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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Le Puy Ltd v Potter & Anor [2015] EWHC 193 (QB) (02 February 2015) URL: https://www.bailii.org/ew/cases/EWHC/QB/2015/193.html Cite as: [2015] IRLR 554, [2015] EWHC 193 (QB) |
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QUEEN'S BENCH DIVISION
Strand, London WC2A 2LL |
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B e f o r e :
Sitting as a Deputy Judge of the Queen's Bench Division
____________________
LE PUY LIMITED | Claimant | |
- and - | ||
(1) CHRISTOPHER ALAN POTTER | ||
(2) ABSTRACT RECRUITMENT LIMITED | Defendants |
____________________
Ms Jennifer Meech (instructed by Franklins Solicitors LLP) appeared for the First Defendant
Hearing dates: 23 January, 2 February 2015
____________________
Crown Copyright ©
MR SALTER QC:
Introduction
Background
Harpur
Mr Potter's role
Harpur's business
Mr Potter's resignation
I have been reflecting on my current position, both with Le Puy and in my personal life and have concluded that I am unable to continue working as I am, and will not be returning to work next week.
My health is my biggest consideration and as you are aware I have a cardiac condition which gives me cause for concern each and every day. I know my own limits, and I'm no longer prepared to sacrifice my health for any prize. You know I have not been sleeping for months now, but I am constantly "on-call" as I have been telling you, I can no longer cope with the pressure of working at Le Puy ..
.. I hope you can see it from my point of view and that we can part on good terms.
I spent time with Hayley on Friday, she has all client details and client expectations for bookings. I am unable to assist with any client contact as I feel on the verge of a breakdown, I am an emotional wreck and need time out. I cannot even face talking to anyone, be it at work or at home ..
The solicitors' correspondence
The Alleged Contract
.. Mr Potter's contract was signed at our then offices at Bletchley Park, with each of us retaining a copy. At that time, I operated out of my own office space and stored all company documents in a four-tier filing cabinet. I place the signed contracts in sealed brown envelopes with their contents marked on the front of the envelopes. When the offices were moved to Central Milton Keynes in February 2014, I began to work from home and the filing cabinet was stored in the company offices due to space constraints at home.
When the offices were moved again in September 2014 to what are now our current premises .. the filing cabinet was positioned next to Mr Potter's desk. At that time, the contracts would still have been located in this Cabinet.
However I cannot find the signed copy of Mr Potter's or my own contract there now.
Mr Potter had the key to the cabinet. He ordinarily kept this in his drawer, however the key was left in the cabinet following his departure which leads me to believe that he had accessed the cabinet shortly before his departure.
Knowing what I now know about Mr Potter's conduct surrounding his departure from Harpur .. I believe that he has taken the signed copies in an attempt to frustrate Harpur's attempts to hold him to the terms of his contract
.. A draft shareholder Agreement and Director Service Agreement were produced on 19 November 2012 but these were never entered into ..
I have draft copies of Director Agreement and Shareholder Agreements, but these were never signed off or agreed. I was never issued with either agreement. I did not sign an employment contract at any time during my employment with [Harpur]. .. I did not sign or accept the terms of any written contract of employment with [Harpur] ..
I note that Mr Day is accusing me of having signed a contract of employment and subsequently removed this from [Harpur]'s filing cabinets. I absolutely deny this accusation. I did not sign an employment contract nor do I know of the contents of anything that was kept in the filing cabinet Mr Day refers to, or in fact which filing cabinet he is referring to. All cabinets were moved each time we moved offices. I have no idea what key Mr Day is referring to either.
I have reviewed the contract of employment that has been produced by the claimant, in its claim that I signed and/or accepted its terms. Had this contract been put in front of me to sign, I would have refused to sign it until elements of it were clarified or corrected I would never have signed or agreed to a contract that in my opinion was not in my interest
That witness statement also drew attention to a number of provisions in the Alleged Contract that were either inapposite to Mr Potter's position and status with Harpur in October 2013, or were terms that it would have been contrary to Mr Potter's interests to agree. These matters, Mr Potter asserted, showed how unlikely it was that he had signed the Alleged Contact, and supported his case that he had not done so.
Mr Potter's original contract of employment with Harpur, signed by him on 16 October 2013 has [now] been discovered ..
I learnt of the location of Mr Potter's signed contract on 15 January 2015, when my accountant, Sean Craven, at Anthistle Craven, called me that day to tell me he had found it in his filing cabinet
.. Checked the hardcopy payroll file .. [and] .. discovered an envelope containing the signed employment contracts for Mr Potter and Mr Day.
As the envelope was located in the 2013/14 payroll file, I presumed it had been there for some time. We would not normally hold employment contracts in payroll files hence why I had not looked there initially.
.. I can only assume therefore that the contract came into the office with a bundle of bookkeeping papers, possibly in error, and that one of my assistants must simply have filed them on the payroll file for safekeeping, not realising that we would typically scan such documents into the document management system ..
The covenants
16.5 during the period of 12 months following the date of termination of your employment you will not directly or indirectly whether on your own account or jointly or as an employee agent consultant manager shareholder direct or otherwise:
16.5.1 canvas or solicit the custom of any person firm or company;
16.5.1.1 who is then; or
16.5.1.2 who you know or ought to know was at any time during the period of one year prior to the date of termination aforesaid
a customer or client of any branch office of [Harpur] from which you were actively employed at any time during the one year preceding the termination of your employment for the supply of services
16.5.1.3 which are competitive to those then supplied: and
16.5.1.4 which belong to the same generic class of those supplied at any time during the period of one year prior to the date of termination aforesaid in each case by [Harpur] or
16.5.2 deal with such a customer for the supply of such services as each case are described in clause 16.5.1
18.2 you undertake at all times after the termination of your employment to keep secret and not to use any information obtained by you during the course of your employment which is of a confidential nature and of value to [Harpur] including without limitation:
18.2.1 secret business methods of [Harpur] and confidential lists, and particulars of
18.2.2 persons registered with [Harpur] at the date of termination of your employment for the purposes of obtaining temporary or permanent work who have worked for [Harpur] or been introduced by [Harpur] to a permanent employment position within the six months prior to termination of your employment.
18.2.3 any person firm or company to whom within the six months prior to the date of termination of your employment [Harpur] has supplied or on whose behalf at the date of termination of your employment [Harpur] is recruiting temporary and/or permanent staff
whether or not in the case of documents they are, or were, marked "Confidential".
The test
If it will not be possible to hold the trial before the period for which the plaintiff claims to be entitled to an injunction has expired, or substantially expired .. Justice requires some consideration as to whether the plaintiff would be likely to succeed at trial. In those circumstances is it is not enough to decide merely that there is a serious issue to be tried ..
A serious question to be tried
The Alleged Contract
.. It is no part of the court's function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial ..
The enforceability of the restrictive covenants
"(1) Post-termination restraints are enforceable, if reasonable, but covenants in employment contracts are viewed more jealously than in other more commercial contracts, such as those between a seller and a buyer.
(2) It is for the employer to show that a restraint is reasonable in the interests of the parties and in particular that it is designed for the protection of some proprietary interest of the employer for which the restraint is reasonably necessary.
(3) Customer lists and other such information about customers fall within such proprietary interests.
(4) Non-solicitation clauses are therefore more favourably looked upon than non-competition clauses, for an employer is not entitled to protect himself against mere competition on the part of a former employee.
(5) The question of reasonableness has to be asked as of the outset of the contract, looking forwards, as a matter of the covenant's meaning, and not in the light of matters that have subsequently taken place (save to the extent that those throw any general light on what might have been fairly contemplated on a reasonable view of the clause's meaning).
(6) In that context, the validity of a clause is not to be tested by hypothetical matters which could fall within the clause's meaning as a matter of language, if such matters would be improbable or fall outside the parties' contemplation.
(7) Because of the difficulties of testing in the case of each customer, past or current, whether such a customer is likely to do business with the employer in the future, a clause which is reasonable in terms of space or time will be likely to be enforced. Moreover, it has been said that it is the customer whose future custom is uncertain that is 'the very class of case against which the covenant is designed to give protection . . . the Plaintiff does not need protection against customers who are faithful to him' (John Michael Design plc v Cooke [1987] 2 All ER 332, 334).
(8) On the whole, cases in this area turn so much on their own facts that the citation of precedent is not of assistance."
.. Mr Day would not employ any other consultants, so it fell to me to build and maintain the relationships we had with clients .. In addition to attending weekly client meetings, I was available 24 hours a day and would often take calls from clients who needed last minute bookings for staff filled .. I had a very good relationship with my clients and it was understood that I was the reason they most of them would use [Harpur]'s services ..
The enforceability of the confidential information provisions
.. particulars of
18.2.2 persons registered with [Harpur] at the date of termination of your employment for the purposes of obtaining temporary or permanent work who have worked for [Harpur] or been introduced by [Harpur] to a permanent employment position within the six months prior to termination of your employment.
18.2.3 any person firm or company to whom within the six months prior to the date of termination of your employment [Harpur] has supplied or on whose behalf at the date of termination of your employment [Harpur] is recruiting temporary and/or permanent staff
In our judgment the information will only be protected if it can properly be classed as a trade secret or as material which, while not properly to be described as a trade secret, is in all the circumstances of such a highly confidential nature as to require the same protection as a trade secret eo nomine. The restrictive covenant cases demonstrate that a covenant will not be upheld on the basis of the status of the information which might be disclosed by the former employee if he is not restrained, unless it can be regarded as a trade secret or the equivalent of a trade secret: see, for example, Herbert Morris Ltd. v. Saxelby [1916] 1 AC 688, 710 per Lord Parker of Waddington, and Littlewoods Organisation Ltd v Harris [1977] 1 WLR 1472, 1484 per Megaw L.J.
We must therefore express our respectful disagreement with the passage in Goulding J.'s judgment .. where he suggested that an employer can protect the use of information in his second category[14], even though it does not include either a trade secret or its equivalent, by means of a restrictive covenant. As Lord Parker of Waddington made clear in Herbert Morris Ltd v Saxelby [1916] 1 AC 688, 709 .. a restrictive covenant will not be enforced unless the protection sought is reasonably necessary to protect a trade secret or to prevent some personal influence over customers being abused in order to entice them away.
In our view the circumstances in which a restrictive covenant would be appropriate and could be successfully invoked emerge very clearly from the words used by Cross J. in Printers & Finishers Ltd v Holloway [1965] 1 WLR 1, 6 ..
"If the managing director is right in thinking that there are features in the plaintiffs' process which can fairly be regarded as trade secrets and which their employees will inevitably carry away with them in their heads, then the proper way for the plaintiffs to protect themselves would be by exacting covenants from their employees restricting their field of activity after they have left their employment, not by asking the court to extend the general equitable doctrine to prevent breaking confidence beyond all reasonable bounds."
It appears to me that the problem is one of definition: what are trade secrets, and how do they differ (if at all) from confidential information? Mr. Poulton suggested that a trade secret is information which, if disclosed to a competitor, would be liable to cause real (or significant) harm to the owner of the secret. I would add first, that it must be information used in a trade or business, and secondly that the owner must limit the dissemination of it or at least not encourage or permit widespread publication.
That is my preferred view of the meaning of trade secret in this context. It can thus include not only secret formulae for the manufacture of products but also, in an appropriate case, the names of customers and the goods which they buy. But some may say that not all such information is a trade secret in ordinary parlance. If that view be adopted, the class of information which can justify a restriction is wider, and extends to some confidential information which would not ordinarily be called a trade secret.
Summary
Is any injunction required?
I have not carried out any work for any clients of [Harpur] following my resignation, nor has [Abstract]. I wholly disagree with [Harpur]'s allegations that I have solicited these clients, or that I have solicited business away from it.
Would damages be an adequate remedy?
.. In a case of this kind there are evident and grave difficulties in assessing the loss which an employer may suffer from the employee taking work with a competitor: even where it is possible to identify clients who have transferred their business (which will not always be straightforward ..) there may be real issues about causation and the related question of the length of the period for which the loss of the business could be said to be attributable to the employee's breach. If the sums potentially lost are large they will not be realistically recoverable from the employee in any event ... There may be other intangible but real losses to the employer's reputation.
The balance of convenience
.. It would be unwise to attempt even to list all the various matters which may need to be taken into consideration in deciding where the balance lies, let alone to suggest the relative weight to be attached to them. These will vary from case to case.
Where other factors appear to be evenly balanced it is a counsel of prudence to take such measures as are calculated to preserve the status quo. If the defendant is enjoined temporarily from doing something that he has not done before, the only effect of the interlocutory injunction in the event of his succeeding at the trial is to postpone the date at which he is able to embark upon a course of action which he has not previously found it necessary to undertake; whereas to interrupt him in the conduct of an established enterprise would cause much greater inconvenience to him since he would have to start again to establish it in the event of his succeeding at the trial.
The undertaking in damages
Provision of information
.. to subvert the normal accusatorial basis of our litigation, where the horse precedes the cart, into an inquisitorial one starting from an assumption that guilt has been proved, and saying to the defendants, 'Tell us everything you and others have done which was wrong.' [when] all that has been shown to date is a good arguable case, no more and no less. ..[23]
Conclusion
Note 1 American Cyanamid Co v Ethicon Limited [1975] AC 396 [Back] Note 2 NWL v Woods [1979] 1 WLR 1294. [Back] Note 3 [1979] 1 WLR 1294 [Back] Note 4 [1991] IRLR 80 at 83. See also Lawrence David Ltd v Ashton [1989] ICR 123 at 135, per Balcombe LJ; and CEF Holdings Ltd v Mundey [2012] EWHC 1524, [2012] IRLR 912. [Back] Note 5 See Note 6 American Cyanamid Co v Ethicon Limited [1975] AC 396 at 403H. [Back] Note 7 (31st ed) para 16-076. [Back] Note 8 [2013] EWCA Civ 1176, [2013] IRLR 970 at [15]. [Back] Note 9 Set out in paragraph 18 above. [Back] Note 10 As Ms Meech correctly points out, paragraph 14 of Mr Day’s first witness statement identifies the particular sites from which Harpur’s customers operate, and paragraph 42 of Mr Potter’s witness statement explains that he wishes to contract with Clipper “though not at any site to which the Claimant has to my knowledge ever supplied staff”. There is also a reference to “Clipper Milton Keynes” in an email dated 18 November 2014, and an email dated 20 November 2014 signed by the “Milton Keynes Site Manager” of UK Mail. These references all suggest that at least some of Harpur’s customers have branches in different locations, and are not inconsistent with Ms Meech’s submission that each branch is responsible for its own hiring. However, these isolated references fall short of a full discussion of the issue, and are insufficient for me to form any firm view on the point.. [Back] Note 11 Set out in paragraph 18 above. [Back] Note 12 Set out in paragraph 18 above. [Back] Note 13 [1987] 1 Ch 117 at 137F. [Back] Note 14 Goulding J. at first instance had defined three classes of information: (i) information which, because of its trivial character or its easy accessibility from public sources of information, cannot be regarded by reasonable persons or by the law as confidential at all; (ii) information which the servant must treat as confidential … but which once learned necessarily remains in the servant's head and becomes part of his skill and knowledge; (iii) specific trade secrets so confidential that, even though they may necessarily have been learned by heart and even though the servant may have left the service, they cannot lawfully be used for anyone's benefit but the master's. [Back] Note 15 [1991] 1 WLR 251. [Back] Note 16 [1991] 1 WLR 251 at 259-260 (emphasis added). [Back] Note 17 [2014] EWCA Civ 1373 at [53]. [Back] Note 18 See eg R v Secretary of State for Transport, Ex p Factortame Ltd (No 2) (Case C-213/89) [1991] 1 AC 603 at 682–683, per Lord Jauncey; cited and applied in National Commercial Bank Jamaica Ltd v Olint Corpn Ltd [2009] UKPC 16, [2009] 1 WLR 1405 at [19], per Lord Hoffmann. [Back] Note 19 American Cyanamid Co v Ethicon Limited [1975] AC 396 at 408F-H. [Back] Note 20 [2009] EWHC 3448 (QB); [2010] IRLR 600. [Back] Note 21 [2011] EWHC 1239 (QB); [2011] IRLR 976. [Back]Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm) at [15] to [22], per Leggatt J. [Back]