propose to say nothing further about these other allegations.

So far, I have held that (1) the judge’s conclusions that there were significant and culpable failures of disclosure in the first two respects which he identified were not reasonably open to him, but (2) that he was entitled to conclude that the claimants failed to some extent in their duty of full and frank disclosure in the remaining two respects. As his decision that the injunction granted by Mr Justice Constable had to be set aside was based upon what he described as the claimants’ ‘overall serious failure’, consisting of all four of the failures which he found established, it is necessary to consider the matter afresh.

Applying the principles which I have set out at [29] to [31] above, I have no doubt that the injunction should not have been set aside. The following points appear to me to be particularly significant.

First, as Mr Justice Constable rightly held, there was on the evidence before him a strong prima facie case that Dr Ally had committed significant breaches of his obligations under the sale and purchase agreement, and had taken extensive steps to conceal his wrongdoing. That view was confirmed, rather than dispelled, by Dr Ally’s evidence at the return date hearing, which included material admissions. In view of the position of Dr Ally, whose reputation represented a significant element of the value of the Derma Med business for which he and his wife had been paid over £10 million, the restraint on competition for a period of two years was an important aspect of the parties’ contractual bargain. The defendants have not suggested that this restraint was unreasonably wide or otherwise unenforceable.

Second, although the defendants made various criticisms of the claimants’ disclosure to Mr Justice Constable, nothing they said suggested that the grant of an injunction was wrong in principle. On the contrary, leaving aside the failures of disclosure, an injunction was clearly appropriate. As to those failures, the width of the definition of ‘Confidential Information’ could and should have been dealt with by a tighter definition (as indeed the parties have now agreed at our request following the announcement of our decision at the conclusion of the appeal hearing), while the failure to disclose in respect of the Earn Out payment was not such, in my view, as to cast doubt on the appropriateness of an injunction.

Third, although the starting point is likely to be that an injunction should be set aside and not renewed when a failure of disclosure is substantial or deliberate, that is only the starting point. Here, the failures of disclosure were not deliberate, as the judge accepted in relation to all four of the failures which he found established, and in my view they were relatively insubstantial when the case is viewed in the round. As the authorities make clear, it is necessary to keep a sense of proportion and to consider also whether some measure short of setting aside an injunction which is otherwise well justified can appropriately be used to mark a failure of disclosure which is not deliberate. The judge did not consider this question.

For these reasons I would hold that the injunction granted by Mr Justice Constable should not have been discharged. I would invite brief written submissions on whether and how the limited failures of disclosure which I have found to be established should be reflected in an order for costs.

Although I have considered the complaints of non-disclosure which the judge found to be established, in a sense they are of only limited relevance, bearing in mind that the injunction granted by Mr Justice Constable was due to expire in any event at the return date hearing. That hearing was the occasion for the court to consider whether any relief was appropriate going forward, and this question fell to be considered in any event, regardless of whether any failures of disclosure were established. In some cases a failure of disclosure at the without notice stage will itself mean that an injunction should be set aside and no fresh injunction should be granted for the future. But that was not the judge’s approach in this case. Although he considered, mistakenly in my view, that the injunction granted by Mr Justice Constable should be set aside, he did not consider that the claimants’ disclosure failings meant in themselves that no fresh injunction should be granted. Instead he considered that question on its merits.

As I have already explained (see at [25] above), the two reasons why he declined to grant a fresh injunction were that Dr Ally had ‘gone on record’ as saying that he would not compete with Derma Med or use its confidential information, and that damages would be an adequate remedy for the claimants. Accordingly it is this reasoning which must now be considered.

Mr Grant submitted that the reasons given by the judge were wrong in principle. First, Dr Ally had not ‘gone on record’ as saying that he would not compete with Derma Med or use its confidential information, any such statement being somewhat elusive. But in any event, such a statement would carry little or no weight. Second, although the judge had given as a reason for concluding that damages would be an adequate remedy the fact that Dr Ally would be good for the money, he had failed to have in mind the principal reason why damages are in general not an adequate remedy for breach of a promise not to compete, namely the evidential difficulties to which such a claim gives rise.

Mr Solomon submitted that the judge’s decision was within the scope of his discretion and that there is no proposition of law that damages can never be an adequate remedy in such cases.

I would accept Mr Grant’s submissions summarised above that the judge’s decision was wrong in principle.

In the light of the strong prima facie evidence of Dr Ally’s dishonesty, including the facts that he had given a similar assurance at the time of the October Re-set which had proved to be valueless and that he had dismissed the claimants’ legitimate concerns as mere ‘paranoia’, any statement that he had no intention or desire to compete with Derma Med would be of very doubtful value. On the contrary, now that his connection with Derma Med was severed, and he was asserting that he was no longer bound by the covenant not to compete, there was a very real risk that, unless restrained, he would continue to do so. In such circumstances, the claimants would face considerable difficulties in proving their case, as 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. …’

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 will generally mean that they are not. As Lord Justice Underhill explained in Sunrise Brokers LLP v Rodgers [2014] EWCA Civ 1373, [2015] IRLR 57:

‘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.’

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 688:

‘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”.’

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 non-compete 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.

The judge did not consider these matters at all and his decision is therefore flawed. Once they are considered, it is in my judgment clear that an injunction and not damages was the appropriate remedy.

Finally, Mr Solomon challenged the judge’s conclusion that there was a serious issue to be tried on the merits. He submitted that we should decide now, in the defendants’ favour, that the claimants’ withholding of the final instalment of the first Earn Out payments was a repudiatory breach of the sale and purchase agreement, which the defendants had been entitled to accept as terminating the agreement, with the consequence that they were released from any further obligation not to compete with the claimants.

However, I would accept the submission by Mr James Kinman, junior counsel for the claimants, that this is not an issue suitable for summary determination. The judge was right to find that the question of repudiation raises a triable issue.

It was for these reasons that I joined in the decision to allow the appeal, to grant an injunction against competition until 24^th March 2024, and to restrain use of the claimants’ confidential information until trial.