Freshasia Foods Ltd v Jing Lu
| Jurisdiction | England & Wales |
| Judge | Mr Daniel Alexander,Daniel Alexander |
| Judgment Date | 04 January 2019 |
| Neutral Citation | [2018] EWHC 3644 (Ch) |
| Docket Number | CLAIM NUMBER: IL-2018-000206 |
| Court | Chancery Division |
| Date | 04 January 2019 |
[2018] EWHC 3644 (Ch)
Mr Daniel Alexander QC
Sitting as a Deputy Judge of the Chancery Division
CLAIM NUMBER: IL-2018-000206
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY LIST (ChD)
Rolls Building
Fetter Lane, London EC4
Mr Douglas Campbell QC (instructed by Myerson LLP) for the Claimant
Ms Stephanie Thompson (instructed by Virtuoso Legal Limited) for the Defendant
Hearing date: 18 December 2018
Judgment with reasons to follow in writing: 19 December 2018
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
Daniel Alexander QC
Mr Daniel Alexander QC
INTRODUCTION AND SUMMARY
On 19 December 2018, I made an order inter alia granting a limited injunction until trial in the following form:
“Until judgment following trial herein or further order in the meantime the Defendant must not (whether acting by himself, his servants or agents or by others acting on his behalf) do (or authorise, cause, assist, or enable others to do) the following acts of any of them without the consent of the Claimant:
…
In respect of food products sold to Chinese retail shops and restaurants in the United Kingdom or elsewhere in the European Union, solicit the custom of, or sell or deliver to any private individual, firm, company or other person who at 28 September 2018 was (a) a customer of the Claimant to whom the Defendant had personally sold and/or delivered the Claimant's products on behalf of the Claimant, or (b) whom the Defendant had introduced to the Claimant or approached on behalf of the Claimant”.
The injunction was based on a non-solicitation clause in the defendant's (“Mr Lu's”) contract of employment and was made on the basis that the claim to relief in this form at trial was sufficiently arguable and that the balance of convenience favoured the grant of an injunction. The other matters in the order, including restrictions on the use of confidential information and directions to trial, were largely agreed.
The non-solicitation injunction was made in more limited form than originally sought. It left out a number of provisions including those relating to attempts to solicit, accepting work for private gain for a particular company, and in so far as it extended restrictions in respect of persons with whom the Defendant had any business dealings or knowledge in the leaving period (alleged to be 12 months) immediately prior to the end of his employment. I declined to make an order in respect of a separate non-compete provision which was sought to prevent Mr Lu from doing the following acts until trial “Own, manage, operate, consult for, or be employed in Kung Fu [his new employer] or any other business substantially similar to or competitive with the Claimant”. These were refused on the footing that this wider relief was unlikely to be enforceable for various reasons and that the balance of convenience did not favour the grant of an injunction I these terms.
At the beginning of the hearing, the parties were far apart. The claimant (“Freshasia”) was trying to stop the defendant from working for his new employer (“Kung Fu”) at all pending trial. That was ultimately not advanced with great conviction, for good reason because the non-compete clause seemed too broad to be justifiable in the particular context. Mr Lu was contending that even the non-solicitation clause was unenforceable both for lack of clarity and because it was oo broad with the invalid parts being non-severable. However, towards the end of the hearing, he offered an undertaking, without prejudice to his contentions, not directly to contact any persons or entities who at the time of the termination of his employment were customers of the Claimant and who were set out in a list to be agreed. Mr Lu's position was therefore that he was prepared to offer some specific non-solicitation protection pending trial, which was in some respects narrower and in some respects broader than that provided by the contractual provisions. It seemed to me that it would be preferable so far as possible to keep to the wording of the contract and that an injunction framed in the terms of the contract, while not ideal, was not so uncertain as to be objectionable. Because of illness, it was not possible to give full oral reasons at the time the order was made. These are therefore the reasons for the order.
The case overall is a relatively straightforward ex-employee dispute, applying conventional principles, with two exceptions. It raises the question of (i) the extent to which the merits should be taken into account in a situation where the length of the covenant and whether it runs beyond trial is itself an issue and (ii) the approach to severance of provisions (to use a neutral term) in the light of the relatively recent Egon Zehnder case in the Court of Appeal.
Procedural history
The application first came before Snowden J on 29 November 2018 in the applications court. He provided a timetable for service of evidence and indicated that the claim was suitable for expedition. The trial has now been fixed for the week commencing 4 th March 2019. The period in question with which the court is now concerned is therefore some 3–4 months. Snowden J declined to grant an interim injunction in the meantime because Mr Lu had been given only 2 days' notice and only had a CLIPS representative. He was also concerned that the injunction sought would prevent Mr Lu from working for the new employer at all, that the prejudice to Freshasia was “not great” and that Freshasia had not moved quickly enough to justify relief without the proper notice. It was common ground that I should look at the matter afresh and consider what relief, if any, should be granted pending trial in the light of all the evidence and full argument.
FACTS
There are witness statements from Mr Jian Lan, a director of Freshasia and from the defendant Mr Lu. Pleadings have progressed to a defence and a reply was due to be served on 21 December 2018. The key facts can be summarised relatively briefly, based on the witness statements and skeletons.
Parties
Freshasia
Freshasia is a UK registered company which supplies food products, particularly dumplings and sliced meats, to Chinese retail shops and restaurants. It has between 100 and 200 employees and a turnover in the millions of pounds. It has about 500 customers in total in the UK and the EU. There are only a few employers in this industry, which is a very specialist market of frozen and packaged food sold mainly to international student customers.
Mr Lu
Mr Lu has a Masters in Marketing and, before working for Freshasia, was with Nestle China. He started work for Freshasia in a relatively junior role of marketing assistant on 12 January 2015 but shortly thereafter progressed to Marketing Advertising Manager. This role involved promoting Freshasia to its target market, running the social media platforms and conducting analysis on the marketing strategy. In his most up to date c.v. of 2018, he refers to this employment with Freshasia as being that of “marketing manager” and says that he was head of marketing, during which time he claims to have been responsible for increasing the profit significantly.
Mr Lu handed in his notice on 11 September 2018. He should have given 1 month and 3 weeks' notice under his contract of employment, but he gave less than 1 months' notice. He told his manager, Mr Lan, that he was leaving in order to work in Hong Kong and later told Freshasia's Area Sales Manager that he was leaving to work for an IT company in the UK. However in fact he left to work for Freshasia's competitor, which is a company trading as Kung Fu. Freshasia claims that he did so to do virtually the same job as he had done for them but Mr Lu has said that his role with Kung Fu is “slightly different”, since he is employed as a business development manager rather than in a marketing role.
Kung Fu
Kung Fu is the trading name of a company (Oriental Food Express Limited) which is also in the business of supplying Asian foods and which is somewhat smaller than Freshasia. Apparently Mr Lu was offered a higher salary (£40,000) by Kung Fu than he had at Freshasia. Freshasia contends that this is because Kung Fu knew Mr Lu would bring customers or confidential information with him and that he has done so with Freshasia losing about £200,000 worth of business, and 55 customers since Mr Lu's departure. It is also said that he has persuaded several other employees to leave and made disparaging remarks about Freshasia. All of this is strongly disputed by Mr Lu, especially as to whether any loss of business has been due to any of his actions. Mr Lu contends that he was not in regular direct contact with customers while at Freshasia and that sales was mainly the responsibility of account managers and/or the directors. He contends that the difficulties Freshasia is experiencing are, in part, due to their failure to recruit a replacement marketing manager and are in any event not a result of any wrongful actions on his part.
Post termination restrictions
Mr Lu is subject to post-termination restrictions in his contract of employment which were incorporated in an Employee Handbook which he signed. There is no dispute, for the purpose of this application, that it is these terms, rather than earlier, much broader, terms which are relevant and that he is bound by them. Those are set out in the section on the terms below.
LAW
I shall outline the applicable principles, dealing more fully with the points where there was dispute.
(a) Approach to interim injunction
The first issue is what test...
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