Thermascan Limited v Norman

The court refused an interim blanket injunction restraining the defendant, a former director and employee, from soliciting or canvassing any of the claimant's clients. The claimant relied on post-termination fiduciary duties said to arise under sections 175 and 170(2) of the Companies Act 2006 and on the post-employment covenant in the defendant's contract, but the contractual restraint had expired and the court held the fiduciary-duty authorities require a demonstration of a "maturing business opportunity" or specific exploitation of company property or information which did not exist here.

The defendant had delivered up company property and gave an undertaking continuing not to use or disclose defined confidential information (including the engineers' boards, survey lists and customer database). The judge found that there had been some solicitation of former clients and that the defendant had obtained work from three former clients, but concluded that the claimant could not show that, at the date of resignation, there were maturing opportunities such as would sustain the broad fiduciary restraint sought. In addition the balance of convenience and the public interest in competition favoured refusal of the interim prohibition on canvassing; the defendant's continued undertaking as to confidential information remained in place.

Background and parties:

• The claimant provides infrared thermal-survey services, much of its work being repeat business. The defendant joined the business in 1995, acquired shares with others, remained a director and employee and later sold his shares; he became technical director.
• The defendant gave notice to terminate employment on 10 September 2008 and ceased to be a director on 10 October 2008. He later worked for another firm briefly and then sought to run his own thermal-imaging business. The claimant alleged he was canvassing its clients and using confidential information such as engineers' boards and survey lists.

Nature of the claim and relief sought:

• The claimant issued proceedings and sought interim relief: injunctions prohibiting the defendant from soliciting or canvassing any of the claimant's clients and from using any confidential information, together with an order for delivery up of company property and an affidavit of that delivery up.

Procedural posture:

• An earlier consent order before Morgan J provided for delivery up and a limited undertaking by the defendant not to solicit until 9 April 2009 and not to use or disclose defined confidential information; the defendant complied with delivery up and gave an undertaking continuing until trial not to use or disclose the confidential information.
• The present hearing concerned the claimant's application to revive or impose a blanket prohibition on soliciting or canvassing any of its clients beyond the expired contractual restraint.

Issues framed by the court:

• Whether the fiduciary duties in the Companies Act 2006, particularly sections 175 and 170(2), or the common law equitable principles can support a post-termination restraint preventing the defendant canvassing former clients in the absence of special facts;
• Whether there existed "maturing business opportunities" or other circumstances making the defendant's conduct a breach of fiduciary duty;
• Whether an interim injunction should be granted, having regard to the continued undertaking about confidential information, the balance of convenience and the public interest in competition.

Court's reasoning and decision:

• The judge reviewed the authorities distilled from CMS/CNS Dolphin v. Simonet and Foster Bryant v. Bryant, including that directors owe fiduciary duties and must not appropriate for themselves corporate opportunities which were maturing at the time of resignation.
• Applying those principles, the judge concluded that where, as here, there had been no discussions or negotiations in progress about future surveys at the time of the defendant's resignation, the claimant could not demonstrate the existence of maturing business opportunities that the defendant had appropriated.
• The contractual non-solicitation covenant had expired on 9 April 2009. The defendant had delivered up company property and given an undertaking not to use confidential information; the court left that undertaking in place. The judge also weighed the prejudice: requiring cessation of a started competing business pending trial would likely cause the defendant greater prejudice than any interim loss to the claimant, and the public interest in competition favoured the defendant.
• Accordingly the court refused the claimant's application for an interim blanket prohibition on soliciting or canvassing the claimant's clients but retained the defendant's undertaking not to use or disclose the defined confidential information and the delivery-up requirement.

The application for an interim injunction prohibiting the defendant from soliciting or canvassing any of the claimant's clients is dismissed. The court held that the contractual restraint had expired, the claimant had not established that "maturing business opportunities" existed at the date of resignation so as to ground the broad fiduciary restraint sought under sections 170 and 175 Companies Act 2006 (and the related common law principles), and the balance of convenience and public interest favoured refusal. The defendant's undertaking not to use or disclose defined confidential information and his delivery up of company property remain in place.