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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Joe Walker (Capital Business) Ltd v Stuart [1998] ScotCS 105 (18 December 1998)
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Cite as: [1998] ScotCS 105
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OPINION OF LORD OSBORNE in the Petitions of JOE WALKER (CAPITAL BUSINESS) LTD Petitioners; against HUGH MacBEAN STUART Respondent: and JOE WALKER (CAPITAL BUSINESS) LTD Petitioners against ANDREW GEORGE LLOYD Respondent ________________ |
18 December 1998
In these two petitions, interdict and interim interdict is sought by the petitioners against the two respondents, who were formerly employed by them. Essentially, the petitioners are seeking enforcement by means of interdict of certain restrictive covenants, said to have been part of the respondents' contracts of employment, against them. The circumstances of the petitioners' applications can be seen from the averments made in the two petitions. In each petition, the respondent has lodged Answers. Also in each petition a number of documentary productions and affidavits have been produced.
On 27 November 1998, there came before me motions in each petition, on behalf of the petitioners, for orders for interim interdict in terms of the prayers of the petitions. At the hearing of the motions, which were opposed by the respondents, the petitioners and both respondents were represented by counsel. Counsel for the petitioners, in supporting the petitioners' motions, indicated that the matter had something of a history. An attempt had been made in a single petition to obtain orders against the respondents, similar to those now sought, but that petition had been dismissed as incompetent. Subsequently two petitions had been brought to obviate that problem and motions for interim interdict had been enrolled in them on two separate occasions. On each occasion, for one reason or another, the motions concerned had been dropped. Now motions for interim interdict were before the Court again. Counsel for the petitioners said that the issues in each petition were substantially the same. The main issue was whether the terms of the respondents' contracts of employment included the conditions now sought to be enforced.
In presenting his submissions, counsel for the petitioners took the petition against Hugh MacBean Stuart as that by reference to which his submissions would be elaborated. He drew attention to certain affidavits which had been lodged in that process. In particular there was an affidavit of Joseph Gilbert Walker and one from a George MacRae, which it was submitted supported the incorporation of the contractual conditions founded upon. It was explained that the petitioners' business had been a partnership until 1990 when the present petitioning company was incorporated.
The contractual document which contained the conditions now sought to be enforced was 6/2 of process. Clause 11 created a restraint upon the disclosure of confidential information. Clause 12 was a non-solicitation prohibition designed to subsist for a period of twelve months from the termination date as defined therein. It was submitted that the restrictions contained in these clauses were limited and essentially reasonable in scope. In relation to clause 12, there was a prohibited area which was limited. The whole effect of the clause was to limit competition in certain specified ways during the period of its operation. It was submitted that the clause was designed to protect the petitioners' business connection. It was indicated that clause 12(d) was designed to preserve the effect of clause 12, in the event of the Court reaching the conclusion that some part of that clause was invalid because its effect was unreasonably wide.
Referring to the terms of the petitions themselves, counsel for the petitioners drew attention to the circumstances which had given rise to the termination of the respondents' contracts of employment. Furthermore, in paragraph 8 of the petitions, it was averred that the petitioners were reasonably apprehensive that, in the circumstances which had occurred, or were likely to occur, the respondents would be in breach of the terms of the conditions relied upon.
Counsel for the petitioners next proceeded to draw my attention to a number of authorities which he contended were of importance in the case. In the first place, he recognised that it was necessary for the petitioners to bring prima facie evidence to support the existence of the right claimed. In that connection reference was made to Chill Foods (Scotland) Ltd v Cool Foods Ltd 1977 S.L.T. 38 at page 39. There Lord Maxwell had said that where, not merely the alleged invasion of a right, but the very existence of the right in question was denied, interim interdict would not be granted unless the person seeking it could produce some kind of prima facie evidence to support his averment of the right. In that case certain interdicts were refused where the petitioner was unable to point to any document, admission or other prima facie evidence or circumstance supporting the averment of the contract sought to be enforced. Counsel for the petitioners submitted that the present case differed from that cited in that, in the present case, the affidavits mentioned set forth prima facie evidence of the existence of the rights sought to be enforced.
In elaborating his submission that a prima facie case for interim interdict had been shown, counsel for the petitioners drew attention to the terms of the second affidavit sworn by Joseph Gilbert Walker, dated 24 November 1998, 6/17 of process. In that affidavit serious allegations were made against the respondents, to the effect that they had taken certain actions which demonstrated that it was reasonable to apprehend that they would breach the conditions of their contracts relied upon by the petitioners. It appeared that they had copied the petitioners' client database onto a computer disc, which was available to them for use at Grampian Business Products Ltd, their new employers. It was clear that the law would protect such material as customer lists, etc. That appeared from Rentokil Ltd v Kramer 1986 S.L.T. 114, at page 116.
If the Court were to take the view that some part of clause 12 was too wide to be enforceable, the effect of clause 12(d) was to enable the Court to sever the objectionable part from the rest of the clause, which could then be enforced. In that connection reference was made to Hinton & Higgs (UK) Ltd v Murphy 1989 S.L.T. 450, at page 452.
Turning to the issue of balance of convenience, counsel for the petitioners submitted that it favoured his clients. An interim interdict would not prevent the respondents from earning their livings; they would still be entitled to work in a circumscribed way. On the other hand, if the orders were not granted the petitioners would suffer serious economic loss, which might well be difficult to quantify. That was a relevant consideration in the context, as appeared from C. R. Smith Glaziers (Dunfermline) Ltd v Greenan 1993 S.L.T. 1221. At pages 1223-4, it was made clear that the difficulty of quantification of loss was a material consideration in assessing the balance of convenience. In all the circumstances the motions ought to be granted.
Counsel for the respondents, in opposing the motions made five submissions. In the first place, he contended that there was no satisfactory material to show that the contractual terms relied upon by the petitioners had even been incorporated into the respondents' contracts of employment; in the second place, on the basis of the material available to the Court and, in particular the documentary productions, it was evident that the petitioners were themselves in material breach of contract and hence, on the principle of mutuality, disentitled from enforcing the conditions relied upon; in the third place, the petitioners' averments relating to reasonable apprehension were irrelevant; in the fourth place, the restrictions sought to be enforced were of unreasonable width; and in the fifth place, the balance of convenience was against the petitioners.
In elaborating these submissions, on the question of incorporation, counsel for the respondents pointed out that there were a number of affidavits containing conflicting information. Against this background, the Court should not conclude that the terms sought to be relied upon had been incorporated in the contracts of employment, since there was no documentary evidence of that having been done. Indeed, the averments of the petitioners and the alleged contractual document produced gave rise to the inference that the document, which contained the conditions relied upon, could not have been incorporated in those contracts. In particular, in paragraph 2 of the petition against Hugh MacBean Stuart it was averred that he commenced employment with the petitioners in May 1986. It was claimed that he was employed under a contract of employment, the terms of which included those set out in a document entitled "Employee Contract of Employment". There then followed the following averment:
"He was, on or shortly after taking up employment supplied with this document by the petitioner and his employment has been on the basis of the terms and conditions set out therein."
Counsel for the respondents submitted that that averment was demonstrably wrong, in respect that the document relied upon, referred to as "this document", 6/2 of process, showed that the employer was Joe Walker (Capital Business) Ltd; since that legal entity came into existence only in 1990, it was plain that the document produced could not have been the document supplied to the respondent in 1986. In the Answers to the petition on behalf of Hugh MacBean Stuart, the petitioners were called upon to aver whether the document produced and founded upon was the actual document said to apply to the respondent's employment from the outset, or a subsequent version. Furthermore, the petitioners were called upon to lodge in process the version of the contractual conditions which was said to apply to the respondent's contract of employment. These calls had not been answered. No other document, which might have been in existence at the time when Hugh MacBean Stuart was first employed by the predecessors of the petitioners had been produced. Both of the respondents denied that the conditions set forth in 6/2 of process had been incorporated into their contracts of employment. Indeed their position was that the first time that they saw this document was when a copy of it was left on the respondents' desks in April 1998, at a time when the respondents were in dispute with the petitioners regarding certain of their contractual conditions relating to remuneration. In other words, it appeared that "this document" had materialised at a convenient moment when a dispute over contractual conditions had arisen between the parties. The position taken up by the respondents was that they had had no formal written conditions of employment. That was true in relation to all sales personnel. In this connection it was of importance to note that, in the petition against Andrew George Lloyd, a document had been produced, 7/11 of process which was dated September 1988 and hence dated from a period of time when the petitioners' business was operated by the partnership which preceded their incorporation. That document was couched in terms appropriate to the employer being a partnership; furthermore, that particular document had been signed by the employee to whom it related, George MacRae. No comparable document signed by the respondents had been produced. It was evident from this situation that certain employees of the petitioners or their predecessors had in fact signed contracts of employment with detailed contractual provisions, but there was no evidence that the respondents had done so.
The reliance had been placed by the petitioners on the affidavits of Joseph Gilbert Moore Walker. In the first affidavit sworn by him, dated 13 October 1998, 6/7 of process he spoke of the drawing up of contracts of employment around 1988 or 1989. He stated that, among others, Hugh Stuart had demanded a contract of employment. He said that when contracts were drawn up, the salesmen refused to sign them as they said that they were too complicated. Referring to the second affidavit of Mr Walker, dated 20 November 1998, 6/17 of process, he pointed out that it contained serious allegations of criminal activity on the part of the respondents. It was astonishing that the petitioners had not thought fit to make averments relating to those matters. That was a circumstance which reflected adversely upon the weight to be given to that material.
A further point was made concerning the issue of whether the respondents had had contracts of employment such as those averred. In clause 2 of the conditions of employment said to have been incorporated into the respondents' contracts it was provided that all salaries were to be paid into the recipients' bank accounts. However, the salary documentation relating to Hugh Stuart showed that until 1997 that was not being done. By 1998 such payments were made. That circumstance tended to support the position of the respondents that the document now sought to be relied upon in fact had its origin in 1998.
A further important consideration arose from an affidavit by Mr David Allan, a solicitor practising in Inverness. He said that in May 1998 he had been consulted by the sales team of the petitioners' predecessors, including Hugh Stuart, with a view to the provision of a contract of employment by the employers for these individuals. He stated that, over a period of time, he conducted a correspondence relating to that matter on behalf of his clients, which ran until January 1989. Thereafter, the correspondence had come to an end without any conclusion having been reached. This correspondence, so far as in Mr Allan's possession, had been produced as an appendix to his affidavit. This material showed that, at a time when, according to the petitioners, the respondents had had formal contracts of employment, that was by no means the case.
Turning to the issue of what he described as mutuality, counsel for the respondents submitted that the respondents' Answers to the petitions demonstrated that the petitioners were in material breach of any contracts which they might have had with the respondents, as a result of which, they were not entitled to enforce any conditions of such contracts in their favour. In this connection, he referred to a series of documents which had been produced as 7/7.1-8. It was said that these documents, which dated from the early months of 1998, showed that the petitioners had been requiring the respondents and others to accept terms of remuneration which were materially inferior to those which they had previously enjoyed. That state of affairs was being imposed upon the respondents. Such conduct on the part of the petitioners constituted a material breach of contract.
Dealing next with the issue of the relevance of the petitioners' averments, counsel for the respondents drew attention to the terms of paragraphs 8 of the petitions. Those paragraphs appeared to be the basis upon which the petitioners relied to persuade the Court that there was a reasonably apprehended breach of contractual conditions. Yet all that was there averred was that the respondents would be working for a rival firm and would be in a position where they would be able to exploit their knowledge of the petitioners' business affairs to the detriment of the petitioners and to the advantage of Grampian and themselves. It was there averred that:
"The easiest way for the respondent to build up business for his new employer would be to approach customers he already knows from having worked for the petitioner, and, making use of the knowledge which he already has both about the petitioner's operations and the customer's own needs, to seek custom from them."
The petitioners' case appeared to be that there was a reasonable apprehension of breach of the contractual conditions relied upon simply from the fact that the respondents had or were taking up employment with a rival business to the petitioners. There were no averments of particular acts on the part of the respondents which might give rise to such reasonable apprehension. When the petitions had been brought before Lord Marnoch earlier on a similar motion, he had expressed the view that that was an insufficient basis for the granting of an interim interdict. That remained the position. It was astonishing that the serious allegations of criminal conduct on the part of the respondents set forth in the second affidavit of Joseph Gilbert Walker, 6/17 of process, had not been made the subject of averments.
Counsel for the respondents next turned to his fourth submission, to the effect that the conditions sought to be enforced against them were too wide; they went beyond what was reasonable for the legitimate protection of the petitioners' commercial interests. Dealing first with condition 11(a), which was concerned with confidentiality, it was submitted that this clause was too wide, because of the appearance there of the words "the termination thereof however arising", referring to the ending of the employee's contract of employment. It was quite illegitimate for the petitioners to attempt to enforce a clause of such width. Such a clause would entitle them to the benefit of it, even in a situation in which they themselves were in material breach of contract. In this connection reference was made to Lux Traffic Controls Ltd v Healey 1994 S.L.T. 1153, P. R. Consultants Scotland Ltd v Mann [1996] I.R.L.R. 188 and Living Design (Home Improvements) Ltd v Davidson 1994 S.L.T. 753. In addition to the criticism already made of clause 11(a), a further criticism could be made relating to the expression "any trade secret or confidential information relating to the company or any of its subsidiary or associated companies from time to time". That expression was fatally lacking in specification as to detail. It would be impossible for the respondents to know exactly what was prohibited, if this clause were to be enforced. Yet another criticism could be directed against clause 11 in respect that, in sub-paragraph (c) it was provided that the obligations contained in clause (a) should continue to apply without limitation in time. That provision was excessively wide. Turning to the provisions of clause 12 of the conditions sought to be enforced, a similar criticism could be made of it in respect of the appearance there of the words "the termination of his employment howsoever arising". The temporal limit of the operation of this clause was said to be "twelve months from the Termination Date". The "Termination Date" was defined in sub-paragraph (c). In the circumstances of the present case there had been no specification of a "Termination Date"; in these circumstances it was difficult to see how the clause could be applied.
Looking at the provisions of clause 12(a)(1) and (2), it was evident that the clause was one which went beyond what was a reasonable protection for the petitioners' legitimate interests. This part of the clause attempted to restrict the activities of the respondents in relation to persons who had not in fact been customers of the petitioners, but with whom the respondents had had what were described as "regular or a series of dealings". That part of the clause appeared to be designed to protect some unspecified interest of the petitioners in certain members of the general public. Such a wide provision could not be properly enforced. This clause sought to go further than the provisions involved in John Michael Design plc v Cooke &c [1987] 2 All.E.R. 332, where a provision seeking protection in relation to what might be described as lapsed customers was sustained. A further problem in relation to this part of clause 12 was that there was uncertainty as to who were subsidiaries of the company. They were not specified. In this connection, the Court should follow the approach in Business Seating (Renovations) Ltd v Broad [1989] I.C.R. 729. Turning to a different aspect of clause 12, the scope of the prohibition was related to what was described as "the Prohibited Area", which was defined in sub-paragraph (c). The definition was obscure and uncertain. It appeared to be defined in relation to, among other things, particular accounts. Finally, the provisions of clause 12(d) were objectionable. That was a consequence of the appearance of the words "or modification" in that provision. The appearance of those words involved the Court being asked to make a contract for the parties, which was illegitimate.
Turning to the question of the balance of convenience, it was submitted on behalf of the respondents that this was against the petitioners. The petitioners could continue their business, even if the alleged contractual conditions were not enforced by interim interdict. However the respondents would not be able to earn their livings in the area in which they lived in the field of activity to which they had been accustomed if an interim interdict were pronounced, as appeared from the averments made in Answer 10 of the petitions. The pronouncing of an interim interdict would result simply in the necessity for the respondents to seek employment in some other part of the country. In any event, there had been substantial delay on the part of the petitioners in seeking to enforce the alleged contractual conditions. A petition, which had been dismissed as incompetent had been brought in September 1988, following upon the resignation of the respondents in August of that year. An earlier motion for interim interdicts had failed on 16 October 1988. The present hearing was taking place some six weeks thereafter, with no explanation being offered for the delay. The respondents had suffered prejudice, in respect that they had not known where they stood. Furthermore, there had been obstruction on the part of the petitioners in relation to the preparation of their case by the respondents. A number of individuals had declined to give precognitions at the request of the respondents' advisors.
Counsel for the petitioners, in reply submitted that any delay which there might have been on the part of the petitioners had been short and had had no effect upon the issues arising in the case. He pointed out that any interim interdict which might be pronounced would be pronounced periculo petentis. Should it appear after enquiry that the orders were not justified, the petitioners might require to compensate the respondents for any adverse consequences of such orders.
It had been said that throughout their careers with the petitioners and their predecessors the respondents had worked without contracts of employment; that was an improbable situation. The Court should not conclude that that had occurred.
As regards the fact that the contents of Mr Walker's second affidavit had not been made the subject of averments, the explanation was that there had been some uncertainly regarding the matter. It was the responsibility of counsel to decide what ought to be averred.
On the issue of mutuality, it would not be possible for the Court reasonably to infer that the petitioners had been in material breach of contract. According to Mr Walker's second affidavit, there had in fact been agreement about the changed terms of employment.
As regards the criticism of the relevance of paragraph 8 of the petitions, that paragraph had to be read along with the other material before the Court, including the contents of Mr Walker's second affidavit.
Addressing the issue of the scope of the restrictions sought to be enforced, it was submitted that they were not excessively wide. In that connection reference was made to TSB Bank plc v Connell 1997 S.L.T. 1254. That case showed that the Court would enforce conditions couched in general terms in relation to confidential information and trade secrets.
In relation to the alleged difficulty arising out of the use of the words "however arising" and "howsoever arising", the position of the petitioners was that they relied on the view taken in relation to such language in P. R. Consultants Scotland Ltd v Mann. Where such words were used, they did not necessarily refer to a situation in which the employer was in material breach of contract.
As regards the point made in relation to the expression "Termination Date", appearing in clause 12(c) it was submitted that a common sense approach should be adopted. It was perfectly clear when the respondents had ceased to be employed by the petitioners.
In relation to the criticism of clause 12 to the effect that in paragraph (a) it sought to protect the interest of the petitioners in persons who had not in fact as yet become their customers, it could be said that, if the petitioners had invested time and money in cultivating members of the public in the hope that they might become customers, they were entitled to protect themselves against activity which might render such time and expenditure valueless.
In relation to the perceived problem as to the uncertainty surrounding who were associated or subsidiary companies, if necessary, the Court could use its blue pencil and strike out that part of the clause. In relation to the criticisms directed against the definition of the "Prohibited Area", it was submitted that the definition would be readily understood by a person who had been involved in sales, as had the respondents.
It is, of course, the case that these motions for interim interdict were the subject of a full hearing, at which both the petitioners and the respondents were represented. During the course of that hearing my attention was drawn to statements made at the Bar and documents, in which conflicting versions of disputed facts were embodied. Furthermore, it is apparent from a consideration of the averments of the petitioners and the respondents that there exist serious conflicts of fact between them. Against this background the question arises of what is the proper approach for the Court to adopt. In the absence of a hearing of evidence, it is plainly impossible for the Court to reach concluded views on the issues of disputed fact. In my opinion, the proper approach is that which is set forth in Burn Murdoch on Interdict at pages 134-135. There the author states, in paragraph 148:
"Although the question of interim interdict remains one of discretion after answers are lodged, it is at least possible then to measure the ex parte complaint against the ex parte defence, without treating either as fully established. Interdict can be granted with less hesitation if all objections have been stated. Although the Court cannot, strictly speaking, accept the statements of either party, yet the answers may sufficiently demonstrate that there is no danger or threat of any wrong, in which case the note may be refused. On the other hand, unsatisfactory answers weigh with the Court in granting interdict ad interim."
In support of this passage, the learned author cites the case of Lindsay v Robertson (1857) 5 M. 864. At page 866 of the report Lord Justice Clerk Patton said this:
"... we must judge of the matter upon such materials as we have. It is impossible for us to take the averments on either side into view, unless in so far as supported by documents or facts established or admitted."
Thus, I conceive the task which I face as being one of examining the whole material placed before me and, so far as practicable in the light of unresolved conflicts of fact, deciding whether the petitioners have demonstrated a prima facie case for interim interdict; thereafter the issue of the balance of convenience requires to be considered, in the light of relevant considerations which can be ascertained at this stage.
Dealing firstly with the issue of whether a prima facie case for interdict has been demonstrated by the petitioners, it appears to me that, in the circumstances of this case, two particular questions arise. The first of these is whether the conditions set forth in the document Employee Contract of Employment, 6/2 of process in the petition against Hugh MacBean Stuart, were incorporated into the contracts of employment of the respondents. The second particular question which arises is whether the petitioners have demonstrated a reasonable apprehension of breach of the conditions contained in the document on which they found.
Approaching then what I shall call the issue of incorporation, the averments of the parties on this question are in fundamental conflict. In the petition against Hugh MacBean Stuart, it is averred by the petitioners that he commenced employment in May 1986. It is then said that:
"He was employed under a contract of employment, the terms of which included those set out in a document entitled 'Employee Contract of Employment'. He was, on or shortly after taking up employment supplied with this document by the petitioners and his employment has been on the basis of the terms and conditions set out therein."
The position of Hugh MacBean Stuart, in his Answers and in an affidavit by him, is that the document referred to never formed part of his contract with the petitioners. Thereafter, in his averments a number of points and calls are made in Answer 2, to which I have already referred.
Looking at the first affidavit of Joseph Gilbert Moore Walker, 6/7 of process in the petition against Hugh MacBean Stuart, the issue is not much advanced. In paragraph 1 of that document the author states the circumstances in which he claims to have drawn up the contractual conditions in question. Thereafter, he states that, when the contracts were drawn up, the salesmen refused to sign them as they said that they were too complicated. He then goes on as follows:
"My solicitor advised me that the employees did not need to sign the contract of employment, they just needed to have a copy of it. They all received copies of the contract of employment. None of them continued to protest about any of its provisions."
In paragraph 2, he continues:
"When the company name changed in June 1990 new contracts were issued to all members of staff then employed. Accordingly Hugh Stuart has had the contract of employment given to him twice."
In paragraph 4 of the same document it is claimed that, on a third occasion, in the early months of 1998 copies of the contract of employment were given to both of the respondents, in connection with a problem which had arisen.
The respondents' position, as explained in their averments is that they never received any document of the kind now said to have been incorporated into their contracts of employment until such a document was left on their desks by the petitioners in about April 1998, when they were in dispute with the petitioners relating to their remuneration arrangements. They state that they both indicated to Mr Joe Walker at the earliest opportunity after receiving the purported contract that they were not prepared to sign it or be bound by it. Beyond these statements of position, there is a variety of other pieces of material which tend to support each side in the conflict, to some extent.
In this confused and difficult state of affairs, certain points appear to me to be of significance. In the first place, certain of the averments made by the petitioners on the matter seem to me to be demonstrably wrong. As I have already quoted, the petitioners aver that Hugh MacBean Stuart was supplied with "this document" by the petitioners, that is to say the document entitled "Employee Contract of Employment". As was pointed out by counsel for the respondents, that is plainly an impossibility. The document, 6/2 of process is headed "Joe Walker (Capital Business) Ltd" and its other terms leave one in no doubt that it was drafted for use in a situation in which the employer was that incorporated body. However, at the time of the commencement of the respondents' employment, it is a matter of agreement that the business of the petitioners was not conducted by a company, but rather by a partnership. With this situation in mind, the respondent Hugh MacBean Stuart called upon the petitioners to aver whether the particular document produced is said to be the actual document applicable to his contract of employment from the outset, or a subsequent version. That call has never been answered.
A further matter of significance appears to me to arise out of a document produced in the petition against Andrew George Lloyd as 7/11 of process. That document appears to be a contract of employment, with one George MacRae dated September 1988. It is drafted in a different way to the document said to have been incorporated in the respondent's contract of employment, in that it is framed so as to indicate that the employer is a partnership, as opposed to a limited company. However, of more importance is the fact that, on page 27 of the document at the end of the contractual conditions spaces are created for the name of the employee, the signature of the employer, the date of the signature, the signature of the employee and the date of that signature. While this document appears to be signed on behalf of the employer, it does not appear to bear the signature of the employee. Nevertheless, the point arising from it which appears to me to be of some significance is that the document has been drafted so as to relate to a particular employee. There is no parallel to this document in the case of either of the respondents. There are no contractual documents which bear even their names and which incorporate the conditions set forth in the document 6/2 of process in the petition against Hugh MacBean Stuart, which is said to be the contract of employment founded upon.
An additional feature, which appears to me to be of very considerable significance in the circumstances is the material which has been produced emanating from one David Allan, a solicitor of 23 Academy Street, Inverness. He has produced an affidavit, 7/11 in the process of the petition against Hugh MacBean Stuart. He makes clear that in May 1988 he was consulted by two employees of the petitioners' business, who approached him, as a solicitor, with a view to their securing contracts of employment. He states that he was advised at that time that the employers were a firm run by two partners, William Fraser and Joe Walker, and that the sales team comprised Graham Rennie, Peter Brown, Hugh Stuart and Fraser MacNab. He states that he was asked by Messrs Rennie and Brown to act on behalf of the whole sales team with a view to securing a contract of employment. Thereafter he describes how he became involved on their behalf in correspondence with Messrs MacNeill & Critchley, Solicitors, who acted for the employers. A draft contract of employment was produced and proposed amendments were suggested by Mr Allan on his clients' instructions in subsequent correspondence. It appears that there followed a course or correspondence between Mr Allan's firm and the solicitors for the employers relating to the matter. This correspondence came to an end in January 1989 without the terms of a contract of employment having been agreed between the solicitors concerned. Mr Allan makes clear that, so far as he was concerned, there was no agreement between the parties on the terms of any contract of employment in 1989. Along with Mr Allan's affidavit there has been produced such correspondence as was in his possession relating to the matter, which confirms what he says in his affidavit. I am impressed by the significance of this material, since it comes from a solicitor who stands independently from any of the parties in the case. Furthermore, the correspondence which he has produced quite clearly demonstrates that the negotiations for the creation of a contract of employment were inconclusive. If one accepts that that was the position, and I see no reason why I should not do so, it follows that the claims made by the petitioners that the respondent Hugh Stuart was employed under a contract of employment in the terms shown in 6/2 of process in the petition against him from shortly after May 1986, must be wrong.
Looking at the whole material before me, the conclusion which I have reached is that the petitioners have not discharged the onus which must be upon them to demonstrate on a prima facie basis incorporation of the contractual conditions upon which they rely into the contracts of employment of the respondents. The position of the petitioners appears to be that contracts along the lines contended for by them were never in fact signed by the respondents and, indeed, no signed documents have of course been produced. The petitioners' case appears to be that in some way the respondents accepted the terms of the contracts now contended for. I have to say that I find that position inconsistent with the indication in Mr Walker's affidavit, 6/7 of process, that the salesmen, including presumably the respondents, specifically refused to sign the documents concerned. There are neither averments nor explanations as to how, against that background, the respondents came to accept the contractual terms contended for.
I turn now to the issue of whether the petitioners have demonstrated a basis for a reasonable apprehension of breach of the alleged contractual conditions on which they found. The averred basis for the petitioners' approach is to be found in paragraphs 8 of the petitions. It is there said that the petitioners are reasonably apprehensive that, if the respondents take up employment with Grampian Business Products Ltd, they will act in breach of the confidentiality and non-solicitation clauses which are founded upon. It is said that the respondents will be working for a rival firm and will be in a position where they would be able to exploit their knowledge of the petitioners' business affairs to the detriment of the petitioners and to the advantage of Grampian and themselves. It is said that the easiest way for the respondents to build up business for their new employer would be to approach customers already known to them from having worked for the petitioners, and, making use of the knowledge which they already have both about the petitioners' operations and the customers' needs to seek custom from them. These averments appear simply to be averments of an intention to take up employment with a rival business to the petitioners. I find those averments to be an insufficient basis for the inference that the respondents would be likely to breach the contractual conditions founded upon, especially where it is said in relation to the balance of convenience, that the respondents would be able to earn their living legitimately in the field in which they are skilled, even if interim interdict were pronounced. That position appears to me to involve the concession that the respondents could be employed in the field concerned without in fact breaching the contractual conditions relied upon. Accordingly, I find that these averments are an insufficient basis for the reasonable apprehension of wrongs upon which the petitioners found.
In this context it is however necessary for me to consider the terms of the second affidavit of Joseph Gilbert Moore Walker, 6/17 of process dated 20 November 1998. In paragraph 1 of that affidavit certain serious allegations are made by Mr Walker against the respondents. These allegations appear to amount to claims that the respondents were guilty of theft of files belonging to the petitioners and that the respondents had misappropriated information concerning customers of the petitioners held on computer; further that they "left the information on the computer corrupted in order that I cannot obtain access to my client database". In my view, it is most surprising that these matters, which are potentially so important, were not adverted to in the first affidavit sworn by Mr Walker on 13 October 1998. It is also most surprising that the material in the second affidavit, to which I have referred, has not been made the subject of averment in the petitions. I put that point of view to counsel for the petitioners, who stated that these matters had not been pleaded, on his responsibility, because there had been some uncertainty relating to the matter. In these circumstances, I find myself unable to give much weight to the contents of the second affidavit regarding the matters concerned. In all these circumstances, I consider that the petitioners have not demonstrated a basis for a reasonable apprehension of breach of the alleged conditions of employment upon which they found.
In Chill Foods (Scotland) Ltd v Cool Foods Ltd Lord Maxwell held, among other things, that, where a right alleged to have been invaded arose out of an alleged contract, especially a restrictive covenant, the very existence of which was denied and in support of which no prima facie case, evidence or circumstance could be demonstrated, at least a very strong argument on the balance of convenience would be required to justify interim interdict. In this connection I refer to what his Lordship said at page 39 of the report. I must respectfully express some reservations concerning the view inherent in his remarks that an interim interdict could, in any circumstances, be pronounced where no prima facie case can be shown. Nevertheless, following that approach, the next issue which I should consider is that of the balance of convenience.
The principal point advanced on the balance of convenience on behalf of the petitioners related to the difficulty for them of quantifying any loss which might be caused by a breach of contract on the part of the respondents. In that connection reference was made to C. R. Smith Glaziers (Dunfermline) Ltd v Greenan and particularly what was said at pages 1223-4. Furthermore it was said that an interim interdict in the terms claimed would not prevent the respondents from earning their livings; they would simply require to work in a circumscribed manner. Against this, on behalf of the respondents, it was said that an interdict in the terms sought would simply make it impossible for the respondents to earn their livings in the area in which they had worked. Furthermore, it was said that there had been undue delay in the applications now under consideration for interim interdict.
In the light of what was said in relation to the balance of convenience, I have reached the conclusion that it does not favour the petitioners strongly, or indeed at all. I consider that in the context of the Highlands, in which the respondents worked, the granting of the motions would be likely to prevent them earning their living in the sphere concerned at all. Against that, difficulty in quantifying damages does not appear to me to carry much weight. In the whole circumstances I shall therefore refuse the motions for interim interdict.
As I have narrated, a variety of other arguments were addressed to me by counsel for the respondents as to why interim interdicts ought not to be pronounced. It is unnecessary for me to make any decision in relation to those matters, having regard to the views which I have already formed. Nevertheless, I shall very briefly indicate my views in relation to them. Firstly, as regards the arguments relating to mutuality. While it appears to have been the case that in the early months of 1998 negotiations were taking place between the petitioners and the respondents relating to the terms of their remuneration and other matters, and while some pressure was apparently being placed upon the respondents to accept new terms relating to remuneration, I do not feel able to reach a clear view in relation to whether the petitioners' conduct amounted to a material breach of contract, on the basis of the material currently before the Court. It appears to me that, in order to reach such a view, a detailed factual investigation of the circumstances of the negotiations and their outcome would be required.
Criticism was directed in a number of detailed respects, which are reflected in my narrative of the argument, against the contractual conditions upon which the petitioners found. I have to say that I was not particularly impressed by these criticisms. In so far as there was force in any of them, I consider that the problems thereby created for the petitioners could almost certainly have been eliminated by severance of the objectionable parts of the conditions concerned, or the invocation of the provisions of clause 12(d) of the alleged contract, in accordance with the approach followed by Lord Dervaird in Hinton & Higgs (UK) Ltd v Murphy.
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OPINION OF LORD OSBORNE in the Petitions of JOE WALKER (CAPITAL BUSINESS) LTD Petitioners; against HUGH MacBEAN STUART Respondent: and JOE WALKER (CAPITAL BUSINESS) LTD Petitioners against ANDREW GEORGE LLOYD Respondent ________________ |
Act: Napier
Mackay Simon
Alt: Hammond
Balfour & Manson
18 December 1998