Maris Interiors LLP v Pleckinger & Ors [2011] EWHC 2260 (QB)

[2011] EWHC 2260 (QB)Case No HQ 11X02462
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 15/09/2011
Before
THE HONOURABLE MR JUSTICE BLAKE
Between
MARIS INTERIORS LLPClaimant(1) BRUCE PLECKINGERDefendant(2) ANTHONY ELLISDefendant(3) ROBERT GREGORYDefendant(4) YUSUF HEPTULLABHAIDefendant(5) ANDREW MARSHALLDefendant(6) WAYNE JUDGEDefendant(7) AREA SQ. LIMITEDDefendant
Jeffrey Bacon (instructed by Wallace LLP) for ClaimantRichard Leiper (instructed by Howard Kennedy LLP) for Defendant’sHearing Hearing dates: 23, 24 August, 2011
Judgment
[1]In these proceedings the claimant is Maris Interiors LLP. The claimant’s business is the supply to clients of solutions for office design, fit out refurbishment and consequential office furniture supply. Its main business deals with contracts over £200,000 in value and its turn over is approximately £25 to £30 million annually. Its main and subordinate business serves approximately eighty to one hundred and twenty projects per annum to clients.[2]Its method of getting business may be summarised as follows. First, it seeks to establish relations with members of firms of commercial estate agents, to obtain information from them as to when a company whose budget is significant enough to be a potential customer of Maris is thinking of moving office. This information is then passed to the telephone sales staff at Maris who seek to make contact with the potential customers. Where there is the possibility of a contract a team headed by a project director or Tier 2 salesmen pursues the opportunity with a view to securing a contract. Tier 2 salesmen are partners in the LLP under the terms of a partnership deed last revised in June 2010.[3]This litigation arises from the departure of a number of members of the claimant’s work force between October 2010 and May 2011. The claimant’s case begins with its concerns arising out of the departure of the first defendant in these proceedings, Bruce Pleckinger.[4]Mr Pleckinger was a former project director and partner in the claimant’s business. He resigned on 3 May 2011 and he handed his company Blackberry to a member of the claimant’s staff on 13 May 2011. Subsequent analysis of the text messages sent through the Blackberry from January to May 2011 lead the claimant to conclude that Mr Pleckinger had acted in breach of the confidentiality and other clauses of the partnership agreement whilst working for the company.[5]One of those with whom Mr Pleckinger was communicating in this period was Wayne Judge. Mr Judge was another former Tier 2 salesman and partner in the claimant’s business. He had resigned in October 2010 and when he indicated that he intended to work for a competitor firm, Area Sq. Limited (hereafter Area Squared), he was put on garden leave for the duration of his notice period expiring in January 2011. The claimant did not seek to enforce a term of the 2010 partnership deed preventing him from joining a competitor within three miles of the claimant’s base at Waterloo, although it did indicate that other terms of the partnership deed including non use of confidential information of the company, and non solicitation of the companies clients were to be abided by. The terms of the text messages suggested to the claimant that Mr Pleckinger was supplying leads he had obtained as a member of the claimant’s business to Mr Judge and that the managing director of Mr Judge’s new employer in breach of the terms of the deed.[6]Further by March, 2011 the claimants had reason to believe that in breach of other terms of the partnership deed Mr Judge had pitched for or was involved in a project for Adams Street Partners UK Ltd, an existing client of the claimant firm, who in the summer of 2010 had reason to believe that repeat work would be awarded to them. This work was subsequently awarded to Area Squared. When this was raised in correspondence it was indicated that Mr Judge had only limited peripheral involvement in the Adams Street project but when relevant e-mail traffic was provided on 13 April, 2010 this revealed that Mr Judge had significant involvement in the project and in the claimant’s view considerable client contact.[7]The claimant was also concerned as to whether Mr Judge had taken and retained company property again in “breach in terms” of the partnership deed. On 7 April, 2011 Mr Judge’s solicitors handed over a hundred documents retained by him when he left the firm. He described them as old documents of limited historical value but the claimant contends that some of these documents were recent from the autumn 2010 and would still have had value to a competitor.[8]Further the claimant became aware that Area Squared had used electronic documentation belonging to the claimant in illustrations provided to clients for pitches.[9]Yusuf Heptullabhai and Andrew Marshall were former tele-sales employees of the claimant. They resigned from the claimants in April, 2011 and were put on garden leave for the duration of their notice period. Both indicated at the time of their resignation that they were not planning to work for Area Squared. It transpired that both did move to Area Squared very soon after in May and the claimant came to know about this on the 1 June, 2011. These moves were in breach of the terms of the contract of employment that precluded them for three months from working for a competitor business within a seven mile radius of Waterloo. It seems that the employer’s contracts had not been updated as regards the extent of the geographical prohibition when those of the partners had been. The Pleckinger text messages revealed that Mr Heptullabhai had participated in February 2011 in the meeting between a number of the claimant’s employees and partners where there was discussion as to the possibility of setting up a rival business. It seems Mr Judge was aware of this and had some contact with Mr Marshall at least. The claimants say that Mr Pleckinger and possibly also Mr Heptullabhai should have alerted their employers to the level of staff discontent. In the event some of the staff attending the meetings remained with the claimants, some left to join business competitors other than Area Squared.

The Proceedings

[10]On 7 July, 2011 the claimant started proceedings against Mr Pleckinger and obtained a without notice injunction for delivery up and for provision of information. On 21 July it sought to join others to those proceedings and obtained interlocutory relief against the first defendant (Pleckinger) and the 2nd defendant Mr Ellis, another partner and Tier 2 salesman who had resigned in order to join a rival and who had emailed himself a number of the claimant’s confidential business documents before doing so.[11]The applications against the proposed 3rd to 7th defendants were stood over for various reasons until the hearing of this application on 23 August. Since I accept that there are serious triable issues between the claimant and each of the defendants, I have concluded that those potential defendants who resisted joined should be joined and hereafter in this judgement I will refer to them as defendants. Mr Heptullabhai is the 4th defendant; Mr Marshall the 5th., Mr Judge the 6th and Area Squared is the 7th. The application against the 3rd defendant Mr Gregory, another departing partner, has been resolved by consent.[12]The claimant seeks from each of the 4th to the 7th defendants orders :- i) Restraining use of confidential information of the claimant’s company in breach of the terms of the claimant contract (clause3) ; ii) For return of company property or affidavits confirming that no such property is held (clause 5 and 6); iii) To prevent procurement of breaches of the non-solicitation clauses of the 4th, 5th and 6th’ defendants terms of engagement with the claimant (clause 13). iv) For supply of information on oath (clauses 8 to 10).[13]In response to these proceedings, the 6th defendant, Mr Judge, has made a witness statement on 29 July to the effect that he has returned all property of the claimants that has been in his possession or control and reconfirms that which he told the claimants through his solicitors on the 7 April, 2011. He also explains that he has no knowledge of how images owned by the claimant came into the possession or use of the 7th defendant. This last assertion is supported by a witness statement of Mr Stamatis, a director of Area Squared, who says that his enquiries have established that these images were used by the company before Wayne Judge joined them and appear in documents at least as early as June 2010. He concludes that they may have been brought by a former employee of the company who in turn was a former employee of the claimant. At Paragraph 9 of this witness statement Mr Stamatis says:
“I am happy to confirm that the company will not use the images again. I have given instructions for all electronic copies held by the company to be deleted and for all hard copies to be destroyed, immediately (save for those copies appearing in copies of Exhibit JS1). I have also given instruction that our designers check their personal image banks and delete any other images that can be identified as belonging to the claimants. To the best of my knowledge on enquiry, the company does not hold any other property of the claimant. Had the claimant raised these concerns in correspondence, the company would have happily deleted the images and ensured that they would not be used as I have now done.”
[14]Notwithstanding these assertions, the claimant is not satisfied with the evidence provided by the 6th and 7th defendants who they say have misled them in the past. Further as a result of the matters briefly summarised above, they are not satisfied that the 7th defendant will not procure a breach of the 4th and 5th defendants’ post termination restrictive covenants in respect of business dealings with clients of the claimant with whom the employees had personal contact during the period of their employment.[15]Whilst the matter has been awaiting hearing there have been developments and refinements to the claimant’s case and the relief sought. As against the 4th and 5th defendant the claimant accepts they have been working for some three months for the 7th defendant and there is no evidence that they have retained possession of company property, supplied confidential information belonging to the claimants to the 7th defendant, or solicited clients of the claimant during the period of post-termination restraint. Nevertheless, because the claimant does not trust the 6th and 7th defendants, and because it does not accept the 4th and 5th defendants’ statement that at the time of their resignations neither had a settled intention of joining the 7th defendant, they submit that they are entitled to relief.[16]The 4th and 5th defendants’ contracts of employment contain the following terms: 14.1 “Without prejudice to his common law duties, the employee shall not (except in the proper course of his duties, as authorised or required by law or as authorised by the LLP), either during the appointment or any time after termination of the appointment (howsoever arising): a) Use any Confidential Information or b) Make or Use any copies or c) Disclose any Confidential Information to any person, company or other organisation whatsoever.” 20.1 “On termination of the appointment (howsoever arising) or, if earlier, at the start of the period of Garden Leave (following the service of notice or purported termination of appointment by the Employee). The Employee should be “Employee) the employee: a) Immediately deliver to the LLP all documents, books, materials, records, correspondence and information… which are in his possession or under his control… b) Irretrievably delete any information relating to the business of any group company stored or any magnetic or optical disc or memory and all matters derived from such sources that is in his possession or control outside the LLP’s premises and c) Provide a signed statement that he has complied fully with the obligation under the Clause 20.1. 24. Post termination restriction 24.1 “The Employee shall not during the period of twelve months after Termination in connection with the carrying on of any business similar to or in competition with the Business either personally, or by agent, whether directly or indirectly, whether on his own behalf or on behalf of any person, firm or company or other organisation and whether as an Employee, contractor, consultant, agent, director, shareholder, member, principle or otherwise without prior written consent of the LLP: 24.1.1. Approach, canvas, solicit or endeavour to entice away or undertake the custom or business of or have business dealings with, any person, company or other organisation to whom the business provided goods or services and …… the employee during the two years preceding the termination had personal contact with as a customer or client of the business.[17]Similar prohibitions were contained in 24.12 with respect to business with whom the company was in negotiation to provide goods or services and under 24.1.4 with “any person or firm or other organisation who acts as agent to the Business in the sense of providing leads or information which is valuable to the development of the Business.” Clause 24.1.5 prevents employees “soliciting or enticing away or endeavouring to entice away from the membership or employment of the Business any person who during the 12 months prior to the Termination was in anyway engaged by the Business.”[18]By clause 24.2 for a period of 3 months after termination the employee shall not be engaged, concerned or interested within a 7 mile radius from the claimant’s premises at Waterloo or thirty miles from their premises at Farnham, Surrey in any business of the same or similar nature to the business that the employee was concerned with of the claimants.[19]The claimant has never sought to enforce this non-competition clause of the contract when it became aware on 1 June 2011 that the 4th and 5th defendants had become employed by the 7th defendant notwithstanding the statements they had given earlier. The claimant nevertheless submits that it would be entitled to claim damages for breach of the term assuming that the term to be enforceable in law.

The Issues

[20]It is common ground that there is a serious issue to be tried between the claimant and the 6th and 7th defendants, they should be joined as defendants and directions should be given for trial. A draft amended claim form was supplied at the outset of the hearing to that effect.[21]Particulars of the claim explaining how the claimant puts its case against the 6th and 7th defendant have not been drawn up despite the passage of time when the proceedings were first contemplated. The parties envisage a trial date remains possible at the end of October or beginning of November. Mr Judge’s post termination obligations will come to an end in October, 2011 having regard to the period of garden leave during which he was bound by the same obligation.[22]It is further common ground that in an interlocutory application of this sort, the Court does not endeavour to form a view as to the ultimate merits of trial on affidavit or witness statement. It must decide whether relief should be granted according to American Cyanamid principles, applied to post employment restrictive covenants in Lawrence David Ltd v Ashton [1989] ICR 123. First, is there a serious issue to be tried between the parties, second would damages be an adequate remedy, third whether the balance of convenience and interest of justice require the orders to be made in the absence of satisfactory undertakings by the defendant.

Conclusions: 6 and 7th Defendants:

[23]I am satisfied on the present state of the evidence that there are triable issues that: i) the 6th and 7th defendants have used confidential information of the claimants in the course of the 7th defendant’s business; ii) the 6th defendant has retained property belonging to the claimant that he ought to have returned; iii) the 7th defendant has had possession of and made use of material that was the intellectual property of the claimant; iv) the 7th defendant with the participation of the 1st and 6th defendants may have been party to information that employees of the claimant were discontent and may have encouraged them to join their firm notwithstanding the terms of the non compete clause.[24]I conclude having regard to the Cyanamid test that it is appropriate that the 6th and 7th defendants be restrained until trial or further order in the absence of satisfactory undertakings from making use or disclosure of any confidential information belonging to the claimant in the terms of paragraph 3 of the amended draft order and or inducing or procuring breaches of contract in terms of paragraph 13 of the draft order. At the outset of the defendants’ submissions in this matter undertakings were offered in respect of paragraph 13 and in effect the witness statements of Mr Judge and Mr Stamatis say they will not use confidential information, but in the circumstances it is just and convenient that they undertake not to do so. Damages would not be an adequate remedy for further breaches of the claimant’s rights (assuming there to have been prior breaches) and there is no hardship on the defendants to restrain them from doing that which they have no right to do.[25]I also accept the claimant’s case for some relief in the absence of an undertaking from the 7th defendant clarifying in a statement of truth or affidavit what enquiries have been made to ascertain the 7th claimant employees hold any property of the claimant, and what the result of such enquiries have been. Given the admitted intermingling of the claimant’s materials with the 7th defendant’s business, the claimant is entitled to some further assurance that past errors and/or wrongs done have been put right.[26]However, I can see no basis for such relief against the 6th defendant personally. He has made a witness statement signed with a statement of truth that he has returned all property of the claimant’s that was in his possession or and confirms his earlier statement to that effect in a solicitor’s letter of April, 2011. Nothing has come to light since those dates to suggest that this evidence is false and that the 6th defendant knowingly retains the claimant’s properties. If it turns out that he has lied there will be consequences at trial.[27]I turn now to consider whether there should be relief for provision of specific information in the terms of paragraphs 8 to 10. As there will be a trial, there will be in due course pleadings, exchange of trial statements, cross- examination on disputed evidence and the like. The normal and appropriate course is for the particulars of the pleadings to establish the issues, and the witness statements to address the issues. Although there is jurisdiction to make an order requiring the defendants to give detailed explanation as to their response to aspects of the evidence, and the terms of Mr Pleckinger’s texts, it is an exceptional measure see Aon Ltd v JLT Reinsurance Brokers Ltd [2009] EWHC 348 QB, [2010] IRLR 600 a decision of Mr Justice Mackay. I have regard to the six factors identified by Mr Justice Mackay in that case at [26] namely: i) inability of the claimant to plead the case without relief, ii) the width of the order sort, iii) the saving of costs, iv) the adequacy of damages and remedy, v) the need to take pragmatic steps to protect the business from future and further loss. vi) the need for measures to police orders granted.[28]The claimant has obtained already considerable information as a result of proceedings against Mr Pleckinger and others and will be able to plead its case. It can apply for specific relief for further particulars of defence or interrogatories in due course if that is appropriate and it is considered that the defendants have been insufficiently forthcoming. There is no need to subvert the normal accusatorial basis of litigation.[29]The questions relate to the content of the Pleckinger e-mails about supply of historic leads in the early part of 2011. If it turns out that this information was indeed confidential and in breach of Mr Pleckinger’s terms of engagement and that the defendants made use of it, there will liability in damages. Those are the matters for trial rather than the orders needed to maintain the status quo and protect the claimant’s legitimate interests pending trial.[30]Making such orders would add to the already significant costs incurred rather than avoid them. They deal with some aspects of the evidence not all of it, as the pleadings and defence statements will need to.[31]Further I accept the defendants’ case that these orders are not necessary for the claimant to take pragmatic steps to protect his own business. The events giving rise to this litigation are publicly known; clients and competitors in this market will know of the changes of personnel. The claimant is able to protect its relations with customers and staff by communicating with them in such terms as they think appropriate without the need of any orders directed against the 6th or 7th defendants.[32]These answers will not materially assist the policing of the orders granted and overall I conclude that they are not necessary or proportionate having regard to the state of the evidence and the directions of the trial.

The 4th and 5th Defendants

[33]The position of these two defendants is very different from the others: they were employees not partners; their duties as employees during and after their employment are set out in their contract of employment, assuming the restrictions upon their activity are lawful. I doubt whether they have wider fiduciary duties to report any dissatisfaction that they had as employees with the claimant’s business, or to report the dissatisfaction and intended departures of others. In any event the claimant’s case is inconsistent with respect to what it knew or believed were the 4th or 5th defendants’ intentions prior to their resignation.[34]In the first affidavit of Mr Smith in support of this relief it is intimated that the claimant took at face value the information they were provided with that these claimants were not going to join Area Squared at the time when they resigned. In his third witness statement dated 19 August it is suggested that it was widely known to partners and staff at the claimants firm that both were intending to move to Area Squared in March. If that was the case it is difficult to see why this was not mentioned earlier, why more specific assurances were not extracted or why the non-compete covenant was not enforced, if the claimant thought it could be. The claimant was in any event uninterested in seeking to retain Mr Marshall’s services and imposed a tight ultimatum on him which resulted in his resignation. The position may be different with Mr Heptullabhai but I cannot see that this has any impact upon the question of whether relief should now be granted against him.[35]The claimant has a suspicion that either or both of these defendants may have been enticed by the 6th and or 7th defendants to join the 7th defendant as a result of information supplied by the 1st defendant and others. However, the claimant did not seek to enforce the non-competition clause in the contract of employment, at the time of resignation or in June when they learned of the employment with the defendant.[36]I recognise that there is a triable issue between the claimant’s and the 4th and 5th defendants as to whether that employment was in breach of enforceable contracts and whether damages should be recovered for it. To that extent there is a case for joining them as defendants. This may lead them to become mixed up in more complex litigation concerned with former partners and their present employer, but there is a common subject matter and it is likely the issues regarding these defendants personally will be so marginal or tangential to this trial that it will not expose them to any great costs to be part of.[37]However, as the claimant fully recognises, there is no evidence whatsoever to suggest that these defendants have retained its property, have used confidential information contrary to their contractual obligations, or are presently engaged in soliciting the claimant’s clients for business whilst employed by the 7th defendant. This employment has now lasted three months. The claimant would have known who its clients are and would have been able to have taken some pre-emptive measures if it thought that appropriate.[38]The claimant is unwilling to supply a list of these clients to the 7th defendant for the purpose of ensuring that they do not require their employees to act in breach of their contractual obligations, because that in itself would be supplying commercially sensitive information to its competitors. However, that does not mean that the individuals have to be subject to a mandatory injunction to prevent a feared future breach of their post termination obligations where there is not any evidence whatsoever that they have breached them in the past or will or have been encouraged to do so. If a different picture subsequently emerges the defendants will have their remedy in damages and possibly a permanent injunction at the end of trial.[39]At present I can see no seriously triable issue between the claimant and defendants as to breaches of the confidentiality and the soliciting aspects of their obligations. Moreover, there is a strong probability that the contractual terms preventing these employees from having business dealings with any firms of estate agents with whom the claimants have dealt with in the past is far to broad to be enforceable.[40]With respect to these two defendants there is some force in the submission that the claimant has not acted promptly with respect to these applications. It was six weeks from the date of knowledge that they had joined the 7th defendant that proceedings of any sort were instituted against them, and there was no prior request inviting them to confirm that they had handed back all the property, or were not engaging with the claimant’s former clients or personal contacts with the agents.[41]In my judgement the interests of justice and balance of convenience favours the continuation of the status quo as the claimants knew it to be from the 1st June to the 21 July, for the further period until the trial of this action. Nothing has emerged during this period that puts the actions of these defendants personally in any different light. I appreciate that there is a judicially approved practice of offering undertakings to avoid unnecessarily contested applications, but there has to be some evidential basis for injunctive relief on a quia timet and it is not sufficient that the claimant is suspicious of the good faith of the 7th defendant. In any event, for reasons already noted, they will have some relief against the 7th defendant inducing the 4th and 5th defendants to breach their obligations still owed to the claimant.[42]Equally in the case of the 4th and 5th defendants there is no basis at all for orders requiring them to provide information. Similar considerations as discussed in respect of the 6th and 7th defendants apply with even greater strength to the 4th and 5th defendants. By contrast with other defendants in this case these defendants have not acted inconsistently with their contractual or fiduciary obligations, other than seeking to work for the 7th defendant at all and not informing the claimants about it following their appointment. That action has not been the subject of restraint, and does not lead to any inference that they have or will be likely to breach the confidentiality and soliciting aspects of their contractual arrangements. In short, other than joining them as defendants to these proceedings for the reasons set out above I would not order any relief against them. If significantly different evidence emerges, the defendants will have the opportunity to obtain the appropriate remedies at the trial.[43]In the light of this judgment I will invite the parties to agree consequential orders and the directions for trial.