Daniel Forse v Secarma Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Terence Etherton MR,Lord Justice Underhill,Lady Justice Nicola Davies |
| Judgment Date | 28 February 2019 |
| Neutral Citation | [2019] EWCA Civ 215 |
| Docket Number | Case No: A2/2018/2982 |
| Court | Court of Appeal (Civil Division) |
| Date | 28 February 2019 |
[2019] EWCA Civ 215
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Murray J
[2018] EWHC 3434 (QB)
Royal Courts of Justice
Strand, London, WC2A 2LL
THE MASTER OF THE ROLLS
Lord Justice Underhill VP
and
Lady Justice Nicola Davies
Case No: A2/2018/2982
Tom Croxford QC and Alice Mayhew (instructed by Mayer Brown International LLP) for the Appellants
Gavin Mansfield QC and Alexander Robson (instructed by Lewis Silkin LLP) for the Respondents
Hearing dates: 31 January & 1 February 2019
Approved Judgment
Introduction
This is an appeal from the order dated 30 November 2018 of Murray J, by which he granted, as part of a wider order, an interim springboard injunction against the appellants. The appellants are among a larger group of defendants alleged to be liable to the respondents for the tort of conspiracy to injure by unlawful means.
In broad terms, the alleged conspiracy is said to be an agreement or concerted action by the defendants, at a time when some of them were still employed by, and were directors of, the first and second respondents (together “Secarma”), to procure key employees of Secarma to resign and join one or more of the fourth and fifth appellants (together “Xcina”) and so build up a cyber-security business competing with Secarma.
The springboard injunction prohibited the defendants from doing a number of things damaging to the business of Secarma, and was intended to prevent Xcina from benefiting from the commercial advantage which the respondents claim Xcina had wrongly achieved from the alleged conspiracy.
Factual background
Xcina offers, among other things, cybersecurity advisory services, including penetration testing (“pen testing”), which includes its more sophisticated version “red teaming”. Pen testing involves testing and exposing weaknesses in the security of a client's IT systems by deliberately trying to hack them. Those with the skills required to perform pen testing are in short supply. Until the events and matters of which Secarma complains, Xcina did not provide that service by using its own employees but outsourced the work, principally to Secarma.
The third appellant, Shearwater Group PLC (“Shearwater”), owns and indirectly controls the fourth and fifth appellants. The fourth appellant, Xcina Ltd, is a wholly owned subsidiary of the fifth appellant, Xcina Consulting Ltd.
Mr Mark Child, the second appellant, is the founder and managing director of Xcina Consulting Ltd.
Secarma carries on a cyber-security company specialising in pen testing. It provides that service by way of an in-house team of pen testers.
Mr Daniel Forse, the first appellant, was formerly employed by Secarma as a manager of a team of pen testers.
Secarma's business was founded by Mr John Denneny, the first defendant, and Mr Mark Rowe, the second defendant. They have not appealed the Judge's order. They sold that business on 30 June 2016. It is not necessary for the purpose of this judgment to recite in detail the various corporate entities that participated in that sale and its aftermath or to describe the various stages in the transaction. It is sufficient to say the business was subsequently carried on by Secarma and Mr Denneny and Mr Rowe continued to be employed by and were directors of Secarma and that the acquisition was effected by way of an Investment Agreement and a Share Purchase Agreement. Secarma's share capital was divided between, among others, Mr Lawrence Jones, the CEO of UKFast.net Ltd (“UKFast.net”), the third respondent.
The Share Purchase Agreement imposed restrictive covenants on Mr Denneny and Mr Rowe requiring them to refrain, for three years following the completion date of the sale, from assisting any other business to compete with Secarma; from soliciting business from any person who, in the 24 months prior to completion, had been a customer of Secarma's or in discussions with Secarma about becoming a customer; and from poaching any person who was at the time of sale or who had been employed by Secarma in the 24 months prior to completion. The covenants are due to expire on 29 June 2019.
On 30 June 2016, the same date the Share Purchase Agreement was completed, Mr Denneny and Mr Rowe entered into contracts of employment with Secarma. Clauses 18 and 19 of those contracts imposed duties of confidentiality and non-disparagement both during and at any time after termination of their employment. Clause 20 imposed 12 month post-termination restrictions preventing Mr Denneny and Mr Rowe from soliciting actual or prospective clients with whom they had dealt personally in the last 12 months of their employment and from dealing with them. They were also restricted from competing with Secarma and from poaching its employees.
On 14 February 2017 the third defendant, Mr Paul Harris, who has also not appealed the Judge's order, was employed as Managing Director of Secarma. His contract contained the same restrictions as in Mr Denneny's and Mr Rowe's contracts of employment, except that the restrictive covenants lasted for six months rather than twelve following termination. His contract was amended on 12 July 2017 to add provisions that would place him on garden leave if either party terminated the agreement.
In a deed of adherence to the Share Purchase Agreement dated 2 October 2017 Mr Harris also agreed to be bound by the restrictive covenants contained in the Investment Agreement as though he had been a party to it.
There followed a series of resignations from Secarma. Mr Forse left on 28 March 2018. His employment contract did not contain any of the competition or poaching restrictions contained in Mr Denneny's and Mr Rowe's contracts. Following his resignation Mr Forse worked as a freelance pen tester. He subsequently joined Xcina. He is responsible for managing and recruiting new pen testers for Xcina.
Mr Denneny gave notice of resignation on 2 May 2018, and his employment terminated on 2 November 2018. Mr Harris gave notice of resignation on 13 June 2018, and was put on garden leave. His employment terminated on 13 September 2018. Mr Rowe gave notice of resignation on 23 July 2018. At the time of the hearing before the Judge his employment was due to terminate on 23 January 2019. There had been 28 resignations from Secarma as of mid-November 2018.
It is the respondents' case that Mr Denneny, Mr Rowe and Mr Harris, while they were directors of Secarma and while they were bound by their restrictive covenants in favour of Secarma, unlawfully conspired with Mr Child and Mr Forse to poach Secarma's employees, with the aim of building up an in-house pen testing business in Xcina. They allege further that, as part of the conspiracy, Mr Denneny, Mr Rowe and Mr Harris used their knowledge of the terms on which Secarma pen testers were employed so as to assist Xcina to offer either the same or more advantageous terms of employment.
It is alleged that, in pursuance of the conspiracy, Mr Forse and Mr Harris sought to recruit Mr Liam Harcourt, who was employed by Secarma as a pen tester. Mr Harcourt ultimately disclosed his conversations and bilateral WhatsApp chats with Mr Forse and Mr Harris to, among others, Mr Jones of UKFast.net and Ms Nicola Frost, the company secretary of Secarma and of UKFast.net. He also disclosed a group chat among certain employees of Secarma, including Mr Denneny and Mr Rowe, as well as Mr Forse and Mr Harris. The group chat was called “Order of the Phoenix”, in which recruitment to Xcina was discussed. Relevant excerpts from those bilateral and group chats appear in the schedule to our judgments. It was his disclosure which eventually led to the commencement of these proceedings.
The proceedings and the hearing before Murray J
The claim form was issued on 14 November 2018. On the same day Secarma and UKFast.net applied for an interim springboard injunction.
The application was heard by the Judge on 23 and 26 of November 2018.
Relevant witness statements for the hearing were made by Ms Frost, for Secarma, and by Mr Denneny, Mr Rowe, Mr Harris, Mr Forse and Mr Child and also, on behalf of the defendants, Mr Michael Stevens, CEO of Shearwater, and Mr Lorenzo Grespan, an Xcina employee who had formerly been employed by Secarma.
The Judge delivered an oral judgment on 30 November 2018.
After setting out background facts, and commenting on the various witness statements, including the WhatsApp messages disclosed by Mr Harourt, he said that he had regard to American Cyanamid Co v Ethicon [1975] AC 396 and Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670 for the principles applicable to interim injunctions, and to the judgments of Haddon-Cave J in QBE Management Services (UK) Ltd v Dymoke [2012] EWHC 80 (QB) and [2012] EWHC 116 (QB), [2012] IRLR 458, for the principles for springboard relief.
He held (at [21]) that there was sufficient evidence to provide prima facie support for the applicants' case, and (at [27]) that there were serious issues to be tried in relation to each of the defendants. He considered the balance of convenience as follows:
“31 First, would damages be an adequate remedy? No. In my view there is a sufficient prima facie case that the Respondents have obtained an unfair head start that cannot be cured simply by reimbursing Secarma Limited for recruitment and related costs.
32 Would an undertaking as to damages provide adequate protection for the defendants? None of the Respondents have so far suggested otherwise.
33 Would the injunction help to preserve the...
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