Monster Vision (Uk) Ltd v McKie

JurisdictionEngland & Wales
CourtQueen's Bench Division
JudgeMR JUSTICE SWEENEY
Judgment Date08 April 2011
Neutral Citation[2011] EWHC 3772 (QB)
Date08 April 2011
Docket NumberCase No: 1HQ/2011/0204

[2011] EWHC 3772 (QB)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

The Honourable Mr Justice Sweeney

Case No: 1HQ/2011/0204

Between:
Monster Vision (Uk) Ltd
Claimant
and
Mckie
Defendant

MR G HARRAP appeared on behalf of the Claimant

MR R DEACON appeared on behalf of the Defendant

Approved Judgment

MR JUSTICE SWEENEY

Introduction

1

On 22 March 2011, following a without notice application by the claimant which was supported by witness statements dated that day from Christopher Beauchamp, the claimant's Managing Director, and Viktoria Gatker, the claimant's Client Services and Operations Manager, and one of its two remaining employees, Rafferty J granted an injunction against the defendant, who is the claimant's former sales director.

2

The defendant was employed by the claimant from 20 July 2008 at a salary of £83,500 per annum and on commission ranging from five per cent to twelve per cent of gross profit on all his deals. The defendant signed a contract containing clauses as to confidentiality, and covering a period of two years following termination, as to non-competition, non-solicitation and non-employment of the claimant's employees.

3

The defendant resigned on 14 March 2011.

4

By the terms of the injunction the defendant was required inter alia:

(1) Until judgment at the end of the trial or further order or until 14 March 2013, whichever was the sooner, to comply with the clauses in his employment contract as to confidentiality, non-competition, non-solicitation, and non-employment.

(2) By 4.30 pm on 29 March 2011, to deliver up to the claimant's solicitors any confidential information and listed items in his possession or under his control.

(3) Also by 4.30 pm on 29 March 2011, to serve a witness statement giving full particulars of various matters and to disclose all documents in his possession, custody or control relevant to or evidencing the matters set out in the witness statement.

5

In Schedule A to the injunction the claimant gave an undertaking as to the damages payable to the defendant in the event of a finding that he had suffered loss by the granting of the injunction.

6

At the claimant's invitation Rafferty J also ordered that the claimant file and serve the claim form on or before 12 April 2011; that the time for the service of the Particulars of Claim be extended until 12 April 2011; that the return date be listed on the first open date after 14 days; and that the defendant pay the costs of the application. The defendant complied with the requirements of the injunction to deliver up, to serve a witness statement and to disclose documents.

7

The return date hearing took place before me on 5 and 6 April 2011. The evidence had grown since the hearing before Rafferty J. At the outset of the hearing before me, there was a second statement from Mr Beauchamp dated 1 April 2011 and accompanying exhibits, and three statements from the defendant dated 29 March, 1 April and 4 April 2011, together with accompanying exhibits.

8

During the course of the hearing, the claimant's solicitor, Mr Abletshauser, provided a statement, and Mr Beauchamp provided a third statement dated 6 April together with accompanying lists. In the result, there are factual disputes across virtually the whole spectrum of the case.

The Issues

9

The claimant seeks the continuation of the injunction, whereas the defendant contends that both the injunction and the costs order should be set aside. The principal legal issues that have arisen during the argument are:

(1) Whether the claimant repudiated the contract of employment and the defendant accepted that repudiation, thereby rendering the contract unenforceable against him.

(2) The enforceability of the confidentiality clause in the contract.

(3) The enforceability of the non-competition, non-solicitation and non-employment clauses in the contract.

(4) The extent to which the claimant complied with its duty of disclosure in the proceedings before Rafferty J and the consequences of any failure to do so.

(5) In any event, the worth of any undertaking in damages by the claimant, given that it has emerged that the claimant is itself a worthless company, and the consequences of that evaluation.

(6) The overall outcome.

10

Given the nature of these proceedings, the resolution of the first three issues lies, in familiar American Cyanamid terms, in an assessment of whether the claimant has demonstrated that it has a good arguable case on each. The resolution of the fourth and fifth issues is rather sharper edged. The outcome of the sixth issue is essentially dependent on the outcome of its predecessors and the exercise of my discretion.

The Facts

11

It is first necessary to set the evidential background by reference to certain undisputed aspects of it as follows:

(1) The claimant company was formed in 2008 and was initially a wholly owned subsidiary of Monster Vision LLC, an American company which was incorporated in September 2005 and is based in Florida. Mr Beauchamp is one of the three principal owners of that company.

(2) The business of the claimant company is the provision of interactive advertising solutions.

(3) The contract of employment that the defendant signed on 20 July 2008 was for a five year term. It was a standard form American contract, as opposed to a contract specifically drafted in order to comply with the law in this jurisdiction. It included the following clauses:

"4. Equity.

Upon completion of twelve months (12) of continued employment Executive will receive a five per-cent (5%) equity interest in the Company. Upon completion of twenty-four (24) months (from Effective Date) of continued employment, Executive will receive an additional five per-cent (5%) equity interest in the Company…

8. Confidentiality.

The Executive agrees to not (other than in the course of performing the duties required hereunder according to the policies and procedures of the Company) make use of, or divulge to any person, any confidential or proprietary information of the company (including any corporate, fictitious or trade names or trade marks) its affiliates (including but not limited to Monster UK) suppliers or customers concerning their trade secrets, customer lists and contacts, businesses, accounts, finances, methods of doing business, plans, dealings, transactions or affairs that come to the Executive's knowledge ("'Confidential Information'").

Upon termination of the Executive's employment with the Company, for any reason whatsoever, the Executive shall :

(A) promptly return to the Company any and all Confidential Information, including all copies thereof, that are in the Executive's possession; and

(B) execute and deliver an affidavit swearing that all Confidential Information has been turned over to the company.

10 Non-compete agreement; Work-for-Hire.

A. As partial consideration for the execution of this Agreement by the Company, the Executive agrees that during the period of the Executive's employment and for a period of two (2) years thereafter (the "Restricted Period"), the Executive shall not: (1) compete against the Company or any of its affiliates with respect to the types of services and products provided by the Company or any of its affiliates (the "business" of the Company); provided, however, that such non-compete provision for the period after the termination of this Agreement shall be geographically limited to those countries in the world in which the Company or any of its affiliates has or reasonably plans (as of the Termination Date) to conduct, business during the Restricted Period, (2) solicit work from any client or customer for whom the Company or any of its affiliates has done, or reasonably plans (as of the Termination Date) to do, work with or for during the Restricted Period or (3) employ (or arrange for third parties to employ) any person employed by the Company or any of its affiliates or any independent contractor contracted by the Company or its affiliates within twelve (12) months prior to the Termination Date."

(4) In February 2010, the defendant incorporated a company called Our Digital Britain Limited and later purchased the domain name ourdigitalbritain. com.

(5) In his resignation letter of 14 March 2011, as delivered to the claimant, the defendant said this:

"Dear Board,

This letter is to inform you of my resignation from Monster Vision UK effective immediately. Monster Vision has clearly breached my employment contract within several areas over a period of many months.

I want to remind all that I am not a director of Monster Vision UK per the correct documentation registered at Companies House and there is a clear and distinct difference between a director and an employee of a company. I am a contracted employee with a minority share holding and per my contract legally I am under no obligation to submit any capital at any point into the business therefore your totalitarian assertion that I contribute £20K and then physical act of taking it out hours later without official written approval and unanswered questions is completely illegal and immoral. Monster Vision paying me £753 on 10/03/2011 was never fully agreed in writing and a clear breach of my contract. I blinked and the money was taken, suddenly, I can't pay my rent.

In addition to this breach Monster Vision were even not willing to agree in writing to another part of my employment contract ( Section 5 Clause D Severance). Instead I was given guarantees of employment for 3 months where I would be compensated with money for my own commissions which has been withheld for...

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