C.T. Dent Ltd v Mr Kfir Yizhaq Atias

Hearing dates: 2 nd October 2020 with further written submissions 5 th October 2020

Approved Judgment

I direct that pursuant to CPR PD39A 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

James Mellor QC:

By this Application, the Claimant, a dental scanning company which is sometimes referred to in the papers as CTDL, sought a variety of urgent injunctive relief against the First Defendant Mr Atias, a former director of the Claimant who resigned as a director on 2 September 2020 and the Second Defendant, a company incorporated by Mr Atias on 9 September 2020.

Following the substantive hearing of the application before me on Friday 2 October 2020 and some further written submissions on Monday 5 October 2020, I granted a fairly extensive Order on 5 October 2020 against both Defendants, for reasons to be given later. This judgment contains my reasons. I have annexed the text of the Order to this judgment.

Although the disputes between the two sides range more widely, the focus of the relief sought on this application concerns the circumstances in which Mr Atias resigned as a director of the Claimant on 2 ^nd September and resigned his position as an employee of the Claimant on 3 ^rd September. It seems to be common ground that for a number of years up to his resignation, the First Defendant was effective CEO of the Claimant, although it does not appear that he ever had a written contract of employment.

The application notice was issued on 23 September 2020 in an intended action. It was served along with the first witness statement of Ms Mai Kelly on the Defendants' solicitors on 24 September 2020. The Defendants responded by saying the application would require a day's hearing and they appeared to offer a number of interim undertakings pending a full hearing of the application, including (a) an undertaking not to open a business competing with the Claimant pending the full hearing of the application and (b) an offer to deliver up his company phone along with ‘ any physical papers he has and electronic access to those that are not available to’ [the Claimant].

The application first came before me on Tuesday 29 ^th September, by which time the offer of any undertakings from the Defendants had been withdrawn, although the offer to deliver up the company phone and certain papers continued to be made in the Defendants' Skeleton Argument. Those points apart, the application was opposed in its entirety. At around 10pm on Monday 28 ^th September, the Defendants served a fairly lengthy witness statement of Mr Atias in which he appeared to respond fully to Ms Kelly's witness statement. At a short hearing on Tuesday 29 ^th September I gave directions for the service of the Claimant's reply evidence by noon on Thursday, with a view to holding a substantive hearing of the Application on Friday 2 ^nd October. In accordance with its undertakings, the Claimant issued the claim form on 29 ^th September and served draft Particulars of Claim with its evidence in reply, a witness statement of Ari Manor. On Friday morning, I was sent a second witness statement of Mr Atias, responding to certain points in Mr Manor's statement. Both sides filed supplementary skeletons. Notwithstanding the flurry of additional documentation, the substantive hearing was able to take place on Friday 2 ^nd October.

The relief sought by the Claimant can be divided into four categories. It is fair to say that as the evidence developed and certain aspects became clearer, so the relief sought by the Claimant became more specific and lengthier, but I can summarise it as follows.

First, there is what has been called the ‘Access Order’ – in brief, the Claimant sought a mandatory order requiring Mr Atias “ take such steps as are necessary to provide the Claimant or its appointed representatives with full access to and control of the database, website, email server and electronic file systems relating to the Claimant's business (together, ‘the Systems’)”.

Second, the ‘Delivery Up order’, by which the Claimant sought delivery up from Mr Atias of any items of property belonging to the Claimant and various documents in certain specified categories which he had in his capacity as CEO.

Third, the ‘Interim Restraints’. I set out the restraints originally sought in full, because much was made of the fact that by the hearing on 2 ^nd October, the Claimant dropped the anti-solicitation injunction. The Claimant sought an order restraining the Defendants until trial or further order from doing the following acts without the consent of the Claimant:

9.1. access the Systems or their contents (including any ct-dent.co.uk email address), except to the extent necessary to enable them to comply with the ‘access’ provisions of the Order;

9.2. make any use of any materials falling within the ‘delivery up’ provisions of the Order, except to the extent necessary to comply;

9.3. provide any materials falling within the ‘delivery up’ provisions above to any person other than the Claimant;

9.4. make use of any software derived from the Software or incorporating any part of its code, or provide any such software to any person other than the Claimant;

9.5. solicit the business of, deal with, or enter into or fulfil any contract with, any person who is, or was at any point in the 12 months prior to 2 September 2020, a customer of the Claimant.

Fourth, the ‘Imaging Order’, by which the Claimant sought an order requiring the First Defendant to arrange for his electronic devices, and any online accounts which have been used by him for any commercial purpose in the last 12 months, to be imaged by an independent computer specialist.

It can be seen that the relief sought was a mix of prohibitory injunctive relief and mandatory orders. For that reason, I proceeded on the basis of the following general principles. First, the approach in American Cyanamid v Ethicon [1975] AC 396, which does not require any repetition from me. Second, and bearing in mind part of the relief sought is mandatory in nature, what I propose to do is to apply the principles as stated by Chadwick J in Nottingham Building Society v Eurodynamics Systems [1993] FSR 468 (later approved by Phillips LJ in Zockoll Group Ltd v Mercury Communications Ltd [1998] FSR 354 at 366). The four principles are conveniently summarised on page 2973 of the second volume of The White Book, as follows:

(1) The overriding consideration is which course is likely to involve the least risk of injustice if it turns out to be “wrong” in the sense of granting an interlocutory injunction to a party who fails to establish his right at trial (or would fail if there was a trial) or, alternatively, in failing to grant an injunction to party who succeeds (or would succeed) at trial.

(2) In considering whether to grant a mandatory injunction, the court must keep in mind that an order which requires a party to take some positive step at an interlocutory stage, may well carry a greater risk of injustice if it turns out to have been wrongly made than an order which merely prohibits action, thereby preserving the status quo.

(3) It is legitimate, where a mandatory injunction is sought, to consider whether the court does feel a high degree of assurance that the claimant will be able to establish this right at a trial. That is because the greater the degree of assurance the claimant will ultimately establish his right, the less will be the risk of injustice if the injunction is granted.

(4) But, even where the court is unable to feel any high degree of assurance that the claimant will establish his right, there may still be circumstances in which it is appropriate to grant a mandatory injunction at an interlocutory stage. Those circumstances will exist where the risk of injustice if this injunction is refused sufficiently outweigh the risk of injustice if it is granted.”

I also bear in mind that in the decision of the Privy Council in National Commercial Bank Jamaica Ltd v Olint Corp Ltd [2009] 1 WLR 1405 at [19]–[20], Lord Hoffmann indicated that no distinction in principle exists between mandatory and prohibitory relief and the court should adopt the path that will cause the least irremediable prejudice to one party or the other.

Third, because an imaging order is sought, I have had regard to TBD (Owen Holland) Limited v Simons [2020] EWCA Civ 1882.

Mr Maguire, for the Defendants, submitted:

14.1. that the question of whether a director has breached his fiduciary duties is acutely fact sensitive, a proposition I accept;

14.2. that a director is entitled to exploit a maturing business opportunity, irrespective of whether any plan to do so was made prior to resignation, relying on Allfiled UK Ltd v Eltis [2016] FSR 11 at [102] per Hildyard J. The proposition goes too far without significant qualification. The paragraph cited relies on Foster Bryant Surveying Ltd v Bryant [2007] EWCA Civ 200 as an example where ‘ the rigour of fiduciary accountability may occasionally be abated where the resignation has been...