Dinsdale Moorland Services Ltd v Evans & Ors

Summary judgment should be refused where the defence has a realistic, rather than fanciful, prospect of success. The court must avoid conducting a mini-trial, while testing whether factual assertions have real substance against the available evidence and reasonably anticipated evidence. Allegations of fraud or dishonesty are a further reason for a trial.

A contractual acknowledgement that a restrictive covenant is reasonable does not prevent the employee from arguing that the covenant is contrary to public policy or wider than reasonably necessary. For disclosure, service of a document which can fairly be described as a list gives prima facie compliance with an unless order. Strike-out requires lack of good faith, an illusory list, or patent deficiencies showing apparent rather than real compliance.

Dinsdale Moorland Services Ltd brought proceedings against former employees and associated companies concerning restrictive covenants, alleged secret shareholdings, fiduciary duties, misuse of confidential information, conspiracy and related relief.

The claimant sought summary judgment on 16 issues. It also sought a declaration that the defences of Gareth Evans, Stuart Evans and Conservefor Ltd had been struck out automatically under an unless order requiring standard disclosure by list. The defendants denied liability, contended that the disclosure order had been complied with, and sought relief from sanctions in the alternative.

The central questions were whether the defendants had realistic prospects of defending the substantive allegations and whether their disclosure lists amounted to compliance with the unless order.

1. Summary judgment. The application for summary judgment was dismissed. The defendants had realistic prospects of success on all 16 issues. The court applied the guidance summarised in Nigeria v Santolina Investment Corporation and others [2007] EWHC 437 (Ch): a realistic defence carries some degree of conviction; the court must not conduct a mini-trial; and the evidence must include evidence reasonably expected to be available at trial. Allegations of dishonesty provided an additional powerful reason for permitting a trial (paras [30], [99]).
2. The enforceability of the restrictive covenant was plainly arguable. A clause in an employment contract cannot be made enforceable merely because the parties agreed that it was reasonable. Restraint-of-trade principles involve public policy, and the employer had to show both a legitimate business interest and that the restriction was no greater than reasonably necessary for its protection. The evidence did not establish that a restriction covering the whole United Kingdom was plainly enforceable (paras [40]-[46]).
3. The allegations that Gareth Evans and Stuart Evans acquired a secret shareholding in Intracuity raised factual issues requiring trial. The contemporaneous emails created grave suspicions, but did not establish that an agreement had been concluded. The defendants’ denials and the evidence capable of being given at trial meant that summary judgment was inappropriate (paras [66]-[69]). The legality of the dismissals depended on whether the secret shareholding had been acquired. If the dismissals were wrongful, there was also a serious issue whether the restrictive covenants survived DMS’s repudiatory breach (paras [78]-[83]).
4. The suggested fiduciary duty owed by Stuart Evans could not be established merely from the existence of an employment relationship. Fiduciary duties arise from particular contractual obligations and are circumscribed by the contract. Whether the relevant obligations and information were confidential remained open for trial (paras [92]-[95]).
5. Disclosure and the unless order. The defendants had served disclosure lists by the required date. Following Realkredit Danmark v York Montagu [1998] WL 104421, the lists gave prima facie compliance unless they were not made in good faith, were illusory, or displayed patent deficiencies showing apparent rather than real compliance. The existence of omissions capable of supporting an application for specific disclosure did not itself establish breach of the unless order (paras [131]-[147]).
6. The claimant’s application for a declaration that the defences had been struck out was dismissed. The court therefore did not need to determine relief from sanctions, although it observed that, had the lists been illusory, not made in good faith or obviously defective, relief would probably have been refused in light of the robust approach required by recent authorities (paras [148]-[150]).

First-instance decision. The judgment records no appeal.