Visage Ltd & Anor v Mehan & Ors [2017] EWHC 2734 (QB)

Case No HQ17X03603[2017] EWHC 2734 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 03/11/2017
Before
Mrs Justice Yip
Between
VISAGE LIMITEDClaimantGSCM (UK) LIMITEDClaimantMS ANITA MEHANDefendantMS RITA ABROLDefendantMS TINA KHOSLADefendantMR MANOJ VADHERADefendant(5) MR SANJEEV MEHANDefendantMr Selwyn Bloch QC and Mr Jeremy Lewis (instructed by Walker Morris) for Claimants/ApplicantsMr Jonathan Cohen QC (instructed by Addleshaw Goddard LLP) for 1 st Defendant/RespondentMr David Reade QC, Mr Grahame Anderson (instructed by Kennedys’s Law LLP) for 2 nd, 3 rd and 4 th Defendants/RespondentsHearing Hearing date: 23 rd October 2017
JudgmentMrs Justice Yip :
[1]The Claimants are engaged in the fashion industry. Visage is a clothing designer and supplier, whose customers are well-known high street and online retailers. Until recently the Defendants were all employed by Visage. The Second Claimant is included on the basis that Visage’s sweater section was transferred to GSCM on 1st September 2017 and there may be an issue as to whether the Third Defendant’s employment was transferred to it. For present purposes, that is not something I need be concerned with.[2]The Defendants are all members of the same family, by birth or marriage. They were all part of Visage’s senior management team. Visage had been founded by family members but came under the control of Li and Fung Ltd in 2010 under a share purchase agreement. The family sold out their share for a substantial sum, the agreement being worth £170 million in total. In 2014, each Defendant entered into a new service agreement with Visage. The Defendants received substantial remuneration. Unsurprisingly, the contracts contained restrictive covenants dealing with the position post-termination.[3]The Defendants have now all resigned from the company. The position is that the First and Fifth Defendants remain employees of Visage but are on garden leave. The Fifth Defendant’s notice will expire at the end of December 2017 and the First Defendant’s in April 2018. The employment of the other Defendants has now come to an end.[4]It is the Claimants’ case, in essence, that the Defendants all decided to leave and formed the intention to compete with Visage. It is said that, in very clear breach of their duties under the contracts, they created a competing business while still on the Visage payroll and took advantage of their contacts to solicit employees and customers and made use of confidential information, all to secure a significant head start.[5]It is clear from the evidence I have seen that there are significant factual disputes, which cannot be resolved at this stage and must be a matter for trial. However, it is equally clear that the Claimants have a strong case that the Defendants (or at least the Respondents to this application) have been guilty of unlawful conduct.

The proceedings

[6]Proceedings were issued on 3rd October 2017 together with an application for interim relief. The Claimants sought injunctions and orders for delivery up and information. The application came before me on an urgent basis on 10th October 2017. The parties were able to agree a consent order on the basis that the First to Fourth Respondents gave substantial undertakings until the return date. The Second to Fourth Respondents were only willing to give the undertakings they did on the basis of an early return date. The application for interim relief came back before me on 23rd October 2017 with a time estimate of one day. That time estimate proved to be unrealistic. By sitting late and allowing Counsel to complete their submissions in writing, I was able to hear the parties’ arguments but no time had been allowed for a judgment. I therefore had to reserve my judgment.[7]A second application for interim relief was made on 12th October 2017, seeking information from the First Respondent and springboard injunctive relief against the Second to Fourth Respondents, together with directions towards an expedited trial.[8]Particulars of Claim setting out the claims against the First to Fourth Defendants were served on 19th October 2017. These are lengthy, running to 43 pages. Significant breaches of contract and of fiduciary duty are alleged. I am told that in relation to the Fifth Defendant an extension of time for serving Particulars of Claim against him have been agreed. It appears that discussions in relation to his position are ongoing and I am not concerned with him at this stage.[9]The parties are agreed in principle that there should be an expedited trial. I was told that discussions are ongoing about the directions and the precise timetable and it was to be hoped that such directions can be agreed. I did not hear any argument on the directions. If the parties are unable to agree them, it may be that a further hearing is required. The estimated window for trial is January to February. Therefore, I am concerned with the position until then. I note that First Respondent will remain on garden leave until after that time.[10]The undertakings given by the First Respondent on 10th October 2017 continue until 9th April 2018, that is after the anticipated trial date. Such undertakings largely deal with her position in the interim period but there is an application for her to provide evidence under compulsion which I need to deal with.[11]The undertakings given by the Second, Third and Fourth Respondents were to continue only until the issues could be considered at the return date. Those Respondents offered further undertakings to cover the position to trial. They were not prepared to submit to the application for springboard relief but were prepared to agree somewhat modified restrictions relating to the post-termination covenants. There is also an application for disclosure of information against the First to Fourth Respondents, which is in issue.[12]The Claimants have provided a draft order. The Second to Fourth Respondents have produced a modified draft, following the structure of the Claimants’ draft but amending it to reflect the extent to which they are prepared to consent (either by way of undertakings or by submitting to an order in those terms).

The contentious issues

[13]The matters I need to determine now are as follows: i) Whether the First Respondent should be required to serve evidence covering information in relation to product samples (paragraph 1.2 of the Claimants’ draft order); ii) Whether to grant springboard relief against the Second to Fourth Respondents (paragraph 2 of the Claimants’ draft order); iii) The terms of the orders in relation to the area covenants covering the Second, Third and Fourth Respondents (paragraphs 3, 8 and 12 of the Claimants’ draft order); iv) The terms of the non-dealing clause against the Fourth Respondent, it being suggested that paragraph 13.3 of the Claimants’ draft order is unnecessary given that he only dealt with one customer (ASDA) and will be restrained from accepting any orders from ASDA; v) Whether the Second and Fourth Respondents should be compelled to provide disclosure of information about any wrongful contact with clients, employees or suppliers (paragraph 18 of the Claimants’ draft order).[14]I propose to look first at enforcement of the restrictive covenants and springboard relief, in respect of which there is obvious overlap, and then come to the applications for provision of information.

Interim relief – general principles

[15]The well-known test from American Cyanamid Co v Ethicon Limited [1975] AC 396 applies. The Claimants must show(i) that there is a serious issue to be tried;(ii) that damages would not be an adequate remedy and(iii) that the balance of convenience favours granting the relief sought. In relation to springboard relief, I may need to go further and ask whether there is a real prospect of success: Dorma UK Ltd v Bateman [2015] EWHC 4142.

The evidence relied on

[16]I was provided with six lever arch files for the purpose of this application. The key witness for the Claimants was Nick Cotterell, a director of both companies. I had four witness statements from him dated 3rd, 9th, 12th and 18th October 2017. Other substantive evidence was contained in the statements of Garry Gordon; Tania Holcroft; Stephen Lister and Bryan Pool.[17]Each of the Second to Fourth Respondents had provided two statements dated 13th and 16th October 2017. To date, the First Respondent has not submitted any formal evidence.[18]My consideration of the substantial documentation was greatly assisted by the provision of a chronology prepared by Counsel for the Claimants which conveniently summarised the events relied upon with references to the relevant evidence in support. I appreciate that this was not an agreed chronology. However, it appeared to accurately reference relevant evidence. The Respondents challenged the interpretation placed on some of the events rather than challenging the accuracy of the chronology itself.[19]The service contracts relied upon were entered into in 2014, when each of the Respondents received a substantial increase in salary. The Fifth Defendant, Mr Mehan, resigned in December 2016 giving 12 months’ notice. The First Defendant, Ms Mehan, was the next to resign on 9th April 2017, again giving 12 months’ notice which will accordingly expire in April next year. The following day, the Second, Third and Fourth Defendants also resigned giving 6 months’ notice as they were required to.[20]Mr Mehan was put onto garden leave on 5th June 2017. Ms Abrol was placed on garden leave on 13th June 2017. Ms Khosla was suspended on 23rd June 2017 on the grounds of gross misconduct relating to working for another company she had an interest in and diverting orders to Tudorknight Ltd, a company of which her husband is sole director. Mr Vadhera was placed on garden leave on 18th August 2017 and finally Ms Mehan went onto garden leave on 3rd September 2017.[21]On the face of it, there appears to be strong evidence that each of the four Respondents has been involved in substantial unlawful activity during their employment and garden leave. While I recognise there are factual issues to be tried, the fact that there has been wrongdoing is not seriously challenged. In the circumstances and having regard to what I must determine at this interlocutory stage, I do not propose to set out the evidence relied on in detail.[22]The Claimants’ case on breach is set out at paragraphs 24 to 26 of the Particulars of Claim (this runs to some 17 pages). The chronology provides a convenient reference point for the evidence relied upon. In brief summary, the evidence paints a picture of each of the four Respondents being involved in business activity in competition with Visage while still on the Visage payroll. There is evidence of contact being made with clients for their own purposes; cutting other Visage employees out of meetings; using samples and certainly fabric swatches from Visage for the purposes of another business (Artisan 8); obtaining and sharing information about Visage and its clients and approaches to Visage employees. A number of senior employees have subsequently left Visage without saying where they are going. There is also evidence of at least three significant orders being obtained.[23]The Claimants acknowledge that the Third Respondent, Tina Khosla, is in a different position. Their case is that the First, Second and Fourth Respondents have set up a new business, referred to as “the New Family Business”. They suggest that Ms Khosla has provided assistance and also rely upon her diversion of profits to Tudorknight. I am quite satisfied that there is a serious issue to be tried in relation to Ms Khosla’s involvement in the competing business. The evidence presented by the Claimants would suggest her role goes beyond mere knowledge. The passing of significant information as to factories and mills used by Visage to Ms Khosla from Ms Mehan (as referred to in paragraph 26.2) creates a strong inference of ongoing common purpose. Ms Khosla’s explanation that the information was sent to her only for printing will have to be tested at trial but does not at this stage overcome the inference that Ms Khosla has played an active part in the activity of the other Respondents.[24]Viewing all the evidence available to date, I am satisfied that the Claimants have presented a strong case that the Respondents have been building up a new competitive company while still in the employment of Visage and have made use of connections with Visage customers, suppliers and employees and of confidential information and materials to progress and secure orders.

Restrictive covenants

[25]In considering the enforceability of the restrictive covenants, I have regard to TFS Derivatives v Morgan [2005] IRLR 246 in which Cox J reviewed the case law and described the process to be adopted by the court. This involves ascertaining what the term means, identifying whether the employer has shown that it has a legitimate business interest requiring protection and then considering whether the term goes no wider than is reasonably necessary for the protection of such interests. The court must then consider (both at trial and at the interim injunction stage) whether it is just to grant relief.[26]Of course, the court cannot determine all issues going to enforceability at the interlocutory stage. In Arthbuthnot Fund Managers Ltd v Rawlings [2003] EWCA Civ 518, Chadwick L.J. suggested that at this stage, the court must ask itself:
“whether it is plain and obvious that the restraint will fail after examination at a trial. If it is not plain and obvious … then the clauses must at this stage be regarded as having a reasonable prospect of being upheld.”
[27]Generally, the Respondents maintain their position that the restrictive covenants are in unreasonable restraint of trade but they have been prepared to give undertakings to a speedy trial. In offering such undertakings, the Second to Fourth Respondents have adopted a different form of wording in respect of the area covenants. In the case of the Fourth Respondent, he also seeks a modification to the non-dealing covenant. The Respondents say that their proposed amendments will bring clarity to the restraints and avoid issues arising later in relation to any question of breach. They say this represents a pragmatic solution that will provide proper protection for the Claimants at a time when it is not possible to get to grips with all the issues. In this way, they say that the balance of convenience between the parties can be best met. If the covenants are later found to be too wide and they unnecessarily inhibit the Respondents from legitimately earning, it is likely to be difficult for them to prove their losses resulting from being unnecessarily held back so that enforcing the Claimants’ cross-undertaking as to damages is not a sufficient remedy.[28]The order which the Claimants seek against each of the Second to Fourth Defendants includes:
“until judgment after trial or any Order specifically discharging this Order, or after [date], whichever is the earliest, the [Respondent] shall not directly or indirectly within the Prohibited Area: a) be engaged on [his/her] own account or with any one or more of the Named Persons in the capacity of employee, officer, consultant, adviser, director, partner, principal or agent in; or b) hold any Restricted shareholding, in i) the New Family Business; or ii) any company which carries on, any business or venture which is or is about to be in competition with any of the Businesses with which [she/he] has been concerned or involved to any material extent during the 12 months preceding the Termination date; or in relation to which at the Termination date [she/he] possesses Confidential Information.” a) be engaged on [his/her] own account or with any one or more of the Named Persons in the capacity of employee, officer, consultant, adviser, director, partner, principal or agent in; or b) hold any Restricted shareholding, in i) the New Family Business; or ii) any company which carries on, any business or venture which is or is about to be in competition with any of the Businesses with which [she/he] has been concerned or involved to any material extent during the 12 months preceding the Termination date; or in relation to which at the Termination date [she/he] possesses Confidential Information.”
[29]Save for the underlined part, this reflects the terms of the covenant in the Respondents’ service agreement. The reference to “the New Family Business”, which is defined at paragraph 11 of schedule 4 to the Claimants’ draft order, is included to spell out to the Respondents that the business to which I have referred above is included within the scope of the restriction.[30]The undertakings which the Second to Fourth Respondents offer do not refer to “the new Family Business” and seek to limit the definition of “Businesses with which [she/he] has been concerned or involved to any material extent during the 12 months preceding the Termination date; or in relation to which at the Termination date [she/he] possesses Confidential Information.” They do this by removing that wording from the body of the undertaking and instead providing a definition of “Businesses” within Schedule 4. That definition restricts the prohibited activities by reference to the particular sections of the Visage business in which each Respondent worked. For the Second Defendant, Rita Abrol, this is defined as “ladies’ knitwear products and sweaters”. For the Third Respondent, Tina Khosla, it is “products of a type supplied by the First Claimant’s jersey division and denim.” For the Fourth Respondent, Manoj Vadhera, the definition is “the supply of products, within the description of Restricted Products, to ASDA.”[31]The Fourth Respondent also seeks to remove Clause 13.3 “accept the supply by any Supplier of Restricted Supplies” from what is Clause 13 in the Claimants’ draft order. This is on the basis that his role at Visage was limited to responsibility for the client relationship with ASDA. Therefore, he says, there should be no restriction on him dealing with a supplier provided that he is not doing so in connection with obtaining products for ASDA.[32]The Claimants have accepted for the purpose of the interim relief that the individual Respondents were not materially involved with products outside their divisions but say that the evidence is that they were “concerned or involved to a material extent” with the wider Visage business. They say that they require the full protection as set out in the covenants, to which the Respondents agreed.[33]Both sides accept that the court does not have power to remodel a restrictive covenant. All it can do is to consider its enforceability. Mr Bloch suggests that the Respondents are seeking remodelling of the covenant and that this is as impermissible at the interlocutory stage as it would be at trial. However, I understand Mr Reade to be saying that the undertakings offered will best hold the balance until trial until the issue of enforceability can be fully determined. His position is that the combination of the undertakings already given by the First Defendant, who is clearly seen by the Claimants as the main protagonist, and the undertakings now being offered by the Second to Fourth Respondents will provide the Claimants with such protection as they can reasonably require and so appropriately ‘hold the ring’ until trial. In particular, Mr Reade contends that a competing family business could not be maintained in light of the combined undertakings since the no dealing covenants prevent the Respondents dealing directly or indirectly and whether on their own behalf or on behalf of another person. However, the undertakings proposed by the Respondents are not so restrictive as to prevent the Respondents working altogether in a way that the Claimants’ proposed order may be.[34]The Claimants maintain that the Respondents’ proposed undertakings do not meet their concerns. They say that there was a clear distinction drawn by the draftsman between the dealing covenant and the area covenant, that this was intentional and properly reflected the structure of the business and the Respondents’ roles. The Respondents now seek to amalgamate the covenants by confining them all to the particular divisions in which they each operated. Their concern is that if a narrower definition in the covenant contended for by the Respondents is adopted they will seek to divide up business in a way that gets around the restrictions but frustrates the object of the covenants which were entered into.[35]The Claimants also highlight that the Respondents were sophisticated business people. While they did not all personally benefit directly from the sale of the family business, the very substantial payments made by the Claimants are part of the relevant background. Having had regard to Merlin Financial Consultants Limited v Cooper [2014] IRLR 610 and One Step (Support) Limited v Morris-Garner [2015] IRLR 215, I consider that it is appropriate to take account of the context in which these covenants have arisen. It is also the case that the Respondents received significant increases in salary in consideration for their new contracts.[36]In the circumstances, the Claimants have undoubtedly raised a triable issue in respect of enforceability of the covenants as drafted. I do not consider that damages would be an adequate remedy for the Claimants and they have provided an appropriate cross-undertaking in respect of damages that may become payable to the Respondents. Therefore, I must consider where the balance of convenience lies.[37]Notwithstanding what Mr Reade says about the combined protection of the undertakings already given by the First Respondent and those now offered by the Second to Fourth Respondents, on the facts of this case and in light of all the evidence I have seen, I find that the balance of convenience requires that the Respondents are held to the covenants that they entered into in the relatively short period to trial. Therefore, those parts of the order relating to the restrictive covenants should be in the form put forward by the Claimants.[38]I consider that it is reasonable to include reference to “the New Family Business”. I am satisfied on the evidence before me that there is a clear case that such a business was being created in competition to the Claimants. The insertion does not extend the scope of the covenant in any way but simply makes it clear to the Respondents that this is something falling within the scope of the court’s Order.

Springboard relief

[39]A useful summary of the basis on which springboard relief may be granted is to be found in the judgment of Openshaw J in UBS Wealth Management (UK) Ltd v Vestra Wealth LLP [2008]IRLR 965 at paragraph 4:
“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 serious economic loss to a previous employer caused by former staff members taking an unfair advantage, an ‘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 restrained. I accept that injunctions are to protect against and to prevent future and further losses and must not be used merely to punish past breaches of contract.”
[40]I also have in mind the principles relevant to the granting of springboard relief set out by Haddon-Cave J. in QBE v Dymoke [2012] IRLR 485, helpfully summarised in both sides’ skeleton arguments.[41]The real issue raised by the Respondents is in relation to the head start or unfair competitive advantage. The Respondents deny that there has been a head start. In the alternative, they contend that any head start has now expired and in any event the relief sought should not be granted as it goes beyond what is reasonably required by the Claimants and would be unduly oppressive.[42]I confess I find it hard to see how the Respondents can maintain that there has been no head start at all on the basis of the evidence available. Certainly, there can be no doubt that there is a serious issue to be tried in relation to the unfair advantage obtained by the Respondents.[43]On the face of it, the evidence of orders being taken while most of the Respondents were still on garden leave suggests that the Claimants have a powerful case that there has been a clear head start.[44]In considering whether that head start still exists, the Respondents apparently rely on two matters. First, they contend that the fashion industry has become so fast paced that the shelf-life of any confidential information will be very short. In effect, turnover is so quick that any head start that was gained has already expired. Secondly, they suggest that the effect of the undertakings given by the First Respondent and the enforcement of the covenants against the Second to Fourth Defendants will be to nullify any head start.[45]While the question of the period of time over which any unfair advantage is likely to persist will be one for trial, the Claimants have a clear basis for asserting that such advantage will continue at least until trial. The Third Respondent’s employment terminated on 6th October 2017. The Second and Fourth Respondent’s employment terminated on 10th October 2017. The First Respondent continues to be on garden leave, which will expire in April 2018. It would appear likely that steps towards the establishment of a competing business commenced, if not before, then around the time of the Respondents’ resignations. Acting lawfully, they could not take advantage of the established supply chains or Ms Mehan’s connections. They would have had to recruit staff without the benefit of still being within the Visage network and they could not have had confidential information about suppliers and customers.[46]By way of example of the advantage relied upon by the Claimants, reference is made to Ms Abrol’s first statement and her reference to one of the orders in question (with New Look) being “on hold given these proceedings”. That order (from an important Visage customer) was apparently obtained following a meeting involving Ms Abrol and Ms Mehan while both were on garden leave. Ms Abrol suggests that it would fall outside her covenant as it was “nothing to do with sweaters”. Yet at the time she was still employed and she was accompanying Ms Mehan whose remit included all ladies wear. This seemingly supports the Claimants’ concerns that, without springboard relief, the Respondents will simply pick up the business they had begun to establish and will work around the covenants by swapping areas of responsibility.[47]In my judgment, there is clear evidence of the continuing existence of an advantage secured by an unfair head start such as would justify springboard relief to trial.[48]I do not accept that the enforcement of the covenants together with the First Respondent’s undertakings removes the justification for springboard relief. While noting the difference in the case against Ms Khosla, I consider that the relief must also apply to her. It is appropriate to prevent her taking up any advantage gained by the other Respondents in circumstances where there is, at least, clear evidence of her facilitation of others’ plans.[49]I have considered the balance of convenience in relation to springboard relief. It seems to me that the Claimants properly seek to limit any damage that has been done by actions taken by the Respondents while still in their employ. By contrast, the Second to Fourth Respondents, who have only just reached the end of their notice period and who remain subject to restrictive covenants risk being held back from competitive activity which may later be found to be lawful, for a relatively short period. The Claimants’ cross-undertaking secures damages for any loss the Respondents may suffer. Although Mr Reade relies on their need to support their families, the background would suggest that they are unlikely to become impoverished in the period to trial. The threat to the Claimants’ business if the Respondents are allowed to capitalise on an unlawful head start are real. Bearing in mind that this was a business for which very substantial consideration was paid to the Respondents’ family (including some of the Respondents themselves), I am satisfied that the balance of convenience requires the granting of springboard relief.

Ancillary orders for disclosure

[50]At the hearing on 10th October 2017, the First Respondent undertook to provide details of any contact or attempted contact made by clients, employees or suppliers in accordance with Clause 12 of her service agreement. A Schedule has been served on her behalf in compliance with that undertaking.[51]The Second to Fourth Defendants did not give such an undertaking but they did give an undertaking to state where any of the items listed in Schedule 3 but no longer in their possession are and to give the names and addresses of anyone who has had the listed items or copies of them. The listed items include samples and designs and documents containing confidential information. The First Respondent was not prepared to give an equivalent undertaking.[52]The Claimants now seek orders to obtain the disclosure that those Respondents have respectively not given by way of undertakings. In relation to Ms Mehan the disclosure sought has been narrowed so that it is limited to product samples. So, an order is sought against Ms Mehan for the relevant disclosure in relation to product samples no longer in her possession (paragraph 1.2 of the Claimants’ draft order) and an order is sought against the Second and Fourth Respondents for disclosure in relation to contact by customers, employees and suppliers (paragraph 18 of the Claimants’ draft order). In relation to paragraph 18 of the draft order, although the heading refers to Second “to” Fourth Respondents, the Claimants have confirmed that they seek the order against the Second “and” Fourth Defendants, that is the Third Defendant is not included in paragraph 18.[53]In relation to this part of the application, Counsel for the Claimants and for the First Respondent have highlighted the history leading up to the making of this application. Each are critical of the other side’s stance. The First Respondent claims that the Claimants had deliberately overreached and then narrowed their position in the hope of persuading the court that the reduced position was reasonable. The Claimants are critical of the Respondents for not accepting their narrowed position and for alleged delays in responding to their proposals. While perhaps reflective of the general heat and intensity of this litigation, I do not think this is a particularly helpful starting point for what I need to decide.[54]The parties agree that the starting point so far as the legal principles are concerned is AON Limited v JCT Reinsurance Brokers Limited and others [2009] EWHC 3448. Having reviewed the power to make disclosure orders and the case of Intelsec Systems Ltd v Grech-Cini [2000] 1 WLR 1190, Mackay J concluded that orders of this nature were on any view “exceptional and not a routine order, one which should not be made as a matter of course where prohibitory injunctions of the type found elsewhere in this proposed order are to be found.” He set out six matters which he considered relevant to the exercise of his discretion in relation to whether to make an order, which are conveniently summarised in Goulding on Employee Competition at paragraph 10.169 – 10.178 and which I adopt here:• Whether the claimant would be unable to plead his case without the order sought;• Whether the order was focused and proportionate or was tantamount to standard disclosure in an unpleaded case• Whether the order would save costs• Whether damages would not be an adequate remedy, by which is meant something more than that it would be difficult to prove the extent of damage;• Whether there are practical steps, short of an injunction, that the employer can take to protect against the recruitment of employees and the loss of clients;• Whether the disclosure provisions are necessary to permit policing of the prohibitory orders[55]In relation to the disclosure sought from the First Respondent, the Claimants say that the relief is narrowly focussed and is needed to allow the Claimants to take pragmatic steps to protect the business. However, in my judgment, there is a lack of clarity as to exactly what is covered and what pragmatic steps are required to be taken and can only be taken with the information sought.[56]It is immediately apparent that there is an issue between the parties as to what is meant by “product samples”. There is reference to “inspiration samples”, meaning, it would seem, garments that have been purchased on the open market from designers and high street stores which are used to identify design features that might be included in a future product. It is difficult to see how the Claimants could claim confidentiality in these items. The highest they appeared to put it was that the confidentiality lay in the selection of the products. It is unclear who made that selection or in what circumstances.[57]The pragmatic steps the Claimants seek to take in response to information provided under the proposed order are far from clear. Mr Lewis asserted on their behalf that “it is an essential part of business development to be able to follow up on samples” and that even if the Respondents were no longer competing “there remains the risk of the samples being used by others”. It is also said that “it is important to be able to demonstrate to existing employees and suppliers that Visage have regained control which includes following up on its designs.”[58]There is no question that the Claimants are unable to plead their case without the order sought. They have already set their case out against these Defendants at length. While the case may not be complete, proceedings are underway and standard orders for disclosure will follow. I do not consider there is any prospect that the order sought will produce a saving in costs. On the contrary, it seems to me that it would give rise to a real risk of satellite litigation about whether or not it has been fully complied with. It does not seem to me that the order is necessary to properly police the undertakings given by the First Respondent. Given the scope of those undertakings, the Claimants have the opportunity to re-establish client relationships and to follow up opportunities for orders.[59]In my judgment, the Claimants have not established a sound basis for me to make an order in the terms of paragraph 1.2 and having regard to all the circumstances, including the factors in AON, I decline to exercise my discretion to make such an order.[60]The relief sought at paragraph 18 of the Claimant’s draft order against the Second to Fourth Respondents did not seem to be pursued with any great vigour. In the Claimants Addendum Skeleton Argument, it is suggested that it is in the same form as the undertaking already given by Ms Mehan and states that “it would have been open to” the Second, Third and Fourth Respondents to set out frankly their contact with customer, suppliers and employees. That may be so. However, it does not form a proper basis for me to make an exceptional order. I agree with the conclusion of HHJ Seymour QC in the case of Dellner Woodville Limited v Blackham [2012] EWHC 1739(QB) that the discretion to make an order of this type should only be exercised where there are “special circumstances in the particular case which justify the making of these exceptional orders”. It does not appear to me that in relation to paragraph 18 the Claimants have really put forward any special circumstances. Accordingly, I also decline to make an order in the terms of paragraph 18.

Conclusion

[61]For the reasons set out above, I grant the injunctive relief in respect of the restrictive covenants and the springboard relief in the terms sought by the Claimants. I refuse the Claimants’ application for orders in the terms of paragraph 1.2 and 18 in their draft.

Consequential Order

[62]Having circulated this judgment in draft to the parties, they have largely agreed the terms of the consequential order. Two issues remain outstanding. I have been provided with (fairly lengthy) written submissions at short notice. The parties ask me to deal with the outstanding issues on paper without the need for a further hearing. I have considered all those submissions and the attached authorities. Due to the short time available, I will express my conclusions very briefly.[63]The first issue I must decide relates to the directions for trial. Should I now direct that the issue “whether the Claimants are in breach of contract by failing to pay the First to Fourth Defendants a bonus” be included in the list of issues for the Liability Trial?[64]The Defendants have not yet field their Defences and Counterclaims. It is asserted by the that such a counterclaim will be brought. It seems likely that issues relating to bonuses will be raised at the Liability Trial in any event and therefore that any counterclaim will overlap. I agree with the additional submissions received from Mr Cohen in his email timed at 17.29 on 2nd November 2017 that it would seem odd for the Court to consider the bonus claims for one purpose (defence of the application for injunctive relief) but not for the purpose of determining liability on the counterclaim. The Court will wish to determine as many issues as reasonably possible at the one trial. Accordingly, once a counterclaim has been formally made, I would expect the Court to want to consider the extent to which it should be included in the Liability Trial and my preliminary view is that the issue identified should be included. Nevertheless, I am not going to direct trial on an issue that has not yet been pleaded. Paragraph 20 provides a mechanism for the parties to agree the inclusion of further issues or to seek further direction from the Court in default of agreement. In my judgment, that is the appropriate course but I invite the Claimants’ attention to my preliminary view and would hope that this issue can be resolved by agreement once the counterclaim has been pleaded.[65]The final issue is costs. I have considered all the submissions carefully and exercise. my discretion as to costs having regard to CPR Part 44 and to the authorities put before me.[66]In my judgment, it is appropriate to order the Claimants to pay the First Defendant’s costs of the hearing on 23rd October 2017. The only live issue at that hearing as against the First Defendant was the application for an ‘Aon Order’. On that issue, there was a clear winner and loser. The application did not succeed. I consider it appropriate that the unsuccessful Claimants pay the First Defendant’s costs of that hearing. Save for the costs of the hearing itself, I will reserve all other costs as between the Claimants and First Defendants, for the reasons I give below. Although the rules provide for a summary assessment of costs as the hearing lasted less than one day, I am not going to summarily assess the costs. It is not entirely from the First Defendants’ Schedule exactly what costs relate to the hearing and I would require the assistance of the parties to conduct a summary assessment properly. The quantum of the costs relating to the hearing alone are not sufficiently clear at this stage for me to consider it appropriate to order a payment on account of costs. Therefore, the order as between the Claimants and First Defendant will simply record that the Claimants shall pay the First Defendant’s costs of the hearing on 23rd October 2017 to be subject to a detailed assessment if not agreed and all other costs shall be reserved to the trial judge.[67]I also reserve the costs as between the Claimants and the Second to Fourth Defendants. In reserving these costs and the balance of the costs between the Claimants and First Defendant, I have considered the ‘traditional approach’ set out in Desquenne et Giral UK Ltd v Richardson [2001] 1 FSR 1 (CA) and the more modern authorities including Taylor v Burton and another [2014] EWCA Civ 21 and Underwriting Exchange Ltd v Newall and another [2015] EWHC 948. In this case, I consider it appropriate for costs to be determined once the issues have been tried and success overall has been determined. At that stage, the Court will also be in a better position to consider the conduct of the parties leading up to the applications.[68]I note that the parties have included a direction listing for trial at paragraph 34 of the draft Order. Having checked, I am informed that this was not agreed with listing before being inserted into the draft Order. If the parties wish to have a fixture rather than a listing within a window commencing 5th March 2018, they will need first to confirm with listing that the case can be accommodated on that basis. The parties should please take steps to confirm the position with listing before finalising the order for my approval.[69]The parties should please now finalise the order to reflect my decisions.

Cited in 1 later judgment