Dinsdale Moorland Services Ltd v Evans & Ors

The claimant sought a declaration that the defendants' defences had been struck out for breach of an "unless" order and, in the alternative, summary judgment on numerous substantive causes of action. The court applied the established summary judgment principles (Swain v Hillman framework as summarised in Nigeria v Santolina) and concluded that there were numerous realistic triable issues: whether a restrictive covenant in the claimant's managing director's contract was enforceable; whether the first and second defendants acquired secret shareholdings in Intracuity and thereby breached fiduciary or contractual duties; whether their summary dismissals were lawful; and whether subsequent dealings with Conservefor involved misuse of confidential information or procuration of business. The court also considered the effect of the earlier unless order and the adequacy of disclosure and concluded that the disclosure lists, while imperfect, were not so illusory or prepared in bad faith as to trigger automatic striking out. The claimant's applications for a declaration of strike-out and for summary judgment were therefore refused.

Background and parties

Dinsdale Moorland Services Ltd (DMS) is a peatland conservation business. Gareth and Stuart Evans were senior employees (Gareth as managing director) dismissed on 16 December 2011. Intracuity Ltd and Conservefor Ltd are companies said to compete with DMS. Central allegations were that the Evans brothers secretly acquired or sought shareholdings in Intracuity, thereby making undisclosed profits and breaching duties, and that Gareth breached a nine‑month post-termination restrictive covenant.

Nature of the application

• (i) DMS applied for a declaration that the defendants' defences had been struck out for non-compliance with an "unless" order; and
• (ii) in the alternative, DMS applied for summary judgment on a range of issues including enforceability of the restrictive covenant, breaches of fiduciary duty, conspiracy, inducement, dishonest assistance and entitlement to relief (accounts, damages).

Issues framed by the court

1. Whether the restrictive covenant in Gareth Evans' contract was enforceable or void as restraint of trade, or excluded by repudiatory conduct by DMS (lawfulness of summary dismissal).
2. Whether Gareth and/or Stuart Evans acquired secret beneficial interests in Intracuity and thereby breached fiduciary or contractual duties.
3. Whether the summary dismissals were justified or wrongful.
4. Whether subsequent involvement with Conservefor and successful tenders involved misuse of confidential information, procurement, or accessory/conspiratorial liability.
5. Whether the defendants complied with the disclosure "unless" order and, if not, whether relief from the sanction should be granted.

Court's reasoning and conclusions

The judge applied the established tests for summary judgment and for enforcement of conditional "unless" orders. On the restrictive covenant the court found there were substantial triable issues: DMS had to show a protectable proprietary or customer-related interest and that the covenant was no greater than reasonably necessary; the court was not persuaded it was plain that the covenant was enforceable and rejected the claimant's estoppel point as unsuitable for summary disposal. On Intracuity the contemporaneous emails and documents gave rise to serious suspicions but did not conclusively establish that the Evans brothers became beneficial shareholders; the denials therefore raised realistic prospects of success and required trial. The lawfulness of dismissal depended on whether a secret shareholding had been acquired; because that issue was triable the dismissal issues were also triable. On dealings with Conservefor there were overlapping issues of enforceability of the covenant, confidentiality and involvement in tenders which could not be resolved on paper. Regarding disclosure and the earlier DJ Jordan "unless" order, the court held that separate lists were provided and, applying authorities such as Realkredit and Re Atrium, concluded the lists were not so deficient or prepared in bad faith as to justify automatic striking out; accordingly the strike-out declaration failed. The court also observed that allegations of dishonesty further supported allowing a full trial.

The applications by DMS were dismissed. The court refused to declare that the defendants' defences had been struck out for breach of the unless order and refused summary judgment on the pleaded issues. The judge concluded there are multiple realistic triable issues on (inter alia) the enforceability of the restrictive covenant, the existence of any secret shareholdings in Intracuity and resulting fiduciary or contractual breaches, the lawfulness of the dismissals, and the alleged misuse of confidential information and related accessory/conspiracy claims; disclosure lists were not so defective or prepared in bad faith as to warrant strike-out.