Basic Solutions Ltd v Sands

At the interim-injunction stage, an applicant must provide evidence establishing a serious issue to be tried. Mere assertion, speculation or inference from uncontroversial facts is insufficient, particularly where breach of confidence is alleged.

Restrictive covenants must be construed according to their natural and ordinary meaning, commercial context and the public policy favouring fair competition. The mere provision of product samples for testing does not constitute “supply” where the contract contemplates sales or an ongoing commercial relationship. A 12-month restriction is unenforceable unless shown to be reasonably necessary to protect a legitimate business interest.

Where an interim injunction would effectively determine the dispute, the court may consider the broader merits. Public interest in maintaining competition may inform the balance of justice.

The claimant sought an interim injunction against a former employee who had joined a company established by his son and proposed to tender to Network Rail with a competing product.

The application relied on restrictive covenants in a 2002 service agreement and, alternatively, an equitable duty of confidence. The claimant alleged that the competing product had been developed using confidential information, know-how or samples connected with its own product.

The defendant argued that the contractual restrictions had not been triggered, were unenforceable, and that there was no evidential basis for the breach-of-confidence case. The central issues were whether the contractual definitions covered the provision of samples, whether the restrictions were enforceable, whether there was a serious issue to be tried, and where the balance of justice lay.

1. Application refused. The claimant failed to establish a serious issue to be tried in respect of either the restrictive covenants or the alleged equitable duty of confidence.
2. The restrictive covenants had to be construed by reference to their natural and ordinary meaning, the commercial realities and the public policy permitting fair competition. The provision of samples for testing, even with a view to possible future sale, was not “supply” for the purposes of clause 14. The contractual restrictions were therefore not triggered on that basis.
3. The 12-month restrictions were not shown to be reasonably necessary for the protection of the claimant’s legitimate business interests. Long lead times in tendering did not, without more, justify such a period, and the restrictions were unenforceable in that respect. The court also indicated that the blanket reference to “any Group Company” was excessively wide, applying the approach in J A Mont (UK) Ltd v Mills [1993] IRLR 172, although that point did not need to be finally determined.
4. In a case where the interim application was likely to determine the practical outcome, the court was not confined to a narrow application of the American Cyanamid principles and could consider the broader merits. The claimant’s evidence on confidentiality consisted largely of assertion and speculation. It was contradicted by the unchallenged evidence that the competing product was novel and had not been developed from the claimant’s information.
5. The second American Cyanamid limb was neutral because damages for either party would involve a speculative lost-chance assessment. The balance of convenience, or balance of justice, favoured the defendant: preventing him from tendering would stifle his opportunity, whereas allowing competition caused the claimant only to face an additional competitor. The public interest in competition and improved services was also relevant.