Thomson Ecology Ltd & Anor v APEM Ltd & Ors

An employee’s duty of fidelity is defined principally by the terms of employment, including the employee’s role and responsibilities. A senior manager may be obliged to report a developing threat to the employer’s business and must not assist a competitor to recruit the employer’s staff while employment continues, including during garden leave. Registration of a misleading domain name or company name may constitute actionable passing off. Damage may be presumed where goodwill is interfered with, even if future passing off and actual damage are no longer possible. Summary judgment may be granted on admitted breaches where a prompt declaration has practical commercial value. An intrusive inspection order requires a properly defined risk to confidential information and must not become a speculative investigation for further claims.

Thomson Ecology Limited and Thomson Unicomarine Limited applied for summary judgment and interim relief. The claim against APEM Limited concerned passing off arising from the registration of domain names and incorporation of a company using the name Unicomarine. The claim against David Hall concerned alleged breaches of his contractual duty of fidelity and confidence while employed by Unicomarine.

The application was based substantially on admissions. The court considered the scope of Mr Hall’s duties, the date on which his employment ended, the effect of garden leave, whether the passing-off claim was actionable despite the defendants’ remedial steps, and whether an order for inspection of computers, devices and email accounts was justified.

1. Summary judgment against Mr Hall. Mr Hall’s duty of fidelity was determined by his contract and job description. His responsibilities as operations manager, including overall responsibility for the Letchworth business, reporting obligations and responsibility for staff, required him to report a developing threat from a competitor. The court applied the approach in Ranson v Computer Systems plc [2012] IRLR 769.
2. A senior employee who knows of a planned or developing raid on the employer’s staff or client base may be required to report it. Mr Hall’s failures to report relevant approaches and recruitment activity breached his duty of fidelity.
3. Assisting a competitor to recruit the employer’s staff was plainly inconsistent with that duty. The fact that the employees could lawfully leave on notice, or that Mr Hall could have approached them after employment ended, did not alter the position. The same negative obligations continued during garden leave, although positive work obligations were attenuated.
4. Mr Hall’s employment continued until 27 December 2012. The correspondence did not establish an agreed variation replacing the contractual notice period with payment in lieu. Summary judgment was granted in respect of the admitted breaches identified in paragraph 22 of the judgment. Other allegations were unsuitable for summary determination because their context or scope remained uncertain.
5. Passing off. The five characteristics identified in Erven Warnink Besloten Vennootschap v J Townend & Sons (Hull) Ltd [1979] A.C. 731 were applied. Registration of the misleading domain names and incorporation of the similarly named company constituted actionable passing off. Damage was presumed where goodwill had been interfered with, following One in a Million [1999] 1 WLR 903, even though no future passing off or actual damage was possible. The court granted a declaration but refused an enquiry as to damages.
6. Interim relief. The proposed inspection order was too broad. The claimants had not identified a sufficiently defined risk to genuinely confidential information, and the order would permit a speculative search for further allegations. The application for interim relief was refused.