Symphony Group Plc v Hodgson

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Justice Waite,LORD JUSTICE BALCOMBE
Judgment Date28 Apr 1993
Judgment citation (vLex)[1993] EWCA Civ J0428-3

[1993] EWCA Civ J0428-3

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

(FROM THE QUEENS BENCH DIVISION)

(Mr Robin Stewart QC)

Before: Lord Justice Balcombe Lord Justice Staughton and Lord Justice Waite

Symphony Plc
and
Halvanto Kitchens Ltd

MR A HOCHHAUSER appeared on behalf of the Appellant Plaintiff (instructed by Eversheds Hepworth & Chadwick, Infirmary Street, Leeds LS1)

MR J GIBBONS appeared on behalf of the Respondent (instructed by Booth & Co, South Parade, Leeds LS1)

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Lord Justice Balcombe.

4

These appeals, from an Order made by Mr. Robin Stewart, Q.C. sitting as a deputy High Court Judge on 3 August 1992, raise important questions on the exercise by the court of its jurisdiction under section 51 of the Supreme Court Act 1981 to order that the costs of proceedings be paid by some person other than a party to those proceedings.

5

The plaintiff, Symphony Group plc ("Symphony"), carries on business as a manufacturer and supplier of kitchen units. The defendant, Lawrence Colin Hodgson, aged 25, was employed by Symphony as an estimating supervisor at a salary of £9,500 p.a.; with overtime his earnings were of the order of £12,500 p.a. Mr. Hodgson's contract of employment with Symphony contained restrictive covenants which provided (inter alia) that for one year after the termination of his employment he should not be engaged or interested in the manufacture or sale of kitchen furniture and that during the same period he should not work for certain listed companies engaged in the business of the supply and/or manufacture of kitchen furniture. On 29 May 1992 Symphony added, as they were entitled to do under the terms of the contract, the name of Halvanto Kitchens Ltd. ("Halvanto") to this list. Halvanto is a competitor of Symphony and is also engaged in the manufacture and supply of kitchen units.

6

In early January 1992 Mr. Hodgson was exploring the job market. In March 1992 he saw Ellis Fairbank, a recruitment agency, by whom he was introduced to Halvanto and on 16 March 1992 he had an interview with Mr. Andrew Bramley, the managing director of Halvanto. Mr. Hodgson was asked to come for a second interview and to bring with him his contract of employment with Symphony. On 14 April 1992 he had a second interview with a representative of Halvanto and shortly afterwards he was offered a job by Halvanto —a formal written offer and aceptance was dated 30 April, but the judge found that the actual offer was made and accepted on 14 April. On 1 May 1992 Mr. Hodgson gave to Symphony, who at that time knew nothing of what he had been doing, written notice to terminate his employment. There were meetings in the following week between Mr. Hodgson and representatives of Symphony and Mr. Hodgson steadfastly refused to say who were his new employers. Symphony assumed that he was going to a competitor but did not know who. Mr. Hodgson left Symphony's employment on 8 May 1992 and on the same day went to the offices of Messrs. Walker Morris, solicitors who acted for Halvanto, and there drafted a letter to Symphony claiming that Symphony had repudiated his contract of employment by certain actions taken between 1 and 8 May 1992.

7

On 11 May 1992 Symphony issued a writ in the Queen's Bench division of the High Court, to which Mr. Hodgson was the sole defendant, claiming damages and injunctive relief against him and on the same day obtained an ex parte injunction from Schiemann J. The Statement of Claim was served on 12 May 1992 and on the same day Mr. Hodgson was granted an emergency legal aid certificate. Accordingly the maximum period during which Halvanto could have financed

8

Mr. Hodgson's case was the four days between 8 and 12 May. Since that latter date Mr. Hodgson has been in receipt of legal aid and Messrs. Walker Morris and counsel instructed by them have acted for him under the terms of a legal aid certificate or certificates. Symphony's solicitors were notified of the grant of legal aid to Mr. Hodgson on the following day, 13 May, and were in due course duly served with notice of the issue of his full legal aid certificate. Symphony's application for interlocutory relief came on inter partes on 5 May before Sir Gervaise Sheldon, sitting as a deputy judge of the High Court, when he continued the interlocutory injunction until trial or further order and directed a speedy trial. It was at that hearing on 15 May that Symphony first learned that Halvanto was Mr. Hodgson's new employer. On 27 May 1992 Symphony's solicitors wrote to Halvanto a letter, addressed for the attention of

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Mr. Bramley, which contained the following passages:-

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"Our client has clearly notified you that its employees are under post-employment obligations restraining them from working for competitors. Despite this however, you have offered employment to one of Symphony's existing employees,

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Mr Lawrence Hodgson. That offer of employment has been accepted and since you have clearly induced Mr Hodgson to breach his contract of employment, Symphony now holds you liable to it in damages.

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Symphony intends to issue proceedings against you to recover such damages and we would be grateful if you would let us know whether any solicitors are instructed to accept service of those proceedings."

13

On 1 June 1992 Messrs. Walker Morris, as solicitors for Halvanto, confirmed that they had instructions to accept service of any proceedings that Symphony might issue. At no time has Symphony sought to join Halvanto as a defendant to the action against Mr. Hodgson, nor to initiate separate proceedings against Halvanto. At no time before the hearing of the action against Mr. Hodgson did Symphony tell Halvanto that it might seek to make Halvanto liable for payment of the costs of that action.

14

The full trial of the action started on 22 June 1992; by then pleadings had been closed, discovery completed and witness statements exchanged. This reflects considerable credit on everyone concerned: the parties, their solicitors and the court. The hearing lasted over 8 days, the main issues being the validity of the restrictive covenants and whether Symphony had repudiated Mr. Hodgson's contract of employment. In the course of the hearing Mr. Bramley gave evidence for Mr Hodgson. On 6 July 1992 the judge delivered a written judgment which ran to 31 closely typed pages.

15

He found for Symphony on every issue and granted substantial injunctive relief against Mr. Hodgson, the claim for damages not being pursued by Symphony. He also made an order for costs against Mr. Hodgson but, as Mr. Hodgson was legally aided, directed that that order should not be enforced without the leave of the court. Realistically there is no prospect of Mr. Hodgson being able to pay those costs which we were told could run into six figures.

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In the course of his judgment the judge expressed severe criticism of the actions of Halvanto and Mr. Bramley. I cite the following passages by way of example.

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"When the Defendant left the employment of the Plaintiffs, his intention was to take up employment as a trainee sales representative, covering the Lancashire Area with Halvanto Kitchens Ltd. They are direct competitors of the Plaintiffs. On the face of the covenants in his contract of employment, this was in direct breach of those covenants.

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The evidence establishes, in my judgment, beyond any doubt, that both the Defendant and

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Mr Andrew Bramley, the Managing Director of Halvanto Kitchens Ltd, knew that this was, on its face, a breach of the terms of the covenants, and intended by their conduct to take the Paintiffs on. Mr Bramley has in the preceding months twice condidered taking on salesmen from the Plaintiffs. Twice, on his admission, he had been advised by his Solicitors against it, because of restrictive covenants in the contracts of employment of the respective salesmen……

20

Contrary to what Mr Andrew Bramley said in his statement….. the first interview of the defendant on 16th March 1992 was not for any specific job, but a general interview of a candidate who might possibly fit in somewhere. I find it difficult to give any description to that paragraph of Mr Bramley's statement other than that it was deliberately misleading……

21

In evidence, the Defendant and Mr Bramley told me that the offer of 14th April was conditional on Halvanto being satisfied about the non enforceability of the restrictive covenants. Had that really been the case, one would have expected that Mr Bramley would have referred the matter to his Solicitors for their advice. But on his own evidence he did not. He said that he and his Chairman, Mr Curtis Wright, discussed the covenants, and by themselves decided that they were too wide and unenforceable. I find this evidence unsatisfactory and incredible."

22

At the end of the judgment counsel for Symphony applied for an order that Halvanto should pay its costs of the action. The judge could of course have dismissed the application then and there if he thought it had no substance. He did not do so, and in those circumstances very properly directed that the application be adjourned to a date to be fixed to enable Halvanto to be represented and that prior to any such hearing Symphony should serve upon Halvanto a notice setting forth the basis upon which the costs application was made.

23

By a summons dated 14 July 1992 Symphony gave notice of its application to Halvanto, the grounds of the application being contained in a Schedule to the summons. The Schedule is lengthy, extending to 6 1/2 pages of typscript, but the matters on which Symphony relies to support its claim against Halvanto can be grouped under two main heads.

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(1) Sub-paragraphs (1) to...

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