ESL Fuels Ltd v Fletcher & Anor

On an application for an interim injunction in a trade-secrets claim, the court applies the American Cyanamid principles flexibly. The court may give proper weight to a clear view of the likely outcome, but should avoid conducting a mini-trial on disputed evidence.

The relevant status quo is the state of affairs before the most significant recent change. Where loss from continued misuse can be quantified and the defendant’s nascent business may be destroyed by restraint, damages may be adequate and the balance of convenience may favour refusal of an injunction against trading. Protection of confidential information may nevertheless be granted, subject to safeguards such as preservation of profits.

ESL Fuels Ltd sought interim injunctive relief pending a speedy trial concerning alleged confidential information and trade secrets used to manufacture the Ultra 35 heating fuel. The defendants, Stephen Fletcher and Prema Energy Ltd, disputed the existence and character of the alleged secrets, contending that the product could be made using industry knowledge and ordinary blending techniques.

The application followed Fletcher’s departure from ESL and Prema’s commencement of competing activity. The central issues were whether there was a serious issue to be tried, whether the alleged confidential information was sufficiently identified, the relevant status quo, the adequacy of damages, and the balance of convenience.

1. Serious issue to be tried. The court applied the first limb of American Cyanamid. The evidence raised genuine disputes about whether the asserted formula, components and manufacturing process amounted to trade secrets and whether Fletcher had received them in circumstances importing an obligation of confidence. Those disputes could not properly be resolved on written evidence.
2. The court rejected the submission that a more extensive merits assessment was required because the relief might restrain competition. Lansing Linde Ltd v Kerr concerned a different form of post-termination restraint. Series 5 Software Ltd v Clarke confirmed that disputed issues should rarely be resolved at an interim hearing. The proper approach was the flexible formulation in Guardian Media Group Plc v Associated Newspapers Ltd: the court could give weight to a clear view of the likely result without conducting a mini-trial.
3. Status quo. The relevant status quo was the state of affairs before the defendants set up in business selling Prema 35. The court preferred the approach that the status quo is assessed by reference to the period before the most significant recent change.
4. Damages and balance of convenience. ESL’s likely pecuniary loss from competing sales could be quantified through sales and disclosure evidence. Reputational loss could be addressed if ESL succeeded at trial. By contrast, an injunction stopping Prema’s new business might strangle it near birth. The balance therefore favoured the defendants in relation to sales of Prema 35, provided they preserved the net profits pending trial.
5. The court nevertheless granted an interim injunction protecting the alleged confidential information. The defendants were not prevented from selling Prema 35, but had to preserve the relevant net profits pending trial.

This was a first-instance interim application in the High Court. The claim had initially been heard by Mr Justice Norris in London, who transferred it to the Manchester District Registry and gave interim case-management directions. The effective hearing was then conducted before His Honour Judge Hodge QC.