Affinity Workforce Solutions Ltd v TCE Kathryn McCann
| Jurisdiction | England & Wales |
| Judge | Mr Justice Snowden |
| Judgment Date | 24 October 2019 |
| Neutral Citation | [2019] EWHC 2829 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL 2019 MAN 000087 |
[2019] EWHC 2829 (Ch)
Mr Justice Snowden
Vice-Chancellor of the County Palatine of Lancaster
Case No: BL 2019 MAN 000087
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN MANCHESTER
BUSINESS LIST
Liverpool Civil and Family Court
Vernon Street, Liverpool
William McCormick QC (instructed by Hemingways Solicitors Limited) for the Claimant
Daniel Tatton Brown QC (instructed by TLT Solicitors LLP) for the Defendants
Hearing date: 9 October 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This is an application by the Claimant (“Affinity”) for an injunction to restrain the First to Fifth Defendants (the “Employees”) from taking any part in the business of the Sixth Defendant (“Tradewind”) until after the expiry of certain covenants which are alleged to have been included in their contracts of employment with Affinity, and which restrict their ability to engage in competition with Affinity for six months after termination of their employment. Affinity and Tradewind are competitors in the business of providing recruitment services in the education sector, matching vacancies at employer schools (referred to as “clients” or “customers”) with suitable teachers and other potential employees (referred to as “candidates”).
The Employees ceased to be employed by Affinity between 17 May 2019 and 2 July 2019 and have all now been employed by Tradewind. In the claim, Affinity seeks injunctive relief to enforce the relevant covenants and damages for breach of contract against the Employees, and injunctive relief and damages for inducing a breach of contract against Tradewind.
If applicable, the relevant periods of post-termination restriction will expire between 17 November 2019 and 2 January 2020. The parties have therefore proceeded on the basis that such periods will expire before any trial of the action can take place.
As I shall explain, although the application issued by Affinity sought wider relief so as to enforce a number of covenants, each of the Employees has offered to give undertakings to the Court until after expiry of the relevant six-month period not to solicit or deal with any of the customers or candidates included in an agreed list as applicable to her. Although the lists of identified customers and candidates have been agreed for each of the Employees, Affinity does not accept that this regime is sufficient. In consequence, the debate at the hearing before me concerned the single issue of whether the Employees should, instead of giving the undertakings, be restrained more generally from being employed or engaged by Affinity for the remainder of the applicable six-month periods. In that regard, Affinity indicated that in order to mitigate the potential effect of such an order on the Employees, it would have no objection to their remaining employed and paid by Tradewind, provided that they played no role in its business.
Background
As indicated above, each of Affinity and Tradewind operate a recruitment business in the education sector. Whilst a single client school may require many candidates over time, without a sufficient reservoir of suitable candidates, the needs of the school will not be met by the recruitment agency, and its business may be lost. Neither clients nor customers will necessarily deal exclusively with a single recruitment agency, but being the first port of call for either group is an important advantage. That position is hard-won and valuable, and the result of the forging of personal relationships between employees of the recruitment agency and the schools and candidates over time. There was no dispute between the parties that such relationships and the confidential information relating to them concerning, for example, the needs of the schools and the qualifications and aspirations of the candidates, can be the proper subject of protection by suitable covenants in the contracts of employment of employees of an agency.
Each of the Employees, together with four others, was employed by Affinity until earlier this year. Some, but not all, had become employees of Affinity following a TUPE transfer of their contracts of employment from other companies whose businesses had been acquired by Affinity, in particular Capita Resourcing Limited (“Capita”) and Monarch Education Limited (“Monarch”). The result is that the Employees do not have identical contracts of employment: that is an issue to which I shall return below.
The First Defendant was the North West regional director for Affinity, based in Liverpool and the line manager for the other Employees. She was summarily dismissed by Affinity on 17 May 2019 for alleged gross misconduct which is said to have included the taking of unauthorised paid holidays. It is also said that following her termination, the First Defendant forwarded to her personal email a large amount of confidential information and documents belonging to Affinity that would have been valuable to a competitor but of no proper use to her.
The First Defendant has denied the allegations against her. She appealed her dismissal at an internal hearing on 13 June 2019, but her appeal was rejected by Affinity a few days later. The First Defendant has since commenced proceedings claiming that she was wrongly and unfairly dismissed. In these proceedings she relies upon her wrongful dismissal as the basis for contending that Affinity repudiated her contract of employment, with the result that she is not in any event bound by any post-termination restrictions in it.
Thereafter, between 18 June and 2 July 2019 eight other employees resigned from their employment at Affinity's Liverpool branch. After short periods of garden leave, their respective employments with Affinity then terminated.
The First Defendant commenced employment with Tradewind on 20 June 2019. Each of the eight other former employees of Affinity also started to work for Tradewind between 29 July and 5 August 2019. Affinity has alleged that the First Defendant induced or encouraged the other employees to leave Affinity and take up employment with Tradewind.
By letters sent on 12 and 18 July 2019, Affinity complained that the conduct of each of its ex-employees amounted to a breach of their continuing fiduciary duties and their contractual duties of confidence to Affinity. The letters sought extensive contractual undertakings from each of the ex-employees to the effect that they would not make use of any confidential information of Affinity or solicit the custom of, or deal with, relevant clients or candidates with whom they had dealt whilst at Affinity. Importantly, the undertakings sought did not seek to prohibit the ex-employees from working for Tradewind.
Extensive correspondence then ensued between solicitors instructed on behalf of all of the ex-employees and Affinity. In the course of that correspondence, on 12 August 2019 the solicitors for the ex-employees proposed a revised set of undertakings to be given to Affinity based upon the earlier draft suggested by Affinity, and including a list of identified schools for each individual ex-employee. The solicitors also protested that Affinity should follow the relevant CPR Pre-action protocols and not issue proceedings as Affinity had threatened.
The correspondence continued, and on 6 September 2019, the current solicitors for Affinity who had recently been instructed, wrote a comprehensive letter outlining its position on the applicable contracts and covenants. That letter referred, for the first time, to covenants in the employment contracts of the ex-employees which were said to prohibit competition with Affinity as well as those which related to use of confidential information. It did not, however, specifically identify any injunctive relief that might be sought.
On 13 September 2019, the solicitors for the ex-employees responded at length, protesting (inter alia) that Affinity had known for some time that the ex-employees had joined Tradewind, but had not previously sought to rely upon any non-compete restrictions in the undertakings demanded. The letter repeated the willingness of the ex-employees to give undertakings in the form suggested on 12 August 2019.
Thereafter, between 20 and 24 September 2019 the solicitors for the parties negotiated and agreed draft undertakings and lists of the critical schools and candidates for each of the ex-employees. At no stage did Affinity require those draft undertakings to include an undertaking not to compete with Affinity by working for Tradewind.
However, and without warning, on 26 September 2019 the solicitors for Affinity emailed the solicitors for the ex-employees indicating that although Affinity was prepared to accept contractual undertakings in the agreed form from four of the ex-employees,
“Having reviewed the evidence, [Affinity] intends to issue proceedings against [the Employees].
The email did not identify what, if any, specific evidence had come to light to cause Affinity to adopt this position.
The immediate response from the solicitors for the ex-employees was to express astonishment that Affinity had performed what they described as a “ volte-face”, to set out that lists had been agreed on the basis of the draft undertakings offered for all of the ex-employees, to challenge Affinity to identify any new evidence which had supposedly necessitated the issue of proceedings rather than the acceptance of undertakings in agreed form from the Employees, and to suggest that if...
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