Gamatronic (UK) Ltd & Anor v Hamilton & Ors

The defendants seek (i) orders striking out the claimants’ statement of case and consequential orders under CPR 3.4, and (ii) summary judgment under CPR 24.2. The main issues are (i) whether the claimants have made a binding and applicable agreement to release the first and second defendants from liability for claims now made; (ii) whether the statement of case should be struck out in whole or in part because the claims are inadequately or defectively pleaded or because claims asserted, in particular causes of action for money had and received and for which damages is a necessary ingredient, have no proper factual or juridical basis; and (iii) if the statement of case is struck out, whether the proceedings should be dismissed (in part or in whole) or whether the claimants should be permitted to serve a new or amended pleading. There are other applications before the court: the claimants seek permission to amend the claim form, and there are applications for security for costs. I have deferred argument about them until after delivering this judgment, but I record that the security for costs applications have been resolved except as to the costs of and relating to them.

I heard submissions about the proper approach to determining applications of this kind, but (unsurprisingly) there was no dispute about them. I need say only that I seek to apply the principles formulated by Lewison J in Easyair Ltd v Opal Telecom Ltd, [2009] EWHC 339 (Ch) and by Hamblen J in Credit Suisse International v Ramit Plana OOD, [2010] EWHC 2759 (Comm).

From 2001 to 2012 Mr Robert Hamilton, the first defendant, and Ms Jayne Mansfield, the second defendant, were directors and joint Chief Executive Officers of the first claimant (whom I shall call “Gamatronic UK”), and they together owned 49% of the shares. The litigation arises from an acrimonious breakdown in their relationship with Gamatronic UK’s majority shareholder, the second claimant, an Israeli company whom I shall call “Gamatronic Israel”, and the other two directors of Gamatronic UK, Mr Joseph Goren and his daughter Ms Sharon Bar Zvi, who together largely own Gamatronic Israel. Mr Hamilton and Ms Mansfield now work for the third defendant, whom I shall call “Vox”, and the claimants say that they started to do so while still directors of and employees of Gamatronic UK, and in that regard misused confidential information and otherwise behaved dishonestly and improperly. The businesses of Gamatronic UK and Vox are both to do with uninterruptible power supplies (UPSs), which ensure power to computers and other equipment is not interrupted by power failures, but there is some question (upon which I need not and do not enter) about how closely they compete.

In 2001 Gamatronic UK, Gamatronic Israel, Mr Hamilton and Ms Mansfield entered into a Founders Agreement dated 21 December 2001, which set out the terms on which the shareholders in Gamatronic UK should work together, including the shareholdings to which they should subscribe and the terms of Directors Service Agreements into which Mr Hamilton and Ms Mansfield should enter. The shareholders, including Mr Hamilton and Ms Mansfield, agreed to use their best endeavours to promote the interests of Gamatronic UK. The Founders Agreement included provisions which (in essence and by way of incomplete summary) precluded Mr Hamilton and Ms Mansfield from being involved in any competing business and from disclosing or misusing “Confidential Information” (as specified in the Founders Agreement). It also provided that the shareholders in Gamatronic UK should offer their shares to the remaining shareholders before selling them to a third party. Further, if a shareholder committed a breach of the Founders Agreement which “in the case of a rectifiable breach is not rectified within 7 days of written notice”, then the Founders Agreement was to terminate as regards the defaulting shareholder and the others were entitled to buy his or her shares.

Gamatronic UK entered into new contracts of employment with Mr Hamilton and Ms Mansfield dated 25 January 2007, which were still in force when their employments ended. They provided (again, by way of incomplete summary) that the employees would devote their “best efforts, entire productive time, ability and attention to the business” of Gamatronic UK; that they would not disclose or misuse Gamatronic UK’s Confidential Information (as defined in the contracts of employment); and that while employed and for 12 months thereafter they would not (i) be involved with any business competing with Gamatronic UK or Gamatronic Israel in areas where they transacted business; or (ii) seek to solicit or divert away from Gamatronic UK or Gamatronic Israel any employees, suppliers or actual or prospective customers. The contracts of employment specified that any breach of the obligations about Confidential Information could result in summary dismissal for gross misconduct.

Apparently until 2011 Gamatronic UK made profits, but in 2011 it had losses in three of the four quarters of the year. The reasons are controversial: the defendants, or at least Mr Hamilton and Ms Mansfield, attribute the downturn, at least in significant measure, to defective products and customer dissatisfaction with them. The claimants contend that an effective cause of the reversal in Gamatronic UK’s fortunes was wrongdoing on the part of Mr Hamilton and Ms Mansfield. Whatever the reason, Mr Hamilton’s and Ms Mansfield’s relationships with Gamatronic Israel, Mr Goren and Ms Bar Zvi deteriorated. On 11 May 2011 they gave notice to Gamatronic Israel that they intended to sell their shares in Gamatronic UK, stipulating a price of some £5,102 per share (or some £500,000 for their combined 49% shareholdings). Exchanges about them leaving Gamatronic UK dragged on and became increasingly hostile. By the end of January 2012 Mr Goren was questioning their bona fides: on 29 January 2012 he wrote to them, “Your current behaviour is making me more and more suspicious regarding your true motivation and wonder whether you in fact want to harm [Gamatronic UK] while wasting our time on fruitlessness negotiations [sic]”, and “My feelings regarding your good faith are not so well and in some sense I feel cheated by you”. On 14 February 2012 he wrote “due to your continuing frustrating delays I cannot avoid from attributing you untrue intentions [sic]” and “There is a limit for your tricks and we have reached that limit!!!”.

By a sale and purchase agreement (“SPA”) entered into, apparently, on 29 February 2012 by Gamatronic UK, Gamatronic Israel, Mr Hamilton and Ms Mansfield it was agreed that Gamatronic Israel should buy and Mr Hamilton and Ms Mansfield should sell their shares on Gamatronic UK for £115,000. (The actual sum to change hands was apparently £112,000 because of addition of a “bonus” payment and deduction of directors’ loans, but I ignore that for present purposes.) Clause 6 was headed “Founders Agreement”, and I shall set it out.

at any time during the period of six (6) months beginning with [29 February 2012], deal with any person who is at [29 February 2012], or who has been at any time during the period of six (6) months immediately preceding that date, a client or customer of the Company; and

at any time during the period of six (6) months beginning with [29 February 2012]:

offer employment to, enter into a contract for the services of, or attempt to entice away from the Company, any individual who is at the time of the offer or attempt, and was at [29 February 2012], employed by or directly engaged with the Company; or

procure or facilitate the making of any such offer or attempt by any other person, and

At the same time Mr Hamilton and Ms Mansfield each entered into an agreement (a “Compromise Agreement”) with Gamatronic UK to determine his or her employment and directorship, and pursuant to them Mr Hamilton ended his employment on 23 March 2012 and Ms Mansfield ended her employment on 15 May 2012. The recitals to each agreement referred to the SPA and stated:

By the Compromise Agreements, it was agreed that “The Employee represents and warrants as a condition precedent of [Gamatronic UK] entering into this Agreement that … as at the date of this Agreement, the Employee has not breached the confidentiality obligations in the Contract of Employment”; and “at the date of this Agreement, the Employee has not done or omitted to do anything that would entitle the Company summarily to dismiss the Employee without compensation”; and Mr Hamilton and Ms Mansfield acknowledged that Gamatronic UK was relying on these provisions in deciding to enter into his or her Compromise Agreement.

The claimants rely on other provisions of the Compromise Agreements, of which again an incomplete summary suffices: that Mr Hamilton and Ms Mansfield would return to Gamatronic UK all Confidential Information (as defined in the Compromise Agreements) and all property belonging to Gamatronic UK; that they each warranted that he or she had not passed on to any third party information about the business of Gamatronic UK or any group company; and that their obligations about confidentiality that were in his or her previous contract of employment would remain in full force and effect after the employment was terminated.

In broad terms the claimants’ complaints are that, both before and after 29 February 2012 and both while and after they were employed, Mr Hamilton and Ms Mansfield became involved with Vox, diverted business and business opportunities from Gamatronic UK to Vox, misused confidential information to benefit Vox and kept what they were doing secret from Gamatronic UK and Gamatronic Israel. For example, according to the claimants, Mr Hamilton and Ms Mansfield:

Worked from November 2010 with a Mr Ian Ward, who was a director of Vox, and a Mr Gerald Flynn for and on behalf of Vox to put Vox in a position to start trading.

Sought to divert business from Gamatronic UK to Vox (a) by not passing business enquiries to Gamatronic UK and (b) by having Vox’s marketing material sent to at least one potential customer of Gamatronic UK.

Had meetings in February 2011 in Denver USA to advance Vox’s business, explaining their absence from work untruthfully.

Collected for Vox’s use confidential information, including contract details of Gamatronic UK’s customers.

Encouraged each other and Mr Sean Briggs to resign their employment with Gamatronic UK and to work for Vox.

Did not disclose to Gamatronic UK their own or the other’s wrongdoing.

I do not understand either Ms Emily Gillett, who represented Mr Hamilton and Ms Mansfield, or Mr Gabriel Buttimore, who represented Vox, to argue that the claimants do not have a sufficient case for present purposes (i) that Mr Hamilton and Ms Mansfield so acted and (ii) that they were therefore in breach of their contractual obligations under the Founders Agreement and their Contracts of Employment, and in breach of their fiduciary duties to Gamatronic UK. They were right not to do so. I need not to relate the evidence upon which the claimants rely. It suffices to refer by way of illustration to (i) an email apparently sent by Mr Hamilton from an email address of Vox (Robert@theupsco.com, UPS being Vox’s trade name), in which he described himself as a director of Vox, a description that he said in his witness statement was an “unfortunate error” but did not satisfactorily explain; and (ii) an email dated 25 November 2011 sent by a Mr Noam Segev of XPCC, which Ms Bar Zvi describes as an American company which manufactures UPS systems, to Mr Hamilton and Ms Mansfield about meeting “all four partners in this new venture”. This, the claimants submit, refers to Mr Hamilton and Ms Mansfield and Mr Ward and Mr Flynn as the partners in Vox, and no other interpretation has been suggested.

However, in their evidence on these applications the claimants have also made extensive and apparently cogent allegations that after they ceased to be employed Mr Hamilton and Ms Mansfield obtained and, it is to be inferred, used for Vox’s benefit confidential information of Gamatronic UK, and in particular that they had email business enquiries made to an address of Gamatronic UK diverted and forwarded automatically to an address of Mr Hamilton. This apparently continued until July 2012 when Gamatronic UK learned by chance about what was happening.

I come to the first main issue: whether the claimants are barred from making claims against Mr Hamilton and Ms Mansfield for breach of fiduciary duty or breach of contractual duty, and also claims that have been made for money had and received, in conspiracy, for procuring breach of contract and for interference with business. Ms Gillett argued that they are so barred because they entered into the SPA and in particular agreed to clause 6.2, the “Release”. In response Ms Rachel Oakeshott, for the claimants, advanced two arguments: that, on its proper interpretation, the Release does not cover the claims that they seek to bring; and that the Release is not binding upon them because, when the SPA was made and the Release was agreed, Mr Hamilton and Ms Mansfield were concealing their wrongdoing from Gamatronic UK and Gamatronic Israel, were in breach of duty and were guilty of sharp practice. I have concluded that each of these arguments has a sufficient prospect of success to answer the applications for summary judgment and under CPR 3.4 on this point. I seek to explain my decision sufficiently to deal with the applications, conscious that the matter might be subject to further examination at trial.

Ms Gillett’s first point was that the claimants have not pleaded either of the arguments that they advance. I am not impressed by this: it is not generally incumbent on the claimants to meet a potential defence before it is pleaded. The interpretation arguments are properly introduced in a reply. There might be some room for debate about whether the claimants should have to include in their claim form and particulars of claim some arguments that the Release is not binding: in so far as they seek “judicial rescission”, as opposed to “self-help rescission” (to adopt the terminology of Snell’s Equity (23^rd Ed.) para 15-010), possibly the relief should be included in the prayer, and, were rectification to be sought, possibly a decree would be required. But these questions are arid: if the claimants sought to introduce such claims after the Release was pleaded in the defence, I cannot see any reasonable objection.

However, Ms Gillett also had arguments of substance. The starting point for questions of interpretation is the natural and ordinary meaning of the words used. Ms Gillett emphasised the wide and general wording of the Release (the reference to all liabilities and claims howsoever arising and the express inclusion of liabilities and claims before the Release or relating to the period before the Release) and the context of the Release, both the contractual context of clause 6, a clause terminating the Founders Agreement, and the more general context that the parties to the SPA apparently “wanted to achieve finality” (to adopt the words of Lord Nicholls in BCCI v Ali, [2001] UKHL 8 at para 27). She argued that, interpreting the Release objectively, the parties evinced an intention to accept the risk of abandoning claims of which they are unaware. (Here Ms Gillett sought to support her submission on the basis that all parties to the SPA were advised by lawyers. The claimants accept that Gamatronic Israel were advised by solicitors, Berwin Leighton Paisner, but dispute that Gamatronic UK were advised. I cannot resolve that question and it makes no difference to my conclusions.)

Ms Oakeshott had three points about the proper construction of the Release, which I can sufficiently state as follows:

That it applies only to liabilities and claims that had arisen by the time that the SPA was concluded, and does not cover claims arising from conduct thereafter; and that Mr Hamilton and Ms Mansfield continued their wrongdoing after 29 February 2012 and indeed after their employment ended.

That the Release does not cover breaches of the contracts of employment or of fiduciary duties.

That the Release does not cover breaches arising from the deliberately wrongful conduct of Mr Hamilton and Ms Mansfield of which the claimants were unaware, and could not have been expected or thought to be aware, when the parties entered into the SPA.

Ms Gillett observed that the Founders Agreement provided for Mr Hamilton and Ms Mansfield to become directors (and so to assume fiduciary duties) and to enter into contracts of employment, and provided that they should use their “best endeavours to promote the interests of [Gamatronic UK]”, and restrict their involvement with competitors; and she submitted that therefore claims for breach of the duties that they thereby assumed are covered by the broad words “whatsoever and howsoever arising under or in connection with the Founders Agreement”. I am not wholly persuaded of this: after all, the parties at the same time entered into the Compromise Agreements with a widely worded provision for settling claims of Mr Hamilton and Ms Mansfield arising from their employment contracts and their positions as directors, which might indicate that the parties did not consider those claims covered by the Release. Were this the only question that determined whether some or all of the claims are barred, I would have engaged more fully with it and been more ready to express a definitive conclusion on it, but in view of my other conclusions, it might only embarrass the trial judge for me to do so.

As for whether the Release covers claims of which the claimants were unaware when they entered into it, Ms Gillett had two main points. First, she pointed out that the Release was not agreed in the context of a settlement of actual or contemplated litigation. It was designed to apply more generally, and it must, she submitted, have been intended to cover claims that were not known because otherwise the Release would be effectively stripped of any real purpose: again she could rely on the speech of Lord Nicholls in the BCCI v Ali case at para 27. Secondly, as is illustrated by the decision of the Court of Appeal in Priory Caring Services Ltd v Capita Property Services Ltd, [2010] EWCA 226, the ambit of a release agreement should be determined in light of the (actual or imputed) knowledge of the parties when they make it (such as knowledge “that there was at the very least a question mark over [a person’s] competence or even honesty”: loc cit at para 66): this might support an inference that the parties intended that it should cover claims in relation to known matters, whether based on allegations of incompetence or dishonesty. Accordingly, Ms Gillett relied on communications such as those to which I referred at para 6above and the suspicions expressed by Mr Goren of bad faith (or “tricks” or “cheating”) in support of her argument that, properly interpreted, the Release covers claims based on matters that Mr Hamilton and Ms Mansfield had concealed from Gamatronic UK or Gamatronic Israel or both, even if they had been done and concealed in bad faith.

I would see considerable force in the submission that the Release cannot be so interpreted as to exclude liabilities and claims simply because they were not known when it was agreed. However, on the claimants’ case, the potential liability would have been known to Mr Hamilton and Ms Mansfield: the central question is whether by the Release the claimants evinced an intention to release them from liabilities and claims for matters which they had concealed and which the claimants therefore did not suspect. Without a clear picture, which will probably only emerge after disclosure and at trial, of (i) the nature and extent of Mr Hamilton’s and Ms Mansfield’s involvement with Vox, and (ii) the claimants’ knowledge or suspicions made known to Mr Hamilton and Ms Mansfield when they entered into the SPA, I am not prepared to conclude that the claimants have no real chance of succeeding on this point.

I come to the claimants’ alternative argument, that the Release is not binding on the claimants because of the circumstances in which they agreed to it. In a witness statement made in response to the applications, Mr Elliott Lister, the claimants’ solicitor, said that “the release may be set aside if obtained by misrepresentation, including fraudulent misrepresentation, or sharp practice”. The factual basis of the complaint is that Mr Hamilton and Ms Mansfield were under a duty to disclose at least to Gamatronic UK their involvement with Vox, but instead deliberately and dishonestly misrepresented the position, by their conduct and the terms of the Compromise Agreements. In my judgment, the claimants have shown a sufficient argument that they can prove this factual basis for the purposes of these applications.

In the BCCI v Ali case, Lord Nicholls said this at para 32:

When opening the applications Ms Gillett argued, with some justification, that the claimants had not said what remedies they contended might be available to them, and it was unclear whether or not the claimants had it in mind to rescind the SPA for misrepresentation. But even so, given Lord Nicholls’ observation and my conclusion that the claimants have a real chance of establishing that Mr Hamilton and Ms Mansfield were guilty of sharp practice at the relevant time, I would have been reluctant to conclude that the claimants had no escape from the Release. During the hearing, Ms Oakeshott was more specific than the claimants had previously been: she said that the claimants contemplated rescission, and canvassed arguments that, in the circumstances of this case, equity might allow the claimants to rescind without making restitutio in integrum by way of returning the shares: because they were valueless or their value negligible, or because, unknown to the claimants at the time of the SPA, Mr Hamilton and Ms Mansfield might have had to sell them the shares for a fair price to Gamatronic Israel after being dismissed for gross misconduct (by way of breach of their obligations regarding confidential information).

I view with some scepticism the claimants’ chances of rescinding the SPA without returning the shares, but I need say no more because this is not essential to the claimants’ argument; they might still escape from the Release (even assuming that they fail on their interpretation arguments) by accepting that the shares should be returned as the price for electing to rescind or by seeking on the grounds of their unilateral mistake and sharp practice of Mr Hamilton and Ms Mansfield rectification of the Release so as to exclude from its ambit claims arising from their involvement with Vox: see Chitty on Contracts (31^st Ed), para 5-122. Indeed this might be a case in which the court might put Mr Hamilton and Ms Mansfield to an election whether to have the Release rectified or to submit to rescission. I do not propose on these applications and before the facts are known to explore further the claimants’ possible answers to the Release defence. I cannot conclude that they have no real chance of finding one if sharp practice is established.

I therefore reject the submission that the Release means that the claimants have no real prospect of succeeding on the claims or some of them.

I therefore come to the criticisms of the claimants’ statement of case, and the argument that claims are not sufficiently pleaded. Ms Oakeshott emphasised the guidance of Lord Wolff in McPhilemy v Times Newspapers Ltd, [1999] 3 All ER 775 and cited in the White Book at 16.0.2 that statements of case should be concise and avoid excessive details and particulars. That is so, but they must still be sufficient accurately to identify the issues for the court as well as the parties. For this reason I reject any suggestion that a pleading is sufficient if the other parties can discern what lies behind it: parties should not have to dig behind what is pleaded to detect what is alleged (particularly where dishonesty or comparable impropriety is alleged); and, perhaps more important, its meaning should be plain to the court as well as other parties.

In this sort of case where the claims are based upon allegations of covert wrongdoing, claimants are often unable to provide full details and solid evidence of their complaints. In Dar Al Arkan Real Estate Development Co v Al-Sayed, [2013] EWHC 1630 (Comm) at para 3, I cited the judgment of Morritt C in Toshiba Carrier UK Ltd v KME Yorkshire Ltd, [2011] EWHC 2665 (Ch), and, observing that the thrust of the complaint was that the defendants worked together secretly to damage the claimants’ reputation and business, I said that, “On a summary judgment application the court is not blind to claimants’ difficulties in such cases, of producing solid evidence of the role of each defendant in covert activities, particularly before disclosure”. The same is true of the difficulties in pleading with particularity, but lack of particularity is different from lack of clarity.

Before coming to the complaints of the defendants about the statement of case, I refer to three concerns of my own. First, the pleading contains headings above the numbered paragraphs. This has become fashionable: uncontentious headings can be useful, but contentious headings are an embarrassment. In this case many of them are objectionable, especially because the body of the pleading did not reflect them. Two examples from many will illustrate this:

Paragraph 29 is introduced by the heading “Diversion of a business opportunity away from Gamatronic”. The paragraph refers to an email to Gamatronic UK and alleges that Mr Hamilton wrote to “a third party” that he had not passed it on to Gamatronic UK. The pleading does not allege that the email presented a “business opportunity”, or that it was in fact diverted from Gamatronic UK. That might be an inference, but it is not stated.

Paragraphs 38 and 39 are headed “Improperly claimed expenses and stolen laptops”. It is not otherwise pleaded that laptops were stolen, but only that “when they left Gamatronic the First and Second Defendants failed to return to Gamatronic 3 laptops worth £6,696”. It is not pleaded that this was deliberate, let alone that it was done dishonestly and with the intention permanently to deprive anyone of the laptops.

Ms Oakeshott told me that the defendants were not expected to plead to the headings (although apparently the defendants had not been told this). It was contemplated that such allegations (or insinuations) were to remain unanswered. This cannot be permitted: the headings must be struck out, and replaced, if at all, with neutral headings.

Secondly, frequently there were pleaded references to unidentified third parties. I have given one example at paragraph 28i) above. Similarly at paragraph 26 of the pleading it is said that the first defendant emailed “two third parties”. This coyness makes the pleading difficult to follow and obscures the issues. Ms Oakeshott sought to justify it on the basis that the claimants do not wish to identify persons with whom they had done or hoped to do business, but this cannot be allowed at the cost of obscuring their contentions and the issues.

Thirdly, I return to paragraphs 38 and 39 of the pleading, where the claimants plead the failure to return the laptops and that Mr Hamilton, while employed, claimed as expenses items (such as the cost of gym equipment) to which he was not entitled. No relief is claimed in respect of these complaints. Ms Oakeshott described them as “background”, but I consider them an unwarranted distraction. They should be removed.

What causes of action are pleaded by the claimants against Mr Hamilton and Ms Mansfield? I have referred to the claims for breaches of fiduciary duties, breaches of the Founders Agreement and breaches of their contracts of employment. In a “Summary of Claims” at paragraphs 6 to 10 of the particulars of claim, the claimants also allege (i) “unlawful interference with Gamatronic’s [sc Gamatronic UK’s] business”, (ii) conspiracy against Gamatronic UK, this being, as Ms Oakeshott made clear, an allegation of a conspiracy to injure by unlawful means and not a conspiracy with the predominant purpose of causing injury, and (iii) the return of money paid under a mistake. The Summary of Claims does not indicate a claim made in deceit or dishonesty, and neither does the claim form (either as issued or in the proposed amended form) do so. Further, while the pleading states that “the Claimants” claim damages for losses suffered by them as a result of Mr Hamilton’s and Ms Mansfield’s breaches of fiduciary duty and contract, interference with business and conspiracy, it does not say which claimant asserts which claims.

Although no claim in deceit or otherwise in dishonesty is indicated in the Summary of Claims, the pleading elsewhere makes such allegations. I have already dealt with the allegation of computers being stolen. Ms Gillett has other complaints that allegations of this kind are later introduced and made too vaguely to be proper, and that their relevance is unclear. Thus,

With regard to the meetings in Denver, it is pleaded (at para 28) that Mr Hamilton and Ms Mansfield “lied” to Gamatronic and to Gamatronic Israel about the reasons for their absence from work. Although they plead that this is shown by an email from Ms Bar Zvi (then Ms Goren) to Mr Hamilton and Ms Mansfield (which appears only to reflect her understanding of why they were away), nothing is pleaded as to who is alleged to have told what lies to whom.

Perhaps more importantly, it is pleaded (at para 34) that the negotiations leading to the SPA and the Compromise Agreements were “conducted on a false basis that, and in reliance on the First and Second Defendants’ representations by words and/or by conduct that, the First and Second Defendants had not committed gross misconduct or breached their contractual or fiduciary duties to Gamatronic”, and (at para 34) that before entering into the Compromise Agreements that Mr Hamilton and Ms Mansfield had “previously represented” fraudulently that they had not done anything that would entitle Gamatronic UK summarily to dismiss them. The pleading does not identify when and how the false representations were made. It is not said to which claimant the words or conduct were directed, and in the course of the hearing Ms Oakeshott accepted that in fact neither claimant is in a position to allege any misrepresentation by words. There was no satisfactory explanation for how this came to be pleaded.

Further, the claimants go on to plead that each of them relied on the representations made fraudulently and “previously” to the Compromise Agreements, and that “it caused them to suffer loss”. The loss is not identified, but more fundamentally it is not clear from the pleading whether the claimants are here introducing a claim in deceit, despite none being included in the claim form or the Summary of Claims.

I consider these complaints justified. Of course, an isolated omission from a pleading of a necessary detail or a vague allegation can often properly be remedied by particulars, even when dishonesty is alleged, but this is not such a case.

What of the complaint that it is impossible to tell what claims are made by which claimant and that the relief sought is obscure? The relief sought in the prayer by the Gamatronic UK (as well as further or other relief and costs) is:

“An injunction prohibiting [Mr Hamilton and Ms Mansfield] from using any Confidential Information or disclosing any Confidential Information to any person, firm, company or other organisation”.

“The return of £204,047 in money had and received”.

“Damages to be assessed”.

“An account of profits”.

“Interest (including compound interest) pursuant to section 35A of the Senior Courts Act 1981”.

The injunction: the statement of case alleges wrongdoing by Mr Hamilton and Ms Mansfield while they were employed by Gamatronic UK, and specifically under the heading “Further misuse of [Gamatronic UK’s] Confidential Information and diversion of business opportunities away from Gamatronic and to Vox” they make complaints about the conduct of Mr Hamilton and Ms Mansfield during the time when they were still employed by Gamatronic UK. Although the paragraph under the heading does not expressly refer to confidential information (another example of a mis-match between headings and what is pleaded under them), the pleading appears to be directed to misuse of confidential information when employed. However, Gamatronic UK also asserts post-employment conduct of Mr Hamilton and Ms Mansfield in support (inter alia) of the claim for an injunction: Ms Bar Zvi referred to conduct in July 2012 as a “key example of Vox being passed confidential information by the First and/or Second Defendants and it being misused”. I do not need to decide whether a claim for an injunction might be upheld without these allegations of post-employment wrongdoing (although on any view it would be distinctly weaker). What matters is that the claimants’ argument on the applications went beyond what is permissible on their present pleading. (It might be that in due course the claimants will learn more, and wish to add further allegations about what the defendants were doing: that is no reason not to plead properly what they are already alleging.)

There is another difficulty with the injunction sought. It refers to “Confidential Information”, and in the pleading capital letters in this context indicate a reference to Confidential Information as defined contractually, either in the Founders Agreement or in the contracts of employment or in the Compromise Agreements. Elsewhere, in the Summary of Claims and with regard to the claims against Vox, capital letters are not used: see para 10 of the pleading. Since there is no reference in the Summary of Claims to a claim for breach of confidential information per se (as opposed to a claim for the contractual obligations relating to Confidential Information) against Mr Hamilton or Ms Mansfield, I would suppose that the injunction claim is based upon (actual or threatened) contractual breach. I so deduce, but the pleading should not leave it to the reader to resolve this sort of question. Moreover, it should be clear whether in the context of the prayer for an injunction “Confidential Information” is used as in the sense defined in the Founder Agreement or as defined in the contracts of employment or as defined in the Compromise Agreements.

Gamatronic UK’s claim for money had and received: it is pleaded on the basis that while they were employed Gamatronic UK paid to Mr Hamilton and Ms Mansfield salaries, dividends and commission, and that they did so “under a mistake” in that Mr Hamilton and Ms Mansfield were acting for Vox and in breach of their duties to Gamatronic UK. It appears from paragraph 47 of the statement of case that the claimants’ argument is that the mistake caused the payments in that, but for the mistake, Gamatronic UK would have dismissed Mr Hamilton and Ms Mansfield summarily.

Ms Gillett submitted both that this claim is not properly pleaded and that there can be no proper basis for it in law. I agree that it is inadequately pleaded:

The claim in the prayer is that both Mr Hamilton and Ms Mansfield are liable for the total amount paid to the two of them. Ms Oakeshott acknowledged in argument that that is unsustainable, and said that the intention was to claim from each what each was paid. This needs to be corrected.

The pleading states the total amount paid by way of salary, commission and dividends, but the sums are not explained (or even broken down between Mr Hamilton and Ms Mansfield). The defendants are entitled to the information, but if this had been the only criticism, the proper course would have been to request particulars.

The pleading does not indicate how the mistake impacts on the payment of dividends: dismissal per se would not affect the shareholder rights of Mr Hamilton and Ms Mansfield. The claimants might say that they would have been entitled to buy the shares, but that would have to be pleaded.

I am sceptical whether, even if better pleaded, a claim of this kind could be sustained in respect of salary and commission. The fundamental problem facing it is that, on the face of it, the consideration for the payments was work done for Gamatronic UK and it is not pleaded that there was a total failure of that consideration. In her submissions, Ms Oakeshott argued that Gamatronic UK could rely on total failure in response to any contentions that the claim fails because counter-restitution is impossible. However, as things stand, nothing before me indicates that they could properly do so and it seems prima facie improbable. (I observe that the claim is pleaded only in money had and received: a claim in damages for these sums might face a similar difficulty: see Brandeaux Advisers (UK) Ltd v Chadwick, [2010] EWHC 3241 at para 46ff.) The claim in respect of dividends strikes me as even more improbable.

I have hesitated whether I should dismiss the claims for money had and received. In the end, since I shall give the claimants an opportunity to re-plead their case generally, I shall not prohibit them from trying to formulate a coherent claim for money had and received. They will have to analyse the facts and law carefully before doing so in order to satisfy themselves that it has a proper basis.

Gamatronic UK’s claim for damages: the claimants do not indicate how much Gamatronic UK claim as damages, pleading that they have suffered loss and damage and that it “will need to be quantified following disclosure with the benefit of expert evidence”. (In submissions it was pointed out that the claim form states that the value of the claims is “in excess of £300,000” and apparently supposed that that is directed to the damages claim. I infer that it reflects the claims for moneys had and received, which are some £320,000 in total.)

I do not criticise the claimants for being unable at this stage to assess the amount of damages that they claim. However, they do not identify even their heads of loss beyond pleading (at para 21) that Gamatronic UK “claims as damages from the defendants its lost profits and other losses it suffered as a result of their breaches of duty”. It is not clear whether this part of the pleading is directed only to the claim against Mr Hamilton and Ms Mansfield (as might be indicated by the reference to breach of duties) or also against Vox (as might be indicated by the unqualified reference to “the Defendants”). More importantly perhaps, the pleading does not indicate, I cannot conceive, and when asked Ms Oakeshott was unable to say, what “other losses” might be claimed in damages. I consider this a defect in the pleading.

The defendants, and in particular Mr Gabriel Buttimore on behalf of Vox, made a more fundamental attack on the claim for damages, and he submitted that, on the evidence presented on these applications, the claimants have not presented a sufficient case that loss was suffered, at least as a result of anything for which Vox are responsible. The claims against Vox, as stated in the Summary of Claims, are as follows: “The Claimants … claim damages from Vox who (1) procured the breaches of contract by [Mr Hamilton and Ms Mansfield]; (ii) unlawfully interfered with [Gamatronic UK’s] business and/or conspired against [Gamatronic UK]; and (3) misused [Gamatronic UK’s] confidential information”. (They do not, it is to be noted, assert a claim for procuring breach of fiduciary duties.) Proof of loss is a necessary ingredient of claims for procuring a breach of contract, unlawful interference with business and conspiracy. (I did not hear submissions about the position with regard to misuse of confidential information, and I need not and do not say anything about that.)

Ms Bar Zvi’s evidence is that in 2011 Gamatronic UK performed badly and suffered losses, and that she attributed this to Mr Hamilton and Ms Mansfield “not acting in good faith and in [Gamatronic UK’s] best interests in this period and not spending their best efforts, entire productive time, ability and attention to Gamatronic UK’s business”, but instead “acting for and on behalf of [Gamatronic UK’s] competitor, Vox”. Mr Buttimore observed that she does not attribute losses to business being diverted away from Gamatronic UK, and he submitted that Ms Bar Zvi’s evidence provides inadequate support for a claim that the losses were attributable to Mr Hamilton and Ms Mansfield not making proper efforts for Gamatronic UK. However, Ms Bar Zvi gives other evidence relevant to Gamatronic UK’s losses, including for example naming six of their customers who are said to have moved to Vox, the clear inference being that this was because of wrongful conduct of Mr Hamilton and Ms Mansfield acting in concert with, or pursuant to a conspiracy with, Vox.

Mr Buttimore also submitted that it is “illuminating” to compare quarterly profit and loss figures given by Ms Bar Zvi in her statement with quarterly sales figures in the documents that she exhibits to her statement, and that “it is apparent that the dramatic fall in profits is not explained by the lower sales figures over the same period”. To my mind, this is too frail a basis to reject Ms Bar Zvi’s evidence on applications of this kind.

I agree that the evidence about this is thinner than might be expected, and that the presentation of the losses is less than clear. I cannot conclude that Gamatronic UK do not have a real prospect of proving damage if, as they allege, Vox are liable for the conduct of Mr Hamilton and Ms Mansfield with regard to their business. I therefore decline to give summary judgment for the defendants or to strike out the claims on the basis that Gamatronic UK do not have a sufficient case that the alleged wrongful conduct caused loss.

The claim for an account of profits: the Summary of Claims does not allude to an claim for an account of profits, and nothing in the pleaded claim identifies what causes of action are said to give rise to a claim for an account of what profits against each of the defendants. In principle, there could be no obvious objection to Gamatronic UK seeking an account (i) against Mr Hamilton and Ms Mansfield for breach of their fiduciary duties, and (ii) possibly against Vox for use of confidential information. But the pleading is defective in the absence of anything in it to indicate (i) which actions of Mr Hamilton and Ms Mansfield were breaches of fiduciary duties as a result of which they enjoyed (and perhaps are enjoying) profits, and (ii) what confidential information Vox are said to have used. As Laddie J said in Ocular Sciences Ltd v Aspect Vision Care Ltd, [1997] RPC 289, 359, “… it is well recognised that breach of confidence actions can be used to oppress and harass competitors and ex-employees. The courts are therefore careful to ensure that the [claimant] gives full and proper particulars of all the confidential information on which he intends to rely in the proceedings”. It might be that before disclosure the claimants cannot give full particulars, but they have not attempted to give any particulars at all, even of the nature of the confidential information on which this claim is based. They must do so if these claims are to be pursued.

The defendants did not specifically complain about the prayer for interest, but I add this. I do not understand the claim for compound interest: compound interest cannot be claimed under the 1981 Act, the express basis of the interest claim, and no claim for equitable interest is pleaded. I also observe that, although the claim for money had and received is for “a specified amount of money”, the particulars required by CPR 16.4(2)(b) are omitted.

I come back to the pleading of claims against Vox. Mr Buttimore complained:

That with regard to the claim in conspiracy, an ingredient of the cause of action is an intention to cause damage to the claimant, and this is not pleaded.

That with regard to the claim for procuring a breach of contract, ingredients of the offence are knowledge of the contract and intention to interfere with the performance of it, and these are not pleaded.

The relief claimed by Gamatronic Israel in the prayer to the particulars of claim is similar to that claimed by Gamatronic Israel except (i) no injunction is sought by Gamatronic Israel and (ii) the claim for money had and received is for £115,000, the consideration paid (or said to have been paid) for the shares under the SPA. Many of the criticisms of pleading of the claims by Gamatronic UK apply to the pleading of the claims of Gamatronic Israel. However, here it is even more difficult to understand what claims might be made even if a new statement of case is served. In particular:

Nothing in the pleading or in the evidence indicates what losses Gamatronic Israel suffered or in respect of what they claim damages. The Summary of Claims refers, for example, to Vox being in competition with Gamatronic UK, and business opportunities being diverted from Gamatronic UK, and Gamatronic UK’s confidential information being misused, and Gamatronic UK’s employees being encouraged to resign. No comparable allegations are made by reference to Gamatronic Israel. See too paragraph 44above, where I set out how the claims against Vox are summarised.

It is not said that Mr Hamilton and Ms Mansfield were directors of Gamatronic Israel and nothing is pleaded about why they owed Gamatronic Israel fiduciary duties. The pleading includes no allegations about confidential information of Gamatronic Israel. I cannot see any basis upon which Gamatronic Israel could claim for an account against any of the defendants. During the hearing Ms Oakeshott acknowledged this difficulty.

I do not understand what claim can properly be made against Vox by Gamatronic Israel.

The pleading of Gamatronic Israel’s claim for money had and received is vulnerable to criticisms corresponding to those about the claims of Gamatronic UK made on that basis. Further, I am far from confident that a claim for the return of the consideration for the shares could be formulated without it being recognised that the shares had to be returned. However, I do not propose to say more about that on these applications.

I am driven to conclude that the claimants’ pleading is seriously defective, and that the defects so permeate it that overall the pleading does not present claims to which the defendants can fairly be required to respond. This leads to the third question that I identify at the start of my judgment. The general principle is that “a pleading should not be struck out as hopeless if it is one that can be cured by a permissible amendment”: Shade v The Compton Partnership, [2000] PNLR 218,223. (The case was decided under the pre-CPR regime, but the position is not, I think, significantly altered: see Soo Kim v Park, [2011] EWHC 1781 paras 40, 41.) However, so many criticisms of the statement of case are, in my judgment, justified that I do not think that they can be cured by amendments. It must, I conclude, be struck out.

I observe that in the Compton Partnership case Robert Walker LJ referred to the former convention whereby as a matter of professional courtesy barristers were usually given the opportunity to cure defects in a pleading before an application was brought to strike it out. The convention is (for better or worse) dead, but in many cases the duty imposed by CPR 1.3 might require that notice be given of an intention to strike out on the grounds of pleading deficiencies that might be remediable, so as to avoid unnecessary delay and expense. In this case the defendants cannot be criticised: RadcliffesLeBrasseur, the solicitors for Mr Hamilton and Ms Mansfield, wrote a letter on receipt of the particulars of claim inviting amendment, and they drew particular attention to the injunction claim, the absence of any claim for rescission of the SPA, the claims for money had and received, and the absence of evidence of loss or damage. They indicated an intention to strike out the pleading or for summary judgment, but the pleading was not amended in any way in response.

Should the claimants be allowed to re-plead such of their claims as they are advised to pursue, or should the proceedings be dismissed, leaving the claimants to bring new proceedings? Mr Buttimore submitted that the deficiencies in the pleading demonstrate that the claimants have launched these proceedings without properly thinking their claims through. This, he argued, is also reflected in their defective claim form, which asserts no claim against Vox. I accept those submissions. He went on to argue that I should infer from this that the claims against Vox are brought to harass them and are an abuse of process, and that therefore the claimants should not be permitted to re-plead their statement of case, the proceedings should be dismissed, and the claimants should be left, if so advised, to bring new proceedings. I do not draw this inference about the claimants’ purpose, and see no point in requiring the claimants to issue new proceedings to bring claims which, if properly pleaded, could properly be brought in this action. On the (limited) information before me on these applications Gamtronic UK appear to have a sufficient factual basis to formulate proper claims against the defendants. I consider that justice and the overriding objective are best served by giving them the opportunity to serve a new statement of case. Even if their claims cannot be fully particularised, the new pleading would have to be distinctly clearer and more focused than those in the claimants’ original pleading. I have expressed scepticism about some of the causes of action that Gamatronic UK have sought to pursue and whether Gamatronic Israel have any proper claim at all, at least against Vox. The claimants may, if they are so advised, seek to re-formulate all their claims, but I trust that they will reflect carefully before doing so, and that they will consider not only my judgment but other complaints made by the defendants. Otherwise they risk facing similar applications and the court might be more inclined to strike out the proceedings altogether.

If a new statement of case is presented, it must be verified by a statement of truth signed by Mr Goren or Ms Bar Zvi. The original pleading, signed by Mr. Lister, included allegations of representations for which there appears to be no proper basis (for example, of misrepresentations by words), and I make this direction to reduce the risk of further such errors.

I reiterate what I said during argument. Undoubtedly and understandably this dispute has provoked strong feelings, and they might be justified. But “grudge matches” ruin winners and losers alike. The legal expenses involved in these proceedings are no doubt already substantial: Ms Oakeshott referred to the claimants undertaking an extensive exercise to recover many thousands of electronic documents that had been deleted. The proceedings are still at an early stage, and the costs to date will be dwarfed if the dispute is not resolved well before trial. I do not pretend to have a detailed grasp of all the facts behind it, but, for what it is worth, my firm impression is that any recovery will turn out to be far less than the litigation costs, and that no award of costs will cover the shortfall. In the meanwhile, inevitably and for many reasons the proceedings will take their toll on the businesses in which both sides are involved, let alone on the lives of all parties and their families. All the parties indicated when I asked that they are willing to go to mediation to seek to reach a consensual resolution, and I hope that they will do so with a readiness to compromise.