AAA & Anor v CCC

The Court of Appeal considered an appeal by the defendant against a High Court order granting a final injunction restraining publication or disclosure of specified information contained in a Confidential Schedule (CS1) and restraining adverse or derogatory comments and conduct likely to damage the claimants' business. The claimants relied on covenants in a professionally drafted Settlement Agreement and Release (the SAR) and a separate Employee Compromise (the EC) executed on 31 August 2017, in particular clauses 11.5 and 11.3 of the SAR and clauses 10.1 and 10.5 of the EC.

The court held that (a) the information in CS1 was obtained as a result of the defendant's period of employment/directorship of the first claimant and fell within the SAR definition of Confidential Information; (b) the disclosure of true but non-public allegations may nonetheless be adverse, derogatory or bring the claimants into disrepute and so may breach the contractual covenants; (c) the contractual covenants were not so vague as to be unenforceable; and (d) the employer (AAA) could obtain injunctive relief enforcing the EC covenant for the protection of its directors and employees even though some beneficiaries (BBB) were not parties to that contract, subject to privity considerations on enforcement. The court dismissed the appeal save that it made two limited amendments to the injunction: (1) to limit the protection in relation to adverse or derogatory comments about the second claimant to the period "so long as he remains a director or employee of the First Claimant"; and (2) to delete from paragraph 3(d) the words after "the release of the Information" describing a further category of covered material.

This was an appeal from a High Court order of HH Judge Eyre QC dated 14 November 2019 granting final injunctive relief arising from disputes between former business partners who were also directors and equal shareholders of a company (AAA). The background was highly fact-specific and involved allegations of sexual harassment, sexual assault and various alleged financial and other misconduct made by the defendant (CCC) after he agreed to transfer his shares and accept payments under a Settlement Agreement and Release (SAR) and an Employee Compromise (EC) executed on 31 August 2017.

Nature of the application: The claimants sought final injunctive relief on the basis of the confidentiality and non-disparagement covenants in the SAR and EC to restrain the defendant from publishing or disclosing the information listed in a Confidential Schedule (CS1), from making adverse or derogatory comments about the claimants, and from acting in a way that would damage their business. The High Court granted summary judgment for the claimants on their contractual claim and made the injunctive order, subject to express savings for legal advice and certain statutory whistleblowing channels and a liberty to apply to vary the order.

Issues framed: (i) whether the matters listed in CS1 fell within the contractual definitions of "Confidential Information" in the SAR or EC; (ii) whether the covenants were sufficiently certain to be enforceable; (iii) whether truth or belief in the allegations was a defence to contractual enforcement; (iv) whether an injunction could protect persons (for example the second claimant) who were not party to the EC; and (v) whether parts of the injunction were impermissibly vague.

Court’s reasoning and outcome: The Court of Appeal accepted the High Court's approach. It was satisfied there was no realistic dispute that the defendant's employment/directorship was the source of the disputed information and that such information could properly be regarded as confidential under the SAR. The court agreed that disclosure of true allegations not already public can still be "adverse or derogatory" and capable of bringing claimants into disrepute; truth is not necessarily a contractual defence to a claim for breach of confidentiality and non‑disparagement in these circumstances. The court rejected arguments that the contractual terms were so uncertain as to be unenforceable, holding that the clauses should be read in context and were capable of practical application. The court accepted that AAA could seek to enforce the EC covenant for the protection of its directors and employees, although privity might limit third-party enforcement in practice. Some criticisms of the wording of the injunction were accepted: the court limited paragraph 3(c) so that protection for the second claimant would only continue while he remained a director or employee, and it deleted the concluding words of paragraph 3(d) relating to "any matter arising out of engagement" on the ground that they added uncertainty. The appeal was otherwise dismissed.

Contextual note: The court recognised the need to protect freedom of expression under Article 10 ECHR but concluded that Article 10 considerations did not prevent the immediate grant of contractual injunctive relief; the order preserved express statutory and legal advice exceptions and a liberty to apply to vary the order in future circumstances where the balance under Article 10 might differ.

This was an appeal against a High Court order granting final injunctive relief enforcing confidentiality and non‑disparagement covenants in a Settlement Agreement and an Employee Compromise. The Court of Appeal dismissed the appeal in substance but ordered two limited amendments to the injunction: (1) paragraph 3(c) was limited to protect the second claimant only while he remains a director or employee of the first claimant; and (2) the concluding words of paragraph 3(d) after "the release of the Information" were deleted because they created uncertainty. The court upheld the view that the disputed information fell within the SAR definition of Confidential Information, that contractual covenants were not too vague to enforce, and that truth of allegations does not necessarily defeat a contractual claim for breach of confidentiality or non‑disparagement.

Appeal from the High Court of Justice, Business and Property Courts in Manchester (Business List (ChD)) before HH Judge Eyre QC, order dated 14 November 2019 (case no BL-2019-MAN-000091). Interim non-disclosure measures had been made earlier (including an order of Fancourt J dated 4 September 2019). Permission to appeal was limited by Lewison LJ to certain grounds (grounds 2(b) and 2(c)). The Court of Appeal delivered judgment on 7 July 2020 ([2020] EWCA Civ 846).