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Setting up in competition, injunction granted on basis of "implied terms"

19 July 2013 #Employment


The recent case of Whitmar Publications v Gamage [2013] provides guidance for employers who find themselves in competition with former employees, when these employees have taken steps to compete with their employer whilst they were still their employees.

In Whitmar, three employees had worked for the Claimant, a publisher, for a number of years. In January 2013 they resigned from their employment. Mr Gamage advised his employer that he intended to set up a new company, “Earth Island”. The employer (“Whitmar”) argued that the Defendants had set up their company prior to the termination of their employment in competition with Whitmar.

In May 2013, Whitmar commenced proceedings against their former employees claiming damages for breach of contract; an account of profits; damages for breach of fiduciary duty and/or for infringement of its Database Rights under the Copyright and Rights in Database Regulations 1997; and a permanent injunction restraining the Defendants from using and disclosing confidential information obtained during their employment with Whitmar. Whitmar also applied for interim relief.

Whitmar argued that the Defendants acted in breach of their contracts of employment and of their obligations as employees. The Defendants were under an implied duty of good faith and fidelity which continued until the end of their employment.

It was also contended that since leaving Whitmar, the Defendants had misappropriated and misused Whitmar’s confidential information. Earth Island produced and market several packages with “strikingly similar” features to Whitmar, they refused to return certain confidential information belonging to Whitmar and they removed a large number of business cards which they then used for the benefit of Earth Island.

Decision:

As this was an urgent application for injunctive relief, the court was only able to make a preliminary assessment of the evidence. The evidence pointed strongly against the account given by the Defendants for the following reasons:

  1. Earth Island was incorporated in August 2012, two of the Defendants were directors of that company and a domain name for Earth Island had been registered some months before. No explanation was given for this by the Defendants.
  2. In November 2011 discussions were held between a witness and the Defendants leaving a witness in no doubt that the Defendants had formed the intention to set up competing print titles and the witness was told to keep the facts and contents of their discussions “secret” from the Whitmar. Comments were made by the Defendants such as “so how do we do that without blowing our cover?” and “who else is worth taking?” In addition the witness was shown internal management accounts that Mr Gamage had taken from Whitmar.
  3. Whitmar’s Linked-In groups appeared to have been used as a source for an Earth Island press release.
  4. Confidential information was taken by the Defendants from Whitmar.

The Judge noted “one of the badges of competition in cases such as this is the secrecy with which those who are competing go about their business.” The emails passing between the Defendants were clearly example of the desire for secrecy. In one email the Defendants emphasised that all traces of their communications should be destroyed.

The judge concluded that the steps the Defendants took were not preparatory, but rather were active steps to compete. On that basis the view was taken that Whitmar had a very good chance of succeeding at trial and the interim relief was granted.

Clarkslegal, specialist Employment lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Employment matter please contact Clarkslegal's employment team by email at employmentunit@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

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