[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Tensator Group Ltd. & Anor v Falzon & Ors [2004] EWHC 3440 (Ch) (21 July 2004) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2004/3440.html Cite as: [2004] EWHC 3440 (Ch)

[New search] [Printable RTF version] [Help]

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice The Strand London WC2A
		21 July 2004

MR JUSTICE MANN:

1. The application before me is an application for various heads of relief against four individuals who are former employees of one or other of the claimant companies. Two companies, namely Trak Design Limited ("Trak") and Xtracs Limited ("Xtracs") are parties to the action, but no relief is sought against them in this application. The nature of the relief referred to in the application is wide-ranging, including orders that the defendants permit the inspection of computer hardware. However, as a result of an order made on a prior hearing and of concessions made by the individual defendants as to some of the relief, the principle issues before me concern an application for injunctive relief to enforce restrictive covenants said to form part of the formal contracts of employments of the individual defendants.
2. The claimants are companies which I will together call Tensator. The first claimant company, the Tensator Group Limited, is the holding company of the second claimant. The individual defendants were employed by one or other of them. It does not matter which; there is no need to draw any distinction between the two claimants for present purposes. I will call the claimants together "Tensator" and assume they were just one entity.
3. The business of Tensator is described in a witness statement of Jeremy Williman as follows:

"Tensator's business is to provide an overall solution for its customers who operate open spaces, from the public's point of entry to their point of exit. The specific product areas involved are:

(1) The manufacture and sale of customer guidance and queue management systems, including the brand named "Tensabarrier". They are also referred to as crowd control products …

(2) Retail merchandising and display. [He then exhibits a brochure exhibiting a cable-based display and signage system].

(3) Retail security items. These comprise mainly retracting tethers or curly cables, to secure items on display to the display board/wall for security purposes..."

4. It is a very substantial business. Its turnover is about £7.5 million per year. The controlling shareholder and the Managing Director is Mr Jeremy Williman.
5. The individual defendants are as follows. Richard Falzon, the first defendant, was the operations director of Tensator. He is described by Mr Williman as his right-hand man and acting Managing Director when Mr Williman was abroad. He was obviously an important part in the organisation. Although described as operations director, he was not formally appointed a director in the company law sense and, as I understand it, did not sit on the board. The date of the cesser of his employment is disputed. He now maintains he resigned on 13 February 2004. The claimants say he resigned by email on 9 April 2004 with effect from 9 May 2004.
6. The second defendant is Tracy Falzon, Mr Falzon's wife. None of the disputed relief concerns her and I can leave her on one side.
7. The third defendant is Mr Stephen Yule. At the time of his departure he was the director of international sales. Again, although described as a director, he was not a director in the company law sense.
8. The fourth defendant is Mr David Tuppin. He was the export sales and marketing manager of Tensator for the last ten years.
9. The position in short is that all four individual defendants are involved in the conduct of the newly established business of the newly established Xtracs. That company was set up by Mr Falzon. It is involved in selling competing products, though only over a limited part of Tensator's product range. There is no evidence of how well it is doing, but clearly it is nothing like as substantial as Tensator. It is said that the individual defendants, or some of them, took confidential information when they left, and indeed it extracted before they left, both in the form of identifiable data such as customer lists, and in the form of information carried in their respective heads. There is no doubt that some such information was taken. After initial denials, the individual defendants accepted that some of them took and were in possession of some customer lists.
10. On 14 May 2004 on the first hearing of this application, Laddie J ordered inspection of a computer hard disc and the defendants volunteered certain undertakings not to use confidential information to preserve documents and to disclose such confidential information as they had. Mrs Falzon and Mr Tuppin also offered certain undertakings against being involved in a competing business and against soliciting customers and employees. If I order nothing more, those undertakings at least will stay until trial. The question for me is whether anything further should be ordered.
11. Tensator claims additional relief based on what it says is the terms of each of the contracts of employment of each of the four defendants. Whilst it is accepted that the relevant terms of employment of Mrs Falzon and Mr Tuppin contained the terms, it is not accepted that the relevant terms were terms of the contracts of employment of Mr Falzon and Mr Yule.
12. The terms in question are set out in a separate document entitled "Confidentiality and Non Disclosure". The copy in the papers is that signed by Mrs Falzon. So far as relevant to these proceedings, the clauses read as follows. There is a clause restricting use of confidential information but I need not read that. The first relevant clause is this:

"You shall not without prior written consent of Tensator Limited during a period of 6 months from the date of termination of your employment directly or indirectly in respect of Relevant Goods and Services solicit the custom of any person, firm or company who during the 6 months prior to the termination of your employment was a customer of Tensator Limited and with whom you dealt directly at any time during such 6 month period.

For the purposes of this clause "Relevant Goods and Services" means any goods or services competitive with those supplied by Tensator Limited at any time during the 6 months prior to the termination of your employment in the supply of which you were involved or concerned during such period.

You shall not without the prior written consent of Tensator Limited during a period of 6 months from the date of termination of your employment directly or indirectly in respect of Relevant Goods and Services, deal with any person, firm or company who during the 6 months prior to the termination of your employment was a customer of Tensator Limited and with whom you dealt directly at any time during such period."

Then I observe there is a definition of relevant goods and services which is effectively the same as that which I have already read.

"You shall not for a period of 6 months after the termination of your employment directly or indirectly whether as a director, shareholder, partner, sole proprietor, employee, servant, agent, contractor or otherwise carry on, be engaged, concerned or interested in any business within the Restricted Area which is competitive with or similar to the business carried on by Tensator Limited at the date of termination of your employment and in which business you were involved at any time during the 12 months prior to the termination of your employment.

For the purposes of this clause "Restricted Area" means within (England).

You shall not for a period of 6 months after the termination of your employment directly or indirectly solicit away from Tensator Limited, or endeavour to solicit away from Tensator Limited any person who at the date of termination of your employment or at any time during the period of 6 months prior to such termination was employed by Tensator Limited in a senior managerial role and with whom you had regular dealings during the course of your employment."

I think it is right to observe that the last of those covenants has not really figured significantly in the debate before me.

13. Mrs Falzon and Mr Tuppin accept they signed undertakings in those terms. Mrs Falzon's is exhibited. Mr Falzon and Mr Yule deny that they signed such terms. Tensator say they did sign. Tensator have produced evidence in support of that, including evidence of general practice and of a general policy to get employees to sign up, which policy they say was implemented fully in respect of all employees. There is also some evidence of personnel files containing such undertakings being kept in a locked cupboard, whose lock was found broken in January of this year. It seems that the trial court will, or may, be asked to find that one of the individual defendants, probably Mr Falzon or Mr Yule, actually removed their signed undertakings from their personnel files. If Tensator's evidence is accepted at face value, then it is likely that Mr Falzon and Mr Yule signed up to the undertakings, whatever the subsequent fate of the pieces of paper. However, they still deny that they signed those undertakings and the fact remains in issue in these proceedings. Mr Freedman, who appears for Tensator, does not invite me to approach these proceedings on the footing that they definitely signed them; Tensator accepts that there is a triable issue on the point.
14. Mr Salter for the defendants has said that this is an issue on which I should find there is no triable issue or serious question to be tried because, looking at the evidence as a whole, I should determine that his clients' evidence is correct so far as Mr Falzon and Mr Yule are concerned, and it is apparent there never were agreed undertakings between Tensator on the one hand and those two individuals on the other on which Tensator could sue. I am afraid I reject this approach. I will not review all the evidence. It is something of a jigsaw puzzle made up of the evidence of several witnesses as to what happened in the past, what systems were in place and so on. As I have observed, if taken at face value, it would support Tensator's case on this point. True it is that it might not be accepted and allegations of conspiracy to destroy copies somewhat raises the bar in these proceedings, but I cannot dismiss the evidence and simply accept the evidence of Mr Falzon and Mr Yule.
15. In Cyanamid terms, there is clearly a serious question to be tried. There were attempts made by each side to weaken the case of the other in argument before me, and although each side faces evidential difficulties there is still a serious question to be tried. I would observe that this case differs from many employee restrictive covenant cases. In the vast majority of cases the terms are not in doubt. The fact that the existence of the terms are in doubt in this case in relation to two of the four defendants raises additional complications.
16. Even if there were a finding that all four individual defendants signed up, they claim to have other defences to this application so far as the application is based on those covenants. They rely on the familiar rules relating to covenants in restraint of trade. They say that all the undertakings go farther than is reasonably necessary to protect the proper interests of Tensator. This is more familiar territory in these sort of applications. The point is particularly taken in relation to Mr Tuppin and the non-dealing with customers and competing businesses. This is particularly relied on in relation to Mr Tuppin because, since 1994, all his contacts are or are said to have been abroad. Mr Salter, appearing for the defendants, relies on the fact that, as appears to be the case on the evidence of Tensator itself, the covenants were extracted from the entire range of employees, including a driver, so one cannot start from what is sometimes taken as the starting point for assessing reasonableness, namely the fact that two commercial parties have agreed terms, because the terms would, he said, be manifestly unreasonable for a driver. That, he says, should colour my approach in looking at the reasonableness of these terms.
17. I need not dwell for long on this point because Mr Freedman does not seek to put his case higher than that there is a serious issue to be tried in relation to it, and because it seems to me that I cannot come to any firmer conclusion in relation to it than that. While Mr Freedman would seek to justify each of the covenants against each of the individual defendants at a trial, he does not say that he can establish at this stage that they are all within the boundary of being no more than is reasonable in relation to each of them. This is therefore another issue which I cannot decide, but where I proceed on the footing that there is a serious issue to be tried.
18. Mr Salter, for his part, said that I should find that all these terms are unreasonable, but it is simply impossible for me, on the basis of the evidence and the time available, to come to any positive and firm conclusion to that effect; the evidence simply does not permit one to do so on an application such as this.
19. The next issue on which Mr Salter says I should find for his clients (and as a result dismiss the application) is one of clean hands. He says that the evidence shows that Mr Williman was guilty of fraud on Tensator because he procured the payment of invoices in favour of a company which had not provided services for those invoices. The invoices amounted to several tens of thousands of US dollars. Mr Williman asserts in his evidence that some at least of the invoices relate to services rendered to the company (for example, work on a brochure) but that some do not. I think that there is a faint suggestion that the latter covered future work, but he has said that in future only invoices covering work done or work in train will be paid. He is seeking the advice of his auditors on this.
20. Mr Falzon and Mr Yule profess to have had great concerns about this, and it is said that they fear that they might somehow be implicated in this practice in a way which will work to their disadvantage. It appears from some of the material that they may even go so far as to allege that this conduct amounted to a repudiatory breach of their respective contracts of employment, but they do not pursue that point before me. What they do say is that the conduct of Mr Williman means that the claimant companies do not come with clean hands, and that the injunction to enforce the various covenants that I have outlined should be refused accordingly.
21. On the evidence that I have seen it does seem that there is a good case for saying that Mr Williman has made payments out of company assets that ought not to have been made. However, even if that is the case it does not seem to me to raise even an arguable case of dirty hands. As observed in Snell on Equity (30th Ed.) at page 32, the maxim that he who comes to equity must come with clean hands "must not be taken too widely". "Equity does not demand that its suitors shall have led blameless lives"; what bars the claim is not a general depravity but one which has "an immediate and necessary relation to the equity sued for [and that is a quotation from Dering v. Earl of Winchelsea [1787] 1 Cox Equity 318 at 319 and 320] and is not balanced by any mitigating factors". I accept that approach and Mr Salter does not dispute the proposition, but he sought to say that there was a link between that misconduct and the present claim. He says that the fraud is the reason his clients left and that that forges the relevant link.
22. It seems to me that that argument wholly fails. While Mr Falzon and Mr Yule say that discovery of these financial wrongdoings was among the reasons that they left the company, Mr Tuppin and Mrs Falzon do not. In Mr Falzon's case the strength of his evidence is reduced virtually to nil by the fact that in about February 2004, several months after he discovered the transactions which caused him, he says, to want to sever connections with the company, Mr Williman offered him the position of Managing Director of Radfords (a company which Mr Williman was in the process of acquiring) with a shareholding and increased salary. Mr Williman admits this offer. Mr Falzon says that he considered this to be an attractive offer and gave it serious thought. He even went so far as to ask two colleagues whether they would be interested in joining him in Radfords. However, in the end he declined. He says it was because he was still fearful that he would be implicated in the illegitimate payments. In my view, the fact that he was prepared to consider the Radfords' offer seriously and found it attractive completely undermines his professed reliance on the illegitimate payments as being a reason for his leaving. It renders it incredible, in my view, and I give the evidence no weight. I should say that I regard the introduction of the evidence of these payments, and certain other evidence of a personal nature involving Mr Williman, as unnecessary and transparent mud-slinging in these interim proceedings designed to embarrass rather than further the legitimate parts of this dispute.
23. In the circumstances, the evidential link between the payments and the employees leaving is not made out. However, even if it were, I do not consider that the allegation has the necessary relationship to the equitable relief sought in this case to come within the principles summarised in Snell. If the financial transactions were wrongful, they were a wrong perpetrated on the company by another officer. Why should a wrong perpetrated on, and not by, the company give the company dirty hands? It is the company that is the claimant in these proceedings, and it is the company whose rights are relied on. How can it be said that a wrong perpetrated on the company has any immediate or necessary relation to the equity sued for when the company is bringing its own action? In my view, it plainly cannot, and the point taken by Mr Salter manifestly fails.
24. The third and last point taken by Mr Salter as being one that I should find for him on, and as a result not grant relief, is non-disclosure by Mr Williman. The point relates to his alleged knowledge of the involvement of Mr Falzon with Trak Designed Limited, the fifth defendant in this case. I shall deal with the point shortly.
25. It is common ground that Mr Williman knew that Mr Falzon had some connection with Trak Design for some period before Mr Falzon left Tensator, but it is disputed what he knew. Mr Williman says that he thought that Trak Design was a printing company owned by Mr Falzon's brother or brother-in-law and which dealt with a limited number of Tensator's products. Mr Falzon says that he set it up in order to trade in a limited range as his own company with Mr Williman's consent. Mr Williman flatly denies that he knew or consented to any such thing.
26. On 9 April in connection with his departure, Mr Falzon emailed Mr Williman as follows:

"Dear Jeremy

I have decided that I will not be returning to Tensator. Please use this email address for any future communication."

Then he sets out some immaterial matters.

On 13 April, Mr Williman responded to that by email as follows:

"Hi Rich,

I am surprised that after years of knowing, working & socialising with you that you have decided to end our working relations with a one liner.

I would value the opportunity to chat, not to try and change your mind but just to understand why you feel you can't even talk to me.

I would hope that at the very least we could maintain an ongoing business relationship?

Clearly the concept had been that trak design would be a "dealer" for our cable display range; is this still the plan?

Obviously if this is not the plan use of our photographs, drawings, etc, becomes a question of copyright.

I hope we can move this forward in a professional manner and look forward to your call."

27. Mr Salter says that this shows that Mr Williman well knew that Mr Falzon was involved in Trak Design in the manner which he, Mr Falzon, alleges. Mr Salter says that if that had been made clear at the outset of these proceedings, there would have been no relief granted by the court, because the application is based on Mr Williman's ignorance before the second half of April of this year as to the involvement of any of the defendants in competing with the claimants, and the application for relief could not have been successfully made. He says the failure to disclose Mr Williman's knowledge in this respect is culpable.
28. The point fails, in my view, for several reasons. First, non-disclosure is relevant to a without notice application but in practical terms there was no such thing here. There was something which was dealt with as a without notice application in front of Laddie J on 14 May, but it was in fact the first return date of the inter partes application on which occasion the defendants were represented, albeit not by Mr Salter. Accordingly, the principles relating to without notice applications and non disclosure do not arise. Second, it seems to me that in a real way there was disclosure of the point. The email that I have just read was actually exhibited to Mr Williman's witness statement provided in support of the application which is now before me. Third, the email does not inevitably point one way and one way only on the evidence. The email is, and can be read as being, consistent with Mr Williman's version of events, which is that he knew that Mr Falzon was, as it were, helping out in Trak Design Limited but did not know that it was effectively a trading vehicle for Mr Falzon.
29. Accordingly, in my view, this point raised by Mr Salter as a complete bar to the application fails. I therefore come back to Cyanamid principles. This is an application in which, in the form it appears before me, the claimants are seeking to enforce the covenants that I have already read. They are wide-ranging covenants which would have the effect of effectively bringing a halt to the business of Xtracs and the involvement of the four defendants in Xtracs were an injunction granted in the terms of all those covenants.
30. I have already indicated that on all relevant points there are serious questions to be tried. Mr Freedman has no knock-out blow in relation to the claims and Mr Salter has no knock-out defence in relation to the claims. That hurdle of Cyanamid is therefore fulfilled. I therefore need to turn to the next question in Cyanamid: Are damages an adequate remedy for the claimant? In my view, they are not really adequate. The loss from any breach of these covenants would be financial, but they would be difficult to quantify, as is extremely common in this sort of case. The damages would be the value of lost business. It would no doubt be possible to identify the maximum possible claim from certain contracts, but it would not be easy to quantify precisely which contracts which the defendants got would otherwise have gone to the claimants during any period during which a bar should have been operating. Furthermore, one could not easily quantify longer term losses to Tensator from the competitor having what is, on this hypothesis, an unjustified foothold in the market. Added to this is the fact that there is no evidence before me of the means of the defendants to pay damages.
31. The next question there is: Would damages on the cross-undertaking be adequate compensation for the defendants (and in particular the first four defendants who are the effective respondents to the application) should it turn out that the injunction, if granted, should not have been granted? In my view the same points in relation to the difficulty of assessing damages apply, and perhaps even more so. If the injunctions were granted in full it would effectively close down a business that has been operating for four months. The business could perhaps be revived in a staggered fashion as the individuals come off their time bars (they each have different time limits, a point to which I will come in due course) but there would certainly be a sudden hiatus of over a month and Mr Falzon, who is probably the principal operator in this business, would be barred for something like four months. It is very difficult to quantify what losses to the defendants would flow from that. It may even be that Xtracs, their corporate vehicle, would run into the sand, so the individuals would have to go off and find alterative employment and lose the opportunity of making money through Xtracs. That would mitigate their loss but it would leave the calculations as to what their loss was just as difficult. I would, however, under this head be prepared to conclude that Tensator is and would be in a financial position to pay such damages as would arise on the cross-undertaking so far as calculable and calculated. It is a very substantial company and the contrary has not been contended.
32. In the light of this I have a situation in which there are serious questions to be tried. Damages are not clearly an adequate remedy for the claimants, nor is compensation on the cross-undertaking clearly adequate compensation to the defendants should I grant the injunction and should it turn out that it should not have been granted. In the light of this, I can and should move on to consider the balance of convenience generally: see Fellows v. Fisher [1976] 1 QB 122, including the question, so far as it is going to assist me, as to whether the counsel of prudence would be to preserve the status quo, whatever the status quo might be said to be in this case.
33. If I grant the relief sought it will, as I have observed, be likely to close down the business of Xtrac at least for a period. All three male defendants work for and within Xtrac and Xtrac competes with Tensator. If I prevent them from working in a competing business in line with the widest of the contested covenants, they will not be able to operate within Xtrac and Xtrac will, as I understand it, be deprive of its key personnel. They will come back on stream as their respective periods of six months from their respective terminations of employment with Tensator expire, but that gives a staggered availability. Mr Yule's period comes to an end on 27 August, Mr Tuppin's on 12 September and Mr Falzon on 9 November according to Tensator, and Mr Falzon has, in a second witness statement, sought to put forward a termination date of 13 March, which would lead to his six months expiring on 13 September. I do not give much weight to this evidence in the circumstances in which it came about. Whether or not this would lead to the business restarting on any and if so which of those dates I do not know, because I do not know the relative importance of the individuals to the business. It may be that the shutdown would be for just a little less than two months, by which time Mr Yule and Mr Tuppin would be free from any contractual restraints.
34. Should I, in the circumstances, make an order which will close down a business which has been going on for at least four months for such a limited period of time? I do not think I should. The present position is somewhat unfortunate. The business has been operating for over four months. That is due to a number of factors. First, Mr Falzon very arguably engaged in some start-up activities before the termination of his employment with Tensator which was probably wrongful. Then there was a period between the date when Mr Williman started to smell a rat and investigate and the date when these proceedings were commenced. The short history is as follows.
35. He started to investigate matters at the beginning of April when the existence of Xtracs was brought to his attention. At first he failed to spot a link between the new competitor in the market and Mr Falzon, but then he saw that there was a potential link because the name Falzon appeared on a company search. He had overlooked this name first time round apparently. He then carried out further investigations. It was not until 30 April that a letter before action was sent and the present proceedings were issued on 6 May. That was followed shortly by the service of the present application.
36. Quite what was happening in the intervening month (between the beginning of April and the letter before action) by way of investigations is not clear. It is clear that investigations were carried out, but how the picture unfolded does not appear from the evidence that I have seen. The impression that I have got is that the approach to the investigation was somewhat leisurely. Mr Freedman for the claimants, who I should say never put his case higher than he should or was entitled to and is to be commended for that, accepted that the approach of Tensator was not obviously the quickest possible, but, he said, it was the quickest that they could actually do. I do not accept that. The clear impression I have is that the investigations were not carried out with the speed that one would expect in this sort of case. I think that they could have got to the commencement of proceedings earlier. I note that Mr Williman's slightly casual attitude to this sort of thing is demonstrated by the fact that it was accepted by Tensator that there was a significant delay in serving reply evidence in this case, part of which was attributed to Mr Williman going on holiday. I would not deny Mr Williman his holiday, but I think that the attitude to the evidence tends to demonstrate a lack of urgency which is consistent with my view of the lack of urgency in April.
37. We then arrive at the hearing on 10 May. I am told that on that occasion when the matter came before Laddie J, it was indicated that there would be insufficient court time available to hear any serious or significant argument in the case and therefore the parties sought to negotiate as best they could to put in place an interim regime. The result was the pattern of undertakings that one sees in the order. In essence, they are undertakings restricting use of confidential information and there are limited undertakings given by Mr Tuppin based on some, but not all, of the covenants in question. I do not think I need to read those undertakings at this stage. The parties anticipated that they would be able to get back for a full hearing for a day or a day and a half at the beginning of June and put in place a timetable in order to achieve this. If that had been achieved, then it would have left rather more of the potential restraint period running. However, it became apparent fairly shortly that that was not going to be possible when, as I am told, it became apparent that yesterday's date, 20 July, was the earliest at which the court could provide time.
38. The position at that stage therefore was that Tensator had accepted rather more limited undertakings on the assumption, shared by both parties, that the matter would be fully argued in the court within roughly a month or possibly less. It is not their fault that in fact that has not proved possible until 20 July when the matter came before me. Accordingly, some of the period of delay in this case arises from two features of lack of court time, first the lack of court time for a meaningful hearing on 10 May which meant that it was not possible for Mr Freedman on that occasion to get any wider relief than he did, and second lack of court time in getting the full inter partes and fully argued hearing on.
39. I am therefore in a position in which I am asked to impose short-term orders on two defendants and a slightly longer term on a third, all of which will have the effect of bringing about the cesser of a business of a company which has, through the same mix of factors, been apparently operating for four months, those factors being a combination, as I have pointed out, of delay by the claimants, but principally being the unavailability of court time. This is an unfortunate situation, but I have to consider the position in which we now are. Mr Freedman has urged me to view the situation as though Xtracs had been in business for only one month, that is to say the situation as at the date of the issue of proceedings (roughly speaking), but in my view that is not realistic. We are where we are. The delays are not attributable to the defendants; if they had been I might have taken a different view. Where we are is a business which has been trading for four months and an application which is, in effect, to take employees out of that business for periods of one to four months. In the circumstances I do not think that adopting that course would strike the right balance.
40. I therefore think that on the balance of convenience it would not be right at this point in time to grant the more extensive relief sought by Tensator in the application. So far as that conclusion is influenced by delays arising out of lack of court time, I reached the result without enthusiasm. It is, however, the sort of thing that may happen where what is sought to be enforced is short-term restrictions. I think that bearing in mind the number and nature of the issues that have to be tried it would be unduly unfair and inappropriate to impose the stop-start burden on these individual defendants.
41. My conclusion on where the balance of convenience and fairness lies is supported by two other factors. First, the additional damage to Tensator's business which results in respect of any trading in the balance of the respective six month period, over and above that which might already have occurred, if any, may well not be that great. The relevant sizes of the operations of the companies are very different and the period is short. Although it may be difficult to quantify damages, it is possible to put a figure on them, because the court always will, if necessary. If the defendants have got themselves an illegitimate head start in their new business then they will doubtless receive their cum-uppance if Tensator pursues these proceedings to a damages claim and they are forced to pay substantial damages. If they can pay those damages then Tensator will have its compensation. If they cannot, then the consequences may be serious for them if Tensator decide to bankrupt them. The covenants, if and insofar as enforceable, are not without commercial significance if they have to be enforced by a damages claim.
42. Second, the purpose of the covenants was said to be primarily to protect confidentiality and sensitive commercial information. There is little doubt that, contrary to their initial protestations, the defendants did take information in the form of lists which they should not have taken. Undertakings have been given and are to be extended in time to prevent the use of this confidential information, and while I accept that the protection from such an undertaking is not the same as the protection which would be afforded by a full enforcement of the covenants, and while I accept that protecting confidential information would be a legitimate purpose of the covenants so far as it applies to defendants with confidential information, nevertheless those undertakings are of some significance and the protection given by them gives me some comfort in the view which I have reached.
43. In the circumstances and with some regret so far as the present situation arises as a result of lack of court time sufficiently early to enable a more meaningful period of cesser to be enforced, I shall make no further order in this application to enforce the covenants. In those circumstances I do not understand Mr Freedman to be seeking any amendment of the protection he currently has from the undertakings given by the defendants.
44. For the sake of completeness I should add the following. First, I have considered whether this is a case in which I should form and apply a view as to the likelihood of success at the trial. At one stage I confess I was tempted to do so, but I have come to the conclusion that this is not such a case. There are many issues in play in these proceedings arising out of the unusual factor of a dispute as to what the terms of two of the contracts were, and arising out of the fact that there are at least three, if not four, significant defendants who have to be considered in terms of the reasonableness of the respective covenants. While it may be easier to form a view on some of the issues as opposed to others, it is not possible to form a useful view on enough of them to make the exercise valuable, worthwhile or proper. Mr Salter, as I have indicated, submitted that the covenants were all unreasonable because they were too wide. I do not feel able to base my decision on any determination in that area because it would involve an analysis of the evidence in which neither side has indulged, which would have taken a long time, and which would probably have led to an inconclusive result anyway in the absence of cross-examination. It is true that the non-competition covenant, the broadest of the four, might be particularly difficult to justify, and the non-dealing covenant may be more difficult to justify than the customer non-solicitation covenant, but that is as far as I think I am prepared to go on this point. This is not a case where I can reach a sufficiently clear view on the likelihood of success at trial to enable me to make that a factor in my determination.
45. Second, Mr Salter urged me to reject the application as an abuse of the process on the footing that that particulars of claim in this case were not served on time; in fact, they were served miles out of time. They should have been served on 28 May and they were actually served on 15 July, seven weeks out of time. That, I have to say, is not impressive and one would normally expect a claimant to do better, but it does not make these proceedings or the application an abuse of the process. It would be disproportionate to strike out the whole proceedings on that basis (and no such application is made) so it would be proper to allow late service, which indeed I did. In the circumstances, Mr Salter's abuse point fails. I ruled against him on that at an early stage of the hearing and the hearing proceeded on a fully-argued basis.
46. The third point relates to the status quo. I have referred above to the possibility of granting relief on the footing that it is better to preserve the status quo. The problem with that in this case, as in many of these cases, which status quo? The full expression "status quo" is "status quo ante bellum", that is to say, the status quo before the war. That would mean putting everybody back to the position that they were in, I suppose, before Xtracs started. That cannot be done fully because at that point the four defendants were employed by Tensator and I cannot order that their employment be restored. I prefer to reach my conclusions on the basis of the reasoning and the reasons that appear earlier in this judgment.
47. Accordingly, and subject to any refinements that Mr Freedman may wish to have in relation to the relief already stated or to the current form of order (and I do not understand him to be putting forward any) I decline to grant any relief on this application going beyond the relief which is comprised in the undertakings which, as I understand it from Mr Salter, will remain in force until trial or further order.
- - - - -