OTS Logistics Belgium NV & Anor v Clarke & Anor

On an application for an interim injunction enforcing restrictive covenants, the court must first identify a serious issue to be tried and then consider the adequacy of damages. If damages are inadequate for both sides, the court should assess the balance of convenience, including the likely uncompensatable harm from granting or refusing relief. Where the evidence of breach is thin, the construction of the covenant is genuinely disputed, and the competing disadvantages are broadly comparable, the prudent course may be to preserve the position by making no restraining order and directing a speedy trial. Restrictive covenants are construed narrowly. A confidentiality covenant may remain effective while the information retains its confidential character, but an injunction must identify with sufficient particularity the information and use prohibited.

The claimants sought an interim injunction against Robert Clarke and Britam Shipping Ltd. They alleged breaches of non-competition, non-solicitation and confidentiality covenants in a share sale agreement and a director’s service agreement. The alleged conduct concerned refrigerated export services from Costa Rica, dealings with suppliers and customers, the engagement of a former consultant, and possible use of confidential pricing and discount information.

The central issues were the proper construction and scope of the covenants, whether there was a serious issue to be tried, whether damages would be adequate, and where the balance of convenience lay pending trial.

1. Interim injunction principles. The court applied the ordinary discretionary approach. It had to ask whether there was a serious issue to be tried and whether damages would be an adequate remedy. If necessary, it then had to assess the balance of convenience, including the relative uncompensatable harm from granting or refusing relief. A clear view of the relative merits could be taken into account, although the court should not conduct a prolonged trial of difficult factual or legal issues.
2. Construction of the covenants. The SPA restriction against competition with the “Relevant Products” was, on the initial reading, confined to products or services supplied by OEL, because the agreement deliberately distinguished “Company” from “Companies”. That specific distinction prevailed over the general provision extending singular words to the plural. The covenant was therefore to be construed restrictively. The DSA’s reference to services “ours” meant, at least clearly, services provided by OEL, although it was arguable that the clause extended to services provided through associated companies.
3. Serious issue to be tried. There was a serious issue concerning whether Costa Rican refrigerated export business belonged to OEL or an associated company, whether Britam’s activities competed with OEL’s products or services, whether CSAV and HSUD were suppliers whose services had been solicited, and whether Clarke possessed confidential information likely to be used. The evidence did not establish a serious case of solicitation of B & C Exportadora or Mr Retana; at most, it was very thin.
4. Damages and balance of convenience. Damages were inadequate for both parties. Loss to the claimants would be difficult to quantify if business moved elsewhere, while preventing a fledgling business from starting could cause similarly difficult-to-assess harm to the defendants. The disadvantages were broadly comparable. Because the construction of the covenants and the legitimacy of the proposed business remained disputed, the court made no order restraining the defendants from carrying on the Costa Rican business or soliciting customers or suppliers, and ordered a speedy trial.
5. Confidential information. A confidentiality covenant is not unenforceable merely because it has no fixed end date; it ceases to bite when the information is no longer confidential. However, the evidence of misuse was thin and the proposed order lacked sufficient particularity. No interim injunction was therefore granted in respect of confidential information. Clarke was required to swear an affidavit confirming that he held no documents or tangible items belonging to, or containing information of, the claimants or their associates, and to give the undertaking identified in his evidence.