OTS Logistics Belgium NV & Anor v Clarke & Anor

This is an application by the Claimants for an interim injunction to restrain what are said to be breaches of covenants contained in a share Sale and Purchase Agreement and a Directors Service Agreement. The claimants are part of the OTS Logistics Group which has OTS Logistics Group Ltd at its apex and a number of other companies, including the claimants, as its members.

In 1988 the 1^st Defendant, Robert Clarke (“Mr Clarke”), started up together with Mr Steven Clayton a logistics business which was carried on by Ocean Express Ltd (“OEL”), a company which they jointly owned. The business was that of freight consolidation. This involves obtaining rates from carriers which, because of the relationship between the consolidator and the carrier and the volume of business transacted between them, are less than the rates that an individual shipper, or at least many individual shippers, can themselves obtain from the carrier in the general market. OCE would offer shippers the rate which they could secure, plus a mark-up for their profit. Even with the mark up the rate would be better than that which the shipper could obtain if it went to the carrier direct. So the shipper pays less than he might otherwise have done and OCE makes a profit.

It is apparent from this description that the price at which carriage is available, or achievable, from different carriers is of critical importance. In the nature of the business information will be available to OEL which is not generally available and may be confidential, including, but not limited to, the prices and discounts which can be obtained from carriers; and the contacts at carriers through whom such rates were obtained.

The business of OEL flourished. According to Mr Clarke’s evidence it started offering export service for container loads to the Caribbean and Latin America; then in 1990 it took over the business of Atlantic Liner Agencies Ltd which operated break back cargo services from UK to USA, Canada and elsewhere. In 2005 OEL started to offer export services for container loads to the USA. Between 1998 and 2005 it set up a number of partly owned subsidiary companies in Europe and elsewhere. In 2005 a subsidiary Ocean Express Shipping LLC (“OESL”) was formed in Los Angeles and operated by Paul Snell. This provided refrigerated export services from Central America. Part of its business involved a service for refrigerated cargo from Costa Rica to Rotterdam/UK. Later this business was carried out by Naca Logistics (USA) Inc, (“NACA”), another OTS Logistics Group company. From around 2004/5 10% of his time was spent running the UK operation of OEL. 60% in running an operation set up in Miami, and 30% in the Los Angeles operation of OESL.

On 24^th July 2007 Mr Clarke and Mr Clayton sold their shares in OEL to OTS Logistics Belgium, NV, the first claimant, for a consideration in excess of £ 7.3 million. The Sale and Purchase Agreement (“SPA”) by which the sale was agreed contained in clause 11 a non compete clause which was to have effect for 5 years from the Closing Date, which was in August 2007, in the following terms:

“11.1

For the purpose of assuring to the Buyer the full benefit of the Business and the goodwill of the Company, each Seller undertakes by way of further consideration for the obligations of the Buyer hereunder as separate and independent agreements that he will not without the prior written consent of the Buyer (such consent not to be unreasonably withheld or delayed) for the period commencing the Closing Date and for 5 years from the Closing Date either alone or jointly with any person, directly or indirectly:

11.1.1

carry on or be engaged concerned or interested in any commercial activity anywhere in the UK that is competitive with the Relevant Products (provided always that this provision shall not restrict the Seller from holding an equity interest of not more than 5% of any class of shares or debentures of a company whose equities are traded on a recognised investment exchange in any part of the world or working for a company which may be engaged in such a commercial activity, provided that he does not participate in that activity). In this Agreement “Relevant Products” shall mean any products or services provided by the Company;

11.1.2

solicit or employ any nominated key personnel of the Companies nor solicit any customers or suppliers of the Companies.

11.2

The Sellers acknowledge that the obligations and undertakings given by the Sellers in this clause, which are given to assure to the buyer the full benefit of the businesses and goodwill of the Companies, are given by the Sellers inter alia in recognition of the benefit which the Sellers will receive under this Agreement and that without the benefit of the obligations and undertakings in this clause the Buyer would not have been prepared to purchase the shares at the price set out in this Agreement.”

“Company” is defined in the SPA as “the Company described in Part 1 of Schedule 2”, which is OEL. “Companies” are defined as “each of the Company,” i.e. OEL, ”the Subsidiaries and the Related Companies”. These are set out in Part 2 and Part 3 of Schedule 2. OESL is one of the subsidiaries. None of the subsidiaries were wholly owned by OEL.

Mr Clarke’s evidence, which, in this respect, is not in dispute, is that he was contemplating moving to the USA (his wife is American). There was therefore a reason for a restriction which was limited to stopping him from commercial activity in the UK which was in competition with the business of OEL. According to him OEL’s core business was in respect of container cargo from the UK and Europe to the Caribbean and break bulk cargo from the UK to anywhere in the world. OEL never shipped from Costa Rica and never shipped refrigerated cargo.

The SPA was completed in August 2007. On 31^st August 2007 Mr Clarke entered into a director’s service agreement (“DSA”) with OEL whereby he was to be employed as a director of that company. That agreement contained, in Clause 9 a confidentiality covenant in the following terms:

“9

You must not at any time during (except in the course of your duties) or after your employment disclose or make use of your knowledge of any confidential information of the Company and its Associates. Confidential information includes (without limitation) all and any information about business plans, maturing new business opportunities, research and development projects, product formulae, processes, inventions, designs, discoveries, or know how, sales statistics, marketing surveys and plans, costs, profit or loss, prices and discount structures, the names, addresses and contact details of customers and potential customers or suppliers and potential suppliers (whether or not recorded in writing or on a computer disk or tape) which the Company or relevant Associate treats as confidential.”

The SPA also contained, in clause 11, a restriction on competition to last for 24 months after the end of Mr Clarke’s employment in the following terms.

“11.1

You will not for the first 24 months after the end of your employment with us engage in any activity or employment within the United Kingdom in the faithful performance of which it could be reasonably anticipated that you would or would be required or expected to use or disclose any confidential information or trade secrets of the Company or its Associates.

11.2

You will not for the first 24 months after the end of your employment with us solicit orders for services competitive with ours from any of our or our Associates agents customers or clients with whom you dealt during the last 12 months of your employment with us.

11.3

You will not for the first 24 months after the end of your employment with us solicit away from us or our Associates who is and was, when your employment ended, employed by us or an Associate during the last 12 months of your employment and over whom you had control.”

The DSA was in the same terms, so far as presently relevant, as an earlier 3 year DSA made in 2004.

In September 2007 Mr Clarke became Managing Director not only of OEL, but also of Confreight UK Ltd, Box Consolidators Ltd and Vanguard Logistics Ltd, with the intention that all four companies should be merged.

In mid-2008 Mr Clarke was, according to his evidence, instructed by Mr Charles Brennan, the CEO of the OTS Logistics Group of companies, to cease any day to day involvement in the services previously carried on by OESL in California including refrigerated services from Costa Rica to Northern Europe as those services had been transferred to NACA in January 2008. Mr Brennan does not recall giving any such instruction.

On 1^st January 2009, according to Mr Clarke, most of OEL’s business was transferred to Vanguard Logistics Services Ltd, only break box services remaining with OEL.

On 1^st April 2009 Mr Clarke’s employment was transferred to Vanguard Logistics Services Ltd. I queried whether, in the light of that evidence, the second claimant was the correct claimant in respect of the DSA, but no point has been taken by the defendants on this, and I, therefore, proceed on the footing that it is. In August or September 2009 he became Regional MD for UK and Europe (on a salary of £ 200,000 a year) and was responsible for all Vanguard operations in various countries in Europe. From then on, according to him, he had nothing to do with the day to day running of OEL.

The use of the expression “Vanguard Logistics” or “Vanguard” is apt to confuse since the former appears, now at any rate, to be the trade name of every company in the OTS Logistics Group. As a result it is not always possible to know to which company Mr Brennan (or Mr Clarke) is referring at different passage in the witness statements.

On 27^th May 2010 Mr Clarke tendered his resignation as Regional MD of OEL to take effect from 27^th August 2010. He was then put on garden leave from mid June 2010. On 3^rd September 2010 he caused Britam Shipping, the 2^nd defendant, (“Britam”) to be incorporated. He is its sole shareholder and director.

The claimants say that Mr Clarke has wrongly used confidential information belonging to them or of their European subsidiaries and American affiliates in order to solicit orders from their customers and to solicit services from their suppliers; and that he has solicited at least one individual to participate in the business of Britam Shipping, all in breach of one or more of the restrictive covenants.

The legal principles involved in an application such as this are not seriously in dispute. Any grant of injunctive relief is discretionary. Whether it is given and in what terms depends on all the circumstances. It is necessary first to decide (a) whether there is a serious issue to be tried, i.e. an issue that is not fanciful; and (b) whether, if there is, damages are an adequate remedy. If the answer to the first is “no”, no injunction should normally be granted. If the answer to the second is “yes” and the defendant is able to pay any damages, an injunction should not normally be granted. If those hurdles are overcome, it is then necessary to consider the balance of convenience which often involves determining which side will suffer more if the court gives, on an interlocutory basis, the “wrong” answer i.e. an answer different to that which is given at trial. Will it be the claimants if, as it turns out, the injunction was wrongly refused or the defendant if it was wrongly granted? If matters are finely balanced an appropriate course may be to preserve the status quo. Where the extent of the uncompensatable disadvantage which the parties would suffer if the “wrong” decision is made does not greatly differ, it is legitimate to take into account the relative strength of the parties cases. The Court will not, however, usually embark on any prolonged examination of the merits or attempt to resolve difficult questions of fact or law and should not, generally speaking, seek to resolve them. But any clear view which the court may reach as to the relative strength of the parties’ cases is relevant: Series 5 Software Ltd v Clarke and others [1996] 1 AER 853.

The claimants’ complaints, as set out in Mr Brennan’s first witness statement of 19^th November 2010 and in the submission of Mr Ramsden for the claimants, are, broadly, these. It is said that Mr Clarke:

The first question is whether the prohibition against competition with Relevant Products in clause 11.1.1 of the SPA relates to products or services supplied by OEL or to those supplied by OEL or the Subsidiaries or the Related Companies. An initial reading of the definition of Relevant Products (“any products or services supplied by the Company”) indicates the former. The “Company” is defined as OEL.

Mr Ramsden submits that that is not the whole picture. Clause 1.5 of the SPA provides that words denoting the singular include the plural and vice versa. Accordingly “Company” includes “Companies”. Thus the Relevant Products are those supplied by any of the Companies.

I find this submission, whilst not unarguable, very difficult to accept. The draftsman distinguished between restrictions relating to the Company, contained in clause 11.1.1, and those relating to the Companies, contained in clause 11.1.2. The distinction must have been intentional. There was a logical reason for it. The express and particular distinction in clause 11 between Company and Companies must, I would have thought, take precedence over the general extension of singular to plural in 1.5. particularly in a restrictive covenant which, even in an SPA, is to be restrictively interpreted.

Clause 11.1 of the DSA restrains Mr Clarke from engaging in any activity in the UK in the faithful performance of which it could reasonably be anticipated that he would or would be required or expected to use or disclose any confidential information or trade secrets of the Company, i.e. OEL, or its Associates, which would include OESL. There is an issue between the parties as to whether OEL carries on the business of reefer exports from Costa Rica. It is Mr Clarke’s evidence that it has never done so; that OESL used to do so, and that it is now NACA which does. If that be right, then any confidential information relating to such exports may belong to NACA.

It is not wholly clear to me whether NACA is an Associate of OEL. But since it is described by Mr Clarke as another OTS Logistics Group company, it is likely to be an Associate, on the grounds either that it is a subsidiary of OEL’s holding company or that it is an associated employer of OEL, being a company of which, like OEL, a third company has indirect control: see the definition of “Associate” in para 25 below.

So far as clause 11.1.2 is concerned OESL is one of the “Companies” but NACA is not. If, therefore, it is NACA which has the customers for reefer exports from Costa Rica, and NACA which is supplied with the services necessary to service those customers, there is no breach of clause 11.1.2 of the SPA.

So far as clause 11.2 of the DSA is concerned the restriction is on soliciting orders “for services competitive with ours” from a defined set of persons. That raises the question as to what is meant by “services competitive with ours”. As to that, the DSA is an agreement between “the Employer” and “the Employee”. Mr Clarke is the Employee. The Employer is defined as “OceanExpressLimited…., herein “We”, “Us” or “the Company”. The DSA also has a definition of “Associate” in the following terms:

“Associate” means any associated employer, as defined in the ERA (Footnote: ¹), of ours/our holding company or any subsidiary of ours or of our holding company as defined in the Companies Act 1985 or a company in which the Company holds part of the issued share capital”

The meaning of “ours” seems to me tolerably clear. It means the services “we” provide and “we” means OEL. Although the use of the word “ours” in a restrictive covenant might well be held to restrict the application of the covenant to services offered by OEL itself, it also seems to me well arguable that, in the present context – the sale of OEL and its subsidiary and related companies - the clause embraces services provided by OEL through its Subsidiary, Related or (more problematically) Associate companies. The prohibition against soliciting orders from the customers of Associates makes limited sense if the services for which orders must not be solicited are only those provided directly by OEL.

It is clear that, in order for Mr Clarke to be in breach of the clause the solicitation must have been of someone within the specified class with whom he had dealt in the last 12 months of his employment i.e. in the year down to 26^th August 2010.

Mr Retana was at some stage a consultant to OEL. According to Mr Clarke Mr Retana ceased to provide any services to OEL from 2005 onwards. According to Mr Brennan, until Mr Retana’s resignation in October 2010 he was securing business from Costa Rica on behalf of OEL, which paid 30% of his consulting fees. That appears to be supported by an e-mail of November 19^th 2007, which Mr Brennan exhibits to his third witness statement, which refers to OESL paying 70% of the cost of Mr Retana and to Mr Retana spending at least 70% of his time selling export reefer services. I note, however, that this is some three years ago.

On Friday 1^st October 2010, by an e-mail to Mr Snell of OESL, Mr Retana resigned with effect from Friday 8^th October. His e-mail was signed as “Delegate for Central America, Ocean Express Group Ltd, U.K”, which is said to be the description he habitually used. Attempts were made to persuade him to stay, which were temporarily successful. But by an e-mail of Wednesday 20^th October he decided to keep his resignation “and this time it is irrevocable” and nominated Friday 22^nd October as his last day.

Mr Clarke resigned from Vanguard on 27^th May 2010 with effect from 27^th August. He was placed on garden leave. When on leave he was, according to his evidence, contacted by various members of OTS’ management, including Mr Retana, who asked him what his intentions were. He told them that he was going to take four months off and then decide what to do.

In July and September he took advice from his solicitors from which it appeared that he would not be breaching the restrictions in the two agreements by seeking to start offering cargo services from Costa Rica. On his evidence OEL only ever shipped to Costa Rica from UK/Europe and never shipped refrigerated cargo. OESL and later NACA shipped refrigerated cargo from COSTA RICA to UK/Rotterdam and very occasionally to LA.

Mr Clarke then decided that there was potential for a business other than the transportation from Northern Europe/UK to Costa Rica undertaken by OEL; in particular:

According to his evidence, around the end of the 1^st week in October Mr Retana contacted him and told him that he had told NACA (sic) at the beginning of October that he was going to cease working for them because he was disillusioned at their lack of interest in services from Costa Rica. Mr Retana asked Mr Clarke about his plans and said that he was probably going to leave the logistics business. Mr Clarke told Mr Retana that he was going to Costa Rica in mid-October to discuss possible new business with Mr Luis Cabezas, who worked for a shipping agency in Costa Rica offering container services from China to Costa Rica. Mr Clarke said he would be happy to meet Mr Retana in Costa Rica and discuss the position with him as well.

Mr Clarke’s evidence that OEL only ever shipped to and not from Costa Rica and that the refrigerated cargo business from Costa Rica was that of NACA was not challenged in Mr Brennan’s second witness statement. However in his third statement Mr Brennan says that the company which provided refrigerated services from Costa Rica was OEL. Prior to the SPA OEL had appointed Dacotrans as its agent in Costa Rica. He exhibits a copy of a final version of an agency agreement with them which was to be signed by Mr Clarke. But that appears to relate to container loads from Europe and the USA. He also indicates that Mr Eric Bake, the manager of Dacotrans was employed by “Vanguard” in early 2010 to grow its business in Costa Rica and Central America. It is not clear to me exactly which company is “Vanguard”.

He also exhibits a specimen bill of lading with Ocean Express at its head which incorporated the terms and conditions of the British International Freight Association. These define the company as the “BIFA member trading under these conditions”, which is said to be OEL. He also exhibits a specimen bill of lading of 21.10.10 for shipment of two containers of pineapples from Costa Rica at 7.2°C. His third statement does not, however, deal with the position of OESL or NACA as set out in Mr Clarke’s first witness statement.

There is thus some not entirely satisfactory evidence that customers for reefer services ex Costa Rica were customers of OEL and that the business of OEL included such reefer services. I consider the evidence of solicitation below.

The customer which, on the evidence, Mr Clarke is alleged to have solicited is B & C Exportadora/Asia Food Express. The suppliers whom he is alleged to have solicited are CSAV and HSUD. The business in relation to which the solicitation is said to have occurred is that of export from Costa Rica on refrigerated vessels. There is no evidence that Mr Clarke ever dealt with CSAV or HSUD.

B & C Exportadora is a shipper of produce which until 21^st October was, according to Mr Brennan, a frequent user of “Vanguard’s” freight consolidation services. It is not wholly clear to me to which company Mr Brennan is referring to when he uses that name. Mr Brennan’s evidence is that Mr Alberto Bonilla, the sales manager of B & C Exportadora, told Mr Eric Bake of Vanguard Logistics Services, Costa Rica (who told him) that he, Mr Bonilla, was told, at some time between 17^th and 23^rd October by Asia Food Express, an Exportadora client based in Holland, to switch freight arrangements from Vanguard to Britam. Mr Bonilla immediately telephoned Mr Retana, who was planning to join Mr Clarke in the business of Britam. Mr Retana told Mr Bonilla that he was not ready to ship under the new brand yet. B & C Exportadora has not provided any shipments to Vanguard since 21^st October.

This evidence is second hand hearsay – what Mr Brennan was told by Mr Bake that Mr Bonilla had said; and it does not show, or necessarily imply, that the proposed change was made at Mr Clarke’s behest.

According to Mr Clarke, he was told at the beginning of October by his agent in Rotterdam that Asia Food Express was planning to change its shipping line to Hapag Lloyd. He was asked if he wanted the opportunity to try and quote for the business. He said he would be happy to quote and that if AFE was interested, they should contact his agents in Costa Rica who are called Conecli.

In about mid-October Conecli received a telephone call from Mr Bonilla’s secretary saying that B & C Exportadora would have a new shipment soon and had been instructed by Asia Food Express to place the shipment with Conecli. Conecli know nothing about Asia Food but, as Mr Clarke had recently confirmed to them that he had agreed to work with Mr Retana, Conecli called Mr Retana to ask what to do. Mr Retana then telephoned Mr Bonilla’s secretary to tell Mr Bonilla that he could not do anything at that time as he was not working for Britam and Conecli until the following week. The matter was left until the next week.

When Retana did start to work for Britam he called the secretary back and confirmed that Britam could handle the booking. Britam then shipped one container for Asia Food Express in accordance with B & C’s instructions: the shipment was from Costa Rica to Rotterdam. Britam made a profit of $ 359. Later Hapag Lloyd came back to Asia Food Express quoting a new very low price far below any rates Britam could get. So all further Asia Food Express orders will be booked to Hapag Lloyd.

This evidence does not make entirely clear whether Mr Clarke’s agents were passing on to him an invitation from AFE to quote or suggesting to him, as their principal, that he should put one forward, although it appears to be the former. The evidence does not explain why AFE gave instructions to switch to Britam or whether they received a quotation.

Mr Bake has also told Mr Brennan that on Monday 15^th November he met Mr Daniel Oviedo of CSAV, a shipping line from which “Vanguard” purchases capacity. Mr Oviedo confirmed that on 19^th October Mr Retana accompanied Mr Clarke to a meeting with Mr Oviedo to negotiate rates for Britam. This shows, the claimants submit, that before his departure (on 22^nd October) Mr Retana was working on behalf of Britam which they suggest, can only have been at the behest of Clarke.

Mr Clarke’s evidence is that he went to Costa Rica on 17^th October. He met Mr Retana on 18^th October and explained his plans to look at a refrigerated service from Costa Rica to UK and Rotterdam, and other reefer services from Costa Rica and Panama to the Mediterranean and USA and non refrigerated imports from the Far East to Costa Rica. Mr Retana told him that Friday 22^nd would be his last day with NACA and that he was interested in working with Mr Clarke.

In the afternoon of 18^th October Mr Clarke met Mr Cabezas. Mr Cabezas gave him details of (a) the reefer services that he was involved in to UK/Northern Europe, including the market prices and target accounts, and (b) a business plan he had prepared for refrigerated cargoes from Costa Rica and general cargo from China to Costa Rica.

Overnight Mr Clarke decided not to proceed with Mr Cabezas and told him that he was going to commence doing business with Mr Retana, although he might want to open an office in Costa Rica next year. On 19^th October he met Mr Retana again and said he would be keen to retain him as a consultant to work on developing refrigerated export business from Costa Rica and Panama and dry van container cargo business from China to Costa Rica utilising the office of a local agent.

Mr Retana drove Mr Clarke to the meeting with Mr Oviedo at CSAV on 19^th October and stayed with him. Mr Clarke told CSAV of his plans for Britam and discussed with him the refrigerated services that CSAV could offer from Costa Rica and Panama to Europe and USA.

Mr Brennan says that it is inconceivable that, at this meeting Mr Clarke would not have been aware of Vanguard’s pricing and discount structure for Costa Rica through Mr Retana and that he could use this in offering rates from Costa Rica. He says that Mr Oviedo has reported specifically quoting to Mr Clarke rates that were $ 100 higher than those applicable to Vanguard on the instructions of CSAV senior management; and that negotiations have continued since 19^th October.

From this Mr Brennan infers that it is likely that in his approach to CSAV Mr Clarke initially indicated to CSAV that Britam would ship the freight that it controlled if he could get pricing equal to or better than what Vanguard was paying and that, even if he did not refer expressly to the Vanguard rate, he would still be using his knowledge of what Vanguard was currently receiving or paying as a benchmark. Such likely use of the Vanguard rate illustrates, he says, the need for injunctive relief to prevent the use of Vanguard’s confidential information by Mr Clarke or Britam and illustrates the need for Vanguard to be protected by clause 11.1.

This inference seems to me speculative. The only reported statement of Mr Oviedo (via Mr Bake) is that he quoted Mr Clarke a rate which was $ 100 higher than the rate quoted to Vanguard. The evidence does not even vouch that Mr Oviedo told Mr Clarke that that was what he was doing, or that Mr Clarke asked for a price equal to or less than what Vanguard was paying.

Mr Clarke says that Mr Brennan’s inference is wholly wrong. When he met CSAV he did not know that CSAV provided any services to Vanguard relating to Costa Rica (Mr Brennan says that is inaccurate) and he knew nothing about rates. He exhibits an e-mail from Mr Oviedo of 22^nd November in response to one from him about the meeting which confirms that CSAV’s rates are confidential to their clients and are not discussed with anybody only with the corresponding client. Mr Oviedo records that at the meeting they discussed briefly rate levels and that at the end Mr Clarke said that he would send him a message indicating the rate level he needed in order to close a deal with Britam; and that since then CSAV had not been able to close with Britam because the rate level that Britam was asking for was too low and CSAV was moving cargo at a much higher rate, at which higher rate Britam had moved two reefers.

Mr Clarke says that at this meeting he discussed the prices that he believed he needed based upon the market rate information given to him by Mr Cabezas. He already knew what prices Hapag Lloyd were prepared to give him and it was upon the basis of this information that he subsequently e-mailed CSAV about the sort of prices he thought he needed if he was to place business with them to either US or UK/Northern Europe.

Mr Clarke left Costa Rica on 20^thOctober and agreed with Mr Retana that Mr Retana would begin working as a consultant for Britam from Monday 25^th October. Mr Clarke said he intended to call Mr Brennan on his return to tell him what he was doing, including the fact that Mr Retana would be working for him. Mr Retana asked him not to disclose this information as he was concerned that if OTS knew that he was going to start work with Mr Clarke they would not pay his consultancy fee for his work in October. As a result of that that Mr Clarke sent the following e-mail to Mr Retana at vanguardlogistics.com :

“Sorry I have not been in touch since 3 or 4 months but have been quite busy since resigning from vanguard. How are things for you at vanguard. Are you still reporting to paul or to erich now. Are you still in touch with magda. I heard she has taken a job is los islas malvinas. Now that the summer is finished in England I may look to do something that can give me a few days work each week but don’t know what yet. Keep in touch my friend …”

Regretting subsequently what he had done Mr Clarke phoned Mr Brennan on 1^st November and told him of his plans for Britam to operate reefer services to UK/Northern Europe which would be in competition with the service provided by NACA, but that would not be the main focus of the development of Britam's business, his intention being to develop reefer services to USA and dry van general cargo services from Costa Rica (Footnote: ²). As far as he was aware these were not routes operated by any OTS companies. He explained that Retana would be working for him as a consultant.

Mr Brennan has not disputed this telephone conversation.

Hamburg Sud is a major cargo carrier. HSUD Caribbean Reefer Pricing in Miami (“HSUD”) is, according to Mr Brennan, a supplier of services to OEL. Mr Brennan’s evidence in his first statement was that the claimants had learnt from HSUD that Mr Clarke had contacted Mr Mathias Staubli of HSUD to negotiate pricing for Britam. Mr Staubli inferred from what Mr Clarke told him that Mr Clarke had control of certain refrigerated container business from Costa Rica. Mr Brennan suggests that that business can only be the business that OTS purchased from Messrs Clarke and Clayton under the SPA. The Clarke statement, Mr Brennan contends, effectively implied that OEL had lost control of the business and was calculated to injure OEL. In his second witness statement Mr Brennan makes plain that his information comes from Mr Gale Searing of HSUD in Los Angeles and that what is of concern to the Claimants is the fact that Mr Staubli was approached at all.

This is evidence of what Mr Searing said Mr Staubli had inferred as a result of what Mr Clarke told him. What Mr Clarke actually told Mr Staubli, and thus the legitimacy of any inference, is unclear.

Mr Clarke accepts that on 15^th October he met Mr Staubli in Miami to discuss his intention to offer reefer services from Costa Rica and Panama to UK, Europe and USA. Staubli told him about the new services his company would be starting in February 2011 to UK, Europe and USA as well as their current services to the Mediterranean. He said nothing at all to Mr Staubli to represent that he controlled any business out of Costa Rica and certainly not that he had any involvement in OTS or any part of their business from Costa Rica. Mr Staubli had confirmed to him that he had received a telephone call from one of HSUD’s sales representatives in Los Angeles, who must be Mr Searing, asking if he had received any contact from Mr Clarke, and he had told him that the two of them had met and discussed rates.

Insofar as reliance is placed on clause 11.2 of the DSA, there is no evidence that Mr Clarke ever dealt with CSAV or HSUD. Accordingly there is no basis for injunctive relief in respect of those two companies, or on account of Mr Clarke’s dealings with them, by reference to that clause.

So far as B & C Exportadora is concerned, there is evidence that Mr Clarke had dealt with them. But it seems to me that the evidence of solicitation is too tenuous to amount to a serious issue. At best it is very thin. I accept that, in cases such as these, evidence of solicitation is often necessarily second hand and that it may sometimes be appropriate to draw inferences on limited material, at any rate at an interlocutory stage. But there is a dividing line between being prepared to do business and soliciting it and it does not seem to me that, in respect of Exportadora, that line has been shown, prima facie, to have been crossed.

So far as clause 11.1.2 of the SPA is concerned the restriction on solicitation is not dependent on Mr Clarke having dealt with the customer or supplier concerned. But, as I have said, the evidence of solicitation of B & C Exportadora is inadequate.

So far as CSAV is concerned the position seems to me different. The purpose of the visit to Mr Oviedo was to discuss prices in respect of CSAV reefer services ex Costa Rica. What is not clear is how that meeting came to be arranged. Given, however, that Mr Clarke regarded himself as free to deal in such services, there is a strong possibility that he was seeking to procure CSAV’s services and, according to Mr Brennan evidence CSAV dealt with Vanguard, which I presume in this context means that it was a supplier to OCE

The position in relation to HSUD is similar. Again Mr Clarke’s intention seems to have been to secure the provision of HSUD’s services for his new business and there is a strong possibility that he set up the meeting for that purpose.

The claimants submit that the evidence shows that Mr Clarke has solicited Mr Retana to provide his services in breach of clause 11.1.2. of the SPA. This is not on the basis that he was one of the nominated key personnel (if any ever were nominated); but on the basis that he was a supplier of services to the Companies. No documentation has been produced showing the exact nature of the relationship between OEL and Mr Retana. There is nevertheless prima facie evidence that he did work for OEL on a consultancy basis.

That begs the question whether in that capacity he comes within clause 11.1.2. (Reliance is not placed on clause 11.3 of the DSA). That clause distinguishes between “nominated key personnel”, a phrase which would not appear to be limited to employees properly so called, and “customers or suppliers”. In that context it seems to me highly debatable whether a provider of personal services is to be regarded as a supplier within the meaning of a restrictive clause such as this. The point is, however, arguable.

The next question is whether Mr Clarke solicited Mr Retana to come and join him. As to that, Mr Retana gave in his notice on 1^st October. There is no evidence that he did so at Mr Clarke’s instigation. Mr Clarke’s evidence is that thereafter he was contacted by Mr Retana with the news that Mr Retana was leaving.

The claimants are not in a position to contradict this account and there seems no reason to doubt it. They can point to the fact that Mr Retana accompanied Mr Clarke to the meeting with Mr Oviedo on 19^thOctober. But there is no indication that he played an active role at that meeting. Mr Brennan in his second witness statement suggests that Mr Clarke solicited Mr Retana to join him at a time when he was actively reconsidering his resignation. But that seems to me speculation. Mr Clarke appears to have been following up on an approach that Mr Retana had already made to Mr Clarke after he had given notice; and Mr Retana appears to have made up his mind to leave OEL by the morning of 18^th October.

The strongest point in the claimants’ favour is that Mr Clarke deliberately misled them by his e-mail of 23^rd October. This e-mail must have been designed to indicate, contrary to the truth, that Mr Clarke and Mr Retana had not been in contact for months. The claimants submit that the fact of this intended deception should cause the court to look with great circumspection on Mr Clarke’s evidence. Mr Clarke had no need to send the e-mail in order to protect Mr Retana’s October fees. He could just have kept silent.

Mr Clarke realised, so he says, that this was a “stupid and misguided thing to do”. In the late afternoon of 1^st November he telephoned Mr Brennan and told him of his plans for Britam Shipping and that Mr Retana would be working as a consultant for him. He confirmed that Britam Shipping would operate reefer services to UK/Northern Europe which would be in competition with NACA (but not, so he claimed, in breach of the SPA/DPA) but that Britam Shipping’s main focus would be the development of reefer services to USA and dry van general cargo services from Costa Rica.

Even looking with circumspection on Mr Clarke’s evidence, it does not seem to me that the claimants have established a prima facie case that he solicited Mr Retana to join him. If I am wrong about that it seems to me that, at any rate, the evidence is very thin.

The claimants’ case is this. Mr Clarke and Mr Retana know details of the claimants (or their Associates)’current costs, prices and discount structures all of which are defined as confidential information. Such information is, as a matter of standard industry practice regarded as confidential and never intentionally disseminated, since, if the rates available from carriers are disseminated to customers or competitors that will damage the position of the consolidator. Consolidator A, who knows the rate available to Consolidator B from a carrier can approach the carrier and seek the same rate or a better one, or at least base its negotiations on that rate as a benchmark. A consolidator who knows the rate charged to shippers by another consolidator can undercut it. Customers who learn the rate can approach the carrier themselves. Carriers may be disadvantaged if their rates and discounts for bulk business are known. It is inconceivable that Mr Clarke was unaware of Vanguard’s pricing and discount structures for Costa Rica through Mr Retana, and that knowledge will enable him to apply that information in offering rates from Costa Rica.

Mr Clarke’s evidence is that when he left he did not take with him any documentation whatsoever regarding the business, and that he has no specific knowledge of Vanguard’s clients’ current costs, prices and discount structures nor of those details for OEL or any other companies in the OTS Group. His role was at a strategic management level and he was not involved in negotiations with suppliers, vendors or customers for the services of Vanguard, OEL or anyone else. All the day to day dealings of OEL were handled by the 3 other directors. The refrigerated export service from Costa Rica was handled in the USA by NACA. He does not know the rates that any of these companies were getting from shipping companies or what they were charging their customers, nor who the current customers were, or what discounts were being offered to them.

Mr Brennan claims that two of the directors who reported to Mr Clarke handled OEL’s day to day matters and that Mr Clarke would have oversight of them and consistent involvement with strategy and budgeting issues; and he would be up to date with commercial details on all of the customers and suppliers. Mr Brennan also refers to an e-mail of 5^th June 2009 from Mr Snell which attaches a Target Account Program listing various clients in Europe and UK that were being followed up by Mr Clarke and his team. This business included refrigerated shipments from Costa Rica to Europe. He also refers to a UK monthly commercial report of Mr Clarke for April 2009 which indicates knowledge of the level of reefer bookings ex Costa Rica and of revenue and rates and in which Mr Clarke reported on margins.

Mr Clarke contends that, in any event, rates in June 2010, the last time when he was actively working for Vanguard, would now, for the most part, be irrelevant since, particularly with the recession, rates vary enormously from month to month. He has not been directly involved in rates and charges since 2008.

Mr Brennan ‘s evidence is that rates are, and were regarded by Mr Clarke as being, confidential regardless of age, and are useful as a benchmark. That benchmark can be adjusted as the market changes so that someone in Mr Clarke’s position can have a fairly good idea at any moment in time what the rates to Vanguard are likely to be and can use those in his negotiation with other carriers.

In his written submission Mr Sadiq for the defendants suggested that the obligations of confidentiality contained in clause 9 are indefinite and therefore unreasonable and unenforceable. I do not accept that that is a decisive point. There will come a time when any confidential information ceases to be confidential in which case the covenant will not bite. If it is confidential it is not unreasonable for the covenant to subsist.

More pertinently, evidence of any actual use of confidential information is very thin. The evidence of the communication with B & C and HSUD does not indicate the use of any such information. The evidence that Mr Oviedo quoted Mr Clarke $ 100 more than he did to Vanguard does not indicate that Mr Clarke ever used or referred to any Vanguard rate.

The better point for the claimants is the contention that Mr Clarke is likely to have more information which can properly be regarded as confidential as to rates and discounts available to Vanguard than he suggests, and that he is also able to obtain it from Mr Retana. There is, as it seems to me, a serious question to be tried on that issue. There is also a serious issue as to whether such information has been or, at any rate, is likely to be used.

I summarise the conclusions which I have reached so far on the evidence presently before me:

there is a serious issue to be tried as to whether:

Mr Sadiq contends that damages will be an adequate remedy for the claimants if they are right. Any loss of business from Costa Rica can be calculated. Mr Clarke is able to pay any damages that are likely to be awarded. His statement of assets reveals that his assets run to over £ 4 million. Per contra, if an injunction is wrongly granted, damages under the claimants’ undertaking will be inadequate. The claimants will have strangled a fledgling business at birth. The effect of having to stop will be highly detrimental to Mr Clarke’s reputation, especially if, as is likely, the claimants put it around that the injunction was granted on account of his dishonesty. Mr Clarke expresses the view that if he is prevented from trading in the way that he seeks, he does not believe that he could restart it in its current form and the work and investment that has put into starting it in the last 2 ½ months would be wasted and his credibility with shippers, agents and customers would be destroyed.

Mr Ramsden submits that the position is the reverse. If no injunction is granted, and the claimants succeed at trial, damages will be difficult to prove. It may be possible to point to business that Britam has secured, as shippers move from Vanguard to Britam (if they do) although even then there may be issues as to whether, if Britam had not got the business, the claimants would have done. But there is a real risk that, as a result of the defendants' illegitimate activities, business will be lost to the claimants which, unbeknownst to them, ends up with Britam or which does not end up with Britam at all. Customers may well not want to be involved with either party if there is a dispute. If the business goes to others, neither party may then know what that business would have amounted to if Britam had not been on the scene.

In my judgment damages are not adequate for either party – for the claimants because of the difficulties in establishing what they will truly have lost if Britam is allowed to compete for Costa Rican export business when it should not have done; for the defendants because the effect of preventing them starting that business may be very damaging and the exact effect unclear. In each case there is likely to be a significant degree of inability to gauge how much the party affected will have suffered from an inhibition to which he should not have been subject. Further if no injunction is granted there is a risk that both sides will lose business.

Mr Sadiq submits that the balance of convenience is in his client’s favour. The claimants have a well-established business which extends well beyond shipments from Costa Rica. There are many routes where it operates with which the business of Britam will not in any way be in competition. The damage potentially caused to a fledgling business intended to operate on a restricted basis from Costa Rica and Panama will, if it is denied that business, be proportionately much greater than any damage to the much bigger business of the claimants. To impose such a denial on the basis of evidence of solicitation and use of confidential information which is as thin as this would be inappropriate.

Mr Ramsden submits that injunctive relief on an interlocutory basis is necessary in order to give the claimants the effective protection which they need. Mr Clarke has received over £ 3 million for the business which he sold. Without an injunction it will be difficult to police any breach of the covenants which he gave as part of a deal by which he greatly profited and for which the covenants provided part of the consideration. Solicitation of clients and customers may be difficult to detect; and the misuse of confidential information even more so.

To the objection made by Mr Sadiq that the orders sought largely mirror the words of the applicable restrictive covenants he observes (a) that that is exactly what you would expect (if the orders went further, it would be said that they were unjustified); and (b) that it is because the letter of the covenants has proved inadequate that they need to be buttressed by the possibility of penal sanctions. Further the relevant status quo is that which was contemplated by the covenants themselves. An injunction will not stifle the defendants’ business but restrict it; and, if a speedy trial is ordered, only for a short time. Since Mr Clarke had it in mind, after his departure from OEL, to take a rest and then to do something which would occupy him for less than 5 days a week, a delay in a full start up is no significant hardship.

The extent of the uncompensatable disadvantage which each party will suffer if the “wrong” decision is made does not seem to me greatly different. It will, broadly speaking, be such loss of Costa Rican reefer export business as cannot be proved to have resulted from Mr Clarke’s breach of covenant or the claimants’ injunction, as the case may be. The fact that the claimants have a lot of other business, and that the defendants do not, does not seem to me to be particularly relevant. The claimants can justly claim that they should not be denied the full fruits of the SPA (involving, as they contend, a restriction on competition, including competition in respect of the Costa Rica export business) for which they paid a very sizeable sum; the defendants that they should not be affected by a restriction which, they say, was deliberately omitted from the deal.

In those circumstances it may be a “counsel of prudence” to preserve the status quo. But, if, as the claimants submit, that is to be regarded as the state of affairs predicated by the SPA, there is a dispute as to what that state of affairs is and , crucially, as to the legitimacy of the defendants engaging in Costa Rican reefer business.

That being so, it seems to me that the appropriate course to take is to make no order now which restrains the defendants from carrying on such business or from solicitation, but to order a speedy trial. The effect of so doing will be significantly to limit any uncompensatable damage that may be suffered by either party. Any damage is likely to be somewhat easier to calculate in the early stages when the claimants are likely to be more aware of any movement of business from them and to whom it has gone.

In coming to this conclusion I also bear in mind that the value of Vanguard’s Caribbean export business seems to be limited. The only information presently available is that the OTS Group controls 1% of the reefer business from Costa Rica to UK/Europe (16,000 containers per annum). Further, one of the reasons for Mr Retana’s resignation is said to have been the apparent disinterest, as he saw it, of the relevant company in business from Costa Rica. There is reason to question that in that Mr Brennan has produced an e-mail of 20^th July 2010 from Mr Bake which refers to Mr Retana continuing to be “very enthusiastic about the potential to develop more reefer business ex not only CR but the whole area, taking advantage of the new set up”. It is not, however, apparent to what extent that potential has developed or is likely to do so. So far as Britam is concerned, the total profit made by it on its business in its first month of trading, involving 13 containers, is estimated by Mr Clarke as $ 1,500 after payment of Mr Retana’s commission.

I have considered separately whether I should now make any order in relation to confidential information. I have come to the conclusion that it is inappropriate to do so for a number of reasons.

Firstly, the order that is sought in relation to the disclosure or use of confidential information is, in essence, in the terms of clause 9 of the DSA. Mr Clarke disputes that he has acted or intends to act, alone or jointly, in breach of this provision. The likelihood is that any claim that the defendants have breached the injunction will involve the same dispute as will in any event arise at trial as to whether that which the defendants are doing is or is likely to involve any such breach. It is of course true that, if an injunction is in place the defendants will be at risk of contempt proceedings if they do what is said to be a breach. But, given the nature of the dispute between the parties it is questionable whether an injunction pending trial will in fact provide any effective relief to the claimants.

Secondly, if there was strong evidence of misuse of confidential information the court would incline to the grant of interlocutory relief, even if there was dispute as to what was confidential and whether or not that confidence had been abused. But here the evidence of misuse is, in my view, thin.

Thirdly, a person against whom an injunction is ordered should be in a position to know from the terms of the order what particular information and what use thereof is enjoined. The order sought is lacking in particularity.

Fourthly, an order for a speedy trial will mean that the rights and wrongs of these issues should be soon determined.

I do, however, consider that Mr Clarke should, as he has offered to do, swear an affidavit confirming that he has no documents, computer discs, tapes or any other tangible items in his possession or control belonging to or containing information of the claimants or their Associates. It seems to me that he should also give the undertaking set out at para 10 of his first witness statement.