Intercall Conferencing Services Ltd v Steer

The Claimant seeks an interim injunction against its former employee, the Defendant, restraining him from working with named competitors of the Claimant and in particular, Premiere Global Services Inc. and its subsidiaries and associated companies until 18 August 2007 or trial or further order. In addition an order is sought restraining the Defendant from divulging any information confidential to the Claimant’s business or concerning its trade secrets, an order that the Defendant deliver up to the Claimant all its documents which he has in his possession and an order that he provides a witness statement providing full information as to the Claimant’s confidential information in his possession. The only remedy sought is the equitable remedy of an injunction as there is no claim for damages. It is not alleged that there has been any breach of confidentiality by the Defendant but the Claimant submits that there is a real risk, on the facts, that there will be such a breach, even if inadvertent, and that it is essential to protect their business that the orders are obtained.

The Defendant acknowledges that he is bound by confidentiality and is prepared to undertake to the Court that he will not breach that duty. He strongly opposes, however, the order seeking to restrain him from working for Premiere Global Services Inc. until 18 August 2007. He states that there has been no breach of the confidentiality clause and there is no real risk that there will be any. The non-competition clause is too wide and does not protect any legitimate business interest of the Claimant. In any event the remedy sought is discretionary, as no claim for damages is made, and given that the Defendant will be prevented from working in his own specialist field if the order is made whereas the Claimants will suffer no financial loss if the order is not made, the Court should decline to grant the interim injunction.

This is not a case where, in my judgment, the Court can finally determine all necessary matters on the basis of the written evidence before it. Evidence, and the cross-examination of witnesses is required before a final determination can be made. In the circumstances the Claimant is entitled to ask the Court to consider whether it is appropriate and reasonable to grant interim injunctions.

The Defendant commenced employment with the Claimant on 20 September 2004 as Head of Training and Personnel Development EMEA. His previous employment had been in a similar sales training role.

The Defendant signed his contract of employment on 21 September 2004. He was required to give one months notice of termination of his employment after three months service and the employer’s right to place him on ‘gardening leave’ during the period of notice was reserved. There was an express confidentiality agreement and, by way of addendum to the statement of the main terms of the contract, a non-competition clause. This, which was also signed on 21 September 2004, stated as follows:-

“It is agreed that the following obligation shall form part of the Contract of Employment between you and the Company and shall be rigorously observed.

Should any provision of this agreement or any part of any provision be rendered void or unenforceable, then that provision or that part of that provision shall be deleted (or, in the case of the period of application, be modified as necessary to make it valid) and, as far as the context allows, all other provisions shall be unaffected.

You agree that you shall not for a period of six months after the termination of your employment (without the previous consent in writing of the Company) directly or indirectly be engaged, concerned or interested (whether as employee, agent, consultant or otherwise) in any of the businesses set out below and which are in competition with the business carried on by the Company at the end of your employment:-

BT

Premiere

Arkadin

Genesys

All New Video

It is further agreed that the businesses named above shall be reviewed regularly and that any additions or deletions will be the subject of written amendment at the sole discretion of the Company.

In signing below, you confirm that you understand, accept and agree to be bound by this Agreement and that it supercedes any previous such agreement.”

The Claimant’s business is to provide conference calling, audio, video, web and event conferencing. It has customers both in the United Kingdom and abroad and is part of Intercall Inc. (United States).

Mr Tom Priestley the Managing Director of the Claimant says in his witness statement that the Defendant was engaged to produce the full induction agenda, training programme and accreditation process for the Claimant’s EMEA sales force, which numbers 138. The Defendant had to prepare documentation about, and to become intimately familiar with the Claimant’s UK operational infrastructure. He had to be completely ‘au fait’ with the Claimant’s company sales methodology for the EMEA sales group and know what customer capacity and telecommunications equipment was. Mr Priestley said that he considered these matters to be trade secrets and such information would be dangerous in the hands of a competitor. Document access was governed by strict permissions and passwords. During the course of his work the Defendant reported to the Sales Director and, in 2006, on an informal basis, to the Head of Direct Sales (HDS) who was then Mr Chris Gallagher. This gave the Defendant wide access to confidential information. In about October 2006 Mr Gallagher went off on long term sickness absence and the Defendant was asked to take over his role on an interim basis. Mr Priestley says that from that point onwards,:-

“There can be no doubt that the Defendant had full access to an extremely wide range of confidential business information available to the HDS such as our business strategy, our existing, pipeline and potential customers, our customer capacity, the names and details of our direct sales team, their salary and commission and bonus details (including the details of the pay review for 2007), our revenue and the deals we were willing to offer new customers.”

Further, the Defendant was one of a small number of senior employees of Intercall who had full access to the customer and sales information on the computer programme ‘Goldmine’. This stored the majority of the company’s confidential data electronically. Mr Priestley states that as temporary HDS the Defendant would receive weekly and monthly sales reports from his team about the division’s customer base with access to all the details of customers under contract, stored on ‘Goldmine’, and details of customers to whom approaches had been made. Contact names, addresses, telephone numbers and contact details and billing information of all customers were held on ‘Goldmine’. A confidential annex indicating the information in particular on this computer programme is served with Mr Priestley’s statement.

Morgan Whipp the Sales Director of the Claimant was the direct line manager of the HDS post and also that of the Head of Training and Personnel Development EMEA. The Defendant therefore reported to him in both his training post and in his temporary HDS post. Mr Whipp states that as part of the training process the Defendant would analyse a sale team member’s performance and believes that he would have known his sales team’s actual customers and pipeline business. The Defendant had access to three types of highly confidential information/trade secrets, namely commission plans and statements for the sales teams, cost pricing for telecommunications, and client information held on ‘Goldmine’ including prospective customers and pre-sales information.

On 22 January 2007 the Defendant tendered his resignation by e-mail. He expressed disappointment at the failure of the Claimant to make a quick decision regarding Chris Gallagher’s replacement, which he had hoped to be. He resigned with immediate effect. Shortly afterwards he informed Emma Robbins, the Human Resources Manager, that he was joining Premiere. On 23 January 2007 he was reminded of the notice period, the non-competition clause and that he would be placed on ‘garden leave’ during his months notice period. The Defendant’s response was to raise a formal grievance alleging that he had been misled by Morgan Whipp regarding his potential promotion opportunities at Intercall and misrepresented about his reasons for his resignation.

Emma Robbins informed Premiere of the Defendant’s agreement to a six month restrictive covenant. The Defendant was given time to take advice on the restrictive covenant and asked to undertake to abide by the provisions of the addendum clause or face an application for an interim injunction. He failed to do so within the time limit set, but did ask whether the Claimant continued to use the sales methodology known as PRIDE which he claimed was his intellectual property. That claim is disputed.

In his witness statement, the Defendant states that he does not possess, has not used and has not disclosed any confidential information, and has absolutely no intention of doing so. He stated that he considered himself bound by duties of confidence. This was reiterated by his counsel, during the course of his submissions. He states that he is not intending to take a sales role with Premiere nor in any way compete with Intercall. The role he is moving to is solely in training. He therefore states that Intercall cannot be said to be protecting a legitimate business interest as any new role he has will not be in competition with Intercall. The restriction is overly wide and vague and should not prevent him from working for Premiere.

The Defendant accepts that he had access to information relating to the Claimant’s customer capacity and telecommunications equipment, but says he had had only little involvement in the work which brought him into contact with that since June 2006. He states that he created the induction presentations he made from the Claimant’s own website. He denies that his knowledge of the direct sales team’s salary, commissions, or bonus was a trade secret rather than something that he knew in his head. As to customer pricing he states that new customers simply had their current pricing package undercut and that such pricing information was common knowledge between rival competing companies. Cold calling of potential customers could provide the relevant information.

The Defendant accepts that he did not have time to both open and read 71 individual commission plans for sales personnel.

As to ‘Goldmine’ he accepted access to it but said that he was an extremely infrequent user of the system. He could not have retained client information to the extent suggested by the Claimant and had not done so.

The presentation he made in January 2007 did not focus on the performance of key customers nor discuss revenue targets but mostly revolved around two fun exercises which were nothing to do with trade secrets. He was shown the proposed 2007 pay reviews but those had not been formally authorised by the time he left.

It was conceded during the course of the submissions on behalf of the Defendant that information as to the salary and commission payments of the sales personnel, together with the ‘Goldmine’ programme, were clear areas of potential confidentiality and that confidentiality might arise in relation to customer capacity. However on the facts the Defendant’s access was limited and the question arose as to whether he remembered it.

In evidence in reply to the Defendant’s witness statement Mr Priestley stated that the Defendant had deleted all but a handful of the e-mails on his computer when he gave notice, so it was not possible to see what he had been doing in recent months. There is no evidence as to whether the hard disk had been examined, and I have accordingly given no weight to this assertion.

Mr Whipp in his further evidence, said that the Defendant was, to use his own words, one of the inner circle or leadership group as HDS. The agenda for the first leadership meeting of 2007 which he attended showed from its headings the extent to which confidential company and business material was covered during that meeting. Thus there was the 2007 budget overview, current and proposed sales head count initiative, sale incentives ideas, leadership objectives, marketing budgets for 2007 and business goals and objectives.

The Defendant made an open offer shortly before the commencement of the hearing of the Claimant’s application. He offered to work for a company called Xpedite, which is a wholly owned subsidiary of Premiere, but agreed not to deal with customers or conferencing.

The correct approach in cases of this kind has helpfully been set out in three recent authorities. Firstly in TFS Derivatives Limited v Morgan [2005] IRLR 246 at paras 37 – 40 of the judgment of Mrs Justice Cox. She there states that when considering a restrictive covenant the court must first decide what it means when properly construed, secondly whether the former employers have a legitimate business interest requiring protection in relation to the employee’s employment, and thirdly once such interests have been established the covenant must be shown to be no wider than is reasonably necessary for the protection of those interests. Even where the covenant is held to be reasonable the court will then finally decide whether, as a matter of discretion, injunctive relief should be granted having regard to its reasonableness at the time of trial. The court cannot blue pencil or sever parts of a restrictive covenant unless that can be done without changing the sense of the contract.

Brake Brothers Limited v Ungless [2004] EWHC 2799 provides a useful analysis of the law from paragraph 15 of Mrs Justice Gloster’s decision onwards, and there is helpful dicta in the recent Court of Appeal decision Thomas v Farr plc [2007] EWCA Civ 118. In the latter case Lord Justice Toulson said as follows:-

“41.

In order to establish that the inclusion of a non-competition clause in an employment contract was reasonably necessary for the protection of the employer's interest in confidential information, the first matter which the employer obviously needs to establish is that at the time of the contract the nature of the proposed employment was such as would expose the employee to information of the kind capable of protection beyond the term of the contract (i.e. trade secrets or other information of equivalent confidentiality). The degree of the particularity of the evidence required to establish that matter must inevitably depend on the facts of the case…

42.

Provided that the employer overcomes that hurdle, it is no argument against a restrictive covenant that it may be very difficult for either the employer or the employee to know where exactly the line may lie between information which remains confidential after the end of the employment and the information which does not. The fact that the distinction can be very hard to draw may support the reasonableness of a non-competition clause. As was observed by Lord Denning MR in Littlewoods Organisation v Harris at 1479 and by Waller LJ in Turner v Commonwealth and British Minerals Limited [2000] IRLR 114 at para 18, it is because there may be serious difficulties in identifying precisely what is or what is not confidential information that a non-competition clause may be the most satisfactory form of restraint, provided that it is reasonable in time and space.”

It is therefore necessary for the Court to consider firstly whether the information sought to be protected is confidential such as requires protection. The Claimant must have a legitimate interest to protect. Secondly it must be established that the employee was exposed to such confidential information in the course of his employment. Thirdly that he is likely to be able to remember sufficient parts of it so that, as Mr Pearman submitted on the Defendant’s behalf, he could be said to take it with him. Fourthly whether in the circumstances there is a risk of breach. Fifthly whether the clause is no wider than is reasonably necessary for the protection of the employer’s legitimate interests, sixthly whether as a matter of discretion it is reasonable to grant an injunction having applied the balance of convenience and other appropriate tests as set out in the American Cyanamid [1975] AC 396.

I am persuaded by the evidence of the Claimant that the information which the Defendant came into contact with, both in his training capacity and in his HDS capacity, included information which was of a confidential nature. The information on ‘Goldmine’ clearly falls into this category as is both conceded and amply borne out by the confidential material attached to Mr Priestley’s statement. The names, addresses, phone numbers, contact details and billing information of all customers, whether an approach had been made to them and if so with what response, is, it seems to me, highly confidential information which the Claimant has a legitimate interest to protect. The information relating to salaries and commission is also clearly confidential and relevant to the poaching of employees. I accept the Claimant’s submissions that they are concerned about both the potential effect on customer sales and poaching of employees were such confidential information to be used, and that there has been no real shift in their case. Furthermore, information as to charging and billing of customers and the deals offered to potential new customers constitute confidential information rather than material which is wholly in the public domain. Mr Whipp’s second statement setting out the headings of the leadership meeting in 2007 demonstrates in my judgment the confidential nature of the material then being considered including the 2007 budget overview, sales incentives ideas, sales head count initiatives, sales leadership objectives and marketing budgets for 2007. Again all these are legitimate interests which need to be protected.

It is clear from the evidence that the Defendant was exposed to this confidential information during his work for the Claimant, in particular since October 2006 when he became acting Head of Direct Sales, though not only then.

There is no reason why a man of the Defendant’s seniority in the Claimant’s employ with his knowledge and experience of the Claimant’s and the industry, should not have recall of significant elements and quantities of the confidential information which he came into contact with during his work. Further recall could be prompted by matters raised by his new employers.

I am conscious of the fact that the Claimant does not allege any breach of the duty of confidentiality but asserts that there is a real risk of the Defendant inadvertently breaching that duty. There are features of the Defendant’s evidence which suggests that he may not have a clear grasp of what information is confidential and what is not. He downplayed the extent to which confidential information came before him, and the extent to which it was significant or whether it was still in date. Thus, he does not deny knowing the 2007 proposed pay reviews but simply says that they had not been formally authorised and changes might yet occur. He does not appear to consider the risk of inadvertent disclosure. An overview of the evidence leads me to the conclusion that there is a real risk of a breach of the duty of confidentiality even though that may be solely inadvertent.

It is submitted on behalf of the Defendant that the non-competition clause is too wide and too vague. The argument that it was not incorporated into the contract through an absence of consideration, even though it was signed at the same time as the contract, was not repeated in submissions and was without merit. Forceful submissions are however made that the clause is effectively worldwide as there is no area restriction, and hence too wide. Furthermore it prevents the Defendant working in any capacity and must therefore be wider than necessary. It does not specify with clarity who the named companies and their associates are. Does, for example the restriction apply to Ireland? The phrase ‘in competition’ is vague and should be construed against the Claimant. The clause pays no attention to the fact that an employee may not carry out work which creates any risk of breach of the duty of confidentiality because the opportunity for breach will not arise; instead the clause seeks to protect the Claimant against any work with named competitors.

I have considered these submissions. But I do not consider that the clause is either too wide or too vague. It is necessary because, as Lord Justice Toulson said in Thomas, difficulties in identifying what is and what is not confidential information may mean that a non-competition clause is the most satisfactory term of restraint. The six month period seems to me to be appropriate and the words ‘which are in competition with the business carried on by the Company’ are reasonable. The capacity in which the employee in fact works for the new employer cannot in itself be decisive. If he possesses confidential information which it is appropriate to protect and there is a risk that in the course of his new work the duty of confidentiality may be breached, it matters not in precisely what capacity he is to work. Here, it is to be noted that the Defendant had access to confidential information when he was head of training even though that was not as substantial as when he became HDS. Breach of the confidentiality clause would therefore be risked in employment in a training post.

The Claimant’s business is both in the UK and Europe and Premiere are in competition in the conferencing field in those areas. I do not consider that the clause is too wide in its area. I come to that conclusion having compared the clauses in other cases, and in particular in Brake Brothers and Thomas.

I accept entirely that a clause in restraint in trade should be no wider than necessary but have concluded that this clause was reasonable as at the time the Defendant accepted it as a term in the contract by which he was bound. I do not consider that the period of six months restraint starting only after ‘garden leave’ has terminated is unreasonable.

I turn therefore to the issue of discretion.

It is of particular importance to note that the Claimant is seeking an equitable remedy and that the Court is exercising its discretion. Further, the Court must have clearly in mind the principles set out in American Cyanamid and in particular the balance of convenience.

It is submitted on behalf of the Defendant that if the non-competition clause is in force the restriction would prevent the Defendant from working in his own specialised field of training and make it more likely that he will suffer loss. He will be less able to obtain secure alternative employment. The Claimant however will suffer no financial loss, Mr Pearman submits, if the clause is not enforced. It should be taken into account that when the clause was signed by the Defendant he did not have the benefit of legal advice, nor did the Claimant advise him that he should take it in spite of the draconian nature of the restriction. The period of six months, it is submitted on behalf of the Defendant, does not give credit for the one months period of notice whilst the Claimant is on gardening leave. The Court should also take into account that the Claimant is changing its operational infrastructure in July 2007 after which, none of the information the Defendant had access to on pricing or operational infrastructure will be of any use. In such circumstances, Mr Pearman submits, the six month period can be seen to be too long. Xpedite is not in competition, albeit an associated company of Premiere and the open offer made by the Defendant will not place him in competition.

I have considered these matters but had nevertheless concluded that it is appropriate in the circumstances to grant the interim injunctions sought. This is not a case where the Claimant will suffer no loss if the restriction is not enforced. The nature of the confidential information, whether it be transmitted advertently or inadvertently, is such that customers could be lost or employees poached. This could have an adverse effect upon the business of the Claimant and its employees. Such a potential loss is difficult to calculate. The Defendant’s loss is however readily calculable and if the interim injunction has been wrongly granted the undertaking as to damages will properly compensate him. Furthermore he is not prevented from obtaining other employment for the period of the restriction anywhere, without territorial limits, provided it is not in competition. I have already said that I did not consider the period of six months to be excessive even allowing for the one months gardening leave and I take the same view in relation to the change of the Claimant’s operational infrastructure in July 2007. I raised these matters myself during the course of submissions but having reflected upon them I do not consider that they should alter the exercising of my discretion in favour of granting the interim injunction. They may well be matters for negotiation between the parties before the full trial takes place. The confidential nature of the material to which the Defendant had access seems to me to require protection until the change in the infrastructure has been concluded and put into effect.

I am therefore satisfied that I should exercise my discretion to grant the injunctions sought by the Claimant. Whether these have been rightly granted will be for consideration at the full hearing. I have been informed that the Defendant may not wish to incur further costs but that a trial date may well be available as soon as April 2007. I order a speedy trial. In the meantime the Claimant can give proper consideration to the open offer made at the doors of the Court prior to the hearing before me. They can investigate whether the Defendant’s offer to work for Xpedite without dealing with conferencing and without dealing with customers can be validly enforced. Until trial or until any agreement is reached between the parties as how to this matter should be dealt with, an undertaking as to confidentiality is not sufficient and the interim injunctions must be granted. The parties should seek to agree the precise terms of the order. If costs are not agreed I will deal with them when this judgment is handed down.