Caterpillar Logistics Services (UK) Ltd v Paula Huesca de Crean

JurisdictionEngland & Wales
JudgeLord Justice Stanley Burnton,Lord Justice Lewison,Lord Justice Maurice Kay
Judgment Date21 February 2012
Neutral Citation[2012] EWCA Civ 156
Docket NumberCase No: A2/2011/3123
CourtCourt of Appeal (Civil Division)
Date21 February 2012

[2012] EWCA Civ 156

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEENS BENCH DIVISION

MR JUSTICE TUGENDHAT

[2011] EWHC 3154 (QB)

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lord Justice Maurice Kay

Lord Justice Stanley Burnton

and

Lord Justice Lewison

Case No: A2/2011/3123

Between:
Caterpillar Logistics Services (UK) Limited
Appellant
and
Paula Huesca de Crean
Respondent

Selwyn Bloch QC and Gavin Mansfield (instructed by Walker Morris Solicitors) for the Appellant

Edward Pepperall (instructed by Keelys) for the Respondent

Hearing date: 31 January 2012

Lord Justice Stanley Burnton

Introduction

1

This is an appeal by Caterpillar Logistics Services (UK) Limited against the order made by Tugendhat J dated 2 December 2011 dismissing its claim for injunctions and damages against Mrs Paula Huesca de Crean, its former employee, pursuant to CPR rule 3.4(2)(a) and (b). The appellant's claim is for injunctive relief to prevent the respondent, its former employee, from misusing its confidential information. I shall refer to the relief sought in detail below.

2

The judge's order was made after he had handed down judgment on the appellant's application for interim injunctions refusing relief. He held that it followed from his judgment refusing interim relief that the claim had no real prospect of success, and he therefore dismissed it.

3

On this appeal, the appellant seeks to set aside the judge's order, and orders for interim injunctions and a speedy trial.

The facts

4

My account of the essential facts is largely based on the judgment of Tugendhat J.

5

The appellant ("CLS") is a company incorporated in the UK. It is a part of the Caterpillar group of companies, best known for the manufacture of heavy earth moving equipment. CLS provides logistics services to other divisions or companies in the same group, and to third parties. It is by itself a very substantial business. The financial statements for the year ending 31 December 2009 record that it employed over 1300 employees (507 of them salaried) and had a turnover of just under £170m.

6

Quinton Hazell Automotive Limited ("QH") is a supplier of automotive parts and an important customer of CLS, in particular at the Hinckley site. There is a ten-year agreement in writing between CLS and QH dated 5 May 2006, known as the Logistics Services Agreement ("the LSA"). It is for the provision by CLS to QH of logistics services at the Hinckley site. QH has premises of its own at the same site. Its parent company is Klarius Group Ltd ("Klarius"), which also carries on business in the supply of automotive parts.

7

The respondent, Mrs Huesca de Crean, was one of CLS's 507 salaried employees until the expiry of the one month's notice she gave to CLS on 10 August 2011. She has worked for over 16 years in the automotive industry. She worked for the importer of Rover and Land Rover in Buenos Aires. She was then offered, and took up, a position with Rover International in this country. In 2005, she joined CLS for the Xpart division, managing MG Rover parts. She is an accountant and it was in that capacity that she was employed in 2005 to work with the then Business Manager of CLS. She then became the Account Manager in CLS's Land Rover commercial team.

8

In about late April or early May 2011 the respondent was promoted to the position of Logistics Centre Manager ("LCM") at the site operated by CLS in Hinckley, Leicestershire. The terms of her employment were set out in a letter dated 15 July 2011. She had been paid just over £50,000 in her previous position, and was due to receive a pay rise of about 10 per cent in her new position with CLS. She was a middle manager.

9

Marianne Brown, the commercial director of CLS, states that as LCM the respondent was responsible for the management of all aspects of operations to ensure service levels and financial targets were achieved; for all employee-related activities at the facility; preparation of budget and maintenance objectives and developing the facility in accordance with CLS's objectives. In practice these were all operational aspects of the LSA. This involved day to day management of 124 employees engaged in providing services to QH. The inventory has a value of some $15m and by September 2011 there were over 1.6m outbound lines for QH. The manager to whom the respondent reported was Dean Ellis, the General Operations Manager. In addition to her usual operational role, the respondent was involved with strategic commercial issues relating to the LSA.

10

The respondent's competency assessments throughout her employment with CLS were at the highest level, such that only about 5 per cent of the employees of Caterpillar Inc achieve the rating she achieved. Her manager's assessment while she was a commercial manager included that she "interacts openly and honestly in challenging situations. [She] consistently acts as a role model for Caterpillar Values in Action based on Integrity, Teamwork, Excellence and Commitment… [She] models openness and honesty, generates trust by showing personal humility". The respondent states that her integrity is a matter of great importance to her. She also states that the knowledge of the automotive and afterparts trade she has gained over 16 years is part of her set of skills and know-how which she uses to earn her living.

11

There is no restrictive covenant in the respondent's contract of employment. The only agreement relating to confidential information is a document headed "Confidentiality Agreement" which was signed by her on 31 May 2005. By it she agreed to the following:

"As a result of my employment by [CLS], I may develop obtain or learn about trade secrets or confidential information which is the property of [CLS] or others that [CLS] has contact with. I will not use any of such trade secrets of [sic] confidential information for myself or others, or divulge them to others, either during or after my employment. The terms 'trade secrets' and 'confidential information' include processes, methods, techniques, systems, formulae, drawings, photographs, machine readable records, patterns, models, devices, compilations, customer and dealer data, internal financial information or any information of whatever nature which gives [CLS] an opportunity to gain an advantage over its competitors who do not know or use it; but I understand the terms do not include knowledge, skills, or information common to my trade or profession."

12

The LSA was originally made between CLS on the one part and QH and its then parent company Affinia Group Inc on the other. On 24 November 2009, when Klarius was considering acquiring CLS, a meeting was held between Klarius and CLS to discuss what might happen following the takeover which in fact occurred. It is evident from the minutes of the meeting that Klarius was intent on reducing its costs under the agreement. The options that Klarius said it would consider included CLS offering a cost reduction, Klarius allowing QH to become insolvent, and Klarius pushing additional volumes through CLS until it "came creeping for a new contract". At a meeting in March 2010, Klarius and CLS discussed so-called joint optimisation projects, the object of which was to improve the efficiency and reduce the costs of the service. Klarius asked for CLS's profit and loss account. CLS refused to provide it.

13

Exhibit G to the LSA sets out what are referred to as Assumptions. They are daily and yearly quantities of lines to be handled by CLS, a figure for annual UK parts revenue for products to be shipped by CLS, and the areas of storage space and office space to be provided by it and charged to QH. Clause 15.9 of the LSA is an unusual provision for the possible amendment of the agreement if the Assumptions become materially incorrect, with arbitration under the LCIA rules if the parties do not agree on the amendments necessary "to enable [CLS] to continue to provide the Services under no more onerous circumstances than would have applied if such Assumptions were correct".

14

Parenthetically, I find it difficult to see how the parties to the LSA could negotiate a possible amendment to its terms so that the Services are provided by CLS "under no more onerous circumstances than would have applied if such Assumptions were correct" without disclosure by CLS of what would otherwise be confidential information as to its costs, and even more difficult to see how the arbitration provided for by the agreement could be conducted without such disclosure. I note also that in January 2009, Brad Chambers, described as EAME Vice President of Commercial, indicated that he would work with QH to find cost reductions if it was possible to do so, although CLS's evidence is that "This statement was merely intended as a statement of commercial goodwill."

15

On 23 December 2010, Klarius wrote to CLS formally invoking the machinery in clause 15.9. The letter set out what Klarius said to be the actual quantities that differed from those in Appendix G to the LSA. The review under clause 15.9 was deferred while QH and CLS worked together to identify efficiencies, and in a letter of 18 March 2011 CLS stated that £300,000 of savings had already been targeted. In April 2011, CLS stated that it would proceed with its review of the Assumptions. On 23 June 2011 the respondent participated in a meeting between CLS and Klarius/QH to discuss possible efficiencies and cost savings. The formal review of the Assumptions and any modifications to the terms of the LSA has not been completed. For the purposes of this appeal, I assume that relations between CLS and...

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