"There is some discussion in the authorities as to whether springboard relief is limited to cases where there is a misuse of confidential information. Such a limitation was expressly rejected in Midas IT Services v Opus Portfolio Ltd, an unreported decision of Blackburne J made on21 December 1999 , although it seems to have been accepted by Scott J in Balston Ltd v Headline Filters Ltd[1987] FSR 330 at 340. In the 20 years which have passed since that case, it seems to me that the law has developed; and I see no reason in principle by which it should be so limited. In my judgment, springboard relief is not confined to cases where former employees threaten to abuse confidential information acquired during the currency of their employment. It is available to prevent any future or further economic loss to a previous employer caused by former staff members taking an unfair advantage, and 'unfair start', of any serious breaches of their contract of employment (or if they are acting in concert with others, of any breach by any of those others). That unfair advantage must still exist at the time that the injunction is sought, and it must be shown that it would continue unless retrained. I accept that injunctions are to protect against and to prevent future and further losses and must not be used merely to punish breaches of contract."
"[68] I agree with Mr Lowenstein that logically, the seriousness of the breach and the egregiousness of the Defendants' conduct cannot have any bearing on the period for which the injunction should be granted - what matters is the effect of the breach of confidence upon the Claimant in the sense of the extent to which the First Defendant has gained an illegitimate competitive advantage . In my judgment, Mr Cohen's submissions seriously underestimate the unfair competitive advantage gained by the Defendants from access to the Claimant's "customer list" and ignore, in any event, the impact (if the injunction were lifted) of actual or potential misuse of other confidential information such as volume of business or pricing information. It is important in that context to have in mind that the Claimant maintains in its evidence that all the information said to be confidential remains confidential."
“ (1) In calculating the profits of a trade, no deduction is allowed for – (a) expenses not incurred wholly and exclusively for the purposes of the trade, or (b) … (2) If an expense is incurred for more than one purpose, this section does not prohibit a deduction for any identifiable part or identifiable portion of the expense which is incurred wholly and exclusively for the purposes of the trade. ” 21. Put briefly, the respondents contend that the sum paid by the appellant was at least partly referable to the appellant’s breach of contract. As such there was a duality of purpose and it was not incurred wholly and exclusively for the purposes of the trade. The appellant contends that the payment was made for the sole purpose of preserving his business and should be deductible. We set out the competing submissions in more detail below. 22. It is well established that where there is duality of purpose, expenditure in connection with a trade will not be allowable for tax purposes. Mr Storey accepted that if in the present case there was duality of purpose then no part of the expenditure could be separately identified as being wholly and exclusively incurred for the purposes of the appellant’s trade. Hence section 34(2) is not in point. 23. The question of duality of purpose has been considered in a number of well known authorities. The appellant relied on the decision of the House of Lords in McKnight v Shepherd[1999] STC 669 . The respondents relied upon the decision of the High Court in Knight v Parry[1973] STC 56 . We have also had regard to a recent decision of the Upper Tribunal in Duckmanton v Commissioners for HM Revenue & Customs[2013] UKUT 0305 (TCC) . This decision was released after the hearing in the present appeal. Henderson J conveniently summarises the law in relation to the interpretation and application of the test for deductible expenditure at [13] to [20]. 24. In McKnight v Sheppard the taxpayer was a stockbroker who incurred legal expenses defending disciplinary charges. He sought to deduct the expenditure on the basis that it was wholly and exclusively for the purposes of the trade. In the House of Lords the Revenue contended that there were two purposes in paying the legal expenses, namely the preservation of his business and his personal reputation. 25. The House of Lords found that there was only one purpose. It distinguished the purpose of the expenditure from its effect. The purpose was the preservation of the trade. The effect was also to preserve the taxpayer’s personal reputation. The House of Lords held that expenditure for that purpose was deductible, relying on the principle in Morgan (Inspector of Taxes) v Tate & Lyle Ltd[1955] AC 21 that expenditure for the purpose of preserving a trade from destruction can properly be treated as being expended wholly and exclusively for the purposes of the trade. 26. In referring to the distinction between purpose and effect the House of Lords quoted a well-known passage from the judgment of Lord Brightman in Mallalieu v Drummond[1983] STC 655 at p699 where he stated: “ The object of the taxpayer in making the expenditure must be distinguished from the effect of the expenditure. An expenditure may be made exclusively to serve the purposes of the business, but it may have a private advantage. The existence of that private advantage does not necessarily preclude the exclusivity of the business purpose. For example, a medical consultant has a friend in the South of France who is also his patient. He flies to the South of France for a week, staying in the home of his friend and attending professionally upon him. He seeks to recover the cost of his air fare. The question of fact will be whether the journey was undertaken solely to serve the purposes of the medical practice. This will be judged in the light of the taxpayer's object in making the journey. The question will be answered by considering whether the stay in the South of France was a reason, however subordinate, for undertaking the journey, or was not a reason but only the effect. If a week's stay on the Riviera was not an object of the consultant, if the consultant's only object was to attend upon his patient, his stay on the Riviera was an unavoidable effect of the expenditure on the journey and the expenditure lies outside the prohibition in section 130. ” 27. In Knight v Parry the taxpayer was employed as an assistant solicitor. On leaving his employment he agreed with one of the firm’s clients that the client would instruct him. The firm alleged that the taxpayer had solicited the client and that this amounted to unprofessional conduct. They reported the taxpayer to the Law Society. 28. The Law Society considered that there was a prima facie case of unprofessional conduct but suggested that the firm bring a civil action against the taxpayer which they did. The taxpayer defended the action and in due course it was found that he had not solicited the client but he had committed a breach of the duty of good faith owed to his employer. The firm was awarded damages and costs. The taxpayer accepted that the damages were not deductible for Schedule D purposes. However he sought to deduct the costs he was ordered to pay and his own costs. 29. Goff J held that the taxpayer had two purposes in defending the action. One was to protect himself against the charge of unprofessional conduct. The second purpose was defending the claim to damages. The purpose of protecting himself professionally was not wholly and exclusively referable to the carrying on of his practice as a solicitor, but to ensure that he was not precluded from doing so. We do not need to consider whether, in the light of McKnight v Shepherd, that conclusion is correct. This is because Goff J also held that even if his conclusion on that issue was wrong the second purpose clearly took the expenditure outside the relief because duality of purpose meant that no relief was available. 30. Mr Storey contends that as in McKnight v Sheppard, the only reason why the appellant paid the sum of£100,000 was to preserve his business and allow him to continue trading. The fact that the appellant was also released from the restrictive covenants in his contract of employment was merely the incidental effect of the Tomlin order. 31. Mrs Oliver for the respondents contends that in the present appeal, as in Knight v Parry, the purpose of the expenditure was twofold: (1) To defend the claim for damages, and (2) To maintain customers for the business. 32. She sought to distinguish McKnight v Sheppard on the basis that the defence costs in that case did not relate to a former employer and there was no duality of purpose. We do not consider that this distinction affects the principle to be drawn from McKnight v Sheppard, in particular the need to distinguish between the purpose or purposes of expenditure and the effect of that expenditure. 33. It is important to consider why the appellant made the payment of£100,000 and incurred costs in defending the proceedings. We accept that he was particularly concerned with the claim to springboard relief because that would effectively destroy any prospects for his business. 34. As a matter of law a claim to springboard relief can arise not only where there has been a breach of confidence, but also where there has been a serious breach of a contractual or fiduciary duty giving the former employee an unfair advantage over the employer. It is not clear to us whether Quantica’s claim to springboard relief derived solely from the misuse of confidential information or whether it also derived from the admitted breaches of contract and fiduciary duty. In this regard we do not have the benefit of all the relevant material. 35. At 1.11 of his skeleton argument Mr Storey submitted that “ …most importantly, the clients with whom Mr McMahon had already done business were not, in Mr McMahon’s view, clients on the restricted list as defined by the contract of employment ”