The Hedgehog Golf Company Ltd v Hauser

In this case, the Claimant, the Hedgehog Golf Company Limited, seeks a perpetual injunction restraining the Defendant, Mr Frank Hauser, from disclosing confidential information.

The Claimant’s business is the sale of a device known as a “hedgehog”. This device, which consists of a series of studs, is attached to the wheels of a golf trolley to enable golfers to play in wet conditions. The device is patented under number 1625027.

Until recently, Mr Hauser was a 50 per cent shareholder in, and a director of, the Claimant. The other shareholder and now sole director of the Claimant is Mr Denis Lantsbury.

In March 2009, Mr Lantsbury presented an “unfair prejudice” petition against Mr Hauser pursuant to section 994 of the Companies Act 2006. That petition came on for trial before Mr Gabriel Moss QC, sitting as a Deputy High Court Judge, in early 2010. On 12 March 2010, Mr Moss gave judgment in Mr Lantsbury’s favour. Mr Moss concluded (in paragraph 61 of his judgment) that Mr Hauser had “been responsible for a whole series of actions which are unfairly prejudicial to the interests of [Mr Lantsbury] as a member”. Mr Moss went on to refer (in paragraph 75) to Mr Hauser’s “attitude of blatant disregard for the truth, for the accuracy of public records, for the validity of company resolutions and for the rights of his fellow director”. Among the appropriate remedies, Mr Moss held, was “to allow [Mr Lantsbury] to purchase [Mr Hauser’s] share at a value to be agreed or, if necessary, to be established by the court after due enquiry” (paragraph 80).

Mr Moss’ judgment was, as is customary, circulated in draft a few days before it was handed down. Shortly after seeing it, Mr Hauser telephoned Mr Gary Baum, a consultant to the Claimant. In the course of this conversation, which took place on 9 March 2010, Mr Hauser put forward a proposal which he asked Mr Baum to pass on to Mr Lantsbury. Mr Hauser also told Mr Baum that, if his proposal were not accepted, he would not only decline to provide any further assistance in connection with a patent infringement claim which the Claimant had brought against Masters Golf Company (“Masters”), but would offer his services to the patent attorneys acting for Masters to assist them in their defence of the Claimant’s proceedings. Mr Hauser also warned that he would make it publicly known that the Claimant’s patent did not extend to the manufacture of wheels and that he would contact golf trolley manufacturers to offer his services in helping them to manufacture wheels.

When giving evidence, Mr Hauser denied that he had threatened to assist Masters. However, Mr Baum struck me as a reliable witness, and I accept his account of the 9 March telephone conversation. It is to be noted that Mr Baum recorded his recollection of the conversation in a witness statement the very next day. It is noteworthy, too, that Mr Hauser openly admitted during his evidence that he had in the past given untruthful evidence under oath.

On 10 March 2010, Mr Hauser sent Mr Lantsbury an email in which he referred to the fact that the offer he had outlined to Mr Baum had been rejected. Mr Hauser went on to say this:

“Gary [Baum] would have told you what I am contemplating, and while the first part is going to be done, I am reflecting on the proposed action against Masters. I have spoken to Carl [a solicitor at the firm handling the proceedings on behalf of the Claimant] and he is of the very strong opinion that I would be a very integral part of bringing the matter to a successful conclusion, you may have other views, but if you think my input could help cement the matter you will need to work out a deal that I could go along with. This is damage limitation from my point of view …. [M]ake no mistake the deal will have to be good one or I will go the other way. The balls in your court.”

In cross-examination, Mr Hauser said that the reference to the “first part” related to his resigning as a director. However, I agree with Miss Erin Hitchens, who appears for the Claimant, that this is not a plausible explanation of the words. There is no evidence from either Mr Baum or Mr Hauser himself that the latter had told Mr Baum that he was intending to resign, and no suggestion to that effect was put to Mr Baum in cross-examination. Moreover, as Miss Hitchens pointed out, when Mr Moss handed down his judgment two days later, Mr Hauser initially appeared to express commitment to the Claimant “as a director of the company”, and he made no reference to having indicated that he would be resigning.

As for the possibility that Mr Hauser would “go the other way”, he said in cross-examination that this referred to disclosing the “full facts” that led up to the litigation with Masters. It seems to me that, in the context, Mr Lantsbury was justified in interpreting the email as being (in Mr Lantsbury’s words) “a threat to engage in conduct that could financially damage the company if matters did not resolve themselves on terms favourable to him”.

When judgment was handed down on 12 March 2010, Miss Hitchens, who was at that stage representing Mr Lantsbury, drew Mr Moss’ attention to Mr Hauser’s 9 March telephone conversation with Mr Baum and his subsequent email to Mr Lantsbury. The question was raised whether Mr Hauser would give an undertaking as to his future conduct. Mr Hauser agreed to give an undertaking in relation to the period “whilst [he was] a director of [the Claimant]”, but he declined to give any undertaking as to what he would do when he was no longer a director. The transcript of the discussions includes these passages in particular:

“THE JUDGE: Are you willing to go as far as saying that if after you cease to be director, you want to approach manufacturers, you will not use any specialist knowledge acquired as a director of the company?

MR HAUSER: No, I am not in any way at all prepared. I think I have been harshly treated on this whole matter, and I will protect my own interests in the future as I see fit.

…

MR HAUSER: As a director of the company I am prepared to do all I can, as I have always done, for the company. The case that is being prepared at the moment against the Masters Golf Company, is the Hedgehog Golf Company against the Masters Golf Company, and I will take that to the nth degree as a director of the company, and fight till I die, for that to succeed …. But if I am not a director of the company, then all that is wrong, as far as I am concerned. The whole thing changes.

…

THE JUDGE: … Just to try and create some sort of civilised order, would you be prepared to undertake not to do anything after your directorship ceases, say for a period of seven days, so that if any application or injunction is going to be made, there is not an unseemly rush, you get proper notice, you have a chance of putting in evidence, and so on. That would be procedurally helpful, but I cannot force you to do that.

MR HAUSER: No, I don’t think I would. No.”

On 16 March 2010, Mr Hauser notified Companies House of his resignation as a director of the Claimant. Mr Hauser did not inform Mr Lantsbury or any other representative of the Claimant that he was resigning. It is fair to infer, I think, that one of Mr Hauser’s objectives, at least, was to free himself of the undertaking he had given on 12 March.

On 19 March 2010 Mr Hauser telephoned Mr Baum again and told him that Mr Lantsbury needed to come back to him with a financial offer “to stop [him] from offering [his] services to the other side”. Mr Baum explained in a witness statement of 29 March 2010 (which I accept):

“[Mr Hauser] also told me that he was out to destroy the company and would do as much as he could to damage the Hedgehog Golf Company, including approaching other golf trolley manufacturers to offer his services to help them to manufacture a trolley wheel. During the conversation he said that he knew that the company’s patent does not cover a manufactured wheel and he was going to make this public knowledge and set up directly with manufacturers to have a Hedgehog type wheel produced.”

On 23 March 2010, Mr Hauser sent Mr Lantsbury a further email. This read:

“Unless I have a positive response to my email to you of 10^th March by at the latest 5pm on Friday 25^th March, then my options are clear.”

On 29 March 2010, Mr Hauser telephoned Mr Baum and told him that he had arranged to meet Masters “to do a deal”.

At this stage, the Claimant applied without notice for, and was granted, an interlocutory injunction restraining Mr Hauser until 15 April 2010 from disclosing “any confidential information as to the practice, business dealings or affairs of the [Claimant] or any of the [Claimant’s] customers or clients”. The order provided for the “confidential information” to include, among other things, “confidential information relating to patent number 1625827 and all other research activities, inventions, secret processes, designs, formulae and product lines”. The reference to “patent 1625827” was intended to refer to the patent the Claimant holds for the “hedgehog”, but the patent number has been slightly misstated. The correct number is 1625027.

On 15 April 2010 Arnold J continued the injunction in similar, though not quite identical, terms until trial. Mr Hauser had been served with the relevant documents, but he was neither present nor represented at the hearing before Arnold J.

On 21 January 2011 Mr Hauser made a witness statement in support of patent proceedings issued by HUA Services LLP. The witness statement refers extensively to the application pursuant to which the Claimant’s patent was granted. I do not need to decide whether Mr Hauser thereby breached Arnold J’s order. It suffices to say that the making of the witness statement shows that Mr Hauser was willing to disclose information damaging to the Claimant regardless of whether doing so could breach Arnold J’s order.

Taking the evidence as a whole, it seems to me that the Claimant is well-justified in its concern that Mr Hauser, if not restrained by injunction, will disclose confidential information without the Claimant’s consent. He has in the past shown a “blatant disregard” for Mr Lantsbury’s rights; he has revealed an intention to destroy or damage the Claimant; he has made a number of threats, including to assist a party with which the Claimant is engaged in litigation; before Mr Moss, he declined even to confirm that he would not use “specialist knowledge acquired as a director of the [Claimant]”; he has shown a willingness to reveal information about the Claimant, to its prejudice, even at the risk of breaching Arnold J’s order.

In the circumstances, I shall grant a perpetual injunction to restrain Mr Hauser from improperly disclosing confidential information. I shall hear further submissions as to the precise terms of that injunction. As I have indicated to Miss Hitchens, my provisional view is that the injunction (which is to last indefinitely) should be rather narrower than those that have been granted on an interlocutory basis.