England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY

		Priory Courts 33 Bull Street Birmingham West Midlands B4 6DS
		2 April 2009

1. JUDGE GRANT: This is an application for an injunction. It comes before the court on a without-notice basis. However, the claimants' solicitors have given notice of the application to the defendant, who has instructed solicitors. Thus it is that at the hearing of this application Mr Smail appears on behalf of the claimants and Mr Terry appears on behalf of the defendant, and the hearing has been conducted on the basis that used to be known by the expression ex parte on notice. Thus, while it is strictly speaking an application made without notice, it has been conducted with the advantage of both parties being present in court, and Mr Terry has been able to make full submissions to the court, as a result of which the court is much the better placed to deal with this matter. The matter is indeed urgent, and the hearing has been conducted in a commendably summary fashion. I have adjourned briefly at the close of submissions but this judgment is being delivered, in effect, as an ex tempore judgment having regard to the overall urgency of the matter.
2. The action. I adopt as a description of the essential features of the action the text in paragraphs 1, 2, 3 and the beginning of 4 of the skeleton argument that Mr Smail has prepared for this hearing. It provides as follows:

"1. The defendant was employed by the Claimants as an associate solicitor and as supervisor in the firm's Birmingham office criminal department. His employment commenced on or about 18 April 2006. His duties included to lead the criminal department in terms of dealing with serious fraud cases.

2. It was an express term of his contract of employment that he would give three months' notice of termination. It was an implied term of his contract that he would well and faithfully serve the firm ('the duty of fidelity').

3. On Friday, 27 March 2009, the Defendant purported to leave the Claimants' employment without giving three months' or any notice in breach of the express term of his contract of employment as to notice.

4. Further, in breach of the implied term of his contract of employment, prior to purporting to leave the Claimants' employment, and whilst still employed by them, the Defendant has sought to obtain the consent of clients of the Claimants' firm to transfer their instructions away from the Claimants."

That suffices as a short summary of the subject matter of the action. I pause to add that, in the course of submission, albeit in the context of a plea in the Particulars of Claim, I inquired from Mr Smail what was meant by the adjective "purported" and/or "purporting' as set out in paragraphs 3 and 4. Mr Smail submitted and/or conceded that it is, of course, the claimants' case not that the defendant purported to leave the claimants' employment on 27 March without giving three months' notice but, in fact, as a matter of fact that is exactly what he did do.

3. Preliminary matters. It is, of course, important for the court to be satisfied as to certain preliminary matters, firstly, that the claim form itself should specify the remedy that the claimants seek, namely including in particular the remedy of the injunction, and the claim form here satisfies that requirement. Secondly, the court must be satisfied that there is real urgency in the matter, and it is common ground in this case that this is such a case. And, thirdly, as in all such cases, it is important for the court to have regard to the provisions of section 37 of the Supreme Court Act, and namely ask itself the question in the round whether or not it is just and convenient to make an injunction in all the circumstances of the case.
4. The general principles to which the court will have regard. Here again it is common ground that the approach of the court remains as set out in American Cyanamid v Ethicon [1975] AC 396, and namely that there are three stages for the court's inquiry to follow: firstly, is there a serious question to be tried, secondly, are damages adequate remedy and, thirdly, where does the balance of convenience lie, namely in favour of granting or refusing the relief that is sought?
5. The basis of the application. Mr Smail confirmed in his submissions to the court that this is not a restrictive covenant case. Instead, the claimants put their case on the basis of two causes of action: firstly, that the defendant failed to give notice as he should have done, and that - as a cause of action - is or would be sufficient to stop or prevent the defendant from soliciting during the three months' notice period; secondly, that the defendant was, in fact, soliciting clients while he was still employed. Mr Smail submits that conduct was a breach of the duty of fidelity; in support of that submission Mr Smail relied on two earlier decisions; firstly that of the Court of Appeal in Wessex Dairies Limited v Smith [1935] 2 KB 80, and secondly that of Havers J in Sanders v Parry [1967] 1 WLR 753. Mr Smail went on to develop his second submission as follows: that in circumstances such as obtained in the present case, as a matter of wide application, if injunctive relief were not to be granted in such a case, then an employee could calculate how to angle his departure in the sense that - while he was still in employment - he could solicit the business of the employer, with a view to transferring clients and/or customers to his new employer. Then he could bring his employment to an end by not giving notice. Thus it is, in Mr Smail's submission, that the circumstances do give rise to a proper claim for what is described as springboard relief. In support of that submission, he referred to the decision of Openshaw J in UBS Wealth Management & Or v Vestra Wealth LLP [2008] EWHC 1974 (QB). With that by way of introduction, I now turn to consider the three matters of general principle.
6. Is there a serious question to be tried? At the outset of his submissions, Mr Terry conceded that there were serious questions to be tried, namely (1) whether there were breaches of the employment contract, and of the implied duty of fidelity that obtained while the defendant was an employee; and (2) whether or not he was in further breach by failing to give notice. However, as Mr Terry's submissions developed, it appeared that that concession should be qualified so that, while it was conceded that those questions already identified did amount to serious questions to be tried, the defendant nonetheless submitted that there was not, in fact, a proper contractual basis to found the claim for such relief. Here the essential submission made by Mr Terry was as follows: that if an employer does not keep the contract of employment alive in the absence of a restrictive covenant, the employer will not then be entitled to injunctive relief. Mr Terry relied in support of that submission upon the decision of the Court of Appeal in Evening Standard Co Limited v Henderson [1987] ICR 588 That point was met by Mr Smail in reply where Mr Smail's submission was that, irrespective of whether the claimant had accepted the repudiatory conduct of the defendant, the claimants would still have their secondary rights available to them under the contract, those rights including claims to damages and/or an injunction. In my judgment, there is force in that riposte. In any event, for the purposes of this ex parte application, albeit conducted in fact on notice, I have come to the view that the claimants have established that there are, indeed, serious questions to be tried, not least those originally conceded by Mr Terry.
7. Are damages an adequate remedy? Here, Mr Terry's submission was as follows, that what the court was concerned with here are solicitors' fees; they relate to a small number of cases, albeit of quite high value; but all are publicly funded cases. Therefore, there is little doubt that there would be the clearest possible paper trail to identify the number and quantum of such fees; thus in due course, if there were to be a claim for damages, those fees could be identifiable and would be payable. As regards the position that obtains as between the parties, my preliminary view is that there is force in Mr Terry's submission. However, Mr Smail in reply pointed to the wider position, which is as set out in the first witness statement of Mr Dass at paragraphs 31 and 32 where he states as follows:

"31. After lengthy discussions with Mr Loy and Mr Jotangia later on 26 March 2009 [and I interpose to explain that Mr Loy, I think, is the practice manager in the claimants' firm and Mr Jotangia is Mr Dass' fellow partner], we all agreed that the Defendant's proposals were not acceptable and that they would in fact probably lead to a number of redundancies in the fraud department; if not the closure of the department itself. We also agreed that we would have no guarantee from the Defendant that he would not attempt to take all of the clients. We felt that we could not rely upon his word. We therefore decided to reject the Defendant's proposals. We felt we would be better off trying to protect the jobs of the fraud department staff and our investment.

32. In the event that we had agreed to the Defendant's proposals, it is likely that the Firm would have had to make five out of the seven remaining staff in the department redundant (to include four fee earners and one member of support staff). Serious consideration would also have had to have been given about retaining the one remaining fee earner and secretary, and whether in fact it would be viable to keep the department running."

In the light of those points, I have come to the view that there is a real risk in this case that damages of themselves would not provide a sufficient or adequate remedy for the claimants.

8. The balance of convenience. Here, Mr Terry identified two matters that the court should have regard to in considering where the balance of convenience lay. Firstly, the right of clients to chose their representation in the criminal matters with which they were concerned, and, secondly, the fact that - were an injunction to be granted - then during its lifetime that might give rise to a tension between the operation of such an order and any order that a Crown Court might make, or might otherwise have made, if and when the Crown Court was dealing with an application to transfer an order for legal representation in those matters. In answer to that point, Mr Smail pointed to the anticipated or known trial dates of the clients in question as set out at pages 29-31 of the bundle, which are pages 2-4 of the exhibit to Mr Dass' first witness statement. The earliest date of trial shown there is September 2009. As any injunction granted would only be for a period of three months from 27 March 2009, i.e. only to 27 June 2009, Mr Smail submitted that the likelihood of any conflict was, or was likely to be, limited and may be significantly limited in extent. I accept that submission.
9. On the law as regards the case of UBS, Mr Terry made a submission that, from paragraph 3 of the judgment, it would appear that there were differences of opinion as between judges of first instance. I have come to the provisional view that, for the purposes of this application, even if there were such a difference of opinion, it remains open to me to adopt the approach of Openshaw J as set out in paragraph 4 of his judgment where he has held as follows:

"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 ... 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."

For the purposes of this application, I propose to adopt that approach.

10. To return to the question whether it is just and convenient to make an injunction on this application. In my judgment, on the basis of the material presently before the court and although only having looked at the authorities in summary fashion, it nonetheless appears to me that this is, in may ways, a classic example of the type of case where springboard relief should be afforded to a claimant. Further, in practical terms, as already observed, any injunction will only last for a period of three months, namely the notice period, with the result that, after 27 June 2009, the public policy concerns articulated by Mr Terry would no longer obtain. Mr Terry also made a submission that, as regards the issue of whether or not there had been discussion between Mr Dass, the partner in the claimants' firm, and the defendant in connection with one client, a Mr Samra, there had not been a full and frank disclosure. Therefore, without seeing the defendant's witness statement that has now been placed before the court, the court would not have had a sufficient history of the facts placed before it. Mr Smail's reply was that there is a distinction to be drawn between references to a discussion which occurred after the relevant event on the one hand, and a proper consultation between the relevant parties which occurred before the event on the other hand; and the claimants' complaint here goes to the latter point. I am not persuaded at this stage that it has been established that there has been any, or any material, failure by the claimants to make full and frank disclosure on this without-notice application.
11. Conclusion. I shall therefore accede to the application and grant an injunction essentially in the terms sought subject to any further submissions from counsel but limited in time to 27 June 2009.
12. Costs are reserved.
13. Mr Terry makes an application for permission to appeal. It is limited to the pure issue of law that is flagged up in paragraph 3 of the decision of Openshaw J in UBS Wealth Management where the learned judge on that occasion held as follows:

"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 Limited, an unreported decision of Blackburne J ... in 1999, although it seems to have been accepted by Scott J in Balston Limited v Headline Filters Limited [1987] FSR 330 at 340.

And then, as I have already held in my judgment, Openshaw J then went on in paragraph 4 to hold as follows:

"In my judgment, springboard relief is not confined to cases where former employees threaten to abuse confidential information ... It is available to prevent any future or further serious economic loss ... caused by former staff members taking an unfair advantage, an 'unfair start', of any serious breaches of their contract of employment …"

I can well see why Mr Terry makes the application. It has, of course, been the fact that the court today has not had the opportunity to look at the cases to which Openshaw J referred in paragraph 3 of his judgment, namely at either Midas or Balston. Therefore, this court has not been able, understandably in the urgent circumstances of this application, to consider in any proper sense of the word the jurisprudence to which reference is there made. Therefore, I do not think it would be appropriate for this court to give permission to appeal although I do think it would be right for me to say that I can entirely see why Mr Terry flags up the point. Indeed, I can see that this is a point upon which practitioners could be assisted, as it were, by further consideration by the Court of Appeal. So, while I refuse the application at this stage, I add those words should Mr Terry wish to renew the application elsewhere.