CEF Holdings Ltd & Anor v City Electrical Factors Ltd & Ors

CEF Holdings Limited owns all the issued shares in City Electrical Factors Limited and I will refer to these companies jointly as “CEF”. CEF operates domestically and worldwide as a wholesaler and manufacturer of electronic components in the United Kingdom. It has some 400 outlets with further operations in Europe, North America, Canada, the Middle East and Australia. They have been represented by Mr. David Reade QC, Mr. Thomas Kibling and Ms Charlotte Davies.

The First to Nineteenth Defendants (“the individual defendants”) are former employees of CEF, while the Twentieth and Twenty-First Defendants are trading companies, which according to CEF were set up to compete directly with CEF in the United Kingdom and which use the trading name of Yesss Electrical. The Twenty-Second and Twenty-Third Defendants were ultimate beneficial owners of CEF along with other members of the Mackie family and still retain a minority interest. The Twenty-Fourth Defendant was an employee of CEF until June 2011 and he is a part of the senior management of the Yesss Electrical businesses. I will refer to the First, Third, Fourth, Seventh, Eighth, Ninth, Eleventh, Thirteenth, Fourteenth, Fifteenth, Sixteenth, Seventeenth, Eighteenth and Nineteenth Defendants collectively as “the Gateley Defendants” and they are represented by Mr. Simon Devonshire QC. The Second, Fifth, Sixth, Tenth and Twelfth Defendants, who I will refer to collectively as “the Bond Pearce Defendants”, are represented by Mr. Gerard Clarke and Ms Amelia Walker. The Twentieth and the Twentieth-First Defendants are represented by Mr. Robert Howe QC and Mr. Nick De Marco.

On 20 April 2012, Collins J heard an application made by CEF without proper notice to the defendants, but which was attended by one counsel on behalf of the individual defendants, namely Mr Gerard Clarke. The judge made orders to which I will refer in greater detail later in this judgment when dealing with the substantive issues, but they can conveniently at this stage be summarised as orders:-

The orders were made until the present hearing, which started on 30 April 2012, when I also heard applications by the First to Twenty-First Defendants to discharge the order of Collins J on a number of grounds including that of non-disclosure and the Court’s lack of jurisdiction to make orders against the individual defendants, who were domiciled outside the jurisdiction. CEF had not served Particulars of Claim when the matter came before Collins J and they were ordered to do so. The draft was served but subsequently amended but after repeated requests from me and from counsel for the Defendants, CEF finally produced its third draft on 2 May 2012, which was the third day of the hearing in front of me. At this time, the Twenty-Second to Twenty-Fourth Defendants were added as parties, but they were not represented at the hearing before me and I will refer to them by their names rather than by their designation in this judgment.

The individual Defendants have delivered up the items specified in Collins J’s order and they have also made the required very detailed witness statements. No complaint has been made that any of the individual defendants have not complied with the order of Collins J. It is also not suggested (let alone proved) that any of the individual defendants had wrongfully used any of the material contained in the documents returned to CEF pursuant to Collins J’s order.

CEF is privately owned by some members of the Mackie family and its customers are predominantly businesses and tradesmen working in the electrical trade. Domestically, CEF operates in six designated geographical areas with five of them being based in England and one being based in Scotland.

To understand the background to this dispute, it is necessary to explain a little about the Mackie family. Thomas Louis Mackie, who founded CEF in 1951, died in January 2012. Gerald Mackie and Georgina Mackie are two of his children, while Adam and Ashley Mackie are sons of Gerald Mackie and therefore his grandchildren. Another of Mr Mackie Senior’s grandsons is Thomas Hartland Mackie, whose mother is Georgina Hartland. He is the most senior member of CEF, and he has overall management control of CEF.

A dispute arose within the Mackie family, and by early 2011, Adam and Ashley Mackie together with their father Gerald Mackie were removed by Mr Mackie Senior from further involvement in CEF. Prior to that date, all three of them had been engaged as consultants providing services to CEF with Gerald doing it through a Jersey company. CEF contend that the consultancy agreement was terminated on 9 January 2011 and it contained express provisions concerning CEF’s confidential information but no interlocutory relief has been claimed against any of the Mackie family in respect of those obligations. There is litigation in progress between Gerald Mackie and his siblings about the terms of the will of Mr Mackie Senior under which Gerald Mackie and his children do not receive any benefit. As I will explain, neither Adam, Ashley or Gerald Mackie nor Mr. Singleton are subject to any restrictions imposed by CEF, which are relevant to the present applications.

CEF’s management structure includes two Managing Directors, one of whom is Mr Charlie Beddows and he has made the main witness statements on behalf of CEF. In the hierarchy of CEF, in the level below the Managing Directors, there are six General Managers. The First Defendant was CEF’s General Manager in Edinburgh, Glasgow, Newcastle, Northern Ireland and Perth. The Second Defendant was CEF’s General Manager for a large part of South East England. These defendants receive salaries of more than £300,000 per annum together with other fringe benefits and this shows their importance to CEF. Below the General Managers in CEF’s hierarchy are the Group Managers and the Third to Tenth Defendants held these positions.

The Third Defendant was Group Manager for Newcastle, the Fourth Defendant was Group Manager for Northern Ireland, the Fifth Defendant was the Group Manager for Bournemouth, the Sixth Defendant was the Group Manager for South East London, the Seventh Defendant was the Group Manager for Reading, the Eighth Defendant was the Group Manager for York, and the Ninth Defendant was the Group Manager for Sheffield, while the Tenth Defendant was the Group Manager for Crawley.

The Eleventh Defendant held the position of Branch Manager in Dunfermline, the Twelfth Defendant held that position in New Milton, the Thirteenth Defendant held that position in Stornaway, the Fifteenth Defendant held that position in Elgin, the Sixteenth Defendant held that position in Dyce, the Seventeenth Defendant held that position in Dundee and the Eighteenth Defendant held that position in Glasgow City Centre. The Fourteenth and Nineteenth Defendants were the Store Managers in Stornaway and Dundee respectively.

CEF is a very large company and it is described on its website as being the United Kingdom’s “leading electrical wholesale network with almost twice as many distribution outlets as our nearest competitor”. CEF’s website also states that its group of electrical companies extends throughout the United Kingdom and also to North America, Middle East, and now Australia while the witness statement of Mr Charlie Beddows points out that CEF has businesses in Spain. There are over 1.2 million products available to order through its branch network, and it is also a manufacturer of these products.

Yesss Electrical is, as I have explained the trading name for the Twentieth and Twenty-First Defendants (“the corporate defendants”). The Twentieth Defendant, was established on 27 May 2011. The Twenty-First Defendant was established on 3 June 2011 with the same registered office as the Twentieth Defendant.

On 16 April 2012, the First and Second Defendants were appointed as Directors of the Twentieth Defendant and of the Twenty-First Defendant, which each have 2 million shares of the nominal value of £1 each and which were allotted for £1.75 each including the share premium.

Yesss Electrical, according to CEF’s evidence, claims to have 400 branches in Europe, but these are the branches operated by CEF European operations which are under the ownership and control of Ashley and Adam Mackie. There is evidence that Yesss Electrical does not intend to trade in the jurisdiction until September 2012.

The case for CEF is that the First and Second Defendants during the course of their employment and in breach of their duties owed to CEF were in competition with CEF, and in particular that they have sought to entice CEF’s staff to leave its employment and to join the corporate defendants for their Yesss Electrical business. It is also said that they had misappropriated the confidential information of CEF, but there is no evidence that it has been used.

The First and Second Defendants as General Managers did not have restrictive covenants which sought to limit their activities after their employment with CEF terminated. This is a surprising omission in the light of the fact that their subordinates (namely the Third to Nineteenth Defendants) had such covenants. The reason for that was apparently that Mr Gerald Mackie, who until November 2010 performed a senior operational role for CEF, had not wanted to have written employment contracts for CEF’s General Managers. CEF did not change this policy after Mr Gerald Mackie left CEF’s employment in 2011 and I will have to return to consider the significance of this omission on CEF’s part.

Turning to the Third to Nineteenth Defendants, the case for CEF is that they had employment contracts containing express written restrictions, which prohibited them from working in competition with CEF during the six month period after their employment with CEF had ceased (“the Non-Competition Clause”), from soliciting CEF’s employees during the same period (“the Employee-Recruitment Restriction Clause”), as well as a provision restraining them during the same period from soliciting customers of CEF (“the Customer Connection Restriction Clause”). The Third to Nineteenth Defendants consider that the first two clauses are void as being in restraint of trade and that is a major issue to which I will have to return because CEF seeks to rely on those provisions (but not the Customer Connection Restriction Clause) in order to obtain injunctive relief against these defendants.

The case for CEF at the time of the without notice application was that the Defendants, and in particular the First and Second Defendants, had conspired together to harm CEF’s business by unlawful means, and that they have been parties to conspiracies which had the specific purpose of targeting the staff of CEF in order to occasion harm to its business. Allegations are made that the individual defendants acted in breach of their contractual and fiduciary duties to CEF by failing to notify CEF of the approaches made to induce them to leave CEF’s employment and to join Yesss with other employees of CEF and thereafter work in competition with CEF. It is said that the First and Second Defendant assisted in the process by enticing or seeking to entice further employees to leave CEF’s employment and to join the entity which uses the name Yesss Electrical. Springboard relief is claimed. All these allegations are strongly disputed.

At the present hearing, the relief sought by CEF has changed, and on the third day of the hearing CEF served a third version of its Particulars of Claim, which was substantially amended from the previous two occasions but this time supported by a statement of truth. As I will explain, after I had circulated a draft of this judgment, I discovered for the first time that on 22 May 2012, a formal version of the Particulars of Claim was served on most of the parties together with claim forms and response packs. At the hearing, CEF sought orders for delivery up against the corporate defendants, which it is agreed will be considered after this judgment is handed down and also orders:-

“(i)

That until trial or further order, and in any event being limited to a period of six months after the employment of [the First and Second Defendants] with CEF ended, an Order that:

a)

The Yesss Companies (or any company owned or controlled by Adam Mackie, Ashley Mackie, Andrew Singleton, Brian Mundey and/or Richard Kay) be restrained from instructing the Third to Nineteenth Defendants in any capacity (whether for reward or otherwise) to provide any technical, commercial or professional advice to, or in any way assist, the Yesss Companies in owning, operating, or setting up in, the business of electrical suppliers in competition with CEF;

b)

The First and Second Defendants must not by themselves their servants, agents or otherwise howsoever provide any technical, commercial or professional advice to, or in any way assist, the Yesss Companies in owning, operating, or setting up in, the business of electrical suppliers in competition with CEF;

c)

The Yesss Companies must not either on their own account or for any person, firm or company directly or indirectly act in competition with CEF without the prior written consent of CEF.

(i)

That the Third to Nineteenth Defendants must not until trial or further order but in any event limited to six months from the termination of their employment with CEF:

(a)

Solicit or Endeavour to entice away from City Electrical Factors Ltd any employee of City Electrical Factors Ltd;

(b)

directly or indirectly on their own behalf or as agent, partner, director or employee of any other person, firm or company or otherwise be engaged, concerned or interested in the business or activities of a competitive company to City Electrical Factors Ltd provided always that this shall not restrain them in so far as their duties or work shall relate solely and exclusively to geographical areas where the competitive company employing them is not in competition with City Electrical Factors Ltd or to services or activities the kind with which they were not concerned to a material extent during their employment.”

The issues raised on the present applications are:-

In the ordinary course of events, I would have dealt with the Discharge issues in (a) first, but it is clear that in order to ascertain what factual matters and legal principles should have been disclosed to Collins J at the without notice hearing, it is necessary to have first considered, and indeed in some cases to have reached conclusions on other issues in order to ascertain what should then have been disclosed by CEF. In those circumstances, I propose to deal first with the Covenants Issue, then with the Springboard Issue and the Jurisdiction issue before dealing finally with the Discharge issues.

Introduction

The contention by CEF is that the Third to Nineteenth Defendants are subject to valid and enforceable post-termination restraints in their contracts of employment. There are three restraints in their contracts of employment, and they state that:-

(a)

“that you will not at any time during the continuance of your employment or within the period of six months after its termination deal with or induce solicit or endeavour to entice away from the Company on your own behalf or on behalf of any third party any person or company, a customer or potential customer with whom you as an employee of the Company during a period of twelve months prior to the termination of your employment has had contact, or dealings with in order to sell or promote or attempt to sell or promote the Company’s products or services” [“the Customer Connection Restriction Clause”];

(b)

“that you will not at any time during the continuance of your employment or within a period of six months after its termination induce, solicit or endeavour to entice away from the Company any employee of the Company” [“the Employee Recruitment Restriction Clause”]; and

(c)

“that you will not at any time during the continuance of your employment or within the period of six months after its termination directly or indirectly on your own behalf or as agent, partner, director or employee of any other person, firm or company or otherwise be engaged, concerned or interested in the business or activities of a competitive company provided always that this sub-clause shall not restrain you in so far as your duties or work shall relate solely and exclusively to geographical areas where the competitive company employing you is not in competition with the Company or to services or activities the kind with which you were not concerned to a material extent during your employment” [“the Non-Competition Clause”].

CEF are not seeking to rely on the Customer Connection Restriction clause, but they seek injunctions to enforce the Employee Recruitment Restriction Clause and the Non-Competition clause. The defendants contend that these two covenants are unenforceable as being in restraint of trade.

Does the American Cyanamid test apply?

The first issue that has to be resolved is how this court should approach this interim application. CEF contend that I should apply the normal American Cyanamid test ([1975] AC 39) and this entails considering whether there is at least a serious question to be tried and then applying the balance of convenience test. The defendants disagree, and they contend first that the American Cyanamid test is not appropriate as no trial can take place, or at least no judgment can be obtained, before the periods in the restraint provisions expire by September or mid-October 2012. So they contend that CEF has to satisfy the court that it will be more likely than not that it will obtain the relief if a trial were to take place.

The defendants derived support for that contention from the comments of Lord Diplock in NWL Ltd v Woods [1979] 1 WLR 1294 at 1306 in which having stated that a Court ought to “give full weight to all the practical realities of the situation to which the injunction will apply” and he proceeded to explain that the American Cyanamid approach:-

“was not dealing with a case in which the grant or refusal of an injunction at that stage would, in effect, dispose of the action finally in favour of whichever party was successful on the application, because there would be nothing left on which it was in the unsuccessful party’s interest to proceed to trial.. Cases of this kind are exceptional but when they do appear they bring into the balance of convenience an important additional element”.

The post-termination contractual restraints on the Third to Nineteenth Defendants will expire between early September 2012 and mid-October 2012, as they had all left CEF’s employment by mid-April 2012. The Springboard relief sought by CEF is only sought until 6 months after the termination of the employment of the First and Second Defendants who left CEF’s employment on 5 March and 4 April 2012 respectively, and so if injunctive relief was granted, it would only last till 3 October 2012. CEF contend that there should be a speedy trial and that court time would be available towards the end of July of this year. I think that it is highly unlikely that the case would be ready for trial by then, especially as CEF anticipates joining many further parties as defendants to this action, such as any other Branch Managers who “have decided to leave CEF but are still in its employ before moving to Yesss”. In addition, the pleadings are at their early stages as Claim Forms with a fourth version of the Particulars of Claim having been served on 22 May 2012 and not all the Defendants have yet been served. I gather that CEF have offered the Bond Pearce Defendants and Corporate Defendants extensions of time for service of their Defences until 17^th July 2012. There were at the time of the hearing, for example, as I will explain in Section VIII below, serious jurisdictional issues that will have to be resolved relating to the right of CEF to sue some of the Gateley Defendants, who are domiciled in either Scotland or Northern Ireland and this will further delay the start of the trial.

Even if I am wrong and the case would be ready for trial by July, it is highly unlikely that a judgment would be given at the end of the trial, which would last for at least ten days. Judgment is much more likely to be reserved and then to be given at the end of September or much more likely in early October 2012 by which time the periods of restraint will have expired or at least almost expired. In those circumstances, I consider that the defendants are correct in contending that I should not apply the American Cyanamid test, because as Staughton LJ explained in Lansing Linde v Kerr [1991] 1 WLR 251 at 258,:-

“If it will not be possible to hold a trial before the period for which the plaintiff claims to be entitled to an injunction has expired, or substantially expired, it seems to me that justice requires some consideration as to whether the plaintiff would be likely to succeed at a trial. In those circumstances it is not enough to decide merely that there is a serious issue to be tried.”

Similar approaches were advocated in cases such as Lawrence David Ltd v Ashton [1989] ICR 123, 135. In those circumstances, the proper approach is not to apply the American Cyanamid test on this application, but instead to consider in respect of claims for an injunction whether it is more likely that CEF would succeed at trial. In case I am wrong on this approach, I will also then consider what my decision would have been if the American Cyanamid test was applicable.

No claim is made and no evidence has been adduced showing that any of the individual defendants are in breach of the Customer Connection Restriction Clause and so it must be assumed for the purpose of this application, first that this provision is valid, and second that it would preclude the Third to Nineteenth Defendants from dealing or inducing or soliciting or endeavouring to entice away from CEF a customer or potential customer with whom the employee concerned had contacts or dealings during the period of six months before the termination of his employment. This is an important factor to be taken into account when considering whether the terms of the Employee-Recruitment Restriction covenant and the Non-Competition covenants are reasonable and enforceable.

The Employee Recruitment Connection Restriction Clause

The first matter to be considered is whether such clauses can ever be valid, as there were for some time two contrary decisions in different two-judge interlocutory appeals relating to the issue of whether such employee recruitment restriction clauses were valid. First, in Hanover Insurance Brokers Ltd v Shapiro [1994] IRLR 82, Dillon LJ (with whom Nolan LJ agreed) expressed:-

“a general view… that an employer does not have any sort of proprietary interest in a stable team of staff entitling the employer to impose restrictions on solicitation of staff”.

In that case, the Court of Appeal had apparently not been referred to an earlier contrary decision in Ingham v ABC Contract Services Limited (unreported 12 November 1993: Court of Appeal Civil Division Transcript 1336 of 1993) in which Leggatt LJ stated in a judgment with which Russell LJ agreed in respect of provision which:-

“is intended to prevent the defendant from poaching the plaintiffs’ employees after he has left their employment. They have a legitimate interest in maintaining a stable, trained workforce in what is acknowledged to be a highly competitive business [an employment agency] ..that is an interest which the plaintiffs are entitled to protect against solicitation and enticement by the defendant”.

Now there is clear authority from a three-judge court in the Court of Appeal that “an employer’s interest in maintaining a stable, trained workforce is one which he can properly protect within the limits of reasonableness by an [appropriate contractual undertaking]. But it does not follow that will always be the case” (per Evans LJ with whom Ward and Nourse LJJ agreed in Dawnay, Day and Co Limited v D’Alphen [1998] ICR 1068, 1111). It was agreed in the Dawnay, Day case that neither of these two-judge interlocutory judgments in the Shapiro or in the Ingham cases should be regarded as being binding. In those circumstances, I regard myself as bound by what Evans LJ said in Dawnay, Day, but that requires me to resolve the crucial question of whether the actual restriction imposed is reasonable.

The settled legal principles which are applicable to determining that issue of the reasonableness of a covenant are that:-

The issue of the reasonableness of the covenant will have to be considered in the context of the present case where the issue is whether it is more likely than not that the applicant for the interim relief will succeed, rather than by applying American Cyanamid principles. In such a case, in order to determine if a post-termination restraint provision satisfies the reasonableness test, it is necessary to examine with care all the surrounding circumstances which militate both in favour of and against the conclusion that the provision is reasonable.

This inquiry entails considering all the relevant factors, which start with an analysis of the employer’s grounds for justifying the inclusion of the provision, and then proceed to determine whether this justification is supported or is undermined by other factors including, but not limited to first the presence of other restrictive post-termination provisions on the employee concerned, and second, whether similar restraints are imposed on other employees especially those who might have similar or greater responsibilities than the employees, whose case is being considered. An employer's justification for a restraint has to be analysed and to be scrutinised with particular care, as experience shows that employers in many cases exaggerate the reasons why post-termination restraint provisions are reasonable. So a decision tailored to the facts of the claim against particular employees is required.

Turning to the evidence put forward by CEF to justify the covenants, Mr Charlie Beddows explains in paragraph 6.1 of his first witness statement that CEF’s employees and their business contacts are “absolutely critical to its business”, because the success of CEF:-

“has been founded on individuals establishing personal contacts and networks throughout the entire wholesale industry and with customers in the electrical trade across the UK. The relationships, right down to the individual at a store level are a key. Customers return to buy CEF products from people that they know, trust and have an established relationship with it is for this reason that CEFs employees have been targeted and offered employment”

He repeated that point as his justification for the injunction together with what he describes as “the covert removal of CEF’s confidential information”. In his second witness statement, Mr Beddows explained that the senior staff employed by CEF have generally worked their way up through the ranks and that CEF looked to promote from within right up to the most senior levels. For those reasons, he regards the loss of even junior trusted and experienced members of CEF’s staff as a significant loss to the business. Indeed, it is true that many of the individual defendants had worked at CEF for many years. Mr Beddows stressed in paragraph 4.20(c) of Mr Beddow’s second witness statement that:-

“individuals (and their teams) build up considerable loyalty to their managers above them, often as they rise through the organisation together. Therefore anyone departing would be well placed to take advantage of their connections and persuade others to leave with them”

Mr Beddows states that this risk to CEF is exacerbated by the high level of responsibilities given to managers within the business and that would increase the vulnerability of CEF, as losing whole teams would create difficulty as it would be difficult to replace them overnight. He points out that those managers, who are below the General Managers in the CEF hierarchy received bonus payments in return for them agreeing to the post–termination restrictions. So Mr. Beddows justifies the inclusion of the covenants on the importance of the labour force to CEF, and above all the loyalty of managers to those who work with them and above all those who are their superiors.

In order to see if the Employee Recruitment Restriction Clause can be enforced, it is necessary to ascertain first whether those subject to it will know precisely what they are enjoined from doing, and then second whether that provision is reasonable.

In order to ascertain what the effect of an injunction enforcing the clause would be, it is necessary to remember that the Employee Recruitment Restriction Clause prevents the employee defendants during their employment or within a period of six months after its termination from inducing, soliciting or endeavouring to entice away from the company any employee of the company, irrespective of where that employee works or whether the person enjoined is even aware of his or her existence. This covenant has to be considered against the background that the Particulars of Claim state that CEF have some 400 outlets with further operations in Europe, North America, Canada, the Middle East and Australia, while it has manufacturing facilities in Turkey, Tunisia and the USA producing a wide range of in-house electrical products. In the versions of the Particulars of Claim served after the hearing opened in front of me, it is said the overseas manufacturing and trading operations CEF are operated through subsidiaries of CEF Holdings, rather than by CEF itself.

The First Defendant’s solicitor has explained in a witness statement that the First Defendant had told him that to the best of his knowledge, CEF employ approximately 2,500 employees in the UK wholesale branches and another 500 employees in the UK on the manufacturing side. Any of the defendants who was subject to the Employee Recruitment Restriction Clause would be precluded from inducing, soliciting or endeavouring to entice away from the company any of those 3000 or so employees of CEF. It is not suggested that the Third to Nineteenth Defendants would have known all or anything more than a very small percentage of these employees of CEF or that they would have even known their names. These defendants worked within a small designated area and so it is inconceivable that, for example, the Thirteenth and Fourteenth Defendants who were based in Stornaway would have known managers in Cornwall let alone have any working relationship with them.

It follows that these defendants would not know if they might be acting in breach of the Employee Recruitment Restriction Clause and that is a fatal objection because it is settled law that an injunction should not be granted if the person subject to it does not know what he can do and what he cannot do. Indeed as Balcombe LJ explained in Lawrence David v Ashton [1989] ICR 123, 132:-

“I have always understood it to be a cardinal rule that an injunction must be capable of being framed with sufficient precision so as to enable a person enjoined to know what it is he is to be prevented from doing. After all, he is at risk of being committed for contempt if he breaks an order of the court. The inability of the plaintiffs to define, with any degree of precision, what they sought to call confidential information or trade secrets militates against an injunction of this nature. That is indeed a long recognised practice.”

By parity of reasoning if an employee would not be able to identify who he could solicit after being served with an injunction enforcing the Employee Recruitment Restriction Clause; this would be a crucial factor against granting such an injunction.

I would refuse to grant an injunction to enforce the Employee Recruitment Restriction Clause for that reason, but there is also an additional and perhaps more important reason for reaching that conclusion and that is because, as I explained in paragraph 38, CEF’s concern about former employees soliciting former colleagues is based on the loyalty of managers to those who work with them apart from the difficulties of replacing their employees when they leave CEF’s employment.

There are cases where the court have upheld covenants based on such factors and an example of such a case where such a provision was upheld is the case of Hydra plc v Anastasi [2005] EWHC 1559 (QB) in which a small company with only 12 employees at the time of the agreement imposed such a restriction. On the facts of the case, Royce J held that the employer was entitled to protect the stability of its relatively small workforce by imposing a covenant precluding the solicitation of employees. This was a case where the employees who could not be solicited were known to the defendant and were people over whom he would have had or at least might well have had influence.

In contrast in the Dawnay, Day & Co case (supra), the Court of Appeal upheld a decision by Robert Walker J (as he then was) that a clause in a shareholders agreement prohibiting managers for soliciting or enticing away any person who is “at the time of being a director, officer, employee or other servant of the company” was too wide. This decision, which was not the subject of an appeal, showed the need for a restriction to apply not to all employees, but only to employees who were part of a trained workforce and who were identifiable by the employee restrained as well as being known to him.

Indeed, it is noteworthy that the Court of Appeal in that case upheld as enforceable, a different covenant precluding the managers for a twelve month period after ending their employment from soliciting or enticing away any “director or senior employee”. Robert Walker J had upheld this covenant stating with my emphasis added that:-

“in all the circumstances including the small size of the bond broking community, the specialised and competitive nature of its business and the importance of the team element”.

These cases show that Employee Recruitment Restriction Clauses will be upheld where they apply to identifiable employees, who formed part of the team which included the employee, who was being enjoined. Further support for this approach comes from the decision in SBJ Stevenson Limited v Mandy [2000] IRLR 233 in which Bell J upheld such a covenant. In that case, there were only thirty or forty staff members who were affected and who together had formed “a close and no doubt friendly team and I would expect that all of them who had been there any time would be in possession of some confidential information” [40]. Significantly, a further limitation on the covenant in that case was that it only applied to employees or directors with whom the employee, who was being restrained, had “had dealings”. The critical factors in that case, which led to the covenant being upheld, were that the defendant knew the people who he could not entice away and those people also knew the employer’s confidential information.

Another critical difference is that while the defendants in the SBJ case and in the Hydra case as well as the employee restrained by the Court of Appeal in the Dawnay Day case were being restrained from soliciting people with whom they worked and with whom they were fellow team members, the Employee Recruitment Restriction Clause in the present case goes much further and it applies to people with whom the Third to Nineteenth Defendants had not worked and were not aware of. Of course, it must not be forgotten that Mr. Beddows stressed the justification of the Employee Recruitment Restriction Clauses being based on the influence gained over other people with whom the employee in question worked, but he did not explain why it was reasonable for the restriction to apply not merely to those employees of CEF but to all employees of CEF.

Pulling the threads together, there are two reasons why the Employee Recruitment Restriction Clauses are invalid. First, the Third to Nineteenth Defendants would not have known who they could solicit, because so many of CEF’s employees would not have been known to them and I have referred to the comments of Balcombe LJ in the Lawrence David case as showing the need for a person subject to a restraint to know what he can do without being liable for contempt. By parity of reasoning, the injunction seeking to enforce Employee Recruitment Restriction Clauses do not identify the names of the people who the defendants sought to be restrained cannot solicit.

So it comes to this, the critical differences between, on the one hand, the cases in which similar provisions were upheld, and, on the other hand, the present case is that the restriction in this case relates to all the fellow employees of the Third to Nineteenth Defendants, a very large proportion of whom were not known to them and this category included people with whom they have had no contact, and who they could not identify. It must be stressed that the Third to Nineteenth Defendants work in different small discrete areas of the country and are unlikely to know people who work in different areas hundreds of miles away.

Second, even if the injunction could identify those people, it would be unreasonably wide as it would preclude the defendant soliciting employees of CEF, with whom the defendant restrained would have had no contact in their employment and about whose work they would know little and to whom no loyalty was due. So, CEF would have no legitimate interest in protecting them from being solicited to give proper notice and there are similarities with the covenant which was not upheld in Dawnay, Day supra, as I explained in paragraph 47 above.

I am fortified in reaching that conclusion by three other factors, of which the first is the absence of any comparable restriction in the contracts of employment of their superiors, namely the First and Second Defendants. This factor in the absence of some cogent and rational explanation for this apparent inconsistent treatment undermines the contention that CEF actually had a legitimate interest to protect by this employee recruitment restriction covenant. This is especially so, as there is every reason to believe that CEF would have had an appreciably stronger case to justify the Employee Recruitment Restriction Clause in the case of general managers than for their subordinates, like the Third to Nineteenth Defendants. The present management of CEF had over a year since they took control to impose covenants on men of the status of the First and Second Defendants so as to prevent them soliciting employees after their employment with CEF finished, but they have failed to do so. No reason has been put forward for this failing, and this factor seriously undermines CEF’s case that they have a legitimate interest to protect for which the employee recruitment restriction clauses are necessary, especially as Mr. Beddows in his witness statement had explained that “individuals (and their teams) build up considerable loyalty to their managers above them, often as they rise through the organisation together”.

Second, if the managers like the individual defendants were so important to CEF and so difficult to replace, so that a Employee Recruitment Restriction Clause was required, it would surely follow that these employees would have been required to give substantially more than one week’s notice of their intention to leave, but that is all the notice that was required of the Third to Nineteenth Defendants in their contracts. No reason has been given to justify this surprisingly short period of notice.

A third reason why this covenant is unenforceable is, as Sir Christopher Slade said in a judgment with which Butler-Sloss and Mann LJJ agreed in Office Angels Limited v Rainer – Thomas (supra), that:-

“49…The Court cannot say that a covenant in one form affords no more than adequate protection to a covenantee’s relevant legitimate interests if the evidence shows that a covenant in another form, much less far-reaching and less potentially prejudicial to the covenantor would have afforded adequate protection.”

So if CEF could have justified the imposition of a Employee Recruitment Restriction Clause, adequate protection might have been given to CEF by limiting much further the class of employees, who could lawfully be solicited by perhaps, for example, restricting the employees who could not be solicited to those with whom the employee had worked or perhaps to his subordinates or superiors. Such a covenant might well have protected CEF’s genuine concerns and this is a further ground for not upholding this covenant. Although I am not guaranteeing that such a covenant would be enforceable, it would stand a greater chance of being upheld than the present clause.

In my view, the Employee Recruitment Restriction Clause is unenforceable on the NWL v Woods test. In case I am wrong and the American Cyanamid test applied, that would lead to the same result because even assuming that I accepted all the evidence adduced by CEF, the Employee Recruitment Restriction Clauses were unenforceable for the same reasons as I already explained. Although the American Cyanamid test seeks to prohibit a court resolving disputed questions of fact, it is clear that it requires the court to be satisfied that CEF can “establish there is at least a serious question to be tried”. Slade J (as he then was) explained (with emphasis added) in the case of In re Cable; Garrett v Walters [1977]1 WLR at19 F 20B that:-

“it remains incumbent on a plaintiff seeking an interlocutory injunction to establish that there is at least a serious question to be tried. On any claim for an interlocutory injunction the court must still, as a first step, consider whether the evidence available to the court discloses or fails to disclose that the plaintiff has any real prospect of succeeding in his claim for a permanent injunction at the trial; if the available evidence fails to disclose this, the motion must fail in limine and questions of balance of convenience will not fall to be considered at all (see, for example, the American Cyanamid case” and

“…it is still necessary for any plaintiff who is seeking interlocutory relief to adduce sufficiently precise factual evidence to satisfy the court that he has a real prospect of succeeding in his claim for a permanent injunction at the trial. If the facts adduced by him in support of his motion do not by themselves suffice to satisfy the court as to this, he cannot in my judgment expect it to assist him by inventing hypotheses of fact on which he might have a real prospect of success.”

In those circumstances, it is unnecessary for me to have to consider whether there have been any breaches of the covenants restricting the individual defendants from soliciting other employees. There is powerful evidence, as I will explain in paragraph 78ff below, that very many (if not all but one) of the individual defendants were solicited by either Adam or Ashley Mackie , who of course were not bound by these or by any other covenants, but in the light of my conclusions on the non-enforceability of this covenant, I need not deal with this further.

The Non-Competition Covenants

This covenant (the terms of which are set out in paragraph 23 above) has to be considered against the background that all the individual defendants, who were subject to this covenant performed different roles for CEF in different places and each defendant had a separate geographical focus. This is important because of the nature of CEF’s business, and as the version of the Particulars of Claim before the court when the hearing in front of me started explained, CEF:-

“operates domestically and worldwide as a wholesaler and manufacture or electronic components. In the United Kingdom it has some four hundred outlets with further operations in Europe, North America, Canada, the Middle East and Australia.. [as well as] manufacturing facilities.. situated in Turkey, Tunisia and the USA producing a wide range of in-house products”.

The most recent versions of the Particulars of Claim now state that the overseas operations are conducted through subsidiaries but even if that is right, the clause is operative throughout the United Kingdom. The Non-Competition Claus has also to be considered against the background that the individual defendants are also bound by the Customer Connection Restriction Clause (which is set out in paragraph 23 above) and so it becomes necessary to see whether additional protection of the kind set out in the Non-Competition Clause is reasonable.

In those circumstances, it is difficult to see why any further restriction is reasonable and enforceable, as the Customer Connection Restriction Clause would provide the necessary protection. This is an important factor, because the heart of CEF’s case is the importance of customer loyalty which Mr David Reade QC for CEF explained at the hearing before Collins J that there were “long serving employees with very long established relationships between staff and the customer base”. That point was stressed and repeated in the witness statements and in the oral submissions.

It is difficult to see why in those circumstances the Non-Competition Clause is required and the additional justification for this is that workforce stability is needed. So it is said that if this provision was not included in the contracts of the Third to Nineteenth Defendants, they could then join a competitor who would benefit from what is described in CEF’s skeleton argument as being:-

“the ready-made aspect of gaining whole teams and reporting lines, but also from the close connections between the employees and their shared skill and experience”.

I do not understand how that can be a protectable interest, as this is part of the connections and skill, which an employee is entitled to use when he moves jobs. It is also said that these provisions are required to protect CEF’s confidential information, but something less intrusive could have been used such as a clear covenant setting out what is confidential together with a prohibition against using this material. The comments of Sir Christopher Slade in the Office Angels case set out in paragraph 34 (iii) above would be particularly apposite; they destroy CEF’s argument on this point.

So applying the NWL v Woods test, I have concluded that the Non-Competition Clause is not reasonable, and that it cannot be upheld, but there are also other additional reasons why the restriction is unenforceable, such as that:-

It is noteworthy that in the Office Angels case, the Court of Appeal refused to uphold a restriction precluding an employee from engaging in or undertaking the trade or business of an employment agency within the radius of 3000 metres of the branch or branches of a company at which the employee was employed for a particular period, or in the case of a branch or branches in the Greater London area then within a radius of 1000 metres. As in the present case, the claimant in that case was unable to identify what proper legitimate business interest was being protected.

For those reasons, the covenant is unenforceable on NWL v Woods grounds but it also would fail to meet the American Cyanamid test because even on the undisputed facts, it would not be reasonable and there was not a serious issue to be tried on this basis.

Introduction

CEF are seeking an order in the form set out in paragraph 20 above.

The basis of CEF’s without notice application before Collins J was that there was a conspiracy by the First and Second Defendants, which had the predominant purpose of harming CEF with the use of unlawful means, namely the breaches by the First and Second Defendants of the duties owed by them to CEF. It is said that part of the unlawful means was that they induced the other individual defendants to act in breach of their post-termination covenants to go to work for the corporate defendants. By the time the application for interim relief came in front of me ten days later, the case for CEF had changed as it was said that there was a further conspiracy between the First and the Second Defendants together with the Twentieth and Twenty First Defendants, but also one with Adam and Ashley Mackie and Andrew Singleton, whose names have now appeared in the latest draft of the Particulars of Claim. This conspiracy alleged was either a conspiracy to use unlawful means or a conspiracy to use lawful means or unlawful means with the predominant intention or predominant purpose of causing harm to CEF. It was the latter way of putting it which was the basis of CEF’s case at the hearing.

Originally, CEF had sought Springboard relief against all defendants, but that claim has now been dropped. Mr Reade explained that the aim of the Springboard relief in the present application was not to compel the dismissal of the Third to Nineteenth Defendants, but instead to prevent Yesss Electrical using their services and to prevent the First and Second Defendant from continuing to give effect to their tortious conspiracy, which was aimed at damaging CEF. Mr Reade says that although Yesss is not trading, it is recruiting people like the individual defendants, who are all former employees of CEF.

Mr Reade contended that the wrongful acts of the First and Second Defendants had been taking place from the beginning of 2012, because from June 2011 the First and Second Defendants were planning to leave CEF and to join Yesss with the consequence that CEF should have been alerted. Mr Reade explained that he has limited the claim for relief to six months from the time when the First and Second Defendants left CEF’s employment on 5 March 2012 and 4 April 2012 respectively. At the heart of CEF’s case is the contention that the First and Second Defendants have acted unlawfully by soliciting CEF’s employees to transfer their allegiance to Yesss with the consequence that Yesss Electrical has gained an unlawful head start. It is said that they acted as “recruiting sergeants” for Yesss and in consequence, they have destabilised CEF’s workforce. This, it is said by Mr Reade, should be remedied by granting Springboard relief for a period of six months after the employment of the first two defendants ended and that would end by 3 October 2012. As I explained in paragraphs 27 and 28 above, it will be almost impossible for a trial and a judgment to be given before then and so the NWL v Woods test applies.

Haddon-Cave J in QBE Management (UK) Limited v Dymoke and Others [2012] EWHC 80 (QB) has recently carefully summarised the principles governing the grant of Springboard relief and his summary has been agreed by all counsel to be correct. Some of the relevant principles are that:-

“240.

First, where a person has obtained a 'head start' as a result of unlawful acts, the Court has the power to grant an injunction which restrains the wrongdoer, so as to deprive him of the fruits of his unlawful acts. This is often known as 'Springboard' relief.

241.

Second, the purpose of a 'Springboard' order as Nourse L.J. explained in Roger Bullivant v Ellis [1987] ICR 464 is "to prevent the defendants from taking unfair advantage of the Springboard which [the Judge] considered they must have built up by their misuse of the information in the card index" (at page 476G). May L.J. added that an injunction could be granted depriving defendants of the Springboard "which ex hypothesi they had unlawfully acquired for themselves by the use of the plaintiffs' customers' names in breach of the duty of fidelity" (at 478E-G). The Court of Appeal upheld Falconer J.'s decision restraining an employee who had taken away a customer card index from entering into any contracts made with customers.

242.

Third, 'Springboard' relief is not confined to cases of breach of confidence. It can be granted in relation to breaches of contractual and fiduciary duties (see Midas IT Services v Opus Portfolio Ltd., unreported Ch.D, Blackburne J. 21/12/99, pp. 18-19), and flows from a wider principle that the court may grant an injunction to deprive a wrongdoer of the unlawful advantage derived from his wrongdoing. As Openshaw J. explained in UBS v Vestra Wealth (supra) at paragraphs [3] and [4]:

"There is some discussion in the authorities as to whether Springboard relief is limited to cases where there is a misuse of confidential information. Such a limitation was expressly rejected in Midas IT Services v Opus Portfolio Ltd, an unreported decision of Blackburne J made on 21 December 1999, although it seems to have been accepted by Scott J in Balston Ltd v Headline Filters Ltd [1987] FSR 330 at 340. In the 20 years which have passed since that case, it seems to me that the law has developed; and I see no reason in principle by which it should be so limited.

In my judgment, Springboard relief is not confined to cases where former employees threaten to abuse confidential information acquired during the currency of their employment. It is available to prevent any future or further economic loss to a previous employer caused by former staff members taking an unfair advantage, and 'unfair start', of any serious breaches of their contract of employment (or if they are acting in concert with others, of any breach by any of those others). That unfair advantage must still exist at the time that the injunction is sought, and it must be shown that it would continue unless retrained. I accept that injunctions are to protect against and to prevent future and further losses and must not be used merely to punish breaches of contract."

The important issues which have to be considered on the interim application are first whether CEF can establish up to the appropriate standard sufficient evidence to support a conspiracy or other wrongful conduct needed for Springboard relief and that the conditions necessary for Springboard relief as set out in the QBE case have been satisfied; and then second whether the interests of justice and proportionality require the imposition of a Springboard injunction. I will consider the matters initially by applying the NWL v Woods test, and then by considering the matter on the basis that American Cyanamid applies.

Is there evidence to support a conspiracy or other wrongful conduct needed for Springboard relief?

In considering these ingredients of the tort of conspiracy to injure, it is important to bear in mind that it is a very serious tort, which requires clear evidence. Megaw LJ explained in Jarman & Platt Ltd. v I. Barget Ltd, and Others [1977] FSR 260, 267, that it is well settled that:-

“… a charge of conspiracy in civil proceedings is generally to be regarded as a grave charge; and that, particularly where the allegation is made against persons of hitherto unblemished reputation, the standard of proof which has to be satisfied before a court can properly hold that the charge is established is a high one, commensurate with the seriousness of the charge. Hornal v Neuberger Products Ltd. [1957] 1 Q.B. 247; Blyth v. Blyth [1966] A.C. 643. Unless for some good reason on the particular facts an allegation of conspiracy in civil proceedings is to be treated, substantially, only as a technical matter, such an allegation, equally with an allegation of fraud, must be clearly pleaded and clearly proved by convincing evidence.”

Mr Howe prefaces his submissions by stressing a number of important and valid points, which are adopted by counsel for all the defendants and they are that:-

How it came about that the individual Defendants resigned

Each of the individual defendants has explained how and why it came about that they resigned from CEF and moved to Yesss. Ashley Mackie approached the Second Defendant, the Fifth Defendant, the Sixth Defendant, the Tenth Defendant and the Twelfth Defendant. Adam Mackie approached the First Defendant, the Fourth Defendant (after he had decided to retire for other reasons), the Seventh Defendant, the Ninth Defendant and the Seventeenth Defendant as well as the Eleventh Defendant, whose wife had arranged for him to meet Adam Mackie. The Fifteenth and Nineteenth Defendants applied directly to Yesss, while the Eighth Defendant was approached by Mr Singleton. The Third Defendant was approached by Adam Mackie after a discussion with the First Defendant. The Thirteenth Defendant was approached by the Eleventh Defendant and he then approached his brother, who is the Fourteenth Defendant. The Sixteenth Defendant was told about Yesss at a meeting by Mr Milne in mid-March 2012 and he later called Yesss. The Eighteenth Defendant left on 14 April 2012 having been told about it by the First Defendant “about three weeks earlier”.

Many of the individual defendants have explained in their witness statements why they wanted to leave CEF’s employment. For example, the First Defendant explained that he was unhappy at CEF by the time he was approached by Adam Mackie on about 20 February 2012 as he considered that Mr. Beddows was taking away his responsibilities and he also had other concerns about his style of management. He considered an offer and accepted it on about 23 February 2012. The Third Defendant was approached by the First Defendant on 27 February 2012 and I will return to consider this in paragraphs 95 and 96 below. The Fourth Defendant also said that he applied for retirement as he had not been happy at CEF after a disagreement with Mr. Beddows and that he duly applied for retirement on 24 February 2012. He said that at about this time he was approached by Adam Mackie with a proposal for a job. The Fifth Defendant explained that he had not been happy at CEF since the Mackies had left CEF and Mr. Beddows had started running CEF, and so when he was approached by Ashley Mackie in February 2012 with a job offer, he decided to accept it. All the other defendants give credible account of how one or other of the Mackies approached them and they accepted the offers.

I will return to comment on this evidence when I have examined all the other evidence. To assist me, Mr. Reade very helpfully produced a useful table setting out the matters in the witness statements which he said supported the Springboard claim and the defendants’ counsel then helpfully inserted the evidence, which they said answered these allegations. I will now deal with the allegations made by the parties with the benefit of this table.

What is the evidence against the First Defendant?

It is alleged by CEF that the First Defendant failed to disclose to CEF that he was involved or he agreed that he would be involved with the new venture of the Mackies in June 2011 and he thereby kept from CEF the consequential nascent threat that he posed to CEF’s business. As I understood Mr Reade’s submissions, that was one of the fundamental bases of CEF’s Springboard case.

The basis of this claim is a statement made by Mr Ashworth, who was described as one of their “loyal” General Managers and who says that he was told by Adam Mackie in June 2011 that the Mackies already had the First Defendant “on board” in relation to a proposed new venture. The First Defendant was not a party to that conversation, but his evidence is totally contrary to this.

In any event, the statement of Mr. Ashworth is very vague and it does not represent any clear or unambiguous assertion that the First Defendant has acted in breach of his duty, but even if it does, I have come to the conclusion that I am unable to accept what Mr Ashworth says for three reasons. First, this evidence is an important part of CEF’s case, but it was not given in support of the without notice application before Collins J, and no explanation has been put forward as to why this was not done. Second, if Mr Ashworth considered that the First Defendant was not being loyal to CEF, his duty of fidelity to CEF at least when he joined them later in 2011 would have required him to report this information to his superiors at CEF, because a duty in those terms has been pleaded as owed by employees at his level in the Particulars of Claim. It is not suggested that Mr Ashworth did report it, or that he has been disciplined for his gross dereliction of duty in not doing so. Third, and perhaps most importantly, I have found the evidence of the First Defendant that he did not know about Yesss until 20 February 2012 to be particularly convincing, as it is not alleged (let alone shown) that the First Defendant did anything to progress the new venture until the end of February 2012.

I should add, as I will explain later, that there is no suggestion that I can accept that CEF would have done anything if they had been told about the First Defendant considering joining Yesss Electrical. I am quite satisfied that the evidence of the First Defendant is correct and that he had no involvement with the Yesss business until after 27 or 28 February 2012 which was just before he left CEF's employment on 5 March 2012. There is no suggestion or claim that Mr Mundey breached any express or implied notice obligation by leaving on 5 March 2012.

The next allegation against the First Defendant is that on 27 February 2012, Thomas Taylor, CEF’s Group Manager in Edinburgh had a meeting with the First Defendant, who told him first that he, that is the First Defendant, intended to leave CEF and to join a new venture with Adam, Ashley and Gerald Mackie, which would be called Yesss Electrical, and second that it intended to compete with CEF. According to Mr Taylor, the First Defendant said that if Mr Taylor joined Yesss, then they would match his income, bonus and length of service but would also increase his pension.

The First Defendant is also alleged by Mr Taylor to have said that it was the intention of the Mackies to bring Yesss back into CEF within the next few years and that those employees, who did not join Yesss, were putting their own future careers at risk. Mr Taylor also says that the First Defendant told him that he and Adam Mackie would visit him on the following Tuesday (which would have been 6 March 2012 and which was the day after the First Defendant would have left CEF’s employment) in order to discuss proposals and that any calls and emails between them should be on their personal accounts.

It must be remembered that this allegation is being put forward to support a Springboard application, which means that the allegation would only have real potency, if the defendants had actually wrongfully obtained some benefit from the conversation. Mr Taylor still remains employed by CEF, and therefore no benefit has accrued to the defendants from these statements and no detriment was suffered by CEF, even if I accepted them. More importantly, the First Defendant denies that he said anything to Mr Taylor, other than that he intended to leave CEF and to join the new organisation, which would be aimed at the entire electrical market. This all took place shortly before the First Defendant left CEF’s employment on 5 March 2012. The First Defendant denies saying to Mr. Taylor that if he did not join CEF, he would be putting his career in jeopardy.

The next matters relied on by CEF are events on 28 February 2012, when the First Defendant is alleged to have contacted Mr Taylor to ask for his feedback on the meeting of the previous day. Mr David Milne, the Group Manager of CEF in Perth, says that he was also contacted by the First Defendant, who asked him to meet him at a local restaurant, and at that meeting the First Defendant explained that he intended to resign in order to join the business called Yesss Electricals, which would compete with CEF. Mr Milne says, but it is denied by the First Defendant, that the First Defendant asked if Mr Milne would be willing to leave CEF and to join Yesss. According to Mr Milne, the First Defendant said that the Mackies were targeting CEF employees, but the First Defendant denies saying this.

It is also said by Mr Milne that later that day, the personal assistant of the First Defendant contacted Mr Milne and asked him to go home as he was to receive a call from Adam Mackie and during that call, Mr Mackie would give details of the role Mr Milne would have with Yesss. According to Mr Milne, Mr Mackie also said that the Second, Third, Fourth, Fifth, Eighth, Ninth and Tenth Defendants were already on board. Mr Milne has not left the employment of CEF and therefore his evidence cannot assist the Springboard application. In any event, much of that alleged conversation is denied by the First Defendant, and it does not show a conspiracy not least because Mr Mackie was entitled to say what he did and he did not induce Mr Milne to break his contract with CEF.

There were, according to Mr Taylor, further discussions on 1 March 2012, when the First Defendant is alleged by Mr Taylor to have contacted him and to have said that he wanted to finalise details of his meeting with Mr Adam Mackie on the following Tuesday. This is denied, but in any event, it fails to show anything, which could be used to support, let alone form, the basis of a Springboard application.

According to Mr Taylor, there were subsequent conversations between the First Defendant and Mr Taylor on 3 and 4 March 2012, when the First Defendant asked Mr Taylor if he had made a decision and on the second occasion, he was told that Mr Taylor did not want to join Yesss. Again, even if this was true, it does not further the claim for a Springboard relief.

On 4 March 2012, there was, according to Mr Milne, contact apparently between Mr Adam Mackie and Mr Milne in which Mr Adam Mackie said that he was disappointed that Mr Milne would not be joining Yesss and a similar conversation took place between Gerald Mackie and Mr Milne. On 5 March 2012, Mr Mackie is alleged to have left Mr Taylor a voicemail to call him urgently and when Mr Taylor called back, Mr Mackie said “I hear you are coming on board”. Mr Mackie admits that he contacted Mr Taylor and Mr Milne to see whether they wanted to come “on board”.

On 5 March 2012, which was the day when the First Defendant’s employment with CEF terminated, he is alleged by Mr Milne to have said that if people did not join Yesss, they would “live to regret this”. The First Defendant denies this, and he says that in the conversation, he told Mr Taylor that he understood his decision before saying “the normal goodbyes and the conversation ended”.

On the same day, Mr Taylor and Mr Milne said that they phoned Mr Mackie and they told him that they would not be joining Yesss, but that they were going to tell Mr Beddows about the approaches. In my view, these conversations do not further in any way the allegation of a Springboard conspiracy even if they were true, because they do not show any wrongful conduct whether in the form of a conspiracy or otherwise. Further in any event, the defendants did not gain any advantage from those conversations and CEF did not suffer any disadvantage with the consequence that they do not further the claim for Springboard relief.

It is also alleged that in that week, the First Defendant is said to have solicited the Third and Fourth Defendants successfully as well as his personal assistant to leave CEF’s employment, but also to have unsuccessfully solicited Mr Milne and Mr Taylor to leave CEF’s employment. His recruitment of Ms Stirrat (his personal assistant) is even on CEF’s case no threat to them, while the Fourth Defendant had already indicated his intention to retire from CEF. The Third Defendant has explained that on 27 February 2012, he met the First Defendant, who told him that he was going to join a new business run by the Mackies and that he wanted to sound out the Third Defendant, who agreed to talk to Mr Adam Mackie.

Thus the case against the First Defendant amounts to a complaint that he persuaded one valuable employee, namely the Third Defendant, to leave CEF. I have no reason not to believe the Third Defendant’s account, which does not amount to showing that the First Defendant persuaded the Third Defendant to leave CEF. It is difficult to see what head-start the First Defendant or the Yesss network obtained by this, because if the First Defendant had told CEF on 27 February 2012 that he had decided to leave to join Yesss, he would probably have been dismissed on the spot and he could then have solicited the Third Defendant to join Yesss without CEF being able to complain and without him having acted in breach of any obligation owed to CEF. Alternatively, the First Defendant would not have been in breach of any of his obligations to CEF if he had simply waited a week after 27 February 2012 by which time he was no longer employed by CEF, so that he could then have solicited the Third Defendant. So this episode cannot further the claim for Springboard relief.

I have considered with care the evidence of the First Defendant and consider that applying the NWL v Woods test, that it is true and that I should accept it. In any event even if I did not accept it, none of the evidence against the First Defendant would even on the American Cyanamid test have shown “at least a serious question to be tried” as to whether there was a conspiracy or any wrongful conduct on the First Defendant’s part, which could form the basis of a Springboard claim as none of it gave the Yesss companies a head start of the kind needed to prove that there was a case for Springboard relief. At best, the case for CEF fails to appreciate the potency of the points set out in paragraph 75, above and in particular the special relationship that the Mackies enjoyed with the employees of CEF, which enabled them not only to approach those employees with ease, but also to persuade them without much difficulty to join the Yesss network. This explains why they did not need the services of the First Defendant as a “recruiting sergeant”.

What is the evidence against the Second Defendant?

The Second Defendant explained that in August 2011, he was unfortunately diagnosed with pancreatic cancer and that he was on sick leave from 19 September 2011 until his summary dismissal on 4 April 2012. During this period, he was receiving chemotherapy and other treatment. He explained that he was approached in November 2011 whilst on sick leave by Ashley Mackie, who explained first that he and Gerald and Adam Mackie were intending to trade in the United Kingdom under the name of Yesss Electrical, and second that those running Yesss Electrical would like him (that is the Second Defendant) to be involved in this business.

The Second Defendant stated that he had told Ashley Mackie that he was on sick leave, and that he then needed to concentrate on recovering his health. He explained that while he was on sick leave, he was visited by some of his Group Managers including the Fifth Defendant, and he was informed that during these meetings that the Group Managers had been approached by Ashley Mackie and offered roles in the Yesss business. The Second Defendant’s evidence was that he did not approach or solicit any employees of CEF and encourage them to join Yesss.

The Second Defendant stated that during this time when he was on sick leave, he felt he could use his time at home to keep himself up-to-date concerning CEF’s employment documentation and its rules and regulations so that he would be ready when he was able to return to work. He also felt insecure because he had been off sick for a long period of time, and so he wanted to ensure that he understood CEF’s human resource policies so far as they applied to his situation and that explains why he had some documentation in his possession.

CEF attach importance to an exchange of emails between the Second and Fifth Defendants on 1 February 2012, in which they discussed their post-termination restrictions and attached CEF contracts and documents including the Appendix B and “other confidential documents”. The Second and Fifth Defendants state that the reasons why the documents were sent to the Second Defendant was that he wanted to find out if those considering leaving CEF to join Yesss were under any post-termination restrictions. In any event, nothing is wrongful about this, especially as the documents concerned do not fall within the categories of document that CEF required employees to treat as confidential. In any event, these matters do not show a conspiracy or any unlawful conduct.

On the following day, there was a further exchange of emails between the Second and Fifth Defendants, but there is nothing in those documents which either shows a conspiracy or any wrongful conduct relating to the use of these documents.

On 5 March 2012, there is an assertion by CEF that the Second Defendant called Ms Sarah Bean, CEF’s Regional Group Office Manager to a meeting with the Fifth Defendant at which the Second Defendant told her first, that Adam and Ashley Mackie were setting up a company to compete with CEF, second that some people had already been approached about joining Yesss, but third that one of them had blown the whistle so that the plan for people to leave had been brought forward and that the Group Manager in the region would soon be departing. The Second Defendant is alleged to have asked Ms Bean if she wanted to join Yesss.

The contents of this conversation are denied by the Second and Fifth Defendants, who explained that the Fifth Defendant, who had decided to leave CEF and to work for Yesss, wanted to tell Ms Bean, who was then in the office about it. During that conversation, the Second Defendant says that he told Ms Bean that the Fifth Defendant would be leaving CEF to work for Yesss and that he, that is the Second Defendant, might be following the Fifth Defendant. According to the Second Defendant when Ms Bean asked if there would be a position for her in Yesss, the Second Defendant said that because she was the wife of a CEF employee, he could not see that she would be the first choice for Yesss. There was a follow-up call to Ms Bean by the Fifth Defendant, but none of these communications with Ms Bean seem to show either a conspiracy or indeed that the defendants or any of them got an advantage, let alone an advantage wrongfully, which could find the basis of Springboard relief.

The Second Defendant also explained that after he was dismissed by CEF on 4 April 2012, he contacted Ashley Mackie and told him honestly and correctly, that there was nothing to prevent him joining Yesss. He had no post termination restrictions imposed on him. After applying the NWL v Woods test I accept the evidence put forward by the Second Defendant, which is consistent and credible. I reach the same result by applying the American Cyanamid test for the same reasons as I set out in paragraph 97 when considering the First Defendant.

Allegations against parties other than the First and Second Defendant

It is alleged that in September 2011, Mr Ashley Mackie had a meeting with Mr Ashworth at which he, that is Ashley Mackie said that he was enthusiastically behind the plan to set up a competitor business and to entice employees away from CEF and that their aim was to create “the perfect storm” at CEF. This is an allegation, which was only made in Mr Ashworth’s evidence in reply and it is one in respect of which the Defendants have not had an opportunity of commenting, I therefore do not attach any importance to it, especially as it does not show that any enticement would be unlawful.

On 15 December 2011, the next complaint of CEF is that Mr Ashley Mackie rang Mr Beddows and it is said that he was cross about the fact that Mr Ashworth had decided to move back to CEF and that Mr Mackie is reputed to have said to Mr Beddows “you wait we are going to nick all your staff”. This again was only raised in a witness statement served on 27 April 2012 to which the defendants, and in particular Mr Mackie, have not had an opportunity to respond. It is surprising that it was not raised in the earlier witness statement if any importance is to be attached to it. Again, more importantly, it does not show anything unlawful involving the individual defendants or anything unlawful as Mr. Mackie was entitled to lawfully recruit CEF’s staff.

Another allegation relates to an event on 16 March 2012 when the Seventh Defendant, who had resigned on 9 March 2012, called Mr Darren Wiggs the Group Manager in Canterbury and tried to persuade him to join Yesss. This is denied by the Seventh Defendant, but there is nothing wrongful in this conduct because, as I have explained, there was no valid restraint against this conduct in his contract of employment. In any event, he denies trying to recruit Mr Wiggs as he, that is the Seventh Defendant, knew that he was not someone who Yesss would be interested in recruiting. In any event, Mr Wiggs has not moved employment and so the conversation does not further the Springboard claim.

Another allegation is that at about the same time, the Seventh Defendant phoned Stuart Taylor, Paul Griffiths, Paul Thompson and David Piper to try to persuade them to join CEF, but the Seventh Defendant denied these allegations, but he did say that he was leaving and that they would be welcome to see the “Truth Presentation”.

The next allegation relates to events of 19 March 2011, when it is said the Seventh Defendant called Mr Wiggs and offered to arrange a one-to-one meeting with Mr Mackie, but this was denied by the Seventh Defendant. On 21 March 2012, it is alleged that the Seventh and Eighth Defendants participated in a recruitment meeting for Yesss at Rudding Park Harrogate together with Adam Mackie. The Seventh and Eighth Defendants had left CEF’s employment by this time in March 2012, and the Seventh Defendant denies that he participated in the recruitment meeting. Even if this allegation is correct, it does not further the claim for Springboard relief as no advantage accrued to the Yesss network.

It is said on behalf of the Twentieth Defendant that a meeting did take place on 21 March 2012 to discuss Yesss and that it was attended by CEF staff, but that this meeting was held in response to a meeting held by CEF at which statements were made about the Twentieth Defendant, which the Twentieth Defendant wished to correct. Whatever the truth of this, nothing was done by the Seventh or Eighth Defendants which was wrongful bearing in mind that the restraint provisions relied on by CEF were not valid, and that these defendants had ceased to be employed by CEF. In any event, no advantage was gained by any defendant, which could or indeed does support a Springboard claim.

On 25 March 2012, the Fifth Defendant sent an email to the First, Second, Third, Fourth, Sixth, Seventh, Eighth, Ninth, Twelfth and Twenty-Fourth Defendant giving them the mobile numbers of people at Yesss. By that time, the Twelfth Defendant had not been dismissed by CEF, but all the other defendants had by then resigned.

The Twentieth Defendant accepts that the Fifth Defendant should not have sent this email to people, who had not resigned or served their notice period, but it explained that the idea behind it was to keep lines of communication open. In any event, there is nothing in this which would suggest that a conspiracy of the kind relied on by CEF existed. So, no advantage was gained by the Twentieth Defendant by this email, which could be the subject of a Springboard order.

On 4 April 2012, the Second Defendant was dismissed and the Fourth Defendant, whose employment had ended on 5 March 2012, emailed to the Twenty-Fourth Defendant a document entitled “Top 100 Suppliers” list. The Twentieth Defendant explained that this information was never used, and there is no evidence from CEF that any wrongful use has been made of this by the Fourth Defendant. So this is not relevant to a Springboard claim.

On 5 April 2012, Mr Mark Eden an accountant at CEF received a text message from Mr Singleton which said:-

“[the Second Defendant] dismissed by [Beddows] a day after chemotherapy, KB written into will for 5 million SFR when Gerald written out (!) way before Gerald’s affair was known… do you fancy a job mate?”

The Second Defendant and Mr. Singleton have not had an opportunity to respond to this evidence, which was filed shortly before the hearing in front of me, but it is noteworthy that Mark Eden made clear that Mr. Singleton had apologised for the text and he had explained that he was feeling emotional. In any event, this does not show a conspiracy or anything which can be used to support the claim for Springboard relief.

On 10 April 2012, Mr Eden was called by Mr Singleton and Mr Eden told him that he thought Yesss Electricals’s real purpose was to try to get Adam, Ashley and Gerald Mackie back into the UK business to which Mr Singleton is alleged to have said that he agreed and to have said that “it was the last throw of the dice”, as the agenda for Yesss was to get Adam and Ashley Mackie in particular back into the UK business.

This evidence was served, again, shortly before the hearing in front of me, but the Twentieth Defendant has stated that the purpose of the business of Yesss was not an attempt to renegotiate a controlling hand in the UK business. Whether that is true or not, this does not show either a conspiracy or anything unlawful on any basis for granting Springboard relief.

On 14 March 2010, the Tenth Defendant returned his laptop to CEF, but only after it had been professionally wiped. He explained that this was done to remove any personal information relating to him. On 18 April 2012, the Sixth Defendant destroyed his USB hard drive storing a backup of his laptop. The Sixth Defendant explained that on his USB hard drive, there was a backup of information contained on his laptop, which had already been returned as well as some historical financial information and perhaps some documents from suppliers such as brochures or flyers.

The Eighth Defendant returned his laptop, but again only after it had been wiped and he explained that this had been done to remove his personal information such as his Will. He said that he did this in the knowledge that any information about CEF would be on its server.

On 20 April 2012, the Defendants returned various items of CEF that they kept after their employment had ended and there is a separate schedule that included the Buying Guide, Black Book, laptops which had been professionally wiped, Top 100 supplier lists, various financial documents and customer reports. The Twentieth Defendant explained that it did not condone or obtain any use of confidential information and that it had no intention of using it. There is no allegation that any such evidence has been used.

It is not disputed that that the individual defendants have handed back all material including any information that might be viewed as confidential, and there is no evidence that any of the information has been misused for the benefit of Yesss.

Looking at the matter in the round and at the allegations against parties other than the First and Second Defendants matters cumulatively and having applied the NWL v Woods test, I have reached the conclusion that the evidence is accurate and that it should be accepted as it is cogent and clear, especially as the evidence adduced by CEF does not undermine it in any meaningful way. In any event even if the evidence relied on by CEF against was correct, it would not show that the defendants had obtained “a head start” by acting unlawfully and so the prerequisite for granting Springboard relief had not been satisfied.

It is for exactly for that last reason that I have reached the same conclusion when applying the American Cyanamid test to the allegations against parties other than the First and Second Defendants cumulatively. So far as the Twentieth Defendant is concerned, there is no evidence that it has used any confidential information of CEF or that it intended to use it. Again I do not accept that on applying either test, any of the defendants have induced any employees of CEF to break their contracts and there is, for example, no evidence that any of the defendants gave less than the prescribed period of notice to CEF or that their behaviour either when considered individually or collectively could enable the Court to grant Springboard relief.

So, I have concluded that at its highest, the case for CEF is based on suspicion, but my conclusion is the same as was recently stated in the Caterpillar case [2011] EWHC 3154 (QB) by Tugendhat J, who concluded that:-

“138.

The upshot is that there is before the court no direct evidence that [the defendant] has acted with impropriety, whether consciously or otherwise. A case based only on suspicion does not raise a triable issue. If I am wrong about that in this, then on the evidence in the present case I do not consider that [the claimant] is likely to succeed at trial”.

So CEF has failed to show a conspiracy or other wrongful conduct needed to form the basis for granting Springboard relief. The position therefore is the same as was described by Cranston J in S G & R Evaluation Service v Boudrais [2008] IRLR 770 and [2008] EWHC 1340 [QB], when he concluded that:-

“30 I am not persuaded that this is a case where the Springboard jurisdiction should be exercised. The confidential information, as I indicated earlier, has been handed back or sterilised. There is no evidence that it has been used. In my view, it would be wrong to assume the misuse of information and to accept that the Defendants have misled the court and lied on affidavit in the assurances they have given in this regard. The resignation of employees is lawful provided the notice period is served, and it is not unlawful to move to competitors. On the facts of this case., the Springboard jurisdiction is not founded.”

Have the conditions necessary for the granting of Springboard relief been satisfied?

I have concluded that there is no evidence to support a conspiracy or other wrongful conduct needed for Springboard relief and this means that this claim fails, but in case I am wrong and there is such conduct, I will move on to consider the next issue which entails determining whether the other conditions necessary for Springboard relief have been set out on the basis that (contrary to my conclusions) CEF have shown that there was evidence to support a conspiracy or other wrongful conduct needed for Springboard relief.

A useful starting point is to be found in some more of the principles laid down in the QBE Management case (supra) by Haddon-Cave J and they are that:-

243.

Fourth, 'Springboard' relief must, however, be sought and obtained at a time when any unlawful advantage is still being enjoyed by the wrongdoer: Universal Thermosensors v. Hibben [1992] 1 WLR 840 Nicholls V-C; see also Sun Valley Foods Ltd v. Vincent [2000] FSR 825 ESP at 834.

244.

Fifth, 'Springboard' relief should have the aim "simply of restoring the parties to the competitive position they each set out to occupy and would have occupied but for the defendant's misconduct" (per Sir David Nicholls VC Universal Thermosensors v. Hibben [1992] 1 WLR 840 at [855A]). It is not fair and just if it has a much more far-reaching effect than this, such as driving the defendant out of business [855A],

245.

Sixth, 'Springboard' relief will not be granted where a monetary award would have provided an adequate remedy to the Claimant for the wrong done to it (Universal Thermosensors v. Hibben [1992] 1 WLR 840 at [855B]).

246.

Seventh, 'Springboard' relief is not intended to punish the Defendant for wrongdoing. It is merely to provide fair and just protection for unlawful harm on an interim basis. What is fair and just in any particular circumstances will be measured by (i) the effect of the unlawful acts upon the Claimant; and (ii) the extent to which the Defendant has gained an illegitimate competitive advantage (see Sectrack NV. v. (1) Satamatics Ltd (2) Jan Leemans [2007] EWHC 3003 Flaux J.). The seriousness or egregiousness of the particular breach has no bearing on the period for which the injunction should be granted. In this regard, it is worth bearing in mind what Flaux J, said at paragraph [68]:

"[68] I agree with Mr Lowenstein that logically, the seriousness of the breach and the egregiousness of the Defendants' conduct cannot have any bearing on the period for which the injunction should be granted - what matters is the effect of the breach of confidence upon the Claimant in the sense of the extent to which the First Defendant has gained an illegitimate competitive advantage. In my judgment, Mr Cohen's submissions seriously underestimate the unfair competitive advantage gained by the Defendants from access to the Claimant's "customer list" and ignore, in any event, the impact (if the injunction were lifted) of actual or potential misuse of other confidential information such as volume of business or pricing information. It is important in that context to have in mind that the Claimant maintains in its evidence that all the information said to be confidential remains confidential." (Emphasis added)

247.

Eighth, the burden is on the Claimant to spell out the precise nature and period of the competitive advantage. An 'ephemeral' and 'short term' advantage will not be sufficient (per Jonathan Parker J. in Sun Valley Foods Ltd v. Vincent [2000] FSR 825 at 834).”

The judge in that case also explained correctly in my view in paragraph 285(1) of his judgment that:-

“the appropriate measure for the length of a spring board injunction is the length of time that it would have taken the wrongdoer to achieve lawfully what he in fact achieved unlawfully, relative to the victim”

I have concluded that these principles present insuperable difficulties for CEF, as it has not discharged the burden of showing the precise nature and period of any competitive advantage, which the corporate defendants or any other defendant acquired as a result of their alleged conspiracy or wrongful conduct if correct. No evidence was given to show what unfair advantage was obtained by the corporate or any defendants in terms of the length of time that it would have taken for them to achieve lawfully what they achieved unlawfully, if CEF’s account of the First and Second Defendants’ wrongful behaviour, including acting as “recruiting sergeants” was correct. To obtain Springboard relief, a claimant has to prove the precise period and the nature of the competitive advantage, but there is no evidence to that effect.

There is also no evidence that those defendants who left CEF’s employment failed to give a proper period of notice, or that they have been using CEF’s confidential information. So I was left with the clear impression that the defendants obtained no advantage from any aspect of Yesss’s wrongful conduct or if there was any advantage, then it was so short as to be an “ephemeral” and “short term” advantage which, as I explained, would not justify granting Springboard relief.

In addition, CEF has failed to show, as it was required to do so, that the defendants and in particular the corporate defendants are still enjoying “an unlawful advantage” over CEF especially as the Yesss network is not trading and will not trade until September 2012. This is another reason why Springboard relief cannot be obtained.

It seems likely that, even if I am wrong and CEF has suffered a disadvantage as a result of the defendants wrongful actions, then a monetary award is likely to provide suitable remedy, especially as the corporate defendants have substantial capital as I explained in paragraph 14 above and also because in paragraph 10 of the latest version of the Particulars of Claim, it is stated that both corporate defendants are companies “of substance”.

So even if contrary to my conclusions, CEF can establish the existence of a conspiracy and other wrongful conduct on the part of the First and Second Defendants, then Springboard relief cannot be obtained, I would decline to grant relief.

Introduction

The First Defendant, the Eleventh Defendant and the Thirteenth to Nineteenth Defendants live in Scotland, while the Fourth Defendant lives in Northern Ireland. The issue arises whether this court has jurisdiction over any of these ten defendants (“the non-English defendants”).

Schedule 4 of the Civil Jurisdiction and Judgment Act 1982 (“CJJA”) deals with the allocation of jurisdiction within the United Kingdom and it is a modified version of Brussels 1 Regulation (Council Regulation 44/2001 on Jurisdiction).

Rule 1 provides that: “Subject to the Rules of this Schedule, persons domiciled in this part of the United Kingdom shall be sued in the courts of that part”. That rule can only be displaced, so that the person domiciled in a part of the United Kingdom may be sued in the courts of another part of the United Kingdom by virtue of Rules 3 to 13 of that Schedule.

The non-English defendants contend that they cannot be sued in the High Court, because there are provisions in Rule 10, which deal with “Jurisdiction over individual contracts of employment” and which provides, insofar as is material, that:-

“10(1) In matters relating to individual contracts of employment, jurisdiction shall be determined by this rule, without prejudice to rule 3(e)….

(3)

An employer may bring proceedings only in the courts of the part of the United Kingdom in which the employee is domiciled.”

There are very limited circumstances in which the provisions of that rule can be departed from, and they are set out in sub-rule (5), which says:-

“The provisions of this rule may be departed from only by agreement on jurisdiction –

(h)

which is entered into after the dispute has arisen; or

(i)

which allows the employee to bring proceedings in courts other than those indicated in this rule.”

It has not been suggested that this sub-rule applies, because the non-English defendants have not made any such agreement. I understand that on 8 May 2012 after the hearing in front of me had concluded, CEF’s solicitors made a request of the solicitors for the non-English Defendants for them to submit to the jurisdiction of the English courts and that these requests have not been acceded to.

The position of the Non-English Defendants other than the First Defendant

The case for the non-English Defendants (other than the First Defendant) is that the case against them has been based on covenants in their contracts of employment, but because of the provisions of rule 10(3) of Schedule 4 of the CJJA (which I have set out in paragraph 138 above) those claims can only be brought in the places where these defendants are domiciled and that is not England or Wales.

It has been suggested by CEF that this Court could invoke section 25 of the CJJA to grant interim relief against non-English defendants and this section, insofar as is relevant, provides that: -

“(1)

The High Court in England and Wales or Northern Ireland shall have power to grant interim relief where—

(a)

proceedings have been or are to be commenced …in a part of the United Kingdom other than that in which the High Court in question exercises jurisdiction; and

(b)

they are or will be proceedings whose subject-matter is within the scope of the Regulation as determined by Article 1 of the Regulation…;

(2)

On an application for any interim relief under subsection (1) the court may refuse to grant that relief if, in the opinion of the court, the fact that the court has no jurisdiction apart from this section in relation to the subject-matter of the proceedings in question makes it inexpedient for the court to grant it,,,”

There is an insuperable difficulty preventing CEF invoking this provision, as the court can only make an injunction under section 25 where “proceedings have been or are to be commenced.. in a part of the United Kingdom other than that in which the High Court in question exercises jurisdiction”. The speech of Lord Scott (with whom the other members of the Appellate Committee agreed) in Fourie v Le Roux [2007] 1 WLR 320 at page 332 makes it clear that the existence of a claim for substantive relief or that one will be instituted in another part of the United Kingdom would be required to invoke this section but no such claims have been made or promised to be made. For those reasons, this court has no jurisdiction to grant injunctions to enforce the post-termination covenants against the non-English defendants.

The Claim against the First Defendant- What is the correct test for determining whether he can be sued in England?

Mr. Reade sought to contend at one stage that as against the First Defendant “the Court could give permission in the usual way under CPR rule 6.37”. This submission is wrong, because Schedule 4 of the CJJA provides the only regime for suing somebody domiciled in another part of the United Kingdom. Not surprisingly this submission was not pursued, and instead it was submitted that CEF could rely on two provisions of Schedule 4 of the CJJA to justify suing the First Defendant in the High Court. Those provisions are :-

CEF contend that the reason why rule 10 is not relevant is because it has limited application and that it can only apply to claims made under a contract of employment and not to claims for conspiracy. According to Mr. Reade, this reflects the interpretation of a predecessor provision by His Honour Judge McGonigal, sitting as a Deputy High Court Judge in Swithenbank Foods Limited v Bowers [2002] 2 All ER (Comm) 974. The claimant in that case had sued nine defendants, eight of whom had been its former employees for conspiracy to induce breach of contract and for breach of fiduciary duty arising from their contracts of employment. The Judge held that these provisions applied to the breach of duty claim, but not to the conspiracy claim.

In his judgment, Judge McGonigal said that the advantage conferred by these provisions should be confined to cases where the defendant’s status as an employee is legally relevant and that:-

“25.

I can see no justification of policy for conspirators, or any other tortfeasors, who are employees of the claimant being given jurisdictional advantages not enjoyed by conspirators or other tortfeasors who are not employees of the claimant. I accept Mr Jory's submission that Section 5 is limited to claims in contract. Article 5 of the Brussels Regulation draws a distinction between “matters relating to a contract “and” matters relating to tort ...” and the heading of Section 5 is “Jurisdiction over individual contracts of employment.

26.

Accordingly, in my view the phrase “in matters relating to individual contracts of employment” effectively means “where claims are made under individual contracts of employment”. I express no view on the question whether it bears an extended meaning as suggested in paragraph 19 above. If a claimant brings to the Court a claim against a defendant who is or was his employee which is made independently of the contract of employment, prima facie he should be permitted to bring it in that Court if the Court would have jurisdiction over that claim if the defendant was not the Claimant's employer. If an employer sought to dress up a claim under an employment contract as one not made under such a contract no doubt the Courts would be astute to prevent him. But that is not this case. To interpret the phrase in this way provides a clear test and leads to high predictability regarding jurisdiction.”

The Swithenbank judgment was considered by the Court of Appeal in Samengo-Turner v J & H Marsh & McLennan (Services) Ltd [2008] ICR 18. In his judgment (with which Longmore and Lloyd JJ agreed), Tuckey LJ said, of the Swithenbank case (with emphasis added) that: -

"28 The fact that the defendant was an employee was not legally relevant to the conspiracy claim which was not a contractual claim at all. So the decision in this case is readily understandable, but again I do not think it sheds any real light on our case.”

It is of great importance that in Glaxosmithkline v Rouard [2008] ICR 1375, the ECJ interpreted for the first, and apparently the only, time Section 5 of Chapter II of the Brussels I Regulation, (which is the equivalent of rule 10 in Schedule 4 of the CJAA). It held that, where that section applies to a dispute, Article 6(1) (the equivalent of rule 5 in Schedule 4 of the CJAA) of the Regulation cannot be applied.

The Court decided that, construed literally:-

“23 It is therefore clear that a literal interpretation of Section 5 of Chapter II of the Regulation [which is the equivalent of rule 10 in Schedule 4 of the CJAA] leads to the conclusion that that section precludes any recourse to Article 6, point 1 thereof , [the equivalent of rule 5 in Schedule 4 of the CJAA]”

So this means that the first matter to be considered by a court in a case in which Chapter II of the Regulation (which is the equivalent of rule 10 in Schedule 4 of the CJAA) and Article 6, point 1 thereof, (the equivalent of rule 5 in Schedule 4 of the CJAA) could apply is whether the former provision applies and if it does, then the latter provision should not then be considered.

In support of this conclusion, it was explained that the correctness of the literal construction is confirmed by the travaux préparatoires to section 5 ([24]), its protective objective ([29]-[32]), and considerations of legal certainty ([33]). As regards the protective objective, the Court explained that the protection of employees would be undermined by the application, in favour of employers, of jurisdictional rules, such as Article 6(1), which were not part of section 5 ([30]-[31]). Further, the Court considered that it would be impermissible to construe the Regulation so that only employees could rely on such rules because this would undermine the balance which the legislator had struck, in Section 5, which is the equivalent of rule 10 in Schedule 4 of the CJAA, between the interests of employees and employers ([32]). Counsel’s researches have not found any other references to the Glaxosmithkline case in the Court’s case law.

In support of his contention that rule 10 does not apply and so the First Defendant can be sued here, Mr Reade also relies on the decision of Briggs J in the case of Alpha Laval Tumba AB & Another v Separator Spares International Limited (in liquidation) & Another [2012] EWHC 1155 (Ch), which is a case in which judgment was handed down on the last day of the hearing before me and which has therefore been the subject of subsequent helpful written submissions from all counsel.

In that case, the claimants designed and sold marine separators. They sued the defendant (a Mr Pacy) and before its liquidation his company (SSI), for breach of copyright and confidence in their design drawings, which had been unlawfully obtained and used in SSI’s competitive business. The claimants sought to join a Mr Jasikowski to the proceedings, alleging that he had committed breaches of copyright and breaches of confidence under English law and unlawful competition under Polish law. Mr Jasikowski was domiciled in Poland and the Judgment Regulation applied. Mr Jasikowski and Mr Pacy had set up SSI together in 2005-2006.

They had obtained the claimants’ design drawings by bribing one of its employees (Mr X). Mr Jasikowski had in fact been an employee of the claimants at the time of the bribe, but he had resigned shortly thereafter. So his status as an employee was wholly incidental to the claims advanced against him, as they were based on a bribe and they related to the on-going exploitation of the Claimants’ copyright and confidential drawings in the competitive SSI business or to the bribe.

Mr Jasikowski resisted the application to join him in the English proceedings by relying on, among other provisions, the Judgment Regulation equivalent of Article 10, on the basis of his former employment with the claimants. His counsel argued that it was necessary to construe Section 5 of the Judgments Regulation (mirrored in rule 10 of Schedule 4 of the CJJA) in a purposive manner as to apply to all claims by employers against current or former employees, in order to give effect to the objective of protecting the weaker party in Recital 13, which provides that-

“In relation to insurance, consumer contracts and employment, the weaker party should be protected by rules of jurisdiction more favourable to his interests than the general rules provide for.”

Mr Jasikowski’s counsel argued that to do otherwise would render Section 5 (mirrored in rule 10 of Schedule 4 of the CJJA) nugatory as employers could circumvent then the requirements of Section 5 by framing their case in other causes of action. I interject to explain that Mr Reade submits that this is the same argument, which has been put forward by the counsel for the defendants in the present case.

Both the cases of Glaxosmithkline and Swithenbank were considered by Briggs J, who concluded (with emphasis added) that: -

“31.

I consider that Judge McGonigal was right [in the Swithenbank case] to confine Section 5 to cases where the contract of employment is legally relevant to the claim. Although not necessary for my decision in the present case, I doubt whether it is thereby confined only to claims under the employment contract. Nonetheless, I consider it clear that Section 5 is inapplicable to the claimants’ claims [of breach of copyright and misuse of confidential information] against Mr Jasikowski.”

So the case for CEF is that Briggs J thereby endorsed Swithenbank as correct, notwithstanding the decision in the case of Glaxosmithkline and that he was right to do so with the consequence that Swithenbank should also be followed in this case. Mr Reade contends that he obtains further assistance from the comments of the judge in respect of the operation of Art. 6(1) of the Judgments Regulation (mirrored in rule 5(a) of Schedule 4 of the CJJA) when he said that:-

“35.

I am not persuaded that these considerations significantly detract from what seems otherwise to me to be an obvious case for the application of Article 6.1. The connection between the claims against Mr Pacy [the English domiciled defendant] and the Polish respondents arises from their being sued as parties to a common design, in respect of all the causes of action alleged. The language of Article 6.1 suggests that it is primarily to the closeness of the connection that the court looks when carrying out its value judgment.”

So he submits that this reasoning should also be applied to the claim of conspiracy against the First Defendant, who is connected to the English-domiciled parties to the conspiracy claim (the Second, Twentieth and Twenty First Defendants) as a party to the same conspiracy. So his case is that jurisdiction in England can and should be founded by virtue of rule 5(a) of Schedule 4 of the CJJA, which I set out in paragraph 144 above. The case for CEF is that following Alfa Laval Tumba, the provisions of Rule 10(3) of Schedule 4 of the CJJA do not apply to the claims of conspiracy against the First Defendant; and special jurisdiction can be founded pursuant to rule 5(a) of Schedule 4 of the CJJA of the CJJA, in addition or as an alternative to rule 3(c) of Schedule 4 of the CJJA.

The starting point for the First Defendant is that before Briggs J, it was stated correctly to be common ground [27] that the claimants could not rely upon (the Judgment Regulation equivalent of) rules 3 and 5 of Schedule 4 of the CJJA where rule 10 applied as a result of the decision in Glaxosmithkline.

Mr Devonshire points out that in Alfa Laval Tumba, counsel for Mr Jasikowski drew the Court’s attention to Briggs & Rees; Civil Judgments Jurisdiction (2009) 5^th Ed at paragraph 2.103 where the authors express the view (consistent with the obiter observations of Briggs J in Alfa Laval Tumba) and with emphasis added that:-

“Whether a matter relates to an individual contract of employment only if founded on the contract is uncertain. There seems no reason why a claim formulated as one in tort but which arises from an employment relationship ... would not fall within the Section [i.e. the Judgment Regulation equivalent of Art 10], and every reason why it should fall within it. Likewise, claims which seek to enforce fiduciary duties, or to restrain the misuse of confidential information by an employee should fall within the Section; and in principle this should continue to be true even after the contractual relationship has come to an end ...

A question to which the Section does not immediately furnish an answer is whether its rules apply when proceedings are brought after the termination of the employment, for example, as a claim against a former employee. No case has held that the Section is inapplicable ratione materiae if there is no longer an employment relationship; and in some cases at least the claim will be brought by reason of the termination of employment. It must surely follow that the now ex-employee should continue to benefit from the jurisdictional rules in Section 5 ... [Emphasis Supplied].”

From the passage just quoted, it is clear that the authors did not accept Judge McGonigal’s conclusions as to the restricted reach of Section 5 or rule 10 and it is to be inferred that Briggs J accepts this analysis as he quoted it without comment. Briggs and Rees refers in a footnotes to Swithenbank on page 156 (at footnote 3), but they do not comment on whether it is correct, but the statement set out above indicates they do not believe it to be.

The issue for decision for Briggs J was whether Section 5 of the Judgment Regulation (i.e. the equivalent of Schedule 4 rule 10 of the CJJA) applied to the causes of action asserted against Mr Jasikowski on the basis of “there being no specific claim based upon an alleged breach of his contract of employment” [27]. Briggs J rejected this contention, because he explained, with my emphasis added that:-

“31.

Although he happened to be an employee of [the Claimants] when he bribed Mr X ... it is not even alleged that Mr Jasikowski’s status as an employee gave him access to those drawings. The substance of the claim against Mr Jasikowski would it seems to me be the same whether the opportunity to bribe Mr X occurred while they were working at [the Claimants’] premises, or during shared leisure activities .... [his] status as an employee .... while undoubtedly part of the factual matrix, is legally irrelevant to the claim against him as party to a common design to misuse the claimant’s intellectual property for the purpose of facilitating unlawful competition against them.”

In expressing these conclusions, Briggs J, as I have explained, doubted (obiter) that Judge McGonigal had been right to conclude that what was Article 20.1 and what is now rule 10 (3) of [Schedule 4 of the CJJA] was “thereby confined only to claims under the employment contract” ([31]). The passage quoted in the previous paragraph shows that Briggs J regarded the critical factor in determining whether rule 10 (3) of Schedule 4 of the CJJA applies is whether the defendant’s status “as an employee.... is legally irrelevant to the claim” and interestingly this was the exact wording used by Tuckey LJ in the Samengo-Turner case as I explained in paragraph 147 above. In addition, it is not materially different from the views of Professor Briggs and Mr. Rees, which I quoted in paragraph 161 above that the test is whether the claim “arises from an employment relationship”.

A similar view that the test for deciding whether the claim comes within rule 10(3) applies whether the claim against the employee “arises from an employment relationship” were expressed in B Hess, T Pfeiffer and P Schlosser (eds) Report on the Application of Regulation Brussels in 25 Member States (Study JLS/C4/2005/03) at [352]-[356]. This report, which was based on a wide-ranging survey of the Member States, was presented to the European Commission to assist it with the review of the Regulation required under Article 73 thereof. The authors of this Report consider the decision in Swithenbank to be a “rather strict” interpretation of Article 18(1) of the Brussels I Regulation ([355]), and they consider, with emphasis added, that:

“This case raises the general issue whether claims in tort committed in the context of the performance of an employment contract are covered by Section 5. The comparable issue has been referred to in the context Article 5 (1) [of the Brussels I Regulation]. There, however, it is necessary to clearly distinguish contractual claims from tortuous [sic] claims. This necessity does not exist within the framework of Article 18 [of the Brussels I Regulation]. Extending the protection of employees to tortuous [sic] claims related to the employment contract would not carry any inconsistency into the working of Section 5”

In reaching the conclusion that rule 10(3) applies to all claims, where the status of the defendant as an employee is “legally relevant” to the claim in question, I accept that I am departing from the views of Judge McGonigal, but since his decision, there have been the decisions in Glaxosmithkine and Alfa Laval as well as the academic writings to which I have referred. They all convince me of the correctness of this conclusion as does the wording of rule 10 (“matters relating to individual contracts of employment”), which is wide and the use of the words “relating to” show that the ambit of that provision extends beyond the meaning given to those words in Swithenbank. Furthermore, my conclusion is also consistent with the terms of Recital 13 of the Judgments Regulation, which as I have explained in paragraph 155 states that:-

“In relation to insurance, consumer contracts and employment, the weaker party should be protected by rules of jurisdiction more favorable to his interests than the general rules provide for.”

I suspect that Judge McGonigal might well have reached the same conclusion as I have done, if he had had the benefit of the submissions, which I have had but I have been driven to the conclusion that his decision was “clearly wrong” so that I need not follow it.

I add that the approach in Swithenbank would have the undesirable consequence that it would be easy for those pleading a claim for an employer against, for example, a Scottish employee to circumvent rule 10(3) by not specifically relying on the contract of employment, but instead putting forward a tortious claim of conspiracy or of inducing a breach of contract against the employee so as to circumvent that rule.

CEF’s claims against the First Defendant - Do they fall with rule 10(3) of Schedule 4 of the CJJA?

I agree with Mr. Devonshire that in the present case, the contract of employment is central to the non-contractual claims against the First Defendant. Indeed CEF explains correctly in its Jurisdiction Note of 4 May 2012, that “[t]he tortious conspiracy claims and fiduciary claims ... arise out of the employment relationship”. The First Defendant’s alleged role in the unlawful means conspiracy is said to have involved him triggering the campaign of “cascade recruitment”, whilst he was still employed by CEF and while he was still under contractual and fiduciary obligations of fidelity to them. In addition, the First Defendant is alleged to have abused confidential information and his access to that information arose wholly from his employment status. This is clear from the nature of the information, which he acquired as a result of his employment status with CEF and it includes identifying from his managerial experience who to recruit from CEF or what to offer them to persuade them to leave CEF’s employment and to join the Yesss network.

The case against the First Defendant relies not only upon CEF’s implied contractual duties of fidelity, which are said to arise from the First Defendant’s (and the Second Defendant’s) “senior and important positions within CEF; the degree of autonomy in the operation of their geographical region; the high level of trust in which they were held; and access to highly confidential information” (paragraph 32 of Particulars of Claim). In addition, the First Defendant is alleged to have conspired with others to breach his contractual and fiduciary obligations he owed to CEF (i) during the continuation of their employment - by acting as “a recruiting sergeant” in paragraph 43(1) of the Particulars of Claim, and (ii) during the continuation of his employment and thereafter - by misappropriating and misusing confidential information in paragraph 43(2) of Particulars of Claim.

The First Defendant is also alleged to have acted in breach of his contractual and his fiduciary obligations pursuant to that conspiracy: paragraph 95(1) of Particulars of Claim. CEF also rely on a series of breaches of contractual and fiduciary obligations alleged against him: see paragraph 98 of Particulars of Claim.

In reaching this conclusion, I have not overlooked the fact that it is said by CEF that “No remedy is sought in this claim against Mr Mundey in respect of these breaches of contract, save insofar as the consequences are actionable consequences of the wrongful conspiracy or conspiracies to which Mr Mundey was a party, pending Mr Mundey’s agreement to accept the jurisdiction of the English courts”.

This statement fails to appreciate as appears clear from the Particulars of Claim that the First Defendant’s status qua employee remains at the heart of the claim by CEF against him, as it is legally relevant to it.

At the end of the day, I have come to the clear conclusion that the provisions of rule 10(3) of Schedule 4 of the CJJA prevent CEF from bringing any of its claims against any of the non-English defendants.

Introduction

The defendants contend that CEF failed to comply with their duty of full and frank disclosure to disclose to the court all matters of fact and law material to the application including and in particular the matters which may have been adverse to it. Mr. Howe accepted correctly in my opinion that, it was no part of his case that any of the failures of CEF were deliberate on the part of counsel or the solicitors acting for CEF.

One of the most basic principles of English law is the golden rule that when a party makes an application for injunctive relief on a without notice basis, it has a duty to investigate facts and legal issues fairly so as to present the evidence and submissions to the court in the knowledge that the judge does not have the benefit of submissions on factual and legal issues from the party sought to be restrained.

This obligation has been explained on many occasions, and it extends to both factual and legal issues, because as Bingham L.J. (as he then was) said in Siporex Trade S.A v Comdel Commodities Ltd [1986] 2 Lloyd’s Rep 428,437 an applicant for such relief must:-

“identify the crucial points for and against the application, and not rely on general statements, and the mere exhibiting of numerous documents … He must disclose all facts which reasonably could or would be taken into account by the judge in deciding whether to grant the application. It is no excuse for an applicant to say that he was not aware of the importance of matters he has omitted to state. If the duty of full and fair disclosure is not observed the court may discharge the injunction even if after full inquiry the view is taken that the order made was just and convenient and would probably have been made even if there had been full disclosure.”

Mummery LJ also summarised the position in Memory Corporation Plc v Sidhu (No 2) [2000] 1 WLR 1443 at 1459 H to 1460 B:-

“It cannot be emphasised too strongly that at an urgent without notice hearing for a freezing order, as well as for a search order or any other form of interim injunction, there is a high duty to make full, fair and accurate disclosure of material information to the court and to draw the court's attention to significant factual, legal and procedural aspects of the case. It is the particular duty of the advocate to see that the correct legal procedures and forms are used; that a written skeleton argument and a properly drafted order are prepared by him personally and lodged with the court before the oral hearing; and that at the hearing the court's attention is drawn by him to unusual features of the evidence adduced, to the applicable law and to the formalities and procedure to be observed.”

Hughes LJ said in relation to the comparable duty of a prosecutor on a without notice application in the case of In Re Stanford International Ltd [2010] 3 WLR 941 “191… In effect a prosecutor seeking an ex parte order must put on his defence hat and ask himself what, if he were representing the defendant or a third party with a relevant interest, he would be saying to the judge, and, having answered that question, that is precisely what he must tell”. That is precisely what those acting for CEF should have done certainly in relation to what Bingham LJ described as “the crucial points”.

Was the duty of CEF to give full and frank disclosure discharged or reduced or extinguished by either of two factors?

CEF contend that on the facts of this case, the obligation to give full and frank disclosure was discharged or reduced, first because Mr Gerard Clarke of Counsel appeared at short notice to represent all the defendants when he made very brief representations to Collins J, and second because many parts of the order of Collins J were prefaced with the words “the First to Nineteenth Defendants consenting, without prejudice to their rights to challenge the Claimants’ assertions as to the confidentiality of information”. I will deal with each of these points in turn.

First, CEF contends that the obligation on CEF to give full and frank disclosure was discharged or was reduced, because after having given very short informal notice to some of the defendants, they were represented by Mr. Clarke. In my view, this submission is based on an incorrect understanding of the basis of the rule to give full and frank disclosure. Under CPR 25A2.2, it is provided that:-

“The application notice and evidence in support must be served as soon as practicable after issue and in any event not less than 3 days before the court is due to hear the application”.

The purpose of this requirement imposed on an applicant for an injunction of giving “not less than 3 days notice” is to allow the respondents to the application adequate time in which to consider the applicant’s case on both factual and legal issues and also to enable them to be properly prepared so as not only to be able to address all relevant issues of fact and of law, but also to be able to adduce all relevant evidence and to make full submissions on all legal and factual issues. In other words, the period of three clear days is the minimum period specified to ensure that proper legal and factual submissions of the respondent can be put before the court so as to represent their interests.

It follows that if a shorter period of notice (and particularly if a much shorter period of notice is given), then the respondents to the application cannot be expected to be properly prepared and to be able to put all the relevant legal and factual information before the court. In those circumstances, the obligation of full and frank disclosure continues, but it is subject to one qualification. Obviously, if the respondent who has been given inadequate notice, appears and then deals with all the factual and legal issues in the way in which the applicant for the injunction would have been obliged to have done as satisfying his obligation to give full and frank disclosure, then the applicant for the interim relief is discharged from the obligation to give any further information as it had already been supplied by the respondent.

So the position is that the duty of the applicant who makes an application with less than the prescribed period of notice to give full and frank disclosure continues even when the opposing party is represented on short notice, but significantly he is absolved from this duty, but then only in respect of those legal and factual matters to which that other person has drawn the Court’s attention. I stress that he is not discharged from his duty to give full and frank disclosure in respect of any other matters.

Mr Reade has contended that it was not his duty to repeat Mr Clarke’s points, but it was his duty to explain all further factual and legal issues, which supported or which were relevant to Mr Clarke’s submissions and which CEF would have been obliged to state as part of its duty of full and frank disclosure. In other words, CEF’s counsel was obliged to bridge the gap between what fell within his duty of full and frank disclosure and what Mr Clarke had said. It was, for example, clear that Mr. Clarke had not been able to deal with many major issues relating to the application, such as the jurisdiction to grant relief against the non-English defendants. So CEF’s duty of disclosure in respect to those matters remained unaffected. Indeed Mr. Clarke had not, as I will explain, drawn the attention of Collins J to many of the relevant cases or statutory provisions or to many relevant facts and so CEF was obliged to do so.

On the facts of this case, there is a critically important difference between, on the one hand, the position that the defendants would have been in if they had been given the prescribed three days notice, and, on the other hand, the position they actually found themselves in at the hearing before Collins J after they had been given very limited notice by CEF’s solicitors. In fact, the defendant’s solicitors (save for the solicitors for the Twentieth Defendant) only received informal notice of the application at between 4.30pm and 4.40pm on the previous evening. The papers for the application adduced by CEF were very substantial comprising of three witness statements and exhibits which in total occupied over 700 pages.

The task for the defendants and Mr Clarke was made even more difficult because:-

In those circumstances, I have concluded that the duty of full and frank disclosure imposed on the claimants extended to all the many factual and legal matters which were not fully covered by Mr Clarke at the hearing before Collins J. I reach this conclusion with relief because if a claimant was absolved from his duty to give full and frank disclosure when the opposing party appears on short notice, then there would be every incentive for somebody served with short notice not to appear at the hearing. This would be unfortunate, because the assistance given by those who appear on short notice on the applications for injunctions can be, and often is, considerable.

I am fortified in coming to that conclusion by the statement, which was made by David Richards J in Ghafoor v Cliff [2006] 1 WLR 3020 at paragraph 46 where it was stated in relation to the duty to make full and frank disclosure:-

“The principles are well-established and well-known on applications without notice for injunctions and other interim relief, but they are fundamental to the proper functioning of the court's process on any application without notice. It is of course the very fact that the application is made without notice to other interested parties which makes these principles so important. Other parties do not have the opportunity to correct or supplement the evidence which has been put before the court.”

(Underlining added but supplied by the Court in Re OJSC Ank Yugraneft v Siber Energy plc [2008] EWHC 2614 [72] on the allegations of non-disclosure).

The second point, which was made by Mr. Reade, is that all the orders made by Collins J are prefaced with the introductory words “the First to Nineteenth Defendants consenting, without prejudice to their rights to challenge the Claimants’ assertions as to the confidentiality of information”, save for the injunctions first restraining the First to Nineteenth Defendants from inducing or continuing to induce the claimants’ employees to leave the employment of CEF, and second ordering the Twentieth Defendant not to induce or continue to induce any employee of CEF to breach their contractual obligations owed to CEF.

Mr Clarke, who appeared at short notice for some of the defendants in front of Collins J, consented and so it is submitted on behalf of CEF that this somehow precludes the orders being set aside for non-disclosure. The difficulty with this submission is that the transcript shows that this was not a consent order in the classic sense of being a contract made between parties, but the consent of Mr. Clarke was given in response to Collins J’s statement that instead he wanted to “extract an undertaking from you in respect of delivery up / confidential information” (transcript 7 line 15) and that he “grudgingly [agreed] to” the orders (transcript 79 line 10) over to the return date. In other words, it was a pragmatic concession and this was made very clear when Mr Clarke stated to Collins J that he “reserve[d] the right to come back and argue about all sorts of things later”.

It is important to appreciate that the term “by consent” in an order does not necessarily mean a contractual arrangement, because as Lord Denning MR explained in Siebe Gorman & Co Limited v Pneupac Limited [1982] 1 WLR 185, 189G that:-

“There are two meanings to the words ‘by consent’.. One meaning is this: the words ‘by consent’ may mean a real contract between the parties. In such a case the court will only interfere with such an order on the same grounds that it would with any other contract. The other meaning is this: the words ‘by consent’ may mean ‘the parties here to not objecting’. In such a case there is no real contract between the parties. The order can be altered or varied by the court in the same circumstances as any other order that is made by the court without the consent of the parties”.

This passage was quoted with approval by Ramsey J in Community Care North East v Durham CC [2012] 1 WLR 338.

I have no doubt in coming to the conclusion that the use of the word “consenting” in paragraph 3 of the order made by Collins J meant what Lord Denning described as the “other meaning” of the words “by consent”. This is clearly correct, not only because of the statements made to Collins J by Mr Clarke, which I have set out in paragraph 186(iv) above, but also because Mr. Clarke’s consent was given in response to Collins J’s statement that instead he wanted to “extract an undertaking from you in respect of delivery up / confidential information” (transcript 7 line 15) and that he “grudgingly [agreed] to” the orders (transcript 79 line 10) over to the return date.

This conclusion is supported by the fact that the order itself states after the words “consenting”, that it was “without prejudice to their right to challenge the claimants’ assertions as to the confidentiality of information”.

In my view, there is nothing in the fact that Mr Clarke consented which precludes me from setting aside the order made by Collins J, if an appropriate case of non-disclosure is established, because that order can be, in Lord Denning’s words, “altered or varied by the court in the same circumstances as any other order that is made by the court without the consent of the parties”. I therefore reject the submission that the use of the word “consenting” in the order somehow precludes the Court from setting aside the order. This seems particularly fair in this case because, as I have explained, Mr. Clarke did not have adequate time to obtain instructions and to research the relevant legal principles.

Again I reach that decision with some relief, because frequently counsel appears in the way Mr. Clarke did at short notice and deals with matters on behalf of a party, who had given very little notice of an application for interim relief and the Court benefits from this.

It would be unfortunate if such assistance as Collins J obtained from Mr. Clarke meant that there could no subsequent claim that there had been non-disclosure because of such assistance. Indeed, it would mean this form of assistance would not be given in the future.

Mr Reade sought on a number of occasions to contend that he complied with his duty by flagging up issues or setting out principles, but such steps would only suffice if and only they amounted to full and frank disclosure in the way, which I have sought to set out and which was explained in the passages of the judgments set out in paragraphs 176 to 178 above.

Jurisdiction

It is difficult to think of a matter, which is more important for a Court to determine than the issue of whether it had jurisdiction to grant the relief sought against particular defendants. So it should have been made clear to Collins J that there were at the lowest jurisdictional difficulties for CEF in seeking relief against the defendants who are resident outside England. Those defendants were the First, Fourth, Eleventh and Thirteenth to Nineteenth Defendants. They were all resident in Scotland, with the exception of the Fourth Defendant who is resident in Northern Ireland. As is explained in Section VIII above, there are serious if not insurmountable difficulties in bringing claims against them.

Mr Beddows dealt with this issue in paragraph 10.8 of his first witness statement in which he stated that: -

“I am aware that I am under a duty to provide full and frank disclosure in my witness statement of matters which may mitigate against the granting of injunctive relief. In this regard, some of the Respondents’ were at the time of their resignation living in Scotland and working from CEF premises in Scotland. Although this is a legal matter, I am informed that the Court does have power to make an Order against these Scottish employees who have committed various fundamental breaches of contract and unlawful tortious acts against CEF. These employees form part of a wider group of ex employees, the majority of whom are domiciled in England and the subject matter of the litigation is closely connected such that it is expedient to hear and determine all matters together to avoid the risk of irreconcilable judgments. Furthermore, in the light of this, it is anticipated that the Scottish employees will consent to a single court having conduct of these claims. This issue will be addressed more fully when the application is made to the Court.”

This statement fails to appreciate the obligation on CEF, which in Mummery LJ’s words was “to ensure that “the court's attention is drawn by [the claimant] to unusual features of the evidence adduced, to the applicable law and to the formalities and procedure to be observed”.

In my view, this meant explaining the difficulties and obstacles confronting CEF before it could obtain interim relief against those non- English defendants. Mr Reade’s written skeleton argument for the hearing before Collins J dealt with the matter in this way: -

“There are aspects of the claims which relate to the individual contracts of employment of the Scottish former employees. However the unlawful conspiracy and the inducement of breaches of contract are free standing tortious conduct in respect of which the harm is being inflicted upon the applications which are domiciled in England. Further the delivery up of the property is dependent not on the contract of employment but the right to possession of the property. Article 5 of Schedule 4 would therefore appear to be directly in point and there is jurisdiction to join the claim against all the respondents in these proceedings even though some appear to be domiciled in Scotland.

It is then acknowledge that the former Scottish employees may argue that in respect of claims in relation to their contracts of employment where they are domiciled in Scotland under Art 10 despite Art 3 Schedule 4 they may either agree to submit to the jurisdiction or assert that they must have that part of the proceedings brought against them in relation to their former contract of employment in Scotland. Now that the dispute has arisen it is clear under Art 10 that they may agree that this honourable court will have jurisdiction to deal with all issues in dispute. The solicitors for the former Scottish employees have now indicated that they will accept service of the proceedings and have not raised an issue as to jurisdiction.

For the purposes of this interim application however as noted the relief claimed in these proceedings at this interim stage can be justified without reference to their contracts of employment or their former employment on the basis of the Springboard relief derive from the unlawful conspiracy.

I am troubled by this and what was said at the hearing because: -

The Relevance of the American Cyanamid Test to CEF’s applications

Mr Reade did not draw the attention of Collins J to the fact that the appropriate test for granting interim injunctive relief was not or might not have been the American Cyanamid test, because the periods of restraint on the Third to Nineteenth Defendants would expire between early September and mid-October 2010 depending on when the individual concerned had left CEF's employment. Even when the application came before Collins J, it must have been clear that even with an order for a speedy trial, that could not come on until July 2012 at the earliest because of the number of issues (including those on jurisdiction) and the number of actual and potential defendants. It has always been highly unlikely that the trial will come on in July 2012 for the reasons set out in paragraph 27 above.

In those circumstances, as I have explained in paragraphs 25 to 29 above the approach of the court should have been not to apply the American Cyanamid test, but rather the very different NWL v Woods test of “whether the plaintiff would be likely to succeed at a trial” (per Staughton LJ in Lansing Linde v Kerr (supra) at 258). The submissions of Mr Reade to Collins J were based on the American Cyanamid test with reference in his oral submissions to consideration of whether “there is a triable issue between the parties” and “where does the balance of convenience lie in the intervening period of time” (see page 25 of the transcript). In my view, the judge ought to have been told that there was a higher threshold, which had to be reached before relief could be granted and that was “whether the plaintiff would be likely to succeed at a trial”, or at least, he should have been told that it was arguable that this was the position especially as the task for CEF would have been much more onerous, as the merits of the claim would then have had to have been considered. That would have enabled Collins J to reach a decision on this issue, but instead he was not told of these vital matters.

Mr. Reade seeks to justify his failure to tell the judge of these matters by submitting that Collins J was only concerned with the position between the time of that hearing in front of him and the return date 10 days later. He submits that in those circumstances, the American Cyanamid test was applicable. I do not think that this is correct, because there is nothing in the authorities or any principle of law which suggests that different tests should be applied depending on whether the interim order sought would last till trial or whether it would last until the next hearing before trial. In both cases, the court is looking to see if a trial could take place before the injunctive relief would expire and if it cannot take place, the court has to subject the merits of the case to greater scrutiny, which is the basis and the justification of the NWL v Woods approach which entails applying the test of “whether the plaintiff would be likely to succeed at a trial”.

In any event, even if I am wrong and Mr. Reade is correct, the issue of whether the American Cyanamid test was appropriate should nevertheless have been drawn to the attention of Collins J because in the words of Bingham LJ in Siporex (supra), he was obliged to refer Collins J to all facts and matters “which reasonably could or would be taken into account by the judge in deciding whether to grant the application”. The question of whether American Cyanamid applied was most certainly one of those matters, especially as if did not, the task for CEF would have been much more onerous as the merits would have had to have been considered.

The Non-Inducement Injunction

Collins J’s order requires that the First to Nineteenth Defendants:-

“must not by themselves, their servants, agents or otherwise in any way induce or continue to induce the claimants’ employees to breach their contractual obligations owed to the claimants”.

There were two matters, which I have set out in paragraphs 41 to 53 above and to which the judge’s attention should have been drawn but to which his attention was not drawn and which I will now summarise.

First, the Third to Nineteenth defendants would not have known who they could solicit, because so many of CEF’s employees would not have been known to them and I have referred to the comments of Balcombe LJ in the Lawrence David case that it is “a cardinal rule that an injunction must be capable of being framed with sufficient precision so as to enable a person enjoined to know what it is he is to be prevented from doing”.

This shows the need for a person subject to a restraint to know what he can do without being liable for contempt. By parity of reasoning, the injunction sought to enforce Employee Recruitment Restriction Clauses does not identify the names of the people who he can and who he cannot solicit. In this case, the defendants restrained by Collins J’s order worked in discreet areas and they would not have known the names of the 3000 or so other employees of CEF or indeed what their contractual obligations were to CEF.

Second, even if the injunction could identify those people, it would be unreasonably wide as it would preclude a defendant soliciting people with whom the defendant restrained would have had any contact in his employment and about whose work he would know little and to whom no loyalty was due. So CEF would have no legitimate interest in protecting them from being solicited to give proper notice and there are similarities with the covenant which was not upheld in Dawnay, Day supra as I explained in paragraph 53 above.

Both these matters should have been drawn to the judge’s attention.

The Trade Secrets Injunction

Under this provision, all the defendants were ordered that they:-

“will not reveal to any person, firm, company or organisation or otherwise make use of any of the trade secrets, secret or confidential operations, processes or any information (other than that within the public domain) concerning the organisation, business, finances, transactions or affairs of the claimants (including lists of customers or clients) of the claimant or of any such company which may come to the [defendants] knowledge during their employment by the claimants”.

Mr Howe makes the valid point that this provision falls foul of the statement of Balcombe LJ in the Lawrence David case which I have quoted in paragraph 43 above and he stresses his statement that “the inability of the plaintiffs to define, with any degree of precision, what they sought to call confidential information or trade secret militates against an injunction of this nature”. That is indeed a long recognised practice.

It is true that in this provision there are some details of what the “trade secrets, secrets or confidential operations, processes or dealings or any information” might be, but the details are very general as they are said to be “concerning the organisation, business, finances, transaction or affairs of the claimants (including lists of customers or clients) of the claimants or of any such company which may come to the respondents’ knowledge during the course of their employment by the claimants”.

To my mind this injunction is so wide that it was only fair and just for the claimants to have drawn the attention of Collins J to this fact and the difficulties which the defendants would have had in knowing what they could and what they could not do as well to Balcombe LJ’s comments. This is an important and difficult issue to which the court’s attention ought to have been drawn.

The failure to explain the significance of the fact that the present management of CEF had made no effort to impose written terms on its most senior employees for more that a year

The background to this is that Mr Beddows explained that when Mr Gerald Mackie was performing a senior operational role for CEF until 2011, he had stated that he did not want written employment contracts in place for CEF’s General Managers, such as the First and Second Defendants, and that this practice continued after Mr. Mackie left CEF. Collins J should have been told the significance of this.

The importance of this policy on the part of CEF was that it was inconsistent with its assertion that it was necessary for the subordinates of the general managers and the junior staff to be subject to post-termination covenants to prevent these employees after they ceased to be employed by CEF from competing with them, from soliciting their customers and from persuading their employees to leave CEF's employment. The need for such restraints in the contracts of these employees is undermined by the fact that CEF did not impose restraints on their superiors, namely the general managers who had much greater connections and influence over staff and customers as well as more confidential information. This must have cast doubt on the reasonableness of the covenants which CEF were seeking to enforce. This was a matter which should have been more fully referred to either in the written skeleton argument or in the oral submissions, as it was a relevant matter for the judge to consider on the issue of the reasonableness of the covenants.

The conspiracy claim

The case was presented to Collins J on the basis that the defendants were all involved in a conspiracy which entitled CEF to injunctive relief based on the Springboard doctrine against all the defendants and this influenced the forms of relief he then granted. CEF later realised that there was insufficient evidence to show a conspiracy against the Third to Nineteenth Defendants and dropped that Springboard claim quite correctly. This weakness of CEF’s case should have been made clear to Collins J. No good reason has been put forward as to why CEF did not realise this earlier and did not tell the judge about this very important matter. Another matter which CEF should have told the judge was that there was no evidence to show that the defendants had obtained an advantage as a result of the alleged wrongful conduct or one which satisfies the test set out in QBE Management, which I quoted in paragraph 128 above and which was that:-

“247.

Eighth, the burden is on the Claimant to spell out the precise nature and period of the competitive advantage. An 'ephemeral' and 'short term' advantage will not be sufficient (per Jonathan Parker J. in Sun Valley Foods Ltd v. Vincent [2000] FSR 825 at 834).”

The Non-Competition Injunction

I must now mention two matters in respect of which I stated incorrectly in the draft sent to counsel that orders had been obtained from Collins J. The first such matter related to an application that the Third to Nineteenth Defendants:-

“must not by themselves, their servants, agents or otherwise howsoever carry on, be employed or otherwise engaged, concerned or interested in any capacity (whether for reward or otherwise) in or provide any technical, commercial or professional advice to, or in anyway assist the other respondents or any other company or person owning, operating or engaged in or setting up in, the business of electrical suppliers in competition with the claimants”.

There was some discussion with Collins J about the validity of the covenant on which this was based namely the non-competition covenant because it prevented involvement by the defendants with any company and not merely the defendant companies. Mr Reade answered some general points made by Mr Clarke by stating that:-

“I anticipate that we might find the usual arguments against us that that is in restraint of trade as being beyond the protection of a legitimate interest. Obviously our case is that it is not and there is a triable issue between the parties”.

Collins J’s attention was not drawn to the facts that:-

As no order was made in relation to this application, I need say no more than that there remained many other serious aspects of non disclosure to which I have referred.

The Good Faith Injunction

The same reasoning as set out above applies to the order sought at paragraph 3 of the draft order but not which was obtained and which stated that:-

“until the end of any period of termination if such notice has been given, or further order the [Third to Tenth Defendants] must not by themselves, their servants or agents or otherwise howsoever in any other way act in breach of their contractual duties of good faith and fidelity to the claimants”.

It is unclear as to what was meant by those “contractual duties of good faith and fidelity” and the points set out in paragraph 213 above made in the light of the Lawrence David case (supra) are relevant. It does not appear that the court was told that each of those employees had only to give one week’s notice and in each case their resignation had been given between 5 March and 12 March 2012. My conclusions on the relevance of the matter set out in paragraph 222 above apply with equal force to this provision. Mr. Howe sought to persuade me that CEF had not made full disclosure relating to the problems in the Mackie family and the connections Gerald Mackie and his sons had with the employees of CEF. I have read Mr. Beddows’ witness statement on this matter and I am not satisfied that the defendants can show that there was non-disclosure on this issue.

Effect of Non-Disclosure

In conclusion, as I have sought to explain, there have been a number of instances of non-disclosure and I now have to decide if all or any parts of Collins J’s order should be discharged. In Re OJSC Ank Yugraneft: Millhouse UK Limited V Sibir Energy plc [2009] 1 BCLC 298; [2008] EWHC 2614 (Chancery), the relevant principles were reviewed and Christopher Clarke J explained that he had considered the statement of Mr. Alan Boyle QC sitting as a Deputy High Court Judge, who had said in The Arena Corp v Schroeder [2003]EWHC 1089 Ch [203] that:-

“I would summarise the main principles which should guide the court in the exercise of its discretion as follows:

(1)

If the court finds that there have been breaches of the duty of full and fair disclosure on the ex parte application, the general rule is that it should discharge the order obtained in breach and refuse to renew the order until trial.

(2)

Notwithstanding that general rule, the court has jurisdiction to continue or re-grant the order.

(3)

That jurisdiction should be exercised sparingly, and should take account of the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure.

(4)

The court should assess the degree and extent of the culpability with regard to non-disclosure. It is relevant that the breach was innocent, but there is no general rule that an innocent breach will not attract the sanction of discharge of the order. Equally, there is no general rule that a deliberate breach will attract that sanction.

(5)

The court should assess the importance and significance to the outcome of the application for an injunction of the matters which were not disclosed to the court. In making this assessment, the fact that the judge might have made the order anyway is of little if any importance.

(6)

The court can weigh the merits of the plaintiff's claim, but should not conduct a simple balancing exercise in which the strength of the plaintiff's case is allowed to undermine the policy objective of the principle.

(7)

The application of the principle should not be carried to extreme lengths or be allowed to become the instrument of injustice.

(8)

The jurisdiction is penal in nature and the court should therefore have regard to the proportionality between the punishment and the offence.

(9)

There are no hard and fast rules as to whether the discretion to continue or re-grant the order should be exercised, and the court should take into account all relevant circumstances.”

Christopher Clarke J said of this summary that:-

“103 I regard that as a helpful review of the applicable principles, subject to the overriding principle, reflected in proposition (9), that the question of whether, in the absence of full and fair disclosure, an order should be set aside and, if so, whether it should be renewed either in the same or in an altered form, is pre-eminently a matter for the court’s discretion, to which (as Mr Boyle observes at [180]) the facts (if they be such) that the non-disclosure was innocent and that an injunction or other order could properly have been granted if the relevant facts had been disclosed, are relevant. In exercising that discretion the court, like Janus, looks both backwards and forwards.

He then explained that when the Court considered what to be done about non-disclosure in this way:-

104 The court will look back at what has happened and examine whether, and if so, to what extent, it was not fully informed, and why, in order to decide what sanction to impose in consequence. The obligation of full disclosure, an obligation owed to the court itself, exists in order to secure the integrity of the court’s process and to protect the interests of those potentially affected by whatever order the court is invited to make. The court’s ability to set its order aside, and to refuse to renew it, is the sanction by which that obligation is enforced and others are deterred from breaking it. Such is the importance of the duty that, in the event of any substantial breach, the court strongly inclines towards setting its order aside and not renewing it, so as to deprive the defaulting party of any advantage that the order may have given him. This is particularly so in the case of freezing and seizure orders. *498

105 As to the future, the court may well be faced with a situation in which, in the light of all the material to hand after the non-disclosure has become apparent, there remains a case, possibly a strong case, for continuing or re-granting the relief sought. Whilst a strong case can never justify non disclosure, the court will not be blind to the fact that a refusal to continue or renew an order may work a real injustice, which it may wish to avoid.

106 As with all discretionary considerations, much depends on the facts. The more serious or culpable the non-disclosure, the more likely the court is to set its order aside and not renew it, however prejudicial the consequences. The stronger the case for the order sought and the less serious or culpable the non-disclosure, the more likely it is that the court may be persuaded to continue or re-grant the order originally obtained. In complicated cases it may be just to allow some margin of error. It is often easier to spot what should have been disclosed in retrospect, and after argument from those alleging non-disclosure, than it was at the time when the question of disclosure first arose.”

In this case, there have been a number of instances of serious non-disclosure in this case even after taking account of the two less important matters which did not, contrary to my initial view, lead to orders being made. This non-disclosure, I suspect, was caused by making the application to Collins J before CEF’s case had been fully considered in the light of the duty of full and frank disclosure. None of this was deliberate, but the nature and extent of the non –disclosure leads me to the conclusion that the order made by Collins J should be discharged, save possibly in respect of one matter to which I will return in the next paragraph. Save for that one matter, I do not consider that I should reimpose the order or grant the relief sought because, as I have sought to explain, I do not consider that CEF is entitled to this relief.

The one matter on which I need further submissions relates to the orders for delivery-up made by Collins J because none of the criticisms which I have made of the relief granted apply to it with the exception of these criticisms relating to the jurisdiction issue. Counsel should bear in mind that it was said in the OJSC case that:-

[105] “…Whilst a strong case can never justify non-disclosure the court will not be blind to the fact that a refusal to continue or renew an order may work a real injustice which it may wish to avoid”.

It is not disputed that CEF was entitled to orders for the delivery up of the documents which have now been delivered up and my preliminary view is that it would not be appropriate for those orders to be revoked. As for the remaining orders, I would welcome counsel’s submissions as to what orders I should make.

This issue is now only of academic interest in the light of my conclusion on the last issue, and so I will not further lengthen this long judgment by dealing with it as fully, as I would have done, if this issue was of crucial importance in resolving the present applications.

The defendants contend that there was no or no adequate reason for making an application on a without notice or abridged notice basis to Collins J, and they stress that it is clearly settled law that to grant an interim remedy in the form of injunction without adequate notice is “to grant an exceptional remedy” (Moate Housing Group South Limited v Harris [2006] QB 606).

Indeed, the normal and general rule is that three days notice should be given because CPR Part 23.7(1)(b) states that:-

“except where another time limit is specified in these Rules or a practice direction, must in any event be served at least 3 days before the court is to deal with the application.”

I have set out CPR 25A.2.2 in paragraph 180 above and CPR Part 25.3 provides that:-

“(1)

The court may grant an interim remedy on an application made without notice if it appears to the court that there are good reasons for not giving notice.”

Generally a without notice injunction should be granted only in circumstances where to give notice would enable the defendant to take steps to defeat the purpose of the injunction, such as in the case of many search or freezing injunction, or where there is some exceptional urgency, which means literally there is no time to give notice (see, for example, National Commercial Bank Jamaica Ltd v Olint Corporation Limited (Practice Note) [2009] 1 WLR 1405).

Mr Reade submits that the application, which was in fact made to Collins J, was exceptionally urgent and that it was not possible to wait for the prescribed three clear working days to give proper notice, which would have meant that the application would only have been returnable on 26 April 2010. In this case, the claimants gave informal notice of the injunction, but they had been corresponding with various defendants and their solicitors since early April 2012. Mr Beddows explains the background to the application which was that there had been a wave of resignations in early to Mid-March with the First and Third to Ninth Defendants resigning, while the Second and Twelfth Defendants were dismissed on 5 April 2012.

According to Mr Beddows, there was then a hiatus in the resignations and during this period, the claimant’s solicitors attempted to engage in correspondence with the defendants to seek undertakings, affidavits and the return of confidential information. His case is that the defendants had had the opportunity to respond to the letters before action by 19 April 2012, but that they either failed to respond to those letters or had refused to give the undertakings sought and also that there was a pattern of responding at the last moment without addressing the substance of the matters raised particularly in the case of the First Defendant.

It is said that the First Defendant while indicating an intention to return the “black book” and the “buying guide” which contained confidential information of the claimants, he did not appear to have taken any pro-active action to actually return them and in addition, he has not offered any explanation as to why they were removed in the first place.

According to Mr Beddows what prompted the application for injunctive relief was that on Friday 13 April 2012 the Thirteenth, Fourteenth, Fifteenth, Sixteenth and Seventeenth Defendants all resigned from CEF and this was followed by the Eighteenth and Nineteenth Defendants resigning respectively on 14 and 17 April 2012.

Thus the case for CEF is that it was against this background of the refusal of the defendants to provide the undertakings sought and the further wave of resignations that necessitated the need for an urgent application to the Court to seek first to protect their confidential information and its potential misuse in the recruitment process, and second to seek to restrain recruitment in breach of post-termination restrictions.

On that basis, Mr Reade contends that CEF were justified then in making its application to Collins J on an informal basis in the light of the developing position. It is also important according to Mr Reade that by the time when the application was made to Collins J, all the defendants had instructed solicitors.

In response, the defendants contend that no case has been made out to justify the making of the present application without giving the prescribed three days notice. They point out that there had been little urgency in the correspondence passing between the parties.

In order to ascertain whether the contention of the defendants is correct, it is necessary to consider a number of relevant factors which include the damage that was likely to have accrued to CEF if the relief was not granted to CEF between the hearing before Collins J on 20 April 2012 and what would have been the proper return date if proper notice had been given, namely Thursday 26 April 2012. A factor of importance in determining this issue is to ascertain for how long CEF would have known about their possible claims and how they reacted.

It is clear from the letters that were being written on behalf of CEF that they had known about first what they consider the roles of the First Defendant since at least 4 April 2012 as is apparent from the letter sent to him then, and second that CEF must have known of the alleged wrongful activities of the Second Defendant since at the latest when they set up a disciplinary hearing on 29 March 2012, which led to his dismissal. The fact that CEF did not take any steps thereafter until 19 April 2012 undermines the claim that by then, its claim for injunctive relief was so urgent that CEF could not have waited a few more days by giving notice of its application for injunctive relief.

The witness statement of Mr Beddows explains the urgency not merely on account of the delays in replying to giving information sought by CEF’s solicitors but also “critically.. the First and Second [defendants] on 18 April 2012 were appointed directors of the Twentieth Defendant and this became known to me for the first time on 18 April 2012”. Significantly, neither of these men was under any contractual restriction.

I do not regard the matters relied on by CEF whether considered individually or cumulatively as adequate justification for making the application without giving the prescribed period of notice, bearing in mind first that neither of these defendants was under any contractual restrictions preventing them becoming directors, and second that there was no evidence that Yesss was trading. All this has to be seen against the background that there was no evidence at that stage or indeed now that any confidential information of CEF was being used by any of the defendants because as Tugendhat J said in the Caterpillar case [2011] EWHC QB 3154 “mere suspicion is not enough”.

A further factor which indicates that injunctive relief was not called for was that a fundamental feature of CEF’s case was that although the retention of its employees were of vital importance to them, the period of notice which they had to give to CEF was merely one week.

In addition as Brooke LJ explained in Moat Housing Group – South Limited v Harris [2006] QB 606, 625 at paragraph 63:-

“63 As a matter of principle no order should be made in civil or family proceedings without notice to the other side unless there is a very good reason for departing from the general rule that notice must be given. Needless to say, the more intrusive the order, the stronger must be the reasons for the departure.”

In this case, the restrictions that were sought to be imposed were onerous because of the restrictive covenants and the springboard relief. The seriousness of the problem is shown by the fact that Tugendhat J, who is the Judge in charge of the Queens Bench List and who has much experience of interim applications, recently explained in O’Farrell v O’Farrell [2012] EWHC 123 (QB) that:-

“66.

Like Mostyn J, I too have been shocked at the volume of spurious ex-parte applications that are made in the Queens Bench Division.”

In this case, my view is that bearing in mind the exceptional nature of making applications without proper notice I do not think that CEF were entitled to make the application to Collins J without proper notice. The short notice that CEF gave was not enough, but I need not decide what sanction to impose in the light of my decision that the Order of Collins J has to be revoked as there had not been full and frank disclosure.

The defendants’ counsel contend that there are a number of formal and procedural failings in the way in which this application was presented to Collins J and in the draft order. Apart from the failure to give proper notice to which I have already referred in the previous section, the complaint is made that the Twentieth Defendant was not properly served and that CEF’s solicitors should have taken steps to ensure that the email sent to them had been received. This they say, could have been done by for example following up the email with a telephone call.

A complaint is also made that the exhibits to the main witness statement for CEF from Mr Beddows were not sent to the defendants until after the end of business hours on 20 April 2012 and after the hearing before Collins J had been finished.

It is also said that the claimant did not provide a realistic time estimate for the hearing before Collins J as the court was informed that only 30 minutes pre-reading was required and the hearing itself would only take 30 minutes. Bearing in mind the length of Mr Beddows’ witness statement of 43 closely typed pages and the other witness statements covering over 690 pages, this was clearly a substantial understatement and it led to the judge having inadequate opportunity to pre-read the material on which CEF relied. This should not have happened.

I accept that there is some validity in these points, but by themselves they would not lead to the order made by Collins J being set aside. Indeed if there had been full disclosure and that this was a proper case of a without notice application, none of the points made by the defendants under this head would have led to any sanctions being imposed on CEF.

I cannot finish this judgment without thanking all counsel and their solicitors for the help they have given me with their admirable oral and written submissions. There are some serious lessons to be learnt and they include:-

Notwithstanding the careful submissions of Mr. Reade, I have concluded that:-