Scottish Court of Session Decisions

Centre Maritime Industrial Safety Technology v. Crute, [2003] ScotCS 44 (21 February 2003)

OUTER HOUSE, COURT OF SESSION
A145/03	OPINION OF LORD MACKAY OF DRUMADOON in the cause THE CENTRE FOR MARITIME & INDUSTRIAL SAFETY TECHNOLOGY LTD Pursuers against   CLIVE CRUTE Defender   ________________

 

 

Pursuers: Sandison; Morton Fraser

Defender: Howlin; Dundas & Wilson

21 February 2003

1. In this action, by way of two separate conclusions, the pursuers seeks interdict against the defender. The action was raised on 20 January 2003 and the following day the Lord Ordinary granted interim interdict against the defender from (1) taking up employment with Briggs Marine Contractors Ltd, Briggs Commercial Ltd, Briggs Marine Environmental Services Ltd, or any other company in the group of companies of which Briggs Marine Contractors Ltd is a member, until 31 July 2004 and (2) from disclosing to Briggs Marine Contractors Ltd, Briggs Commercial Ltd, Briggs Marine Environmental Services Ltd or any other company in the group of companies of which Briggs Marine Contractors Ltd is a member, any details of the scheme for marine terminal assessment and marine terminal assessor training devised and developed by the pursuers and disclosed to the defender while in the employment of the pursuers, or from using any such details for the benefit or purposes of the said companies. On 13 February 2003 I heard submissions on behalf of both parties in respect of the defender's motion seeking recall of those interim interdicts. The action had not yet called. No defences were available during the hearing before me, although both parties had lodged productions to which reference was made in the course of the submissions.
2. The pursuers are a limited company that trades under the name 'C-MIST'. It has its principal place of business at Heriot Watt University Research Park in Edinburgh. The pursuers carry on business as researchers, devisors, developers and providers of specialised industrial health and safety services and operational procedures. They offer, in particular, specialised services, training and manpower development programmes for the operators of marine terminals and jetties. It is averred in the summons that the pursuers tailor and implement the Oil Companies International Marine Forum (OCIMF) Competence Assessment Scheme for various jetties and marine terminals, including the BP Coryton Terminal, which is in Essex. A production lodged on behalf of the defender indicates that the pursuers operate a number of Divisions, one of which is known as the Maritime & Offshore Safety Division.
3. The pursuers aver, and during the submissions before me this was a matter of admission, that they provide consultancy services to the Briggs group of companies, which includes Briggs Marine Contractors Ltd ('BMCL'). Those services have been supplied and continue to be supplied at a number of locations. In particular the pursuers have a contract with BMCL for the provision of marine terminal assessment services at the BP Coryton Terminal. That contract relates to the provision of services over a three year period, of which approximately two years have still to run.
4. The Coryton Terminal is owned by BP and operated on their behalf by BMCL. BMCL is one of the wholly owned subsidiaries of Briggs Commercial Ltd, the holding company of the Briggs Group of companies. The holding company is based in Burntisland, Fife. I understand it to be a family owned company. According to a production lodged on behalf of the defender, the core business of the Briggs Group of companies has been the supply of marine contracting services, including the provision of oil and gas marine facilities management. Such services are, in particular, provided by BMCL.
5. The defender was formerly employed by the pursuers as a manager. His employment with the pursuers began on 4 March 2002. Prior to then the defender had been employed as a master mariner, with the vast majority of his employers over the last 30 years having been the operators of ocean going vessels. When the defender joined the employment of the pursuers, he signed a document entitled 'C-MIST Agreement of Service'. Clauses 1 and 4 of that Agreement of Service are in the following terms:

"1. No Manager is permitted to carry out work or provide services of any kind, paid or unpaid, for the clients of C-MIST for at least 18 months after dissociation from C-MIST.

...

4. All knowledge and techniques learned whilst in the employment of C-MIST are confidential and belong to C-MIST. The confidentiality of the company is to be maintained at all times. This would preclude, for example, the release of information of any kind to the press, other companies, other members of staff, or to any other person. Failure to observe strict confidentiality will result in being liable for penalties."

In the Agreement for Service, the term 'dissociation from C-MIST' is defined as meaning resigning, terminating the association or leaving C-MIST.

6. After the defender took up his employment with the pursuers, he received certain training from them. Initially he was put through a refinery competence course lasting 8 days, which was run by the pursuers for the defender and a number of other individuals. He was then sent on a 2 week course entitled "Marine Terminal Operation Course", where he received training with members of staff employed by BP. He also undertook a one day Risk Assessment course, a one week Marine Terminal training course at BP's premises at Grangemouth and two one day courses on Safety Awareness. Although there was some dispute about between counsel as to who paid for the training that the defender had undergone, I was informed that the information available to counsel for the pursuers was that all of the costs incurred in the defender's attendance at those various courses had been borne by the pursuers. I proceeded on the basis that was so. I was also informed that the defender had received person-to-person training from a member of the senior management of the pursuers.
7. In the course of his employment with the pursuers, the defender was also trained in the use of an 8 volume loose leaf manual, prepared by the pursuers. That manual contains details of a comprehensive scheme for marine terminal assessment and marine assessor training and is used by employees of the pursuers, including some who work for the pursuers at the BP Coryton Terminal .
8. Once the defender had undergone training, he worked for the pursuers at the BP Coryton Terminal. In terms of the pursuer's contract with BMCL, the pursuers provide consultancy services at that Terminal. In the course of his duties the defender was required to carry out the assessment of employees of BMCL and also to assist in the training of other assessors employed by the pursuers. The defender's duties involved the defender observing employees of BCML, as they carried out their duties, interviewing those employees to determine whether they understood the safety implications of the work that they were undertaking and the safety procedures they required to follow, and completing written assessments on those employees of BMCL. The pursuers currently employ 14 technical staff and 6 administrators, who work at the BP Coryton Terminal.
9. One of the productions lodged on behalf of the defender was a letter addressed to him dated 11 November 2002. The letter bore to be in the name of Collieson Briggs and was sent on behalf of BMCL. It offered the defender employment with BMCL, as a Deputy Manager at the BP Coryton Refinery, with the start date of 1 February 2003 and a basic salary of £35,000. Although that letter did not refer to nor have attached to it any job specification of the post of Deputy Manager, during the course of his submissions counsel for the defender tendered another document bearing to be the job specification of a "Contractors Manager" for jetty operations at Coryton Refinery. The debate before me proceeded upon the basis that this further document provided some fairly detailed specification of what the defender's duties would include, were he to take up the position of Deputy Manager at BP Coryton.
10. On 25 November 2002 the defender submitted a letter of resignation to the pursuers. The submission of that letter of resignation followed a meeting between the defender and M Laftavi, a Director of the pursuers. Following a second meeting between the pair of them, Mr Laftavi wrote to the defender, by letter dated 9 December 2002. The terms of that letter are as follows:

"I refer to your resignation letter dated 25^th November 2002 and our meetings which took place in the BP CTC building at Coryton on 22^nd November and 6^th December 2002.

You first informed me of your intention to terminate your employment with C-MIST and accept employment with Briggs on 21^st November 2002. At the time, I was surprised and explained to you that such a move would be in breach of your signed Agreement and Conditions of Service.

C-MIST invested a great amount in training you in Marine Terminal Operations and related Refinery Safety Operations in order to provide services to our clients. These investments included paying your salary as well as your expenses for travelling to and attending training courses. I also spent a lot of my valuable time in guiding and training you to provide services for our important clients.

It would be, therefore, morally unfair and in breach of the Agreement you signed with C-MIST if you were to leave C-MIST to start working for one of our clients who is active in the provision of Marine Terminal Operation services; the primary area in which we have invested in giving you training and experience.

During our most recent meeting I explained, and you agreed that C-MIST has been very kind to you and that I was not aware any problem concerning your work with us. I offered to increase your salary to more than you were being offered by Briggs and even to review your working arrangements if you wished. I also explained the overall effect on C-MIST if you were to breach the Agreement and Conditions of Service. I asked you to be fair to us and said that, if you still wanted to leave C-MIST, we would be happy to guarantee you a job until you could find suitable alternative employment compatible with crucial aspects of our Agreement.

At our most recent meeting I asked you to think about the consequences of your actions very seriously and suggested you may want to seek independent legal advice in order to clarify your position in respect of the Agreement you signed with C-MIST. If you intend to take up the offer of employment with Briggs, we will hold you to be in breach of the Agreement and will instruct our solicitors to commence legal proceedings to enforce our rights under the Agreement. We would intend to seek a court order enforcing the terms of Clause 1 of the Agreement of Service, which would effectively prevent you from taking up employment with Briggs and we will almost certainly consider the possibility of raising an action for damages. Can you let me know in writing by no later than Tuesday 17^th December 2002, whether you intend to take up the offer of employment with Briggs?

Under the current circumstances, and until you confirm to me in writing that you do not intend to break the Agreement and Conditions of Service with C-MIST, we cannot allow you to continue working in the capacity of assessing Briggs employees on C-MIST's behalf, I therefore advise that you should remain at home during this time. You will of course receive your normal rate of pay.

As this letter reiterates what I have said to you during our meeting on 6^th December, it is effective as 6^th December 2002, that date being the date on which you confirmed that you intended to leave C-MIST to work for Briggs.

I hope, even at this late stage, you will reconsider your decision and avoid the need for me to commence legal proceedings to enforce the terms of the Agreement. I therefore look forward to hearing from you in writing by no later than 17 December 2002."

Following receipt of the letter of 9 December 2002, the defender confirmed his intention to take up the employment he had been offered by BMCL. That prompted the raising of the present action.

11. In seeking recall of the interim interdicts, counsel for the defender argued that the pursuers had not pled a prima facie case against the defender. He argued that both of the restrictive covenants, in Clauses 1 and 4 of the Agreement of Service, were too wide to be considered fair and reasonable. He argued that Clause 1 went far further than anything reasonably necessary to provide any protection to which the pursuers were entitled as a consequence of their having employed the defender in their Marine and Offshore Safety Division. Counsel stressed that it was clear the pursuers provided a wide range of consultancy services, through its various Divisions and that the terms of Clause 1 failed to draw any distinction between the work that an employee may have done, whilst employed within one of the pursuers' Divisions, and the work carried out by employees working with other Divisions. Nor did the Clause draw any distinction between what an employee might have done, whilst in the employment of the pursuers, and what that employee might be doing were he to be in the employment of a client of the pursuers. Counsel for the defenders submitted that it was clear from the documentation the defender had lodged that the new employment with BMCL would involve the defender acting in a managerial capacity, rather than his carrying out the duties of marine terminal assessment.
12. Counsel for the defender also argued that the restrictive covenant in Clause 4 was too wide for it to be enforceable. The law as to trade secrets did not prevent a former employee of the pursuers, such as the defender, from using the skill he had brought to the pursuers' employment or that he might have acquired during the course of his employment with the pursuers. As drafted, Clause 4 would prevent the defender taking with him into any employment with BMCL (or with any other company within the Briggs Group) the natural development of his own skill and knowledge. The terms of Clause 4 were manifestly too broad to permit the restrictive covenant in Clause 4 to be enforced.
13. In presenting his submissions, counsel for the defender referred to Scully UK Ltd v Lee [1998] I.R.L.R. 259 as illustrating the relevant law to be applied to questions as to the enforceability of restrictive covenants in the field of contracts of employment. He referred in particular to paragraphs 8, 9 and 10 of the judgment of Aldous L.J.. In responding to the submissions of counsel for the defender, counsel for the pursuers did not dispute that Scully UK v Lee correctly set out the test of reasonableness, which is applicable when considering the enforceability of a restrictive covenant in a contract of employment. He accepted that before such a restrictive covenant could be enforced, the restriction it contained must be reasonable in the interests of both of the contracting parties and reasonable in the interests of the public. He also accepted that the terms of both Clauses 1 and 4 fell short of the most exacting standards of legal drafting.
14. Under reference to certain additional authorities, however, counsel for the pursuers argued that the pursuers were entitled to enforce the restrictive covenants with a view to preserving their business connection with their clients, the members of the Briggs Group and in particular BMCL, and to prevent the defender, as one of their former employees, handing over to BMCL the trade secrets involved in the detail of the pursuers' comprehensive scheme for marine terminal assessment and marine terminal. Reference was made to Agma Chemical Co Ltd v Hart 1984 S.L.T. 246 and to the Opinion of the Court delivered by Lord President Emslie at p. 248(1), to Home Counties Dairies Ltd & Another v Skilton & Another [1971] W.L.R. 526, per Harman L.J. at p. 533C - E, Salmon L.J. at p. 536B - E and Cross L.J. 538B - C, Littlewoods Organisation Ltd v Harris [1977] 1 W.L.R. 1472, per Lord Denning M.R. at pp. 1481G - 1482B, and Megaw L.J at pp. 1485C - D, 1486B - C and 1487C -1488F and to two more recent Scottish authorities, PR Consultants Scotland Ltd v Mann 1997 S.L.T. 435, per Lord Caplan at pp. 440H - J and 441A - D, and TSB Bank Plc v Connell 1997 S.L.T 1254, per Lord Osborne at pp. 1259 K - 1260F. Counsel argued that the approach to the construction of commercial agreements discussed in those authorities required the Court to look at the commercial objectives of clauses containing restrictive covenants, that the test of reasonableness did not fall to be applied in too narrow a manner, that it was reasonable for an employer, such as the pursuers, to seek to protect itself from an employee seeking to abuse the access the employee had been given to the employer's customers, that Clause 1 was reasonable as far as the defender was concerned, in view of the extensive training he had received in the course of his employment with the pursuers, and that the public interest was served by the pursuers being entitled to develop and protect their system for port safety in which the pursuers had made substantial investment. It was argued that whatever the technical deficiencies of the two Clauses, and in particular Clause 4, those were not a bar to the Court doing substantive justice between the parties.
15. Having considered the submissions of counsel for both parties, in the light of the productions that had been lodged, I have reached the view that the pursuers have demonstrated there is an issue to try as to whether the pursuers are entitled to interdict against the defenders in terms of the first two conclusions of the summons. In particular I am persuaded that the submissions of counsel for the pursuers have demonstrated the existence of a pima facie case against the defender to the effect that the defender acted in breach of a enforceable restrictive covenant when he accepted the offer of employment with BMCL, set out in the letter of 11 November 2002, and that, were the defender to take up that employment, he would continue to act in breach of that restrictive covenant. Having reached those views it would not be appropriate that I should make any further comment on the details of the submissions I have heard. The legal issues involved will require to be returned to at a later stage in the action. Suffice it to say that once defences have been lodged, there will be a number of factual issues that the parties may wish to address, by way of an averment and the lodging of relevant documentation. Those issues may include the terms of the pursuers' contractual arrangements with BMCL, in respect of the provision of services at the BP Coryton Terminal, further details about the work carried out by the defender, at that Terminal, whilst he was in the employment of the pursuers, and much clearer information about the duties encompassed in the offer of employment set out in BMCL's letter of 11 November 2002. Only once those factual matters are clarified, could there be a full debate and resolution of the legal issues involved.
16. Turning to the issue of the balance of convenience, I have found this a difficult matter to resolve. In seeking recall of the interim interdicts granted on 21 January 2003, counsel for the defender argued that even if I was persuaded that the pursuers had established a prima facie case, I should take the view that the pursuers' case was a weak one and that such an assessment ought to be regarded as a factor pointing towards the recall of the interim interdicts. Counsel for the defender founded on the fact that the granting of interim interdict in actions relating to restrictive covenants in contracts of employment frequently ends up having the same practical effect as a permanent interdict would have. Counsel submitted that continuation of the existing interim interdicts would preclude the defender being employed at the Coryton Terminal. There was no possibility of BMCL keeping the offer of employment open for a further 18 months. Counsel submitted that were the defender to be prevented from taking up the offer of employment with BMCL, he would, approaching as he was his 57^th birthday, have great difficulty in obtaining alternative employment with another employer.
17. In arguing that the balance of convenience favoured the pursuers, counsel for the pursuers founded on the fact that the defender had brought the prospect of unemployment upon himself. Not only had the defender initially accepted the offer of employment with BMCL, he had rejected the improvements in his conditions of employment with the pursuers that had been placed before him in the letter of 9 December 2003, which I have quoted. Counsel for the pursuers stressed that all that the interim interdicts prevented was the defender working with clients of the pursuers and his divulging confidential information to those clients. The defender was perfectly entitled to take up marine terminal work with another employer. Standing the fact that the defender had obtained two offers of employment within the last 12 months, there was no reason to believe that the defender could not seek and obtain other employment. Counsel for the pursuers submitted that by reason of the defender terminating his employment with the pursuers, the continuation of the pursuers' contract with BMCL was now at risk. The defender's departure from their employment had meant that the pursuers had required to train up somebody else to take over the duties that the defender had previously performed. Counsel argued that were the defender to be employed by BMCL at the Coryton Terminal, BMCL might be more likely to terminate their contract with the pursuers than would otherwise have been the case. That was because the defender had undergone training and had acquired expertise and experience in marine terminal assessment, including knowledge of the contents of the pursuers' 8 volume manual, and in the training of those engaged in the assessment of marine terminal employees. Such training expertise and experience might enable BMCL to terminate their contract with the pursuers and to take 'in-house' the marine assessment consultancy services currently provided by the pursuers at the Coryton Terminal. Such training, expertise and experience of the defender might also encourage BMCL to keep 'in-house' the provision of marine assessment service, when BCML take up their duties to operate the associated petroleum terminals at Immingham, owned jointly by TotalFinaElf and ConocoPhillips, under a new contract that BCML have very recently concluded with the joint owners of those terminals. To that extent the defender's employment with BMCL might lead to the pursuers losing out on a chance to tender for the provision of marine assessment services at Immingham.
18. Having given the issue very careful consideration, I have reached the view that the balance of convenience favours the recall of the interim interdicts. In reaching that view I place particular reliance on the fact that the pursuers have a contractual relationship with BMCL for the provision of consultancy services at Coryton and that their contract has a further two years to run. Whilst the pursuers profess to entertaining some concern that BMCL might attempt to terminate that contract, it lies in the pursuers' own hands to prevent that occurring, by ensuring that they place on site, at the Coryton Terminal, a sufficient number of suitably qualified employees to fulfil their contractual obligations to BMCL. The defender is no longer an employee of the pursuers. The pursuers will require to fulfil their contractual obligations to BMCL, without any further assistance from the defender. But if they do so, their contract should run its full course. The pursuers are, of course, entitled to the protection of the law if their contract were to be wrongly terminated by BMCL.
19. In considering the balance of convenience a further factor I have taken into account is that counsel for the pursuers did not assert that the pursuers believe that the defender still has access to their 8 volume manual. In any event, whatever the contents of that manual, the pursuers have prepared, under the auspices of OCIMF, a Guide entitled "Marine Terminal Training and Competence Assessment Guidelines for Oil and Petroleum Product Terminals", which is published and available for purchase by members of the public. The existence of that Guide and the fact that marine terminal assessment is a requirement of terminal operators, such as BP, and not merely an option course of action for those who operate such terminals, rather suggest that there may be limited prospects that the knowledge and experience the defender acquired during his 8 months of employment with the pursuers will have any significant bearing on BMCL's dealings with the pursuers in the future. Whilst the possibility of that occurring cannot be excluded, it requires to be contrasted with the fact that continuing the interim interdicts in existence would prevent the defender being employed by the Briggs Group of companies for a further 18 months.
20. I also take account of the fact that the issues between the parties as to the enforceability of the restrictive covenants contained in Clauses 1 and 4 of the Agreement of Service are not straightforward. Whilst I do not accept the submission of counsel for the defender that the pursuers' case falls to be described as 'weak', counsel for the pursuers very frankly described the drafting of the restrictive covenance as 'falling short of the most exacting standards of legal drafting' and he clearly recognised that in seeking to defend the terms of the restrictive covenants, as being enforceable, it was necessary for him to deploy lines of argument drawn from the various authorities to which I have referred. That raises the possibility that it may take some time before the merits of this action can be finally resolved.
21. Balancing the prospect of an immediate financial loss to an individual with a possibility of prospective financial loss, of a more general and speculative nature, to a large corporate entity is never straightforward. In the present case, however, I am satisfied that the balance of convenience favours the individual. In these circumstances I have been persuaded that I should recall the interim interdicts pronounced on 21 January 2003.