Allfiled UK Ltd v Eltis & Ors

Interlocutory injunctions should ordinarily be approached under the American Cyanamid framework. The applicant need show a serious question to be tried, not an overwhelming case, unless the relief would plainly render a trial otiose. The court must then consider the adequacy of damages and, if necessary, the balance of convenience understood as the risk of injustice.

In disputes involving confidential information, intellectual property, fiduciary duties and employee restraints, the court should impose no wider restraint than reasonably necessary. It may fashion a via media which protects arguable proprietary rights while permitting genuinely independent work. Delay may affect the status quo, but it is not an automatic bar. Material risks to innocent third parties and the practical ability of an undertaking in damages to compensate them are relevant.

Allfiled UK Limited sought interlocutory injunctions against former directors, employees and companies established by them. It alleged misuse of confidential information and intellectual property, breaches of fiduciary and contractual duties, unlawful interference with contracts and conspiracy.

The dispute centred on similarities between Allfiled UK’s personal data store system and software being developed by Port Technologies Limited for Magpie Investment Holdings Limited. Magpie intervened because an injunction might impede its contract with Port Technologies. The court determined whether the ordinary interlocutory test applied, whether Allfiled UK had shown serious issues to be tried, and what relief best protected the parties and Magpie pending an expedited trial.

1. Gateway. The court applied the ordinary American Cyanamid test. The higher threshold of an overwhelming case is exceptional and arises where relief would plainly make a trial otiose. The proposed relief would not have that effect, particularly if the trial were expedited.
2. Serious issues. The evidence disclosed serious issues concerning Allfiled UK’s ownership and confidentiality of the personal data store system and its constituent material. The first three respondents arguably used that material for a rival business, induced breaches of the Magpie and employment contracts, and acted in breach of fiduciary duties. The other individual respondents were arguably in breach of express and implied duties of fidelity. The restrictive covenants were broad, but it was not plain and obvious at the interlocutory stage that they would fail at trial.
3. Confidentiality and fiduciary duties. Competition after resignation is not prohibited merely because it is competition. The issue is fact-sensitive. A former director may remain accountable where resignation was prompted by an intention to appropriate a maturing corporate opportunity or exploit company property, information or opportunity.
4. Damages and balance. Unquantifiable loss of control over confidential information, the respondents’ doubtful ability to pay, express negative covenants, and the arguable proprietary character of the information favoured protection. Port Technologies’ possible liquidation and Magpie’s interests were relevant but not conclusive. The court adopted a via media: material developed wholly independently after 19 January 2015 could be used, while use of Allfiled UK’s property and confidential information was restrained.
5. Orders. The injunctions were to continue pending trial, subject to carefully defined provisos, preservation and reporting requirements, restrictions concerning MSE and other Allfiled UK clients, cross-undertakings in damages, and an expedited trial. The parties and Magpie were invited to submit an agreed draft order; otherwise the matter would return for adjudication.