Vestergaard Frandsen A/S (now called MVF 3 ApS) and Others v Bestnet Europe Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Lord Neuberger,Lord Clarke,Lord Sumption,Lord Reed,Lord Carnwath |
| Judgment Date | 22 May 2013 |
| Neutral Citation | [2013] UKSC 31 |
| Date | 22 May 2013 |
| Court | Supreme Court |
[2013] UKSC 31
Lord Neuberger, President
Lord Clarke
Lord Sumption
Lord Reed
Lord Carnwath
Appellants
Mark Platts-Mills QC
Thomas Moody-Stuart
(Instructed by Field Fisher Waterhouse LLP)
Respondents
Alastair Wilson QC
George Hamer
(Instructed by McGuire Woods London LLP)
Heard on 24 April 2013
Lord Neuberger (with whom Lord Clarke, Lord Sumption, Lord Reed and Lord Carnwath agree)
This is an appeal brought by three companies, MVF 3 APS (formerly known as Vestergaard Frandsen A/S), Vestergaard Frandsen SA, and Disease Control Textiles SA, which are effectively in common ownership, and can conveniently be referred to compendiously as "Vestergaard". Their appeal is against the Court of Appeal's reversal of a decision by Arnold J that Mrs Trine Sig was liable to Vestergaard for misuse of their trade secrets after she ceased her employment with them.
A major aspect of Vestergaard's business is the development, manufacture and marketing of insecticidal bednets, whose purpose is to prevent the sleeper from being bitten by mosquitos, and also to reduce the mosquito population. An important challenge of the relevant technology is to find ways of ensuring that such bednets retain their insecticidal activity over a long period of time, despite vicissitudes such as repeated washing. To that end, Vestergaard developed techniques (which I shall call "the techniques") which enabled them to manufacture and sell long lasting insecticidal nets, known as LLINs. The techniques involved incorporating insecticide and other additives into molten polyethylene, before it is extruded into filaments, which are then knitted to form LLINs.
Mrs Sig was employed by Vestergaard from late 2000, initially as a sales and marketing assistant, and later as a regional sales manager for Europe and Latin America. By clause 8 of her employment contract, she agreed to:
"keep absolutely confidential all information relating to the employment and any knowledge gained in the course of the employment and which inherently should not be disclosed to any third party. The absolute duty of confidentiality also applies after [Mrs Sig] has terminated the employment …".
Mr Larsen, a chemical engineer, was employed by Vestergaard in November 2000 as head of production. His employment contract included provisions (i) preventing him from competing with Vestergaard for a period of one year after his employment ceased, and (ii) requiring him to respect the confidentiality of Vestergaard's trade secrets.
Dr Skovmand, a consultant biologist specialising in insect control, started working as a consultant for Vestergaard in 1998 until some time in 2005. He had no formal service contract. During the time he worked for Vestergaard, Dr Skovmand played a major role in developing the techniques. In particular, he helped to identify a way of preventing the insecticide from being lost during the extrusion of the polyethylene. At the beginning of 2004, he was seeking to prevent the loss of insecticide by evaporation caused by the high temperature of the polyethylene during manufacturing.
The information concerning the techniques was contained in a so-called "Fence database" maintained by Vestergaard.
In the spring of 2004, Mr Larsen and Mrs Sig decided to start a new business manufacturing and selling LLINs in competition with Vestergaard. They discussed this with Dr Skovmand, who agreed to work with them, on the basis that he would have a financial interest in the new business. Accordingly, Mrs Sig resigned from her job with immediate effect in June 2004, and Mr Larsen did so a month later, and his employment ceased at the end of August 2004.
By this time, the new business had already been under way for some five months, because in early April 2004 Dr Skovmand set about developing a new LLIN for Mr Larsen and Mrs Sig, using a polyester base. About a month later, Dr Skovmand informed them that he would be able to develop a LLIN more quickly if he used polyethylene rather than polyester. Mrs Sig instructed him to proceed on this basis, because he told her that a polyethylene-based LLIN, which was in due course manufactured and called Netprotect, could be placed on the market by the end of 2004.
In early August 2004, Mr Larsen and Mrs Sig formed a Danish company ("Intection"), with Mrs Sig as the sole director, for the purpose of developing, manufacturing and marketing the Netprotect product. The following month, Mrs Sig and Mr Larsen went to India with a view to finding prospective manufacturers for the product. In their discussions with the prospective manufacturers, they stipulated that any agreement with Intection would contain confidentiality provisions in relation to the details of the manufacturing of the product.
Meanwhile, with the assistance of Mr Larsen, Dr Skovmand was organising the testing of Netprotect products, and those tests proved sufficiently successful for Intection to arrange a launch for October 2005.
Vestergaard learned of this, and sought to stop the testing and future marketing of the new product. They issued proceedings in Denmark against Intection, and, by an amendment to those proceedings made in June 2005, they alleged breach of their trade secrets. In October 2005, the day before the proceedings were due to be heard, Mrs Sig resigned as a director of Intection, which then ceased to trade.
A new English company, Bestnet Europe Ltd ("Bestnet"), was immediately formed, with Mrs Sig as the sole director, and her father, another investor, and Dr Skovmand, as the main shareholders. The Judge found that Mr Larsen and Mrs Sig moved the business to England "with the express intention of trying to avoid the consequences of the Danish litigation".
Mrs Sig and Mr Larsen provided their services to Bestnet through another English company, 3T Europe Ltd ("3T"), whereas Dr Skovmand worked directly for Bestnet in connection with the testing, development, and projected manufacturing and marketing of Netprotect. His work was successful, and Netprotect LLINs were, from some time in 2006, manufactured for and marketed by Bestnet.
In early 2007, Vestergaard began the present proceedings seeking damages and other relief for misuse of their confidential information, against Bestnet, 3T, Mr Larsen, and Mrs Sig (and two other companies which need no further mention). Following a 16-day hearing, Arnold J gave a judgment on 3 April 2009, in which he had to deal with a large number of issues of fact, expert evidence and law – [2009] EWHC 657 (Ch).
Of particular relevance for present purposes, the Judge made the following findings:
(i) Dr Skovmand was under a duty to Vestergaard not to use any confidential information which he had acquired in the course of his consultancy work for Vestergaard;
(iii) The contents of the Fence database constituted confidential information, namely trade secrets, owned by Vestergaard;
(iv) Dr Skovmand knew of this confidential information as a result of working for Vestergaard, and he had appreciated at all times that it constituted Vestergaard's trade secrets;
(iv) Dr Skovmand had used such information about the techniques in the Fence database as a starting point for the development of the Netprotect product;
(v) By July 2004 at the latest, Mr Larsen was aware of the fact that Dr Skovmand was using confidential information in the Fence database to develop that product;
(vi) While in the employ of Vestergaard, Mrs Sig did not have access to the Fence database, and at no time did she have knowledge of any of the trade secrets which it contained;
(vii) Although, by September 2004, Mrs Sig was aware that the Netprotect product was based on trade secrets, she believed that they originated from Dr Skovmand's work for Intection (and, subsequently, Bestnet);
(viii) By June 2005 Mrs Sig was aware of Vestergaard's allegations, the Judge did not reject her evidence that she had not appreciated that the Netprotect product was conceived with the assistance of Vestergaard's trade secrets;
(ix) At trial, Dr Skovmand and Mr Larsen had put forward an untrue account of the development of Netprotect, including the production of forged documents, but there was no suggestion that Mrs Sig was involved in that.
Unsurprisingly in the light of these findings, the Judge found that Dr Skovmand was liable in breach of confidence to Vestergaard (although there was no question of a judgment against Dr Skovmand, as he was not a party to the proceedings). The Judge then stated at [2009] EWHC 657 (Ch), para 625, that, if Dr Skovmand had "committed an actionable breach of confidence", it was "not dispute[d] that … Mr Larsen, Mrs Sig, Bestnet [and] 3T … were also liable on one basis or another".
Counsel for Mrs Sig then challenged the proposition that she did not dispute liability, and the Judge reconsidered her liability at a further hearing concerned with remedies. Following that hearing, the Judge gave a second judgment on 26 June 2009, [2009] EWHC 1456 (Ch), in which he said this:
"23. Mrs Sig was subject to an express obligation of confidentiality contained in clause 8 of her contract of employment. This obligation explicitly continued after termination of her employment. After termination, however, the obligation is only enforceable in so far as it prevents Mrs Sig from misusing [Vestergaard]'s trade secrets. In the absence of an express term, Mrs Sig would be subject to an implied term to that effect. Although Mrs Sig was not personally involved in devising the initial Netprotect recipes or carrying out the trials, she was closely involved in setting up … Bestnet...
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