ESL Fuels Ltd v Fletcher & Anor

The court considered an application for interim injunctive relief to protect information alleged to be trade secrets and confidential information relating to a blended fuel product called Ultra 35. The judge applied the familiar American Cyanamid framework, first asking whether there was a serious issue to be tried as to whether the information was of sufficient quality to attract equitable protection and then considering the balance of convenience and adequacy of damages. The court found that there were triable issues of fact about whether the formulation and related information amounted to a trade secret and that a clear view could not be formed on the papers as to the likely outcome at trial.

On the balance of convenience the court held that damages would be an adequate remedy for any pecuniary loss and that the competing business (Prema) was a fledgling concern which would be seriously prejudiced by an absolute interim restraint. The judge therefore granted interim relief to protect the claimant’s alleged confidential information but allowed the defendants to continue selling the competing product provided they preserved the net profits from sales of that product pending trial. The status quo was identified as the position before the defendants set up in business selling Prema 35.

The claimant, ESL Fuels Ltd, sued the first defendant, Mr Stephen Fletcher, and the second defendant, Prema Energy Ltd, seeking interim equitable relief to restrain misuse of alleged trade secrets and confidential information relating to a blended heating fuel marketed as Ultra 35. The application was for an interlocutory injunction pending a speedy trial fixed for five days.

Background and parties:

• ESL developed and sold Ultra 35, claiming a confidential blending process and a supplied component (the Product) constituted trade secrets which had been assigned to the claimant on 21 June 2013.
• Mr Fletcher had been a senior employee (described by ESL as a de facto director) who left in September 2013 and formed Prema, which began selling an equivalent product, Prema 35.

Nature of the application: The claimant sought interim injunctive relief to prevent use and disclosure of the confidential information and other consequential relief.

Issues framed by the court:

• whether there was a serious issue to be tried that the alleged information amounted to confidential information/trade secrets;
• what the relevant status quo was;
• whether the claimant had identified the confidential information with sufficient particularity;
• the balance of convenience and whether damages would be an adequate remedy.

Court’s reasoning and conclusions:

• The judge applied the flexible American Cyanamid approach and concluded there were clearly triable issues of fact about whether the formulation and associated information were trade secrets and whether Fletcher had received them in confidence; it was not possible to form a clear view of the likely outcome on the papers.
• The status quo was held to be the state of affairs before the defendants began selling Prema 35.
• The court rejected submissions that the claimant had unduly delayed and held the claimant had provided sufficient definition of the confidential information for interim purposes, whilst recognising the defendants’ point that the undertakings previously given were limited.
• On the balance of convenience the court found damages would adequately compensate the claimant for pecuniary loss, and that Prema, as a fledgling enterprise, would be disproportionately harmed by a full suspension of its trading; accordingly the court limited relief to protecting confidentiality while permitting sales subject to preservation of net profits from Prema 35 pending trial.

The court therefore granted interim injunctive relief in part: confidentiality was preserved by order and the confidential schedule reproducing the particulars of claim was sealed, but sales of Prema 35 could continue provided the defendants undertook to preserve net profits pending trial. A five-day speedy trial was fixed.

Interim relief was granted in part. The court held there was a serious issue to be tried that the information might amount to trade secrets and confidential information but that the merits could not be finally determined on the papers. The court concluded damages would be an adequate remedy for pecuniary loss and that a full interim restraint would risk strangling the defendant company. Consequently the court protected the claimant’s alleged confidential information by injunction while permitting the defendants to continue selling the competing product subject to an undertaking to preserve net profits pending trial and directed a speedy five-day trial to resolve the substantive disputes.