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High Court of Ireland Decisions |
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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Murgitroyd & Co. Ltd. v. Purdy [2005] IEHC 110 (14 April 2005) URL: http://www.bailii.org/ie/cases/IEHC/2005/H110.html Cite as: [2005] IEHC 110 |
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Neutral Citation No: [2005] IEHC 110
[2005 No. 490P]
BETWEEN
PLAINTIFF
DEFENDANT
JUDGMENT of Mr. Justice Clarke delivered 14th April, 2005.
The Plaintiff Company is engaged in the provision of intellectual property services having eight offices spread throughout Europe. The Company hired the Defendant, who is a European Patent Attorney, to work out of the Plaintiff's Dublin office. An initial letter of engagement dated 7th February, 2001, was followed by a written Service Agreement dated 19th February, 2001. A side letter to the contract envisaged a probationary period of six months. The service agreement was, on its terms (clause 2.2), to last for an initial three year period (which was specified as being from the 30th September, 2001) with provision for renewal for a further three years "on the company receiving a written renewal request from the executive in any September during the course of this agreement and thereafter unless and until the executive's employment hereunder shall be determined by either party giving to the other written notice as aforementioned". In the context of the agreement the Plaintiff is "the executive".
It would appear that the mechanism envisaged by clause 2.2 for renewal was not in fact invoked. However it is common case that the Plaintiff remained on in employment after the 30th September, 2004.
The events that give rise to these proceedings commenced on 20th December, 2004 when the Defendant notified the Plaintiff that he intended to leave the Plaintiffs employment. On foot of that notice his employment ended on 19th January, 2005. Immediately thereafter the Plaintiff commenced practising as "Purdy & Associates" at premises at Mespil House, 37 Adelaide Road, Dublin 2. These proceedings concern the contention on the part of the Plaintiff that in establishing that business and, in particular, having regard to the fact that two significant clients of the Plaintiff immediately transferred their work to Purdy & Associates, the Defendant is in breach of certain covenants in his contract of employment.
Insofar as material to those issues the original written service agreement between the Plaintiff Company and the Defendant provided as follows:-
"11. Undertaking
The executive will not within the Republic of Ireland during the period of 12 months following determination of his employment hereunder on his account and in competition with the company carry on any business which competes with the business of the company or any associated company having intellectual property work as one of its principle objects existing as of the date of termination of the executive's employment hereunder and with which the executive shall have been directly or indirectly concerned PROVIDED THAT nothing contained in this clause shall preclude the executive from holding at any time any shares or loan capital (not exceeding one per centum of the shares or loan capital of the class concerned for the time being in issue) in any company whose shares are listed or dealt in on a recognised stock exchange and nothing in this agreement will affect the executive's right to accept employment as an employee in another firm of patent attorneys.
12. Non solicitation
The executive, during the period of 12 months following the determination of his employment hereunder shall not either on his own account or for any person firm or company directly or indirectly solicit or interfere with or endeavour to entice away from the company or any associated company the custom of or provide goods or services of any description to any person, firm or company who or which at the date of termination as aforesaid or who or which in the period of 12 months immediately prior to such date was a customer or client of or in the habit of dealing with the company or any associated company or endeavour to prevent any such person firm or company from continuing so to deal".
There is also a clause precluding disclosure of confidential information.
While accepting that the above terms formed part of his original contract the Defendant has given evidence on affidavit to the effect that on 18th or 19th February, 2002 he informed Mr. Keith Young, the Chief Executive Officer of the Plaintiff that he wished to opt out of the service agreement. He further deposed to the fact that Mr. Young then offered that he might continue in employment but not under the service agreement. He goes on to state that during a performance review which occurred a few weeks thereafter Mr. Young provided him with a standard form of contract for review but that same was not ultimately executed. In those circumstances the Defendant appears to accept that he is bound by a non breach of confidence term (which he accepts would be an appropriate term of his contract of employment even though he had not signed a written contract) but that he is not bound by a non competition clause or a non solicitation clause.
While accepting that there are email records which appear to show an acceptance by him of that position Mr. Young has deposed to the fact that those records were created while he was on holidays and when he did not have access to his files. He has now given clear evidence to the effect that no such arrangement which would have had the effect of releasing the Defendant from the non competition clause in his original service agreement occurred.
In those circumstances there is a clear conflict of fact which will need to be determined so as to decide whether the Defendant is bound by the non competition clause or, indeed, the non solicitation clause. In addition the Defendant argues that even if the service agreement remained in place after his probationary period it did not survive the 30th September, 2004 by virtue of the non invocation of clause 2.2. The Defendant further argues that even if such clause is, as a matter of agreement between the parties, still in existence same should not be enforced as being an unreasonable restraint on trade. These latter matters are again issues which cannot be resolved at this interlocutory stage. The above restriction is significant in that it precludes any form of competition within the jurisdiction for a period of 12 months. On the other hand it does permit the Defendant to become an employee of other companies and in order to reach a full assessment of the reasonableness of the clause it may be necessary for the court to hear evidence as to the nature of the business in this jurisdiction. Furthermore it would be necessary to consider the circumstances of the Defendant's continuance in employment after the 30th September 2004 to determine whether the relevant clauses remained part of the agreement between the parties thereafter. In all those circumstances it is clear that there is a fair issue to be tried between the parties as to the applicability of the non competition clause.
The Defendant denies that he has solicited business from former clients of the Plaintiff Company. He has also offered an undertaking in respect of confidential information. For reasons which I will outline later the Plaintiff Company is disinclined to accept that undertaking and therefore the only issue which arises in respect of confidentiality is as to whether an order should be made rather than the acceptance of the Defendant s undertaking.
The facts in relation to solicitation are that within a short period of time from his departure two major clients of the Plaintiff Company (that is to say the Royal College of Surgeons of Ireland and Massachusetts General Hospital) indicated an intention to move their business to the firm operated by the Defendant. The Defendant has denied in evidence (and has exhibited correspondence in that regard) any solicitation of those clients. While it is a necessary part of the Defendant's case that he is no longer bound by the solicitation term in the service agreement (by virtue of the non applicability of that agreement on the basis of his case) in the light of his denial of any actual solicitation it does not appear to me that the imposition of an order restraining solicitation would be likely to cause any significant damage to the Defendant.
The question of the non competition clause is, however, more contentious and it is necessary, having concluded that there is a fair issue to be tried, to consider whether:-
(a) damages would be an adequate remedy; and
(b) if not where the balance of convenience lies
The above two questions, on the facts of this case, are somewhat interlinked. The Defendant contends that the granting of an injunction restraining him from acting in competition would effectively put him out of business for the remainder of the 12 month period commencing in January last. He must, of course, be correct in that contention in that his business would appear to be one which to a very large extent, if not exclusively, operates in competition with the Plaintiff Company. In those circumstances if he were to be restrained from competing he would effectively have to put his business on hold for a period of some nine months. On that basis he has submitted that, by virtue of the difficulty of obtaining alternative employment in the area, he would be forced to emigrate. On the basis of that argument one must necessarily infer that it would be his intention to live off the income which he would derive from the carrying on of the business. That is, of course, relevant from the prospective of the Plaintiffs in that, in that eventuality, the profits attributable to the competing business would be unlikely to remain intact should the Plaintiffs ultimately succeed.
Thus if the Plaintiff fails to obtain an injunction in respect of non competition at this stage but ultimately succeeded at the trial it will have suffered the potential loss of clients (who may or may not return) and an intervening financial loss which may, in practice, not be capable of recovery.
In the circumstances it seems to me that damages would not be an adequate remedy for the Plaintiff. However the issue in respect of the balance of convenience is more difficult. On balance I have come to the view that the balance of convenience would not favour the grant of an interlocutory injunction in respect of non competition provided that this aspect of the matter can be made ready for trial in a very short period of time. In the circumstances I propose that a preliminary issue should be tried as to the applicability and enforceability of the non competition clause and further propose imposing very strict time limits indeed on the parties to ensure that the trial of that issue can occur very quickly. Having regard to the issues that arise in respect of non competition (as opposed to any of the other issues in the case) it seems to me that this matter could be readied for trial in very early course.
Scottish Law
I should deal with an issue which arose in the course of the hearing concerning the applicability of Scottish law. The service agreement provides, amongst other things, that it is governed by Scottish law. An appropriate affidavit from an expert in Scottish law was produced at the hearing though, it is said, that expert is not fully independent by virtue of the fact that he is a non executive director of the Plaintiff Company. That affidavit deposes to the fact that as a matter of Scottish law terms such as those contained in the service agreement would be enforceable and would be enforced by the courts. It does not, however, seem to me that this issue of Scottish law really advances the case at this stage. The Defendant's primary case is that the service agreement (with the non competition clause contained in it) ceased to be of effect. If he is correct in that contention then the enforceability or otherwise of the non competition clause as a matter of Scottish law is irrelevant. It is conceivable that the issue might be of some relevance in the event that the non competition clause was found by the court of trial to be still in force but where the court was also satisfied that there was a difference in the enforceability of such clause in Irish law as opposed to Scottish law. However that in turn would remain a fair issue to be tried and does not advance matters at an interlocutory stage.
Furthermore under this heading reliance is placed by the Plaintiff on the fact that the Defendant brought an initial application in these proceedings seeking to have the case determined in Scotland by virtue of a choice of jurisdiction clause in the service agreement. In those circumstances, it is said that the Defendant cannot now be heard to argue that the service agreement is not applicable. However on that aspect of the case I agree with the argument put forward by counsel for the Defendant to the effect that he is entitled in relation to jurisdiction matters to take the case as pleaded by the Plaintiff. In other words he is entitled to bring a jurisdiction application based on the assumption that the Plaintiff's case is correct while at the same reserving his entitlement to deny the correctness of that case when the substantive issue comes to be tried. In those circumstances I am not satisfied that the bringing by the Defendant of an application based on the Scottish jurisdiction clause of the service agreement debars him from raising any of the matters which he has raised in these proceedings.
It is now necessary to deal with the question of the undertaking offered by the Defendant in relation to confidentiality. The Plaintiffs stated reasons for not being prepared to accept such an undertaking stem from a number of matters which, the Plaintiff says, has caused it concern in relation to the manner in which the Defendant departed from their employment. These are as follows:-
(a) the fact that it would appear that the Defendant used a Plaintiff Company credit card to pay for the advertisement introducing his new business in the media; and
(b) the fact that it would appear that the Defendant emailed certain confidential documentation to his own email address which documentation might have facilitated him in establishing his competing business.
Without reaching any concluded view (which would not be possible in a hearing on affidavit) as to the facts material to the above contentions and in particular the reasonableness of the explanations given by the Defendant in respect thereof, I am satisfied that it would be unreasonableness at this stage to require the Plaintiff to be satisfied with an undertaking and I am therefore prepared to make an interlocutory order precluding breach of confidence.
Finally it is now necessary to turn to non solicitation. I am not satisfied that there is evidence available at this stage of solicitation. However if such evidence were to become available I would take the view that damages would not be an adequate remedy for the plaintiffs and that the balance of convenience would favour the grant of an injunction. While not currently satisfied that the plaintiff is entitled to an injunction I will give liberty to apply in that regard.
Approved: Clarke J.
