Allfiled UK Ltd (Applicant/Claimant) v Dan Eltis and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hildyard |
| Judgment Date | 19 May 2015 |
| Neutral Citation | [2015] EWHC 1300 (Ch) |
| Docket Number | Case No: HC-2015-001212 |
| Court | Chancery Division |
| Date | 19 May 2015 |
[2015] EWHC 1300 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Hildyard
Case No: HC-2015-001212
Tiran Nersessian (on 30 March & 2 April 2015) and Alastair Tomson (on 13 April 2015) (instructed by R R Sanghvi & Co) for the Claimant
William Willson (instructed by Birketts) for the Respondents
Clive Freedman (instructed by Clarion) for Magpie Investment Holdings Limited
Hearing dates: 30 March, 2 April, 13 April and 7 May 2015
Introduction
Parties
The Applicant, Allfiled UK Ltd ("Allfiled UK"), is a software development company. Its primary business is described in its skeleton argument as being the creation of a " Personal Data Store" system ("the Allfiled PDS system") by which individual consumers are able confidentially to store important personal data such as copies of insurance contracts, renewal dates, banking details and so on. Allfiled UK's business model is that providers of financial and other services would then be allowed to contact these consumers, with their consent, to offer further or alternative services, and Allfiled UK would receive an income stream from these providers for facilitating such access to these consumers.
The first three Respondents are former directors of Allfiled UK. The Fourth to Fourteenth Respondents are former employees of Allfiled UK, and are together known as the "Development Team". The first three Respondents owed duties to Allfiled UK as its directors. All the individual Respondents owed obligations of fidelity to Allfiled UK. Further (with the possible exception of the Second Respondent, who did not sign any contract of service), both they and the other individual Respondents had all entered into non-solicit and non-compete covenants with Allfiled UK
The Fifteenth Respondent, Port Technologies Limited ("Port Tech"), was incorporated on 21 January 2015 by the Second Respondent, and its directors are the first three Respondents. Its only shareholder is the Sixteenth Respondent, which was incorporated by the Second Respondent on 5 January 2015 and has the same directors as Port Tech.
Summary of claim
Put very shortly, the substance of Allfiled UK's claim is that the first three Respondents conspired to set up their own business and encouraged and enticed all the other individual Respondents, who had been working for Allfiled UK in developing technology compositely called the "Allfiled PDS system", to walk out on Allfiled UK and join them at Port Tech, in developing and selling a similar or derivative system to Allfiled's previous customers, and especially a body incorporated in the British Virgin Islands called Magpie Investment Holdings Limited ("Magpie"). Allfiled UK alleges that the Respondents have unlawfully "purloined" Allfiled UK's customers and staff, and are misusing Allfiled UK's intellectual property.
Allfiled UK seeks interlocutory injunctive relief against all the Respondents pending trial or further order to prevent them from using, disclosing or disseminating Allfiled UK's confidential information and intellectual property. Allfiled UK also seeks injunctions to prevent the First to Third Respondents carrying on any trade or business in breach of fiduciary duties they owed to Allfiled UK as directors or former directors of Allfiled UK and to prevent the First and Third to Fourteenth Respondents carrying on any trade in breach of non-compete and non-solicitation clauses in their contracts of employment with Allfiled UK, whether through the Fifteenth Respondent or otherwise.
By its Claim Form (issued on 31 March 2015) Allfiled UK further or alternatively seeks damages for breach of duty and contractual covenant, damages for interference with contractual relations and damages for conspiracy by unlawful means in relation to the individual Respondents' dealings with Magpie and another company called MoneySavingExpert. com Limited ("MSE").
Magpie and its contract with Port Tech
Of particular concern to Allfiled UK is that Port Tech has now purportedly entered a Software Development Agreement with Magpie ("the PT/Magpie Software Agreement") on substantially the same terms as an earlier contract between Allfiled UK and Magpie ("the Allfiled Software Agreement") which both Allfiled UK and Magpie accept had earlier been terminated, each accusing the other of fundamental or repudiatory breach.
Magpie was incorporated on 1 September 2014. It is (as I understand it) a technology and service business which provides consumers with life management services. Magpie's business model is based on a technology platform which enables businesses and consumers to connect through technology for the purchase and provision of goods and services.
Magpie has not been joined as a party in these proceedings, but (without objection from any of the parties) it has intervened to urge the court not to grant any relief that would prevent or impede fulfilment of its contract with Port Tech and thereby severely prejudice it.
The PT/Magpie Software Agreement provides for the supply to Magpie by Port Tech of software and related source codes and the like as defined in Schedule 1 of such agreement, and for the assignment to and vesting in Magpie of the intellectual property rights in such software.
A comparison between the Allfiled Software Agreement and the PT/Magpie Software Agreement demonstrates very substantial similarities between the two: indeed, they are substantively almost identical. The definition of the software to be provided differs only in that (a) under the Allfiled Software Agreement, Allfiled UK was to provide to and vest in Magpie the "Allfiled Rules Engine" and (b) under the PT/Magpie Software Agreement Port Tech is to provide to and vest in Magpie the "Port Rules Engine", and with almost identical further definition of the services to be made available.
It seems plain for present purposes that at least the basic business idea which Allfiled UK comprised in the Allfiled PDS system was developing is the same as the "Port Tech PDS system", even if there are differences (now) in the technology behind them.
Position of the Respondents
Nevertheless, the Respondents deny that they have used or are using the Allfiled PDS system or any confidential information or intellectual property of Allfiled UK, and contend that the contractual covenants relied on by Allfiled UK are too broad to be enforceable. The First to Third Respondents deny any breach of fiduciary duty; all the individual Respondents seem to deny any breach of their obligations of fidelity.
The Respondents contend that they should be left free to work on the development and sale of software and technology which they maintain is not derived from their work for Allfiled UK, and in particular that they should not be impeded in carrying out Port Tech's contract with Magpie. They maintain that, in any event, the balance of convenience is weighted against the injunctive relief sought. Magpie seeks to support them, as previously indicated.
Facts giving rise to interlocutory proceedings
The facts giving rise to and the history of the interlocutory proceedings thus far can be summarised as follows.
IP initially acquired by Allfiled UK
Allfiled UK acquired the basic Intellectual Property ("Allfiled Limited's IP") on which the Allfiled PDS system is based from a predecessor company called Allfiled Limited, which was then in liquidation. Allfiled Limited had been established by the Third Respondent, Mr Stephen Bennett ("Mr Bennett"). The purchase price for the acquisition of Allfiled Limited's IP was some £6,000. The agreement, apparently dated 7 November 2008, was not in evidence.
It was Mr Bennett who introduced the opportunity to acquire Allfiled Limited's IP to Mr Piyush Mepa Kanji Shah ("Mr Shah"), the sole remaining director of Allfiled UK. In his first affidavit (dated 13 March 2015) Mr Shah described Allfiled Limited's IP acquired by Allfiled UK from Allfiled Limited in its liquidation by reference to the business of Allfiled Limited in the following way:
" The company had developed a software programme for the storage online of personal data and documents of individuals who could access those documents anywhere in the world. It had developed a facility for that data to be used for obtaining automated quotations for services, such as motor insurance, for those individuals…"
Original directors and shareholders of Allfiled UK
Mr Shah was Allfiled UK's first director and his wife was its company secretary. Mr Bennett became a director once he had obtained the court approval required for him to be able to take up such office after Allfiled Limited's insolvent liquidation.
Both Mr Shah and Mr Bennett became Allfiled UK's initial shareholders, though it is not clear whether the shares allotted to them were paid up. Urgently needed capital was provided by a body incorporated in the British Virgin Islands called Abbeymanor Limited ("Abbeymanor") which I understand to be owned and controlled by Mr Shah's brother, who is resident in Kenya. Mr Shah has what he describes as "wide latitude to make such investments as I thought fit" on its behalf. Abbeymanor invested some £150,000 in Allfiled UK in return for a mix of Preference and Ordinary Shares. Abbeymanor has at all times been a...
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