Visage Ltd & Anor v Mehan & Ors, Court of Appeal - Queen's Bench Division, November 03, 2017, [2017] EWHC 2734 (QB)

Issuing Organization:Queen's Bench Division
Actores:Visage Ltd & Anor v Mehan & Ors
Resolution Date:November 03, 2017
 
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Case No: HQ17X03603

Neutral Citation Number: [2017] EWHC 2734 (QB)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 03/11/2017

Before :

Mrs Justice Yip

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Between :

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Mr Selwyn Bloch QC and Mr Jeremy Lewis (instructed by Walker Morris) for the Claimants/Applicants

Mr Jonathan Cohen QC (instructed by Addleshaw Goddard LLP) for the 1st Defendant/Respondent

Mr David Reade QC, Mr Grahame Anderson (instructed by Kennedys's Law LLP) for the 2nd, 3rd and 4th Defendants/Respondents

Hearing date: 23rd October 2017

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JudgmentMrs Justice Yip :

  1. The Claimants are engaged in the fashion industry. Visage is a clothing designer and supplier, whose customers are well-known high street and online retailers. Until recently the Defendants were all employed by Visage. The Second Claimant is included on the basis that Visage's sweater section was transferred to GSCM on 1st September 2017 and there may be an issue as to whether the Third Defendant's employment was transferred to it. For present purposes, that is not something I need be concerned with.

  2. The Defendants are all members of the same family, by birth or marriage. They were all part of Visage's senior management team. Visage had been founded by family members but came under the control of Li and Fung Ltd in 2010 under a share purchase agreement. The family sold out their share for a substantial sum, the agreement being worth £170 million in total. In 2014, each Defendant entered into a new service agreement with Visage. The Defendants received substantial remuneration. Unsurprisingly, the contracts contained restrictive covenants dealing with the position post-termination.

  3. The Defendants have now all resigned from the company. The position is that the First and Fifth Defendants remain employees of Visage but are on garden leave. The Fifth Defendant's notice will expire at the end of December 2017 and the First Defendant's in April 2018. The employment of the other Defendants has now come to an end.

  4. It is the Claimants' case, in essence, that the Defendants all decided to leave and formed the intention to compete with Visage. It is said that, in very clear breach of their duties under the contracts, they created a competing business while still on the Visage payroll and took advantage of their contacts to solicit employees and customers and made use of confidential information, all to secure a significant head start.

  5. It is clear from the evidence I have seen that there are significant factual disputes, which cannot be resolved at this stage and must be a matter for trial. However, it is equally clear that the Claimants have a strong case that the Defendants (or at least the Respondents to this application) have been guilty of unlawful conduct.

    The proceedings

  6. Proceedings were issued on 3rd October 2017 together with an application for interim relief. The Claimants sought injunctions and orders for delivery up and information. The application came before me on an urgent basis on 10th October 2017. The parties were able to agree a consent order on the basis that the First to Fourth Respondents gave substantial undertakings until the return date. The Second to Fourth Respondents were only willing to give the undertakings they did on the basis of an early return date. The application for interim relief came back before me on 23rd October 2017 with a time estimate of one day. That time estimate proved to be unrealistic. By sitting late and allowing Counsel to complete their submissions in writing, I was able to hear the parties' arguments but no time had been allowed for a judgment. I therefore had to reserve my judgment.

  7. A second application for interim relief was made on 12th October 2017, seeking information from the First Respondent and springboard injunctive relief against the Second to Fourth Respondents, together with directions towards an expedited trial.

  8. Particulars of Claim setting out the claims against the First to Fourth Defendants were served on 19th October 2017. These are lengthy, running to 43 pages. Significant breaches of contract and of fiduciary duty are alleged. I am told that in relation to the Fifth Defendant an extension of time for serving Particulars of Claim against him have been agreed. It appears that discussions in relation to his position are ongoing and I am not concerned with him at this stage.

  9. The parties are agreed in principle that there should be an expedited trial. I was told that discussions are ongoing about the directions and the precise timetable and it was to be hoped that such directions can be agreed. I did not hear any argument on the directions. If the parties are unable to agree them, it may be that a further hearing is required. The estimated window for trial is January to February. Therefore, I am concerned with the position until then. I note that First Respondent will remain on garden leave until after that time.

  10. The undertakings given by the First Respondent on 10th October 2017 continue until 9th April 2018, that is after the anticipated trial date. Such undertakings largely deal with her position in the interim period but there is an application for her to provide evidence under compulsion which I need to deal with.

  11. The undertakings given by the Second, Third and Fourth Respondents were to continue only until the issues could be considered at the return date. Those Respondents offered further undertakings to cover the position to trial. They were not prepared to submit to the application for springboard relief but were prepared to agree somewhat modified restrictions relating to the post-termination covenants. There is also an application for disclosure of information against the First to Fourth Respondents, which is in issue.

  12. The Claimants have provided a draft order. The Second to Fourth Respondents have produced a modified draft, following the structure of the Claimants' draft but amending it to reflect the extent to which they are prepared to consent (either by way of undertakings or by submitting to an order in those terms).

    The contentious issues

  13. The matters I need to determine now are as follows:

    i) Whether the First Respondent should be required to serve evidence covering information in relation to product samples (paragraph 1.2 of the Claimants' draft order);

    ii) Whether to grant springboard relief against the Second to Fourth Respondents (paragraph 2 of the Claimants' draft order);

    iii) The terms of the orders in relation to the area covenants covering the Second, Third and Fourth Respondents (paragraphs 3, 8 and 12 of the Claimants' draft order);

    iv) The terms of the non-dealing clause against the Fourth Respondent, it being suggested that paragraph 13.3 of the Claimants' draft order is unnecessary given that he only dealt with one customer (ASDA) and will be restrained from accepting any orders from ASDA;

    v) Whether the Second and Fourth Respondents should be compelled to provide disclosure of information about any wrongful contact with clients, employees or suppliers (paragraph 18 of the Claimants' draft order).

  14. I propose to look first at enforcement of the restrictive covenants and springboard relief, in respect of which there is obvious overlap, and then come to the applications for provision of information.

    Interim relief - general principles

  15. The well-known test from American Cyanamid Co v Ethicon Limited [1975] AC 396 applies. The Claimants must show (i) that there is a serious issue to be tried; (ii) that damages would not be an adequate remedy and (iii) that the balance of convenience favours granting the relief sought. In relation to springboard relief, I may need to go further and ask whether there is a real prospect of success: Dorma UK Ltd v Bateman [2015] EWHC 4142.

    The evidence relied on

  16. I was provided with six lever arch files for the purpose of this application. The key witness for the Claimants was Nick Cotterell, a director of both companies. I had four witness statements from him dated 3rd, 9th, 12th and 18th October 2017. Other substantive evidence was contained in the statements of Garry Gordon; Tania Holcroft; Stephen Lister and Bryan Pool.

  17. Each of the Second to Fourth Respondents had provided two statements dated 13th and 16th October 2017. To date, the First Respondent has not submitted any formal evidence.

  18. My consideration of the substantial documentation was greatly assisted by the provision of a chronology prepared by Counsel for the Claimants which conveniently summarised the events relied upon with references to the relevant evidence in support. I appreciate that this was not an agreed chronology. However, it appeared to accurately reference relevant evidence. The Respondents challenged the interpretation placed on some of the events rather than challenging the accuracy of the chronology itself.

  19. The service contracts relied upon were entered into in 2014, when...

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