England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
(His Honour Judge Altman)

		The Royal Courts of Justice The Strand London WC2A Wednesday 24 January 2001

Wednesday 24th January 2001

1. LORD JUSTICE MUMMERY: These are renewed applications for permission to appeal and for an extension of time. They are made in relation to a claim by an employer, Ward Evans Financial Services Ltd ("Ward Evans"). Ward Evans claim that there has been breach of contract by two former employees in the use by them of confidential information while still employed, contrary to express provisions in the contract of employment and in an associated agreement called a Trust and Confidence Agreement.
2. The action was heard by His Honour Judge Altman, sitting as a Judge of the High court, over four days in May 2000. In his reserved judgment, delivered on 30 August 2000, he dismissed the claims for damages and for breach of the express covenants.
3. An application was made on paper for permission to appeal. It was refused by Mantell LJ on 11 December on two grounds. First, there had been no satisfactory explanation for the application being out of time by some eight days. Secondly, the grounds of appeal, as set out in the skeleton argument in the application, had no realistic prospect of success.
4. The application is renewed orally by Mr Cohen on behalf of Ward Evans. His submissions have focused on findings of fact in the reserved judgment as to what happened a few days before the termination of the employment of the first defendant, Mr Fox.
5. Mr Fox's employment with Ward Evans started on 30 June 1997. On 29 October 1998 he and the second defendant, Mr Phillips, purchased a company, Fidelius, with a view to competing against Ward Evans. On 10 December 1998 Mr Fox gave notice, terminating his employment on 9 January 1999.
6. During his employment Mr Fox had been dealing on a regular basis with Certis, a customer of Ward Evans. The judge found that a day or two before the termination of his employment in January 1999, Mr Fox had a meeting with Certis. In the course of that meeting Mr Fox told Certis, in answer to a question, that he was leaving Ward Evans' employment. Secondly, in answer to a question, he told them that Fidelius would be able to do Certis' work. The judge went on to say:

"I find that this conversation arose fortuitously, probably because, unfortunately, on this particular occasion the arrangements that the Claimants had for making a tidy change over and having a meeting with Certis before Mr Fox left had fallen through. Mr Fox did not take the initiative or put himself forward to seek to persuade Certis to transfer. He did not initiate an explanation in a way designed to lead to that result. He then took a number of steps in order to facilitate the transfer and enable Certis to transfer whilst they made it clear that he had not solicited them."

7. The judge then asked the question:

"Were all these facts sufficient to give rise to the inference that Mr Fox 'induced' Certis to transfer? In the end I find that what took place was a genuine approach by the customer, who then was conscious of the challenge that may come from the Claimant and did cooperate with Mr Fox in order to contrive in a rather amateur way documents which were to record the fact that there had been no soliciting. The fact that this was done in a rather artificial way with Mr Fox's help does not destroy the finding that I make that behind it there was in fact no inducing."

8. That passage has to be read in the context of the provisions of the Trust and Confidence agreement. Clause 4 deals with "Obligations after employment". Under clause 4.3 it is provided that:

"The Executive [that applies to Mr Fox and Mr Phillips] shall not directly or indirectly. . .

4.3 At any time before or after the Termination Date, induce or seek to induce by means involving the disclosure or use of Confidential Business Information any Customer to cease dealing with the Company or any Group Company or to restrict or vary the terms upon which it deals with the Company or any Group Company."

9. Mr Cohen draws attention to the fact that, immediately preceding the passage quoted, the judge dealt with the interpretation of the word "induced" in the context of clause 4.3. Having pointed out that the definition was very broad, ranging from, on the one hand, "prevailing on" or "persuading" to, on the other hand, "bringing about" or "giving rise to", the judge went on to say this:

"I find that the word 'induce' in the context of the contracts of employment in this case requires a degree of soliciting, and some intention on the part of the Defendants to perform some act or say some words designed to lead Certis to transfer to Fidelius. It may be that the words spoken by Mr Fox [were] part of the sequence of words and events that led Certis to change to Fidelius. However on a fair construction of my findings of fact it seems to me that he did not 'induce' Certis to act in the way that they did."

10. The judge went on to say that, even if he was wrong and a proper view of the facts would lead to the conclusion that the defendants did induce Certis to transfer to Fidelius:

". . . I would nonetheless, it seems to me, be driven to conclude that it did not so do so by means involving either the disclosure or abuse of confidential business information and accordingly there would have been no breach of the covenant in any event."

11. That has to be read against the judge's earlier finding that:

". . . in undertaking through Fidelius to act for Certis the Defendants employed confidential information gathered during their employment with the Claimants."

12. Mr Cohen's main point is that the judge did not correctly direct himself on the construction of clause 4.3. He submits that, on a proper view of the clause, a breach occurred by reason of the exchanges between Mr Fox and Certis in January 1999, even though there was no positive persuading or soliciting by him.
13. In essence, the point which Mr Cohen makes is this. Under clause 4.3 it is a breach for an employee, such as Mr Fox, to tell a customer of his employer, while still employed, in answer to questions from the customer, that he is leaving and that his new company would be able to do the customer's work. Mr Cohen submits that while he is employed the employee should not provide such information to his employer's customer. He is not serving the interests of his employer by doing so. Moreover, in supplying that information he is making use of confidential information (as defined in the contract) acquired by regular contact with the customer during the course of his employment.
14. It seems to me that there is a real prospect of arguing this point successfully. The view can be taken that Mr Fox was, while still owing duties to his employer before his employment terminated, using information and opportunity, which his employment gave him, to serve the interests of his own company, rather than to perform his duties to his employer. This point also gives rise to a question of the construction and applicability to the facts of this case of clause 3.3 of the Trust and Confidence Agreement. Sub-clauses 3.32 and 3.33 relate to the position of a company, such as Fidelius, in which an employee has a material interest while he is employed, and that interest impairs his ability to act in the best interests of his employer, or requires him to disclose confidential information in order to discharge his duties or further his interest in the company in which he has such an interest.
15. For those reasons, I would regard this as a case with a real prospect of success. I would grant permission.
16. As to the application being out of time, having formed the view that there is merit in this appeal, I have considered the explanation given by the solicitor acting for Ward Evans of how he came to miss the 14-day period from the date of the decision for making an application for permission to appeal. There had been two months since the case had been heard before judgment was given. Judgment was given at a time when many people are taking holidays. It was necessary, in my view, for the solicitor, having obtained the judgment, to seek the views of counsel as to the grounds of appeal and to obtain get instructions from his clients as to whether they wished to pursue the appeal in the light of the advice. The period of eight days' delay in those circumstances should not prevent the appeal, in which I find merit, from proceeding to a full hearing.
17. For those reasons I would grant permission to appeal and extend the time for appealing.
18. LORD JUSTICE RIX: I agree.
ORDER: Applications for permission to appeal and an extension of time allowed. Application to amend the applicant's skeleton argument allowed. (Order not part of approved judgment)