Severe consequences for breaching court order

People often take the view that they can be quite blasé about their contractual obligations, mainly because employers often take the view that suing them is more trouble than it is worth. However, a recent High Court judgment shows that this is a risky course of action and the consequences for serious breaches can be very severe.

OCS Group UK Limited provides services in the aviation industry. It had a contract to provide cleaning and other services to British Airways at Heathrow Airport. In February 2017 it lost the contract which was awarded to a competing firm, Omni Serv Limited. Mr Jagdeep Dadi worked for OCS providing services under the contract until 28 February 2017, when his employment was TUPE transferred to Omni Serv. On 27 February OCS issued proceedings against Mr Dadi and others, seeking declaratory relief (an order determining the rights of the parties without awarding damages or directing anything to be done), an injunction against the defendants and damages for breach of contract, breach of fiduciary duty and/or breach of confidence. It was alleged that they had transmitted confidential documents and information to their home email addresses or external storage devices and that they had made unlawful use of them and/or transmitted them to third parties.

In Mr Dadi’s case, it was claimed that, between 2014 and February 2017, he had sent confidential documents to his personal web-based email account, including information about the logistics and costs of providing aircraft cleaning and other services to British Airways.

The matter came before Mr Justice Marcus Smith on 27 February, without prior notice to Mr Dadi. He granted an interim injunction against Mr Dadi (and others), prohibiting him from disclosing confidential information belonging to OCS and requiring him to provide information about prior disclosures to third parties. He was ordered to retain hard copy and electronic documents, pending a further hearing. He was also ordered not to disclose the existence of the proceedings and the possibility of proceedings against others to anyone other than his legal advisers.

He decided not to defend the underlying proceedings and a default judgment was entered against him.

As is usual in such cases the order of Mr Justice Marcus Smith included a penal notice which warned him that disobedience of the order rendered him liable to be imprisoned or fined or to have his assets seized. He was served with the order at Heathrow by in-house counsel for OCS at 3.10 p.m. on 27 February. While doing so she drew his attention to the penal notice on the front page of the order and read it to him. She also advised him to obtain legal advice as a matter of urgency.

Do employees have to disclose their intention to compete?

In the case of MPT Group Ltd v Peel and others [2017] EWHC 1222 (Ch), the High Court was asked to decide whether employees were under a duty to disclose their intention to compete to their employer.

The facts of the case were that Mr Peel and Mr Birtwistle were employed by MPT Group Ltd (a company that produces and supplies machinery, parts and equipment to the mattress industry) in management positions.  The employees resigned from their positions on the same date, Mr Peel giving the reason for his resignation as wanting to work from home and spend more time with his family, and Mr Birtwistle advising he had been offered a position doing ‘panel wiring’.  They denied that they were leaving to form a partnership/start up their own business in competition with MPT.

Both Peel and Birtwistle were subject to extensive confidentiality clauses and restrictive covenants within their contracts of employment, to the extent that they were prohibited from soliciting or even dealing with customers with whom they had personal contact, for six months.

After the relevant period had expired however, Peel and Birtwistle incorporated MattressTek Ltd, a company that was in direct competition with MPT, and began selling complex mattress machines.  It further transpired that prior to leaving MPT, both men had copied a large amount of company data which included client and supplier databases, price and discount lists, sales quotations and orders, machinery drawings and manuals, and other documentation crucial to MPT’s business.

MPT sought an injunction against the men based on the misuse of confidential information, breach of restrictive covenants, and also upon a breach of the duty to answer questions truthfully.  In particular they sought an interim injunction prohibiting Peel, Birtwistle and MattressTek from soliciting, dealing or contracting with MPT’s customer and suppliers, and an unlimited injunction preventing them from disclosing or using MPT’s confidential information.