LC Services Ltd & Ors v Brown & Ors

A former executive director’s personal customer relationships, together with properly identified customer and equipment information, may constitute legitimate interests capable of protection by post-termination restraints and confidentiality obligations. A restraint covering customer solicitation and negotiations may remain reasonable even though it protects the employer’s opportunity to retain customers who have decided to leave. Confidential information must be defined with sufficient certainty before an injunction is granted. Where information is partly ascertainable from customers or other sources, financial relief may be more appropriate than an injunction.

LCS claimed against its former sales director, Andrew Brown, and his new employer, Kinesis Solutions Ltd, for breaches of contractual and fiduciary duties, misuse of confidential information, interference with property, and breaches of post-termination restrictions. LCS alleged that Brown had diverted business, transferred customer data to Kinesis, removed confidential documents, and used LCS information for Kinesis’s benefit.

The defendants denied liability and challenged the enforceability of the restraints as unreasonable in restraint of trade. The court determined liability and addressed the availability of injunctive and financial remedies.

1. Liability. Brown breached his service agreement and his fiduciary duties by soliciting or seeking business for KSL while employed by LCS, transferring and using LCS’s confidential information, removing documents from the red files, failing deliberately to send renewal quotations, and using confidential maintenance-procedure data. KSL was a willing and knowing participant in those breaches and was also liable on the basis that the breaches were committed on its behalf.
2. Confidential information. The ACT! database and the red files were confidential as a whole, even though some individual information could be obtained elsewhere. The selected test figures of 440 nanometres for fluorescent detectors and 238 nanometres for UV/IV detectors were also confidential because their selection was not inevitable and they were not publicly available.
3. Restraint of trade. LCS had a legitimate interest in protecting customer relationships developed by Brown as its executive director. Clause 17.2 was sufficiently certain and reasonable. It protected LCS’s opportunity to obtain one renewal of annual maintenance contracts without competition from Brown using those relationships. The restriction could also apply to customers who had decided to leave, since the employer might still salvage the business. The court applied the reasoning in International Consulting Services (UK) Ltd v Hart [2000] IRLR 227 and G W Plowman & Son Ltd v Ash [1964] 1 WLR 568.
4. Remedies. LCS was entitled to injunctions enforcing clauses 17.2.1 and 17.2.2, damages for the contractual and fiduciary breaches, damages for wrongful use of confidential information and physical property, and an account of profits in lieu of damages for the equitable breaches and misuse of information. Springboard relief was more suited to interim relief, as in Roger Bullivant Ltd v Ellis [1987] ICR 464. An injunction restraining undefined confidential information would lack certainty, following Thomas v Mould [1968] 2 QB 913. The remaining remedy issues were left for short further submissions, with inquiries as to damages and, if elected, an account of profits.