The High Court has granted a perpetual injunction preventing a former director of the claimant company from disclosing confidential information about the company's business. The court had previously granted an interim injunction against the director, who had subsequently resigned.
The claimant company had developed a patented device known as a 'hedgehog', which is attached to the wheels of a golf trolley so that golfers can use the trolley in wet conditions. The defendant director had been a 50% shareholder in the company, as well as one of its two directors.
In March 2009 the other director, Mr Lantsbury, presented an 'unfair prejudice' petition against the defendant. Judgment was subsequently given in Lantsbury's favour. The judge found that the defendant had "been responsible for a whole series of actions which are unfairly prejudicial to the interests of [Lantsbury] as a member". The judge also noted the defendant's "attitude of blatant disregard for the truth, for the accuracy of public records, for the validity of company resolutions and for the rights of his fellow director". The court determined that Lantsbury should be permitted to purchase the defendant's share in the claimant at a value to be agreed.
Shortly after seeing the draft judgment in the unfair prejudice action, the defendant telephoned Mr Baum, who acted as a consultant to the claimant. The defendant made a proposal which he asked Baum to pass on to Lantsbury. The defendant also told Baum that if the proposal were not accepted, he would not only decline to provide further assistance in connection with a patent infringement claim that the claimant had brought against Masters Golf Company, but would offer his services to the patent attorneys acting for Masters, to assist them in that company's defence of the claimant's legal action. The defendant also made threats concerning defects in the claimant's patent, and warned that he would contact golf trolley manufacturers and offer to help them to develop competing products.
When giving evidence, the defendant denied that he had threatened to assist Masters. However, the judge regarded Baum as a reliable witness and accepted his account of the telephone conversation. The judge particularly relied on the fact that Baum had recorded his recollection of the conversation in a witness statement the next day, and on the defendant's admission when giving evidence that he had previously given untruthful evidence under oath.
Following the telephone call, the defendant sent Lantsbury an email in which he referred to the fact that the offer which he had outlined to Baum had been rejected. The defendant stated as follows:
"I am reflecting on the proposed action against Masters. I have spoken to Carl [the claimant's solicitor] and he is of the very strong opinion that I would be a very integral part of bringing the matter to a successful conclusion, you may have other views, but if you think my input could help cement the matter you will need to work out a deal that I could go along with. This is damage limitation from my point of view... [M]ake no mistake the deal will have to be good one or I will go the other way. The ball's in your court."
The judge found that Lantsbury was justified in interpreting the email as being "a threat to engage in conduct that could financially damage the company if matters did not resolve themselves on terms favourable to him".
On judgment, the defendant was asked whether he would give an undertaking as to his future conduct. He agreed to give an undertaking that would last "whilst [he was] a director of [the claimant]", but declined to give an undertaking as to his conduct thereafter. Four days after the judgment, the defendant notified Companies House of his resignation as a director of the company. The defendant did not inform Lantsbury or any other representative of the claimant.
The judge inferred that one of the defendant's objectives had been to free himself of the undertaking. On March 19 2010 the defendant telephoned Baum again and told him that Lantsbury had to respond with a financial offer "to stop [him] from offering [his] services to the other side". The judge accepted a witness statement in which Baum stated that:
"[the defendant] also told me that he was out to destroy the company and would do as much as he could to damage the Hedgehog Golf Company, including approaching other golf trolley manufacturers to offer his services to help them to manufacture a trolley wheel. During the conversation he said that he knew that the company's patent does not cover a manufactured wheel and he was going to make this public knowledge and set up directly with manufacturers to have a Hedgehog-type wheel produced."
On March 23 2010, the defendant sent Lantsbury a further email, which stated: "Unless I have a positive response to my email to you of 10th March by at the latest 5pm on Friday 25th March, then my options are clear."
On March 29 2010, the defendant telephoned Baum and told him that he had arranged to meet Masters "to do a deal". At this stage, the claimant applied without notice for an interlocutory injunction restraining the defendant until April 15 2010 from disclosing "any confidential information as to the practice, business dealings or affairs of [the claimant] or any of [the claimant's] customers or clients". The interim injunction was granted and provided for the confidential information to include, among other things, "confidential information relating to Patent 16258[0]27 and all other research activities, inventions, secret processes, designs, formulae and product lines".
On April 15 2010 the court continued the injunction in similar terms until trial. The defendant had been served with the relevant documents, but he did not attend the hearing.
On January 21 2011 the defendant signed a witness statement in support of patent proceedings issued by HUA Services LLP. The witness statement referred extensively to the application pursuant to which the claimant's patent was granted. The judge considered that the making of the witness statement demonstrated that the defendant was willing to disclose information that would be damaging to the claimant, regardless of whether he might breach the court order in doing so.
Judgment
The judge was satisfied that the claimant was justified in its concern that the defendant, if not restrained by an injunction, would disclose the claimant's confidential information. In reaching this decision, the judge relied on the fact that the defendant had:
- shown "blatant disregard" for his co-director's rights;
- revealed his intention to destroy or damage the claimant;
- made a number of threats, including a threat to assist a party with which the claimant was engaged in litigation;
- declined to confirm to the court that he would not use "specialist knowledge acquired as a director of the [claimant]"; and
- shown willingness to reveal information about the claimant, to its prejudice, even at the risk of breaching the court's order.
In the circumstances the judge granted a perpetual injunction to restrain the defendant from improperly disclosing confidential information. The judge invited further submissions on the precise terms of the injunction, but indicated that the injunction (which is to last indefinitely) should be made on narrower terms than those granted on an interim basis.
It is unusual for a court to grant a perpetual injunction of this nature. This case provides useful guidance as to the level of defendant misconduct that is required to obtain such an order.
The claimant's earlier application for interim relief, and its witness's credibility, particularly benefited from the fact that the claimant had contemporaneous notes of key telephone conversations, as well as written evidence of the defendant's behaviour.
For further information on this topic please contact Laura Martin at Reynolds Porter Chamberlain LLP by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email ([email protected]).