Stroma Building Control Ltd v Barr

On an application for interim injunctions, the court applied the three-stage approach in American Cyanamid v Ethicon Ltd [1975] A.C. 396: a serious issue to be tried, adequacy of damages, and the balance of convenience. Evidence-preservation orders require more than a demand for protection, but may be justified where the alleged wrongdoing is serious, there is a real concern that relevant evidence may not be preserved, and the order causes little commercial harm. Delivery-up orders may be made for identifiable hard-copy confidential documents. Orders requiring affidavits must remain cautious, focused and proportionate. Interim relief was refused for short-term enforcement of a passing-off restriction because damages were adequate, but preservation, delivery-up and limited affidavit orders were granted.

Stroma Building Control Ltd applied for interlocutory relief against six defendants. The dispute concerned alleged diversion of clients, misuse of confidential information, breaches of employment and contractual obligations, inducement of breaches, and related unlawful conduct by a competing business, Compliance Building Control Ltd.

The fourth to sixth defendants agreed orders or undertakings, leaving the contested issues between Stroma Building Control Ltd and the first to third defendants. The application sought enforcement of contractual restrictions, preservation of evidence, delivery-up of confidential information, affidavits concerning the alleged conduct, and directions for a further hearing.

1. Applicable principles. The court applied the familiar principles in American Cyanamid v Ethicon Ltd [1975] A.C. 396: whether there was a serious issue to be tried, whether damages would be an adequate remedy, and where the balance of convenience lay.
2. Serious issue. The evidence disclosed a compelling case that the competing company had been involved in diverting the claimant’s clients by illicit means. There was also a serious issue concerning the knowledge and involvement of its founders and directors. The absence of a signed employment agreement did not prevent a serious issue arising as to the terms of employment or inducement of breach.
3. Contractual restriction. Interim enforcement of clause 7.2 of the share purchase agreement was refused. The clause concerned unfair competition by passing off, but any financial loss during the short period before the return hearing could be compensated by damages.
4. Preservation of evidence. An order was justified. The serious issue, apparent possible dishonesty by employees or agents, the defendants’ interest in preventing preservation if wrongdoing had occurred, their earlier willingness to give preservation undertakings, the absence of identified commercial harm, and the short duration of the order together supported relief.
5. Delivery up. Orders were made requiring the first to third defendants to deliver up hard-copy documents belonging to the claimant or containing its confidential information. The definition was sufficiently intelligible, and liberty to apply was preserved for disputed documents.
6. Affidavits and directions. The court adopted a cautious and proportionate approach, informed by Aon Limited v JLT Reinsurance Brokers Ltd [2010] IRLR 600 and ASE Plc v Kendrick [2014] EWHC 2171. The first to third defendants were ordered to provide affidavits setting out inquiry results, outstanding inquiries and relevant documents. A further hearing was fixed for 9 February 2021, with costs reserved.