QBE Management Services (UK) Ltd v Dymoke & Ors

I handed down my full Judgment in this matter on 27^th January 2012 in which I found for the Claimant on the main issues and granted ‘springboard’ relief until 28^th April 2012, together with damages in the sum of £314,030.81.

The following three consequential matters remain for determination:

The form of the final Order

There was a debate between the parties as to the form of the Order for final injunctive relief.

The Claimant contended that the form of the Order for final injunctive relief should be the same as the Interim Order which I made on 21^st December 2011 when I indicated to the parties my decision (save for the deletion of the word “own” in paragraphs 1, 3 and 5 of the Interim Order which they were content should come out).

Mr Selwyn Bloch QC, Counsel for the Defendants, raised two objections to the form of the final Order. First, to the inclusion of the words “…or set up…” in paragraphs 1, 3 and 5 of the Interim Order. Second, to inclusion of paragraphs 2, 4, 6 and 7 dealing with inducing breaches of contract by others. Mr Bloch submitted that the words “…or set up…” were inappropriate and too broad for inclusion in the Order. He argued that they would exclude permissible ‘preparatory’ acts, in particular those which Mr Hearn had identified in his fifth witness statement as being steps which the Defendant wished to take in order, Mr Bloch explained, that the new venture wished to ‘hit the ground running’ on 28^th April 2012. Mr Bloch QC also argued that paragraphs 2, 4, 6 and 7 should be struck out because this was an attempt by the Claimant to enforce unenforceable and open-ended restrictive covenants as to confidentiality ‘by the back door’. He said that to include them in the final Order would not be consistent with my finding that the non-compete covenants were unenforceable and, in any event, would be disproportionate in what was already a robust order.

Mr David Reade QC, Counsel for the Claimant, submitted that the Defendants had not previously objected to the formulation of these paragraphs which followed the Interim Order of Mr Nigel Wilkinson QC on 18^th October 2012. He said that the formulation was appropriate as final ‘springboard’ relief which should be aimed at ameliorating the consequences of the Defendants’ unlawful actions. He further argued that confidentiality was an enduring obligation which required indefinite protection in the context of this case.

It was common ground that the form of the final Order is a matter of discretion for the Court.

The principles to be applied when formulating ‘springboard’ relief are, in my view, as follows:

First, the form of the Order and ‘springboard’ relief should fit the facts. In this case, the Defendants were engaged in executing a concerted plan over many months effectively to acquire British Marine’s business by stealth without paying for it (Judgment [249] and [251]) which caused significant damage to British Marine (Judgment [149]) and in my view the case calls for the full protection of the Court (Judgment [283]). The Defendants thereby ‘stole a march’ on the Claimant and gained a significant unlawful advantage (Judgment [284]).

Second, the ‘springboard’ relief should reflect and restrain the spectrum of the unlawful activities which made up the ‘springboard’. In this case, the Defendants obtained a substantial part of their unlawful ‘springboard’ advantage from the misuse of British Marine’s confidential information in furtherance of “Project Phoenix” (Judgment [167]). It is, therefore, appropriate that the injunctive relief should specifically cover the continued misuse of confidential information. Paragraphs 2, 4, 6 and 7 are part of the ‘springboard’ relief that I intend to grant and are not separate from it. The purpose of the relief identified in these paragraphs is not indirectly to enforce the employees’ confidentiality clauses themselves, but rather to assist in rectifying the unlawful consequences of their breach in the first place. For these reasons, I grant the relief in the form of paragraphs 2, 4, 6 and 7 but time limit it to the same period as the main ‘springboard’ relief in paragraphs 1, 3, 5 and 8, i.e. 28^th April 2012.

Third, in granting ‘springboard’ relief, the Court may restrain otherwise lawful activities taking place on unlawful foundations. The purpose of ‘springboard’ relief is to even up the playing field. It is no answer for the Defendants to say that they should not be restrained from continuing now with ‘permissible preparations’ for their new venture when they would not have reached this point of preparedness but for their months of previous unlawful activity. In any event, I do not accept that any of the steps listed in Mr Hearn’s Fifth Witness Statement amount to permissible ‘preparations’ (save perhaps for checking the Terms and Conditions and anodyne testing of the IT system).

Fourth, the form and content of the ‘springboard’ relief should match the tensile strength of the ‘springboard’ unlawfully used by a defendant. As with the length of ‘springboard’ relief, so with content thereof: the equation regarding relative advantage gained is kinetic not merely linear (Judgment [284] and [285]).

Fifth, when granting ‘springboard’ relief, the Court should take account of all the circumstances and grant relief which it thinks is fair, just and equitable. In this case it is relevant for the Court to have regard to the whole history of the Defendants’ unlawful conduct and propensities in the case (Judgment [43]-[168]) and their lack of candour in their evidence to the Court (Judgment[46], [110] and [144]). In such cases, the Order should take care to ensure that the Order leaves no ambiguity or ‘wriggle room’.

For the avoidance of doubt, it is my intention to continue to restrain the Defendants from any further activities or preparations with regard to “Project Phoenix” until 28^th April 2012, i.e. whether or not such activities or preparations might otherwise be regarded as ‘permissible’ or ‘impermissible’.

For the sake of completeness, I should add that there is no difficulty with including the words “…or set up…”. In my view, their import is clear and an order including them would not fall foul of the ‘cardinal rule’ as to clarity enunciated by Balombe L.J. in Lawrence David Ltd. v. Ashton [1989] 1CR 123 at 132. Furthermore, in my view, the terms of Clause 8 of the employment contracts and written definition of ‘confidential information’ are sufficiently pellucid so as not to give rise to difficulties of the sort identified in Ocular Sciences Ltd v. Aspect Vision Care Ltd [1997] R.P.C. 289.

It is noteworthy that this form of Order was not the subject of objection by the Defendants when first granted by the Court in October 2011. Nor does it appear to have caused any difficulty or lack of clarity in practice as to what the Defendants were or were not entitled to do under the injunction. The Order has achieved a stasis on the activities of the Defendants as regards “Project Phoenix” which is what it was intended to achieve. I intend that this should be continued until 28^th April 2012.

For these reasons, I grant final relief by way of ‘springboard’ relief in the form of the final Order attached to this Judgment, which is materially the same as that granted by me at the Interim Stage and that granted by Mr Nigel Wilkinson QC on 18^th October 2011.

Costs

The Claimant seek costs on an indemnity basis and an interim payment.

The Defendants submit: (i) The Claimant’s costs should be awarded on a standard basis not an indemnity basis. (ii) The Claimant should not be awarded costs up to the Order of Parker J. on 25^th August 2011 because it was granted on the basis of non-competition covenants which have been found to have been invalid. (iii) The Claimant should be deprived of 30% of their costs after 25^th August 2011 to reflect the significant increase in time and costs occasioned by the non-competition covenants issue which they lost.

Indemnity costs

The principles governing an award of indemnity costs under CPR 44.4 and 44.5 are well known and not in dispute. They are set out in cases such as Excelsior Commercial & Industrial Holdings Ltd v. Salisbury Hammer Aspden & Johnson [2002] EWCA Civ 87, Amoco UK Exploration v. BAO [2002] 1 BLR 135 and Three Rivers CD v. Bank of England [2006] EWHC 816 (Comm). They were considered recently by David Steel J. in Colour Quest v. Total Downstream [2010] 2 Costs LR 140 and Morgan J. in Digicel (St Lucia) Ltd v. Cable & Wireless [2010] 5 Costs LR.

In my view, the present case involves conduct which does takes it “out of the norm” for five principal reasons:

For these reasons, in my judgment, this is a case in which it is appropriate to award costs against the Defendants on an indemnity basis under CPR 44.4.

Costs up to Order of Parker J.

Mr Reade QC was right to characterise as ‘breathtaking’ the Defendants’ argument that the Claimant should not be awarded costs up to the Order of Parker J. on 25^th August 2011 because the non-compete covenants were later found to have been invalid. I reject it. To accede to such an argument would be to allow the Defendants to profit from their own disingenuity and lack of candour at that stage. The reason why the Claimant’s claim for interim relief before Parker J. was based purely on breaches of the non-compete covenants (rather than ‘springboard’ relief itself) was because the Claimant was in the dark about the nature and scale of the Defendants unlawful activities. The true story only came to light when the Defendants were forced to give disclosure.

30% discount.

I also reject the Defendants’ contention that the Claimant’s costs should be discounted by 30% on an Elgindata basis to account for the time and cost of the non-compete covenant issue on which the Claimant did not succeed.

The core issue in the trial was ‘springboard’ relief (as Mr Bloch said). This is what occupied the vast majority of the time, effort, documents, submissions and debate. The question of the validity of the non-compete covenants occupied relatively little time and, in any event, the process of analysis informed other parts of the case. The case of British Midland Tool v Midland International Tooling Ltd [2003] 2 BCLC 523 where Hart J. granted a 30% discount is distinguishable: it involved an issue which took up 50% of the trial.

In the result, I grant the Claimant 100% of its costs to be assessed if not agreed. I also order the Defendants make an interim payment of £450,000 on account of the Claimant’s costs.

Permission to Appeal

The Defendants seek permission to appeal. The relevant principles are set out in CPR 52.3.

Mr Bloch submitted that the Defendants should be granted permission to appeal on six grounds:

I am unpersuaded by any of these grounds. It is true that this case does involve some interesting areas of law (Judgment [169] ff.). And it may well be arguable that:

In my view, however, the present case is probably not the right one to test these matters. I concluded that it was an overwhelming case on the facts and a clear case for ‘springboard’ relief, whatever the precise law (Judgment [248]). This was far from a marginal case on the ‘cusp’ of what was permissible. The Defendants’ activities mostly fell well on the wrong side of the (useful) table of ‘Permitted/ Prohibited’ activities on page 66 of Brearley and Bloch on Employee Covenants and Confidential Information (3^rd Edition).

For these reasons, permission to appeal is refused.