Seatreiver International Holdings Ltd v Daly & Anor

In this case the existing claimant and applicant, Seatriever for short, together with the proposed additional claimants, Illoom Balloon Limited and Illoom Balloon USA LLC, seeks interim injunctive relief against the intended additional defendants and respondents, Sun Bay, Jupiter Light and Mr Stieler for short, including a 12-month springboard injunction. Whilst the respondents consent to being joined into the proceedings and do not object to interim injunctive relief being ordered against them as regards their alleged – although disputed - misuse of confidential information, they do object to the springboard injunction and to certain of the ancillary orders sought as regards the disclosure of information. Neither the existing defendants nor the respondents object to the joinder of the additional claimants.

Because the case concerns confidential information, part of the hearing was held in private and other orders have been made to ensure that the claimants’ confidential information is not prejudiced.

The application was made on 25 June 2018. It was supported by the third witness statement and the confidential fourth witness statements of Mr Andrew Vickerstaff, Seatriever’s in house lawyer and by the second witness statement of Mr Paul Radford, Seatriever’s head of finance. It was also accompanied by a draft amended claim form and draft particulars of claim setting out the claimants’ case against the respondents.

Because the respondents are two Danish companies and a Danish individual respectively it was necessary for them to be served out of the jurisdiction. Due to difficulties with service the original hearing date of 1 August 2018 had to be vacated and relisted for 10 September 2018. The time allowed was insufficient and the hearing was adjourned part heard to 12 September 2018, with this judgment being circulated in draft prior to 17 September 2018 being the date listed for judgment to be handed down.

The time allowed was insufficient because there was a dispute about the validity of service which had to be determined first and also because in response to the first witness statement of Mr Stieler made on 31 August 2018 in response to the application the claimants served a substantial fifth witness statement from Mr Vickerstaff made on 6 September 2018 and a further sixth witness statement made on 7 September 2018. Although the respondents did not object to the claimants relying on those witness statements nor did they seek an adjournment Mr Budworth did make certain responses to some of their content on instructions and, prior to the resumption of the hearing on 12 September 2018, Mr Stieler made a second witness statement and Mr Vickerstaff made a seventh witness statement on 11 September 2018, both of which were put in evidence without objection by the other side.

I am grateful to the claimants’ solicitors for the preparation of the five files containing the evidence and to the respondents’ solicitors for their cooperation in that process. I pay tribute to both Ms Pennifer for the claimants and Mr Budworth for the respondents for their skilful deployment of their respective clients’ cases. There was no appearance by or on behalf of the existing defendants, Mr Daly and his company AMTD Consultants (Seatriever having already discontinued as against the original second defendant Mrs Daly) with whom the claimants had already reached agreement so far as this application is concerned.

I begin by saying something about the parties and the business in which they are engaged. The claimants are part of a group business, founded and predominantly owned by Mr James Haliburton and now a successful business operating worldwide predominantly in the supply of illuminated party balloons which it markets under the brand name “ILLOOMS”. It has a number of major retail clients both in the UK and USA as well as in Europe and elsewhere, typically large supermarket chains. It also has a number of distributors of its products. The corporate respondents are also part of a group business, founded and solely owned by Mr Stieler and, since 2011 - 2012, one of the claimants’ major competitors in the illuminated party balloons business, also supplying illuminated party balloons under various brand names including “WAKADABALLOON” and “Q-LITE”. It appears from the evidence that until 2011 there had been a cooperative relationship between the two businesses in which one of Mr Stieler’s companies manufactured balloons for the claimants but in 2011-2012 the relationship came to a fractious end with the claimants transferring to another manufacturer and the respondents beginning to manufacture and sell their rival products. Since that time there has been a history of dispute and litigation between the respective businesses which, fortunately, it is not necessary for me to investigate or detail for the purposes of this judgment.

The existing claim was launched in June 2017 against Mr Daly, who had been Seatriever’s global sales director, raising allegations of breach both prior to his departure in March 2017 and subsequently, the latter alleging breach of contractual post termination restraints and misuse of confidential information. Seatriever obtained interim relief on a without notice application on 12 June 2017 which was continued thereafter. Directions were given with a view to a trial taking place in July 2018. At this stage none of the allegations made concerned or involved the respondents in any way. However, as a result of disclosure given by Mr Daly over the period from late March to late May 2018 it was discovered that Mr Daly had been in contact with the respondents in April, May and early June 2017 offering to provide them with confidential information relating to the claimants and to act as their consultant in undertaking business competitive with the claimants.

It was as a result of this discovery that the claimants wrote a detailed letter before action to the respondents on 4 June 2018 setting out their case against the respondents and seeking undertakings in substantially the same form as now claimed. The response from Mr Stieler dated 8 June 2018, which the claimants castigate as wholly inadequate as a response, simply stated that: “I don’t recognise these claims you make in your mail and of course can’t sign anything”. It was following that response that the instant application was produced and issued.

Subsequent to the issue of the application, Mr Daly made his seventh witness statement on 6 July 2018 in order, as he put it, to “clarify my actions following the termination of my employment with the claimant on 17 March 2017 [and] … to explain my dealings with … [the respondents]”. Although the claimants do not accept that Mr Daly has still fully come clean as to the full extent of his actions they do rely upon this witness statement in conjunction with the disclosed documents in support of its case against the respondents.

It is, unsurprisingly, common ground that the principles established in American Cyanamid v Ethicon Ltd [1975] AC 396 apply. I must be satisfied that the claim for relief is not frivolous or vexatious, in other words that there is a serious issue to be tried. If there is a serious issue to be tried, I must consider whether damages would be an adequate remedy on either side if the relief is refused or granted and consider where the balance of convenience lies.

It is also common ground that in relation to springboard injunctions the relevant principles are helpfully and conveniently summarised in the judgments of Haddon-Cave J in QBE Management Services (UK) Ltd v Dymoke [2012] EWHC 80 & 116 respectively, to which I have been referred and have regard.

Since in QBE Haddon-Cave J was considering the position at the conclusion of an expedited trial it was unnecessary for him to consider how the applicable principles should be applied in the context of an interim injunction where the facts are disputed. That was, however, considered by Arnold J in Vestergarard Frandsen A/S v Bestnet Europe Ltd [2009] EWHC 1456 (Ch) where, having reviewed the authorities, he said this at [93]:

“The conclusions which I draw from this review of the authorities are as follows:

i)

In general, the remedy for past misuse of confidential information is a financial one. Where appropriate, the claimant can claim a restitutionary remedy, namely an account of profits, which deprives the defendant of the benefit of his wrongdoing.

ii)

As the law presently stands, it is not clear whether an injunction can be granted to prevent a defendant from benefiting from a past misuse of confidential information. Laddie J in Ocular Sciences interpreted Lord Goff in Spycatcher as having concluded that the answer was no, but I am less confident of this. Bullivant and Universal Thermosensors suggest that the answer is yes, and Laddie J did not consider those cases.

iii)

In my view, it is significant that Terrapin, Bullivant and Universal Thermosensors are all cases about interim injunctions. When an interim injunction is sought, the court's task is to hold the ring pending trial. It is not in a position to determine the parties' legal rights or to award either compensatory or restitutionary remedies. In these circumstances a limited injunction to prevent the defendant from benefiting from his (alleged) past misuse of confidential information may be the best way to preserve the status quo pending trial. If it turns out to have been wrongly granted, the court can require the claimant to compensate the defendant under the cross-undertaking in damages (as occurred in Universal Thermosensors).

iv)

In any event, it seems to me that the reasoning in both Bullivant and Universal Thermosensors indicates that considerable caution is required both as to whether to grant such an injunction at all and, if so, as to its form and duration. As Nicholls V-C pointed out in the latter case, the court must be careful to ensure that such an injunction does not put the claimant in a better position than if there had been no misuse. As the Court of Appeal pointed out in the former case, the duration of any such injunction should not extend beyond the period for which the defendant's illegitimate advantage may be expected to continue.”

Whilst it is not in dispute in this case that a springboard injunction is available in principle Mr Budworth does urge on me the need to exercise considerable caution in deciding whether or not such an injunction should be granted in this case, particularly having regard to the duration of 12 months sought and the number of customers who the claimants contend the respondents should be injuncted from dealing with.

There has also been some discussion both before me and in some of the previous cases as to the extent to which it is proper to have regard to the relative strengths of the parties’ respective cases. Mr Budworth submitted that it is necessary for the claimants to adduce clear evidence of the actual misuse of confidential information and the precise nature and period of the competitive advantage obtained by such misuse. He referred me in particular to the decision of Silber J in CEF Holdings v Mundey [2012] EWHC 1524 (QB) (to which I was referred), in which the judge had considered the well-known decisions in Lansing Linde v Kerr [1991] 1 WLR 251 and Lawrence David Ltd v Ashton [1989] ICR 123. He submitted that without such evidence the claimants should be left to their remedy in damages at trial. Ms Pennifer, whilst submitting that there was no justification in this case for derogating from the American Cyanamid principles, submitted that in any event the claimants had adduced clear evidence of misuse and the competitive advantage which would be obtained by such misuse.

In my judgment it is appropriate to have some regard to the strength of the evidence and the merits of the respective cases as they appear at this stage, whilst remaining alert not to be tempted into making findings which can only properly be made after full disclosure and cross examination of the relevant witnesses. That is because in the present case there is in my view a real risk that any substantive trial could not take place and judgment be delivered much, if at all, before the expiry of the 12 month period. I bear in mind that in her submissions in response Ms Pennifer made plain that the claimants would not oppose the ordering of a speedy trial on the basis, if necessary, of hiving off the issues relevant only to the respondents from the totality of the issues involving Mr Daly. However, whether it would be fair to Mr Daly to take that course would need to be determined as, indeed, would be the appropriateness of hiving off issues of liability from issues of quantum in order to expedite matters. Moreover, there is clearly scope for dispute in relation to the adequacy of disclosure by the respondents, in circumstances where the claimants have already made clear that they have no faith in the respondents’ willingness to provide full disclosure voluntarily if that means exposing their true alleged misconduct. It follows that there is clearly also the scope for derailment of any tight timetable down to trial by contested applications, specifically in relation to electronic disclosure and the need to involve IT experts in that process as, indeed, has already happened in relation to Mr Daly, where the July 18 trial date had to be vacated due in part to the difficulties with disclosure.

There is no need for me to delve into the detail of the claimants’ case as regards what they contend amounts to a clear conspiracy between Mr Daly and the respondents for Mr Daly to supply them with the claimants’ confidential information and to assist them as a consultant to use that information to obtain the claimants’ business from its clients in return for payment. That is because Mr Budworth realistically accepts that on the basis of the documentary evidence and the witness evidence of Mr Daly the claimants have demonstrated that they have a case raising serious issues to be tried in that regard, notwithstanding the contrary case as advanced by Mr Stieler in his witness evidence. Mr Budworth submits that the real issue in this case is whether the claimants have a case raising serious issues to be tried as regards whether the respondents have actually made any improper use of any confidential information made available to them, either at all or in any event such as has already actually damaged the claimants’ business or is likely to do so over the next 12 months.

Ms Pennifer submits that it is nonetheless relevant to consider Mr Stieler’s evidence on these issues in the light of the documentary evidence and the likely probabilities because it demonstrates, she submits, that Mr Stieler’s version of events is entirely lacking in detail, entirely unsupported by documentation, and entirely incredible.

In short, Mr Stieler says that: (a) he was introduced to Mr Daly by the respondents’ former employee, Mr Jonathan Fanoe, on the basis that Mr Daly wanted to meet and make a pitch to them; (b) at the subsequent meeting Mr Daly showed them a sample balloon, which was of no interest to them; (c) he has no recollection of being provided with any paper documents and denies receiving any USB stick containing electronic documents; (d) neither he nor Mr Fanoe to his knowledge accessed the dropbox link provided by Mr Daly allowing access to electronic documents uploaded by Mr Daly to the dropbox; (e) whilst he agreed to and did pay Mr Daly €12,500 as a goodwill retainer for him to provide consultancy services in relation to specific non-balloon products which Mr Daly had said he could prove he was entitled to deal in post his departure from Seatriever, in fact nothing further happened in that regard or otherwise in relation either to the proposed venture with Mr Daly or in relation to any alleged misuse of confidential information in the paper or electronic documents.

I agree with Ms Pennifer that there are some distinct oddities in this account. In particular, it is odd that Mr Stieler was prepared to pay Mr Daly €12,500 as a goodwill retainer prior to confirmation from his lawyer that he was able to provide what appear to have been limited and ill-defined consultancy services and, when Mr Daly did not proceed to do so, did not ask for his money back. It is also odd that Mr Daly and Mr Fanoe chose to correspond using disguised email accounts if the proposal was introduced on the basis that it was all legitimate. It is also odd that Mr Stieler asserts that neither he nor Mr Fanoe were particularly interested in or accessed the dropbox account in circumstances where the contemporaneous emails show that the provision of this information was a key part of the proposition being put forward by Mr Daly and where payment was only made once the documents had been made available. It is also odd that if the discussions were as limited as Mr Stieler says Mr Daly would have been prepared to provide the claimants’ confidential information in relation to matters going far beyond those limited discussions and also to provide draft emails introducing Mr Fanoe to some of the claimants’ key clients, in circumstances where the tenor of the emails tends to indicate that at least one such email, to Asda, was probably actually sent.

In short, I accept Ms Pennifer’s submission that Mr Stieler’s account, unsupported as it is by any contemporaneous documentation, bears a distinct lack of reality. I also accept Ms Pennifer’s submission that in such circumstances Mr Stieler’s overall account should be viewed with some scepticism.

In terms of what was in the information made available through the dropbox site, Ms Pennifer took me through it whilst the court was sitting in private with some care. As relevant to this case it included the following information, which I describe in general terms so as not to prejudice its confidential nature:

It cannot be disputed that all of this information was confidential to the claimants and that Mr Daly’s intention in providing it was to persuade the respondents to use it and to employ him as a consultant using his knowledge of the claimants’ confidential information to attack the claimants’ business.

However the fundamental issue as between the parties is whether or not there is any credible evidence that the respondents have used or intended to use this confidential information for that purpose.

In paragraph 28 of his third witness statement Mr Vickerstaff relied upon a number of specific factors in support of the claimants’ case that the respondents have misused the confidential information. I will address each in turn in the light of the further evidence and submissions made.

Mr Vickerstaff relies on evidence of access to the dropbox in February 2018. In his witness statement Mr Daly said that even before a without notice injunction was obtained against him there had been no actual use of the confidential information to his knowledge and that once he was served with the injunction he decided to have no further active involvement with the respondents and has not done so. The claimants are suspicious as to this assertion and refer to Mr Daly’s own evidence in his witness statement that there was further contact between Mr Daly and Mr Stieler in March 2018, which they say is consistent with the dropbox being accessed in February 2018, as well as evidence that the dropbox was accessed in June 2018, which they say is consistent with when Mr Daly was seen in the USA in cities where Target and Walmart have their offices dealing with these products. However, the claimants have no direct evidence of any continuing active relationship between Mr Daly and the respondents after June 2017. Whilst there is evidence that the dropbox was accessed in February 2018 there is no direct evidence that it was accessed by the respondents and the inference depends on the assertion by Mr Daly’s solicitors that it was not accessed by Mr Daly at that time and that no-one else apart from Mr Fanoe could have done so. Furthermore, whilst they say the timing can only be consistent with the meeting which Mr Daly says he had with Mr Stieler in March 2018, Mr Daly also states in his witness statement that this was purely a discussion about possible future working and that he is not working together currently and has no existing agreement to do so. Further the claimants have no direct evidence that it was the respondents who accessed the dropbox in June 2018 or that it was linked to Mr Daly’s visit to the USA

In my view, all this can only be speculation. If the claimants are right that the confidential information is of great value and has been used by the respondents then it must follow that they would have needed regular access to the confidential information from May 2017 onwards. Since there is no suggestion that they could not have downloaded this information onto their own systems there would be no need to access the dropbox subsequently. Irregular limited access to the dropbox in February 2018 and in June 2018 by the respondents does not make much sense even on the claimants’ case, although I accept that the absence of more regular access does not – for the reason just given – damage the claimants’ case. It follows that I regard this evidence as of no real significance either way and I do not consider that there is hard evidence to suggest that there is a continuing relationship between Mr Daly and the respondents. Mr Daly is facing a committal application in relation to his existing non-compliance with court orders and, whilst I cannot rule out that he is still actively involved with the respondents and seeking to conceal that involvement, I do not think that such evidence as is before me bears that out.

Mr Vickerstaff relies on evidence that he has been told by Mr Halliburton that he was told by Mr Novak of Unique on 16 May 2018 that Mr Stieler had met Mr Novak and offered to supply a similar range of balloons to those currently acquired from the claimants at a fixed percentage below the claimants’ prices. It seemed clear to Mr Novak that Mr Stieler was aware of the products taken by Unique and the prices charged by the claimants. It is said that at the end of 2017 Unique lost an order for light up balloons which it expected to obtain from a customer known as Dollarama in circumstances where it is believed (Mr Vickerstaff does not say by whom) that the supplier was likely to be a business known as Pioneer which distributes the respondents’ Q-LITE product.

Mr Stieler responded to this by saying that he had never met Mr Novak personally but had emailed him on 30 April 2018 with a proposal with a view to supplying it with products and associated rights for sale in the USA, Canada and Mexico. He attached the email chain which showed previous contact in 2014 together with the email in question and Mr Novak’s response on 10 May 2018 to say that he was not interested because he felt “the market is too crowded and only competition will be lowering the cost and profit margin”. He denied making use of any confidential information and said: “we have never offered to sell to Dollarama and have not obtained any orders from them at all”.

Although Mr Vickerstaff has responded to other parts of Mr Stieler’s witness statement, he has not responded to this other than to comment that it was surprising that there had been no contact in the intervening four years. There is no evidence from Mr Novak, directly or indirectly, which addresses what Mr Stieler said nor any explanation as to why not. Nor is there any evidence which confirms either that the supplier is Pioneer or that the products being supplied are the respondents’ Q-LITE product. Moreover, if the respondents’ plan in late 2017 was to cut Unique out by using its distributor to sell direct to the retail customer, that seems inconsistent with an approach to deal direct with Unique in May 2018. It also begs the question why, if the respondents had this information in May 2017, they should have waited until May 2018 to seek to use it.

In the circumstances, whilst I accept that it is not possible to determine this issue one way or another on current evidence, it does not seem to me that the evidence relating to Unique or Dollarama is of significant value.

The last point made in paragraph 30 is one of general application. It is clearly the case that the general strategy propounded by Mr Daly, as outlined in the commercial strategy file, was for the clients to be targeted as soon as practicable. There is no indication of a general strategy for there to be a pause whilst new products were developed using the claimants’ commercial information to copy their products and only once they were available to make a pitch for the claimants’ business using knowledge as to their pricing. However there is no evidence of any approaches to the claimants’ customers, whether direct retailers or distributors, in 2017 let alone any evidence of the claimants having lost business or failed to secure orders from existing customers, specifically those customers identified in the commercial strategy file. If the respondents had intended to use the claimants’ confidential information to mount an aggressive attack on the claimants’ customers by undercutting price one might have expected that this would have come to the attention of the claimants one way or another well before this application was issued, yet there is no evidence to this effect.

Ms Pennifer seeks to meet this argument in a number of ways. She submits that it is likely that following the injunction obtained against Mr Daly in June 2017 the respondents decided to lie low until Mr Daly was free of his restrictions, especially given the evidence that Mr Fanoe left the respondents at around the same time. This, however, seems to me to be sheer surmise, particularly in the absence of cogent evidence that there is a continuing relationship between Mr Daly and the respondents. She also submits that there is evidence from Mr Vickerstaff that the nature of the business relationship between suppliers and customers is typically for an annual review with pitches being made followed by purchasing decisions some months later for stock to be supplied over a 12 month period commencing some months later still. She submits that in those circumstances it is not surprising that there should be a time lag between receipt of the confidential information and business being lost. Whilst I accept that Mr Vickerstaff does indeed give evidence that this is how the market tends to work, that still does not adequately explain in my judgment the fact that it is now some 15 months since the confidential information was received which, on the claimants’ case, gives the respondents a significant competitive advantage, yet apart from the very limited evidence adduced by the claimants which I am now considering there is no hard evidence of its being used at all let alone to secure business from the claimants.

Ms Pennifer submits that the respondents have been working behind the scenes to develop their new product range using the claimants’ confidential information and are only now in the position of making pitches to customers on the basis of their enhanced product range and competitive pricing. Whilst I shall refer to this point in more detail later I repeat what I said in paragraph 32 above that this does not appear to have been the general strategy in May 2017. Moreover, it is not the basis on which the application was launched, since no mention was made in Mr Vickerstaff’s third witness statement of a case based on illegitimate competition from an enhanced product range secured by copying the claimants’ products using the confidential information obtained from Mr Daly.

Next, Mr Vickerstaff relies upon evidence that in or around March 2018 Asda, which the claimants confidently expected would place a substantial order for products for Halloween 2018, stopped dealing with the claimants, simply saying that “no order will be placed for Halloween”. He accepted that there was no direct evidence that the business had been placed with the respondents, although he said that he believed that it was not a coincidence particularly given that: (a) Asda was one of the customers Mr Daly was recommending should be targeted and had drafted an email to that effect which, so the claimants contend, was then sent; (b) Mr Daly has a close relationship with a senior category director of Asda. In his first witness statement Mr Stieler said that this was nothing to do with the respondents, who had not had any orders placed by Asda. In his second witness statement he exhibited a file note of a conversation between his solicitor and the Events and Halloween buyer at Asda on 10 September 2018 (the file note says August but that must be a mistake) in which the latter confirmed that “she was stocking no light up balloons for Halloween 2018”.

I accept that it was not possible for the claimants to investigate this evidence given that it only emerged after close of business on the 11 September 2018. Ms Pennifer submitted that it was possible that the buyer concerned was not the buyer dealing with Halloween light up balloons and, moreover, it did not prove that the respondents had not pitched their Halloween light up balloons to Asda. Given the content of the file note the first submission seems to me to be highly unlikely and there is clearly no evidence of the respondents having pitched for the Asda Halloween contract.

In my judgment this is seemingly reliable evidence which strongly suggests that the statement made by Asda, as recorded by Mr Vickerstaff, that no order would be placed for Halloween, meant simply that and that the claimants have jumped to the erroneous conclusion that it meant that Asda had placed an order with the respondents instead. Whilst I must accept the possibility that this will turn out to be wrong, nonetheless on the basis of the evidence before me it seems to me that a point upon which the claimants placed great reliance in seeking to tie together evidence of misuse of confidential information with the successful obtaining of business by the respondent of a substantial customer of the claimants has turned out on further investigation to be seemingly quite wrong.

Mr Vickerstaff’s next point was that in March 2018 the Turkish subsidiary of the Giochi Preziosi group decided not to renew its distribution agreement with the claimants. When asked why, it indicated that the decision was taken “due to sell through rates being below expectations and competition in the local market”. Mr Vickerstaff says that: “we do not know if this is true or a smokescreen”. In short, there is simply no evidence even now, six months later, that this has anything to do with the respondents. Whilst the claimants seek to make a link on the basis that the group was one of the customers for which some limited information was given in the information provided by Mr Daly, that does not seem to me to go anywhere near far enough.

Mr Vickerstaff’s final point related to the sub-distributor of Goodmark known as Pyragic. He says that on 31 May 2018 Pyragic notified the claimants that it would cease dealing with the claimants from 1 September 2018, having ceased placing orders with Goodmark in early 2018. He accepts that there was no direct evidence that the respondents are the alternative supplier but suggests that it is a distinct possibility. Mr Stieler disputed this in his first witness statement. In his sixth witness statement Mr Vickerstaff says that “on reviewing the [Pyragic] website I identified a webpage offering one of the respondents’ latex light up balloon products for sale”. It is not clear from the witness statement whether he was suggesting that this was a current webpage or whether, as may appear from the context, he was seeking to challenge Mr Stieler’s statement if it was read as a statement that the respondents had never had any dealings with or order from Pyragic. In his second witness statement Mr Stieler said that this was a historic web image relating to a 2012 design not sold since then and not supplied directly to Pyragic. He said that he had looked at Pyragic’s current website which did not disclose them selling any of the respondents’ products.

Ms Pennifer invited me to consider that this showed a real dispute and that Mr Vickerstaff’s evidence could not simply be discounted. I accept that I am not in a position to determine this matter definitively. However it is extremely unsatisfactory that Mr Vickerstaff does not explain when he first accessed the website and whether he is saying that this is indeed the current position compared to the historic position when one can only assume that he investigated the matter prior to launching the application. On any view it is surprising that this evidence only emerged on the last working day before the adjourned hearing of the claimants’ application. In my view it is slender evidence, especially since: (a) at best it refers to one product rather than a whole range; (b) he does not suggest that the website used to, but no longer, makes reference to the claimants’ products. In all the circumstances I am unable to attach much weight to this evidence. On this point, gone are the days when it could safely be assumed that a judge was unable to negotiate a website unaided. I have opened and looked through the catalogues as they appear on the website referred to by Mr Vickerstaff and have been unable to find any reference to the respondents’ product, although I have found reference to the claimants’ product, although I have not relied on this point given that the parties have not had the opportunity to comment on it.

In his third witness statement Mr Vickerstaff stated that the sample balloons which Mr Daly had given the respondents in May 2017 were “samples of the claimant’s prototype LED foil balloon (not yet released into the market and which incorporated a novel printing technique and LED component)”. In his fourth witness statement he said that these were “concept ideas to gauge interest from the retailers concerned”. He did not, however, make any further reference to confidential information made available by Mr Daly to the respondents said to be relevant to the risk of the respondents using that information to copy the claimants’ products, nor did he suggest that there was any evidence or reason to believe that the respondents had or were intending to use the samples or any such information to copy the claimant’s products.

In his first witness statement Mr Stieler accepted that Mr Daly showed him a balloon, which he believed was a plastic rather than a foil balloon. He said that the respondents had already in January 2016 launched their own LED plastic balloon and, hence, made no use of that balloon.

In his fifth witness statement Mr Vickerstaff referred to, but did not exhibit, a recording of what was said between a representative of the respondents and someone instructed by the claimants to pretend to be a customer at the Nuremberg toy fair held each year in January or February 2018. In his seventh witness statement he exhibited a transcript of the recording, from which it is apparent that the respondents’ representative was saying that the plastic balloons she was demonstrating, made from plastic but designed to look like foil (I shall refer to this as the “plastic foil effect balloon”), were not new but that the design was new and that they were smaller. It follows that the claimants must have been aware from February 2018 that the respondents were introducing plastic foil effect balloons to a new and a smaller design, yet did not seek to make anything of this in the evidence served in support of the application.

In his fifth witness statement Mr Vickerstaff observed that Mr Stieler’s evidence about the sample balloon was inconsistent with what Mr Daly had stated in his seventh witness statement of 6 July 2018, which was that he had produced two samples of the claimants’ prototype foil balloon and there was a discussion about how the respondents might alter the design of its plastic foil effect balloon in order to make it smaller and lighter and hence cheaper. This is undoubtedly the case, although it is also the case that Mr Daly does not suggest that he had any further discussions or reached any agreement with the respondents in relation to this subject.

In his sixth witness statement Mr Vickerstaff gave further details as to why he believed the prototype would have been of interest to the respondents, because it would enable them to use it to “reverse engineer” the claimants’ design to reduce the size and weight of their existing “GIGALOON” product. He then said, at paragraph 11: “I have recently discovered a presentation which the respondents seemingly published online on or around 22 January 2018 … Several pages of the presentation are dedicated to a new light up foil/plastic balloon product listed as “coming soon” which appears to be smaller than the GIGALOON product”. In paragraph 11 he said that: “it would seem therefore that the respondents have increased their range from 3 to at least 37 different designs by January 2018, 34 of which relate to the new smaller design … The products marketed appear to be standard sized foil/plastic balloon i.e. a product which is the same or substantially the same as the light up foil prototype product the respondents were shown by Mr Daly eight months earlier. This clearly can be no coincidence”.

Mr Vickerstaff does not say when or in what circumstances he “recently discovered” this presentation from 2018, even though it appears to be a reference to the same product which on the claimants’ evidence it knew that the respondents were demonstrating at Nuremberg in February 2018.

In his seventh witness statement Mr Vickerstaff gives even more detail, again for the first time, as to why he believes that the respondents have copied the claimants’ design as shown in its prototype and which he says is protected by various patents.

In his fifth witness statement Mr Vickerstaff also referred for the first time to the evidence that Mr Daly had provided details of the claimants’ marble balloon supplier, saying that “thereafter, the respondents launched a 2018 catalogue including a marble balloon”. He made the same point in relation to a “disco” light included as “coming soon” in the 2018 catalogue, which he said was clearly copied from the claimants’ new lantern design product details of which were provided by Mr Daly. He provided more details of this in his seventh witness statement, saying that “on 6 September 2018 I discovered a catalogue apparently published by the respondents on or around 22 January 2018 to advertise their new and extended product offering”. He made a similar point in relation to an LED Punch balloon included in the 2018 catalogue.

It would appear from his seventh witness statement that Mr Vickerstaff did not discover the 2018 catalogue until only days before the hearing, even though it appears that it was published on a website as long ago as January 2018. It is difficult in my view to see how the claimants could have been unaware of the website or the catalogue before they made this application and before the evidence in support was produced if they had been genuinely concerned that the information provided by Mr Daly in May 2017 could and would be used by the respondents to improve its products and product range, particularly given the conversation which apparently took place at the Nuremberg fair in February 2018.

In his second witness statement Mr Stieler sought in the time available to address some of these points. As regards the marble balloons, he referred to email evidence showing that in early 2016 and again in early 2017 the respondents had been in contact with the supplier of the marble balloons indicating their interest in that product, including its ability to meet the technical specification to which the claimants attached such importance. He disputed that the disco light product was copied from the claimants’ product, stating that “many similar products are available from many different suppliers”. He said that the supplier of the marble balloons had introduced them to punch balloons, saying that “we are always looking to extend our product range and have used consultants to assist us with this. There is no magic to adding an LED to a variety of balloon products”.

As regards the plastic foil effect balloons, he said this:

“We had introduced a plastic balloon at the fair in Nuremberg in 2016 and received suggestions and requests from customers to produce balloons in smaller sizes. In practice they come in many different shapes, sizes and colours and can be manufactured in foil, plastic or latex. Since we first went to market in 2012 we have introduced some 10 to 20 new products every year since. At present we have no plans to start production of smaller sizes because there has been a lack of customer interest. Equally we have no plans to make foil balloons and none of our products have been or are being “re-engineered” due to Mr Daly’s contact or otherwise.”

I have considered whether I can reach any conclusions on the strength of the evidence for and against the claimants’ recently adduced case in relation to product copying. It is plain in my view that the claimants have put forward a case which satisfies the American Cyanamid test of demonstrating that there are serious issues to be tried. Whilst it can also be said by the claimants that the detail of the evidence which they have adduced in relation to product copying is far more extensive and detailed than the detail of the evidence adduced in response by the respondents, it must be borne in mind that for the reasons I have explained the respondents have had very little time indeed to be able to investigate and to respond, so that in my view it would be wrong to draw any adverse conclusions against the respondents for that reason. I do not think that the respondents can be criticised for not opposing the introduction of the evidence or seeking an adjournment. Indeed the respondents did seek an adjournment on the basis that the application had not been properly served, which would also have enabled them to consider the recently served evidence, which was fiercely resisted by the claimants and which application I rejected on the first day of the hearing. In all of the circumstances I do not consider that I am in a position to reach any conclusions on the strength or weakness of the case in relation to product copying.

As I have already said at paragraph 21, I see considerable force in Ms Pennifer’s submission that the claimants have a strong case that the respondents had paid for and had enjoyed access to the claimants’ confidential information knowing that it was confidential and that the respondents’ case in this regard appears weak and leaves important questions unanswered.

However, for the reasons I have given at paragraphs 24 – 40 above, when addressing the claimants’ case in relation to the evidence of misuse of its confidential information thus far - other than the evidence of product copying to which I shall return - I accept Mr Budworth’s submission that there is very little hard cogent evidence of actual misuse. As I have already said even on the claimants’ case there is a marked absence of evidence of the respondents targeting the claimants’ customers from June 2017 onwards to secure their business using the confidential pricing information available to them, let alone evidence of the respondents successfully doing so. When one considers the detailed evidence in relation to the specific matters relied upon by the claimants it seems to me that it amounts to very little of real weight.

I accept that the claimants have demonstrated that there is a serious issue to be tried, particularly given that the information at this stage is clearly very far from the full picture which will be available at trial and also given that the respondents have, as I have already said, serious questions to answer as to the credibility of their case as to the circumstances in which the confidential information came to be made available to them. Nonetheless it is clear from the authorities that the court must always be cautious before granting a springboard injunction in the absence of cogent evidence that the respondents have actually misused confidential information or otherwise acted in breach of their obligations owed to the applicants and have already obtained the benefits of so doing or are likely imminently so to do. In this case, leaving aside the evidence in relation to product copying, there is in my view no such cogent evidence. Whilst that might be explicable if the confidential information had only been made available in May 2018, in my view it is far from being so readily explicable when it was made available a full 12 months earlier, notwithstanding the arguments advanced to me by Ms Pennifer to seek to explain the position.

I have already said that in my view the claimants’ case in relation to product copying also discloses serious issues to be tried. At this stage it is not possible for me to form a view as to whether or not the late appearance of this case, which only emerged from Mr Vickerstaff’s fifth and sixth witness statements produced and served only on the Thursday and the Friday before the hearing on the Monday, is because the evidence to support it only recently became available (regardless of whether it might have been discovered had fuller enquiries been made previously) or because it is a last grasp attempt by the claimants to use information of little real value to bolster a case which they realised was looking weak so far as the actual misuse by the respondents of confidential information in relation to pricing to attack its customers was concerned. Nonetheless, the fact that it has emerged so late is something to which I should have regard when exercising my discretion.

At this stage I should make reference to the terms of the springboard injunction as sought. As I have already said, the claimants are seeking an injunction to last for 12 months. They are seeking to restrain the respondents from soliciting, contracting with or dealing with what are defined as “restricted persons” in relation to what are defined as “restricted products”. The identities of the restricted persons were not set out in the draft injunction, seemingly because of a concern as to their confidentiality which I must confess I did not understand, although it was made clear that it was intended to include all “those customers, distributors and/or sales agents of the claimants about whom confidential information was disclosed in the dropbox”. At the hearing itself Ms Pennifer clarified that this was indeed the claimants’ position and that the claimants identified 36 such persons. When she went through the dropbox information to identify these persons, it became apparent that as well as the eight identified in the commercial strategy file (see paragraph 22(b) above, namely Tesco, Asda, Sainsburys, Poundland, Poundworld, Walmart, Target and Walgreens), it included all of the others identified in any way, shape or form in the information, however briefly. It also included the two specific distributors mentioned in the evidence, namely Unique and Goodmark.

The claimants have made no attempt to identify what percentage of their overall sales are represented by all of these persons. From the evidence it would appear that they represent all, or nearly all, of its overall sales. Neither party has made any attempt to identify what percentage of the total available market for illuminated balloons is represented by these persons. It appears from Mr Vickerstaff’s seventh witness statement that the claimants and the respondents are two of the five largest supplying organisations in the market although he makes no attempt to indicate respective market share. Mr Stieler does not say in his evidence that either the respondents or, so far he is aware, their distributors, supply their products to any of these persons or have any present intention to do so, although from the evidence disclosed it is clear that he has made a recent approach to at least one, namely Unique.

Mr Budworth submitted that the impact of such an order would be significant both in terms of restricting the respondents’ ability to compete with the claimants but also in terms of restricting the freedom of choice of those persons, submitting that this was effectively a duopoly position. However the force of that submission is somewhat limited by his clients’ failure to give any details which contradict those given by Mr Vickerstaff or of any existing dealings or proposed future dealings between his clients and those persons.

Mr Budworth also complained that the claimants have made no attempt to justify the duration of the springboard injunction sought. Ms Pennifer submitted that Mr Vickerstaff had explained and justified the duration on the basis of his evidence that none of the confidential information in relation to the claimants’ pricing could ever have been obtained legitimately from publicly available information and that the information in relation to the claimants’ prototype samples and its proposed additions to its product range could never have been obtained legitimately until they were introduced to the market. The claimants’ identification of 12 months is on the basis that this is realistically the minimum time that it would take for the case to reach trial and would prevent the respondents from making use of the confidential pricing and product information for a reasonable time assuming, as is the claimants’ case, that the respondents intend to attack its customers in 2018 for the 2019 buying year.

Mr Budworth also submitted that the basis for a springboard injunction is not made out because the more limited injunctions in relation to not making use of and delivering up any confidential information which the respondents have would suffice, on the basis that the claimants have the usual remedies in the event of subsequent discovered breach and on the basis that any existing discovered misuse could be compensated for by monetary award. In that respect he submitted that monetary award was a perfectly adequate remedy as against his clients, if any misuse causing compensable loss was demonstrated at trial, whereas it would be very difficult if not impossible for the respondents to prove any loss flowing from the loss of opportunity to target these clients over the next 12 months. Ms Pennifer submitted that the more limited injunctions would not provide proper protection, particularly if the respondents were already in the process of securing orders based on their misuse of the confidential information and would in any event be difficult to police. She also submitted that in reality it would always be difficult for a claimant to prove what loss was suffered due to the misuse of the confidential information in contrast to loss resulting from what might otherwise be legitimate competition. She submitted that both parties had the same practical difficulties in terms of being able to quantify and recover any monetary compensation resulting from the refusal or grant respectively of springboard injunction relief which it might transpire at trial should have been granted or refused respectively.

Mr Budworth also submitted that it was inappropriate to grant a springboard injunction prior to the respondents being formally joined as defendants to the claim and the case against them formally set out in a properly particularised particulars of claim. Whilst I accept that a court should not grant an interim remedy before a claim is issued unless it is urgent or otherwise desirable in the interests of justice, I am satisfied that it is desirable here. The respondents have been on notice of the claim since early June 2018, when they were sent detailed letters before action, and were served in what I have already determined was a sufficient manner at the end of July 2018. At the same time they also received a detailed draft particulars of claim. They have therefore had a sufficient time in which to consider and respond to the proposed claim and in my view it would not be in the interests of justice to defer the determination of this matter until such time as the claim had been issued and formally served.

Having regard to the totality of the evidence and the respective submissions I am satisfied that on a proper application of the applicable principles in relation to the grant of springboard injunctions the claimants have made out a case for the grant of a limited injunction. I am satisfied that they have shown a serious case to be tried overall in relation to the respondents’ alleged misuse of their confidential information and, in particular, although there is only limited evidence of misuse in terms of pricing information and the like, on the available evidence there is also evidence of actual or potential misuse in terms of product copying. It is clear in my judgment that any such use could not be justified. It is also clear in my judgment that if there is such misuse it will have given or will give the respondents a clear and unfair competitive advantage. In particular I accept that on the evidence there is a serious case that there is a risk of the respondents using such confidential information in their activities in the current year in order to seek and obtain business from the claimants’ existing customers for the forthcoming year. I accept that lesser injunctive relief will not provide sufficient protection for the claimants against that risk, particularly if it is the case that the respondents are able to take well-established business from the claimants which will be very hard to take back, and that damages will not be an adequate remedy in the event of such loss of business. I am satisfied that in the circumstances a springboard injunction lasting for 12 months is a proper and proportionate order to make.

However having regard again to the totality of the evidence and the submissions I am satisfied that it would be disproportionate to make an order which extended to all of the persons identified by the claimants. In my judgment that would extend what is clearly draconian relief too far at this interlocutory stage in a dispute between two major suppliers in the business sector. There is a real risk that it would impose too severe a restriction on the respondents’ activities should it transpire at trial that the claimants’ accusations are unfounded. It would deprive the respondents of the opportunity to take advantage of what they may establish is a perfectly innocently obtained expanded product range to sell into the market this year for forthcoming years. Damages for such loss would also in my view be inadequate, albeit as I have said the respondents have not said in terms that they currently intend to make a pitch to one or more of those customers.

In my judgment the proper and proportionate order to make is to limit the springboard injunction to the eight persons specifically identified in the commercial strategy file, namely Tesco, Asda, Sainsburys, Poundland, Poundworld, Walmart, Target and Walgreens. These are clearly the claimants’ most significant customers. Mr Vickerstaff said in paragraph 9 of his third witness statement that Tesco, Asda and Poundland account for around 67% of Seatriever’s UK sales and Walmart, Target and Walgreens represent around 46% of Seatriever’s total group sales. Since the respondents do not say that they have ever supplied their products to these customers and nor do they say that they have any current intention of so doing, it is difficult to see how they could suffer substantial financial harm as a result of a springboard injunction being granted. I do not think that it is proper or proportionate to seek to restrict the freedom of distributors such as Unique or Goodmark, or indeed their sub distributors, from dealing with whoever they may wish to do so. I appreciate that there are the same risks to the claimants but in my view different considerations apply and the balance of convenience here lies in favour of allowing contact between the respondents and those organisations.

Following the circulation of this judgment in draft Ms Pennifer has urged me to add two further customers to the eight in relation to which specific information was made available by Mr Daly, but I am satisfied that I should not do so on the basis that: (a) in neither case did Mr Daly include a recommended strategy as to how to obtain their business within the commercial strategy file (see paragraph 22(b) above); (b) they are not specifically referred to in the claimants’ evidence as being significant customers.

I am satisfied that no proper basis has been made out for seeking an equivalent springboard injunction in relation to the identified supplier of the marble balloons. In my judgment it would be wrong to do so, in circumstances where that supplier was clearly already known to the respondents and where that supplier has a legitimate commercial interest in being able to supply its products to whoever is ready, willing and able to take them. I am satisfied that damages would be an adequate remedy in this respect and in any event that the balance of convenience does not favour such an order.

As I have said, the respondents do not object to the confidentiality injunction sought nor to the preservation order or delivery orders on the basis that it is understood, as is common ground, that the respondents cannot be required to preserve or to deliver up confidential information, in whatever format, which in fact they do not have. Nor do they object to being required to provide a witness statement confirming compliance and the details of anyone to whom any confidential information may have been provided by them, although they object to being obliged to exhibit any relevant documentation in that respect and I agree that this is unnecessary and inappropriate at this point in time.

The only other substantial area of dispute between the parties is that the respondents oppose the claimants’ request that the respondents should be ordered to notify the claimants’ solicitors of, and then instruct, jointly with the claimants, an independent information technology expert to image and search, any electronic devices, storage facilities or email accounts which do now or have at any time contained confidential information with those experts to provide the respondents’ solicitors with such information and to provide a report to both solicitors before deleting any such information from such sources. In short, Mr Budworth submits that this is an oppressive order to make in a case where the claimants have not identified as against the respondents any case for believing that they would not properly comply with the obligations under the order as made with their disclosure obligations in due course, whereas Ms Pennifer submits that it is necessary and proportionate given the inadequacy of the respondents’ searches thus far and the desirability of insuring that all such information is preserved.

In my judgment the claimants have not demonstrated that it is either necessary or proportionate to make orders to this effect. I do not think that the respondents’ disinclination to undertake a full search of their files and electronic sources in response to a pre-action letter of claim or to this application is sufficient to justify what is otherwise an oppressive order to make at this stage. It is clear that this is a case which is going to require prompt case management which will include appropriate provision for mutual disclosure, including disclosure of information on electronic sources. I do not think that it would be in the interests of justice for the respondents to be required to advance that process at this stage with the assistance of a jointly instructed expert nor, indeed, to be faced with the prospect of having to do so not just once but twice.

All remaining matters are to be addressed at the hearing on 17 September 2018.