SG&R Valuation Services Company v Bourdais
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE CRANSTON |
| Judgment Date | 12 May 2008 |
| Neutral Citation | [2008] EWHC 1340 (QB) |
| Court | Queen's Bench Division |
| Docket Number | 1HQ/08/0293 |
| Date | 12 May 2008 |
[2008] EWHC 1340 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL
Mr Justice Cranston
1HQ/08/0293
Mr S Bloch QC and Mr D Tatton-Brown appeared on behalf of the Claimant.
Mr J Davies QC appeared on behalf of the First and Third Defendants.
Mr S Hornett appeared on behalf of the Fourth and Fifth Defendants.
Absent an express provision for garden leave, can an employer achieve the same result in the case of misconduct by an employee? This question arises in relation to the first and second defendants, employees of the claimant, on this application for interim relief. Already these defendants have given important undertakings as to the use of information belonging to their employer and as to not approaching its other employees with a view to recruiting them to a competitor. However, they seek to take up employment with the competitor immediately and do not want to serve any period of garden leave. The claimant seeks to prevent this.
Background
The background to the application is as follows. SG & R Valuation Service Company LLC is a limited liability company formed under the laws of the State of Delaware. It is an international consulting and advisory company specialising in the hotel sector. It trades in the United Kingdom as HVS International from a London Office (“the claimant”). The first defendant is Dominic Boudrais, a director, who began employment with the claimant in June 1998. The second defendant, Karen Smith, began employment with the claimant in March 2001 and became a director in July 2005. The first defendant had responsibility mainly for Central and Eastern Europe and the second defendant was responsible for the United Kingdom and Ireland. This interim application concentrates on these two defendants. The third defendant, Mark Finney, worked as a consultant for the claimant. He began employment in that regard in March 2007 and worked for just over a year. These three defendants are entitled “directors”, although they are not company directors in the accepted sense. The fourth defendant, Collier CRE plc is a limited company and is a large property consultant surveyor and valuer in the United Kingdom. The fifth defendant is a related company of the fourth defendant, and I refer to defendants 4 and 5 without distinguishing between their functions. Although the claimant and the fourth and fifth defendants have cooperated on business deals, they are also competitors in the sector. The fourth and fifth defendants are prospective employers of the first, second and third defendants.
The immediate events with which I am concerned began, in effect, on 4 th April of this year when the first defendant resigned, giving three months' notice. That was followed three days later by the resignation of the second defendant, again giving three months' notice. Almost immediately, overnight on the 7 th and 8 th April, the claimant started to discover that there was wrongdoing on the part of these two defendants and the third defendant. The claimant asked the first two defendants to remain at home, in effect to take garden leave. Subsequently, on 11 th April, they sent letters of suspension to the first two defendants. Then on 16 th April there were letters of resignation with immediate effect from the first two defendants sent on their behalf by their lawyers in which they accepted what they said was a repudiatory breach by the claimant in requiring them to remain at home. Subsequently, there has been a letter from the claimant inviting the first two defendants to a disciplinary hearing to be heard later this week.
Two preliminary points need to be mentioned. First, none of what follows is a final determination of the factual issues arising. I have just characterised the behaviour of the first three defendants as “wrongdoing”. At this stage all that needs to be said is that there is a serious issue to be tried in this regard as to whether these three defendants are in breach of contractual and other duties which they owe to the claimant. Final determination is for trial, as with the behaviour of the fourth and fifth defendants.
Secondly, the legal background to this wrongdoing can be taken as read. Employees owe duties, implied by law, to their employer: first, a duty of good faith and fidelity; secondly, a duty not without reasonable and proper cause to act in a manner calculated or likely to destroy or seriously damage the relationship of trust and confidence between them and the employer ( Malik v Bank of Credit and Commerce International SA (in liquidation) [1998] AC 20; thirdly, a duty not to misuse confidential information; and, fourthly, in the case of senior employees, fiduciary duties are owed to their employer ( University of Nottingham v. Fishel [2000] ICR 1462.)
With these preliminary points to one side, let me give a very brief resume of what led to the events of early April and this application. There is a considerable body of material, mainly emails, but also affidavits of the parties. Chronologically, matters begin in early February when the first defendant made a PowerPoint presentation to the fourth and fifth defendants, setting out what the first three defendants could bring to the fourth and fifth defendants as employees. Then the material is probably best summarised by category. First, there are emails evidencing an appropriation of confidential information from the claimant, although the confidentiality of some of the material has probably been overplayed. There are email trails evidencing the collection of contact information. For example, on 24 th March the first defendant sends a particularly troubling email, where he suggests resignation on 1 st April and says:
“The idea is to use 31 st March to tidy up our offices and steel (sic) as much as possible…”
One of the unedifying features is the extent to which colleagues are unwittingly enlisted in the acquisition of contact information and other information and then, having been duped, disparaged behind their backs.
Next, there are emails indicating plans to take business opportunities to the fourth and fifth defendants. Thus, there is an email from the third defendant to the fourth and fifth defendants, “Subject: Current Workload and Transferability”, saying:
“The first defendant indicated that you would like to know the projects that I am currently working on for HVS and what could be brought with us so I attach a spreadsheet.”
The first defendant, a short time later, adds a list of his own, which he says he has been “sitting on”. Then there is the solicitation of other staff to join the first and second defendants in an “exodus” to the fourth and fifth defendants which is also evidenced by the email traffic and confirmed in the first defendant's affidavit. That is coupled with the sending to the fourth and fifth defendants of information about the claimant's employees. Thus, on 12 th March the first defendant sends a detailed list of employees, together with position, salaries and bonuses to the fourth and fifth defendants, and comments that “The three of us are happy with it”. Further, there is the email which is sent by the first defendant to the fourth and fifth defendants and copied to the second and third defendants on 24 th March which refers to feedback from a discussion of the previous Thursday and includes the following comment:
“One payment for bringing working tools and know-how. £60,000 each.”
The comment opposite this entry is:
“Agreed with thanks. You have also mentioned that this could be payable off-shore. Some of us will be interested in doing this. Any advice which could be provided would be welcome.”
A particularly unattractive feature of the email traffic overall is that there is the occasional expressed intention to damage the claimant's business. Some of the emails are entitled “Project Chaos”. On 24 th March the first defendant speaks of mass resignation having “maximum negative impact on [the claimant]”.
That is by way of a very brief summary of the background. It will be for the trial to consider all of this, plus additional evidence in its context, and to resolve the factual issues. Once it had been discovered that there was a removal of the claimant's confidential information, the attempted diversion of business opportunities and the soliciting of staff, the claimant made a “without notice” application against the first three defendants on 11 th April, and this court made an order requiring the first three defendants to deliver up and preserve certain items and not to use or divulge certain information. Pursuant to that order, documents were delivered up and affidavits were sworn by the first three defendants. Subsequently, on 22 nd April the matter came before another judge of this court, and on that occasion undertakings were accepted and orders made. This is the return date for that application.
Power to send on garden leave?
The hearing in the current application concentrated on the first and second defendants, although there was an ancillary matter relating to the fourth and fifth defendants, to which I return. Fortunately, in relation to the first two defendants most of the issues have been resolved. They have delivered up what is said to be confidential information and given undertakings not to use it. They have generally been prepared to delete information and to provide confirmation of such deletion, and they have accepted that they should not undertake to solicit any of the claimant's employees...
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