Lansing Linde Ltd v Kerr
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STAUGHTON,LORD JUSTICE BELDAM,LORD JUSTICE BUTLER-SLOSS |
| Judgment Date | 10 October 1990 |
| Judgment citation (vLex) | [1990] EWCA Civ J1010-4 |
| Docket Number | 90/0853 |
| Court | Court of Appeal (Civil Division) |
| Date | 10 October 1990 |
[1990] EWCA Civ J1010-4
Lord Justice Butler-Sloss
Lord Justice Staughton
and
Lord Justice Beldam
90/0853
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(Mr. Justice Knox)
Royal Courts of Justice
MR. S. BRODIE Q.C. and MR. A. COTTLE (instructed by Messrs Slaughter and May) appeared on behalf of the Appellant (Plaintiff).
MR. W.D.C. POULTON (instructed by Messrs Dixon Ward, Richmond, Surrey) appeared on behalf of the Respondent (Defendant).
Lansing Bagnall Ltd. was an English company engaged in manufacturing, distributing and selling equipment for handling materials, mainly forklift trucks. It was part of a group which included companies overseas. Then at the end of 1988 or early in 1989 the group was taken over by Linde A.G., a German company engaged in the same line of business, amongst other activities. It too had overseas companies in its group. The name of Lansing Bagnall Ltd. was changed to Lansing Linde Ltd, and that company is the plaintiff in this action and appellant in the appeal.
The defendant and respondent is Mr. David Kerr. In the course of a business career he joined the Canadian associate company of Lansing Bagnall Ltd, in May 1985. Shortly afterwards he moved to Washington D.C. and established the Lansing Bagnall subsidiary in the United States, becoming in due course its president. But after the takeover by Linde A.G. he was replaced as president, and was offered employment with the English company (by now Lansing Linde Ltd). He was to be director of the Northern division. This was a senior appointment, but it did not in point of form involve his becoming a director of the company. He accepted the offer and moved with his family to the North- East of England. The new employment took effect from August 1989.
Some months later, on 1st March 1990, a contract of employment was signed by Lansing Linde and Mr. Kerr. It provided for six months' notice of termination by either party, and contained a number of restrictions on the employee's activities after termination. Thus clause 16.2 provided that he would not disclose trade secrets or other information; clause 17, that for a period of twelve months after termination he would not solicit business from anyone who had been a customer of the company in the previous two years; clause 18 (which appears to be superfluous), that he would not divulge any information of a confidential nature about the company's affairs; and clause 19(B), that for a period of twelve months after termination he would not be engaged or concerned in any business which was in competition with the company or any group company.
It is this last clause 19(B) which gives rise to the present dispute. In full it reads as follows:
"The Executive will not for a period of 12 months after the termination of his employment with the company (howsoever caused) either personally or by an agent directly or indirectly either on his own account or for any other person, firm or company or in association with or in the employment of any other person, firm or company be engaged in or concerned directly or indirectly in any executive, technical or advisory capacity in any business concern (of whatever kind) which is in competition with the business of the company (or any Group Company). This clause shall not restrain the Executive from being engaged or concerned in any business concern insofar as the Executive's duties or work shall relate solely:
(i) to geographical areas where the business concern is not in competition with the Company (or any Group Company); or
(ii) to services or activities of a kind with which the Executive was not concerned to a material extent during his employment with the company (or any Group Company)."
By letter dated 26th June 1990 Mr. Kerr gave six months' notice to terminate his employment with Lansing Linde. After some discussion between him and the company it was agreed that his employment would end on 6th July 1990. Certain other terms were agreed. It will be necessary to refer to this termination agreement later.
On 30th July 1990 Mr. Kerr entered the employment of Crown Lift Trucks Ltd., and on 3rd August he became managing director of that company. It too is an English company involved in the manufacture, marketing and distribution of forklift trucks. There can be no doubt that Crown Lift is a competitor of Lansing Linde in the United Kingdom, and elsewhere.
Lansing Linde promptly started an action against Mr. Kerr and applied for interim relief. That application came first before Morritt J. on 10th August, when certain undertakings were given and accepted for the time being. Those apparently dealt with disclosure of trade secrets and information, and with soliciting customers of Lansing Linde. A motion inter partes came before Knox J., and was principally concerned with clause 19(B), and whether Mr. Kerr should also be restrained from working for a competing business. With commendable despatch the judge gave judgment on 4th September 1990. He refused to grant such an injunction. From that decision Lansing Linde now appeals.
A critical factor in the view of Knox J. was that a trial of the action, estimated to last five days, could not be arranged in the Chancery Division before March or April 1991. The judge did not, in the event, fix a date for trial; but he gave directions for pleading and discovery, and also liberty to apply (after setting down) to fix an early date for trial. Such trial was to be
"limited to the issue whether the Plaintiff is entitled to the injunctive relief claimed, any issue as to damages to be heard and determined thereafter."
In this court Mr. Brodie on behalf of Lansing Linde applied for some modification of the judge's order, so that a trial date could be fixed forthwith and before other litigants obtained the earliest date now available. Mr. Poulton for Mr. Kerr did not oppose that application as such. However, he pointed out that the Statement of Claim now served by Lansing Linde purports to widen the scope of the action, in particular by including claims for damages for misrepresentation and fraud. Accordingly he submitted that the order for trial of Knox J. was not apt to cover the present situation, or ought to be reconsidered, together with the question whether the writ should be amended.
This court declined to enter upon those matters, since they concern listing and trial management, which in the first instance are peculiarly the concern of judges at first instance. We expressed the view that there should be a prompt application to the Vice-Chancellor, or to Knox J. (since he is familiar with the case) or some other judge of the Chancery Division.
In brief the conclusions of Knox J. were as follows:
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(1) Since a trial could not take place until the 12-month period of restraint had almost expired, it was necessary to assess and take into account the prospects of Lansing Linde succeeding at trial, before granting an interlocutory injunction.
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(2) Mr. Kerr occupied a position in Lansing Linde where he probably came to know trade secrets and confidential information.
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(3) This would support a covenant against competition in the United Kingdom.
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(4) However, a worldwide covenant against competition would probably prove too wide to be enforceable at trial.
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(5) Taking that into account with other aspects of the balance of convenience, the judge would not grant an injunction.
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(6) "The result could easily have been different" if he had only had to consider the balance of convenience on the same basis that there was a serious question to be tried.
It is thus apparent that the first issue in this appeal is whether the judge, having regard to American Cyanamid Co. v. Ethicon Ltd. [1975] AC 396 and subsequent cases, was right to take into account the prospects of success at trial. Other issues raised were whether a covenant against competition could be justified to protect trade secrets only, or some wider class of confidential information; whether Mr. Kerr's position was such that he would be likely to know trade secrets and confidential information; if so, whether that would justify a worldwide restraint on competition; and whether the termination agreement in July 1990 affected the result. In addition there were points raised on behalf of Mr. Kerr as to the interpretation of clause 19(B), and as to a suggested estoppel.
In this court a further affidavit with a substantial exhibit was introduced on behalf of Lansing Linde, without objection on behalf of Mr. Kerr. There was also a further affidavit by him in reply, with exhibits. All this evidence was concerned with the extent of the actual information acquired by Mr. Kerr while he was working for Lansing Linde in the United Kingdom, and how secret or confidential it was.
(A) American Cyanamid and the prospects of success at trial.
As is well-known, the American Cyanamid case laid down the balance of convenience test for the grant or refusal of an interlocutory injunction. Once it is shown that there is at least a serious issue to be tried, the court should not embark further upon an examination of the plaintiff's prospects of success. The main question is then one of lesser evil: will it do less harm to grant an injunction which subsequently turns out to be unjustified, or to refuse one if it subsequently turns out that an injunction should have been granted? In either case the adequacy of a remedy in damages, and the likelihood of its being enforceable, is very important. I suspect...
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Table of cases
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