Premier Model Management Led v Bruce & Ors

Restrictive covenants in an employment contract are enforceable during employment where they are reasonable in the interests of the parties and the public, having regard to the nature of the business and the employment. An employer may protect commercially valuable confidential information, but protection does not extend to information expressly excluded because it is in the public domain.

An injunction may restrain misuse of confidential information as a springboard for competition. A third party may induce breach of contract through silence where, in the circumstances, receipt of confidential information encouraged and intended the breach. Fraud in a civil claim is proved on the balance of probabilities, although cogent evidence is required given the seriousness and inherent improbability of the allegation.

The claimant, a model agency, employed the first defendant as a booker. During his employment he helped establish a competing agency operated by the second and third defendants, forwarded confidential business information, diverted modelling work and made inflated travel claims.

The claimant sought declarations, damages, delivery up of property and injunctions enforcing contractual restrictions and protecting confidential information. Interim injunctions had previously been granted and continued by consent. The central issues were whether the contractual restrictions were enforceable, whether the first defendant had breached them, whether the other defendants had induced those breaches, and what relief and damages followed.

1. Enforceability of covenants. The restrictions applying during employment were reasonable and enforceable. The claimant was entitled to protect commercially valuable information concerning its models and customers. Information already in the public domain was excluded by the contractual definition of confidential information. The 12-month restrictions on soliciting employees and model clients were also reasonable and enforceable.
2. Breach by the first defendant. The first defendant substantially breached his contract over a prolonged period. He took steps to establish a competing agency, acted in competition, misused confidential information, solicited clients and customers, and diverted business opportunities. His forwarding of information to private accounts and to the second defendant was not for the purposes of his employment.
3. Fraud. The first defendant fraudulently inflated travel costs by £21,020. The applicable standard was the balance of probabilities, but cogent evidence was required because of the seriousness and inherent improbability of the allegation. The claimant had incurred liability to reimburse those overcharged, and judgment was entered for the net loss of £20,185.
4. Inducing breach. The second defendant’s receipt of confidential information, including silent receipt in the circumstances, amounted to encouragement intended to induce breach. His close relationship with the first defendant, the volume and duration of the disclosures, his positive responses and his steps to establish a competing agency supported that inference. The third defendant was equally liable because it was the vehicle through which the competing business was developed.
5. The claimant was entitled to injunctions restraining solicitation of staff and models. Further orders concerning the duration and terms of protection for confidential information, delivery up, an account of profits and an inquiry as to damages were reserved for further argument. Damages included £20,185 for fraud and £7,320 for lost commission relating to one model, subject to issues concerning VAT and additional commission claims.