Mimo Connect Limited v Matthew Robert Buley & Ors

Where a company seeks interim protection against directors or shareholders for alleged breaches of fiduciary or contractual duties, the court must assess the balance of risk against the evidence of the alleged wrongdoing. Limited undertakings will not suffice if they leave the company’s legitimate interests inadequately protected. Where restrictive covenants have a limited duration, the court should ordinarily consider whether a speedy trial is required; delay may cause serious injustice. The dispute should be characterised by the legal duties and covenants relied upon, rather than by an unresolved commercial demerger. Springboard relief may be granted where the evidence justifies interim protection against continuing advantage from earlier wrongdoing. A cross-undertaking in damages may be accepted without fortification where appropriate.

Mimo Connect Limited appealed against the decision of Simon Tinkler, sitting as a Deputy High Court Judge in the King’s Bench Division, on the return date of an application for interlocutory injunctions. The claimant alleged that two directors and shareholders, and a company associated with them, had misused confidential information, diverted customers and breached restrictive covenants. The deputy judge accepted limited undertakings, declined wider non-dealing and non-competition relief, declined to grant the relief sought in relation to springboard wrongdoing, declined to impose a notice-period injunction, and refused a speedy trial.

The Court of Appeal considered whether the undertakings adequately protected the claimant pending trial, whether the dispute had been wrongly characterised as one concerning ownership of the company, whether springboard and employment-related relief were required, and whether the case was suitable for a speedy trial.

Appeal allowed. The Court of Appeal unanimously held that it was not reasonably open to the deputy judge to conclude that the case was unsuitable for a speedy trial. The principal covenants lasted 12 months, and postponing trial until the latter part of that period could seriously prejudice the claimant.

1. The dispute was a claim by a company for interim relief against directors and shareholders for alleged breaches of fiduciary and contractual duties. It was not properly characterised as a dispute about ownership of the company. The failed demerger negotiations were therefore not relevant to the interim order required.
2. The accepted undertakings were inadequate against the background of clear evidence of misuse of confidential information and attempts to divert customers to the associated company. The first defendant remained a registered director and both principal defendants remained parties to the shareholders’ agreement. The activities identified were clear breaches of the first defendant’s fiduciary duty and of contract by both first and second defendants.
3. The defendants represented at the appeal accepted that they should be prohibited until trial from dealing with the claimant’s customers, including outside the claimant’s specialist business. A combination of the non-competition covenant in clause 9.1(a) and a prohibition on dealing with customers gave sufficient protection without resolving whether the first defendant was an employee or what notice period applied.
4. Springboard relief was granted against the first to third defendants. No order was made against the fourth defendant, because there was little evidence of his continuing involvement and the claimant did not press for new interim relief against him. The existing injunctions concerning confidential information remained against all defendants.
5. The claimant’s cross-undertaking in damages was required, but the court upheld acceptance of it without fortification by bank guarantee or personal undertakings. It declined to vary the earlier costs order. The agreed order replaced the accepted undertakings as against the first to third defendants with injunctions and included directions for pleadings and a speedy trial.

• Court of Appeal (Civil Division): appeal allowed. The limited undertakings were replaced by injunctions, springboard relief was granted against the first to third defendants, and directions were made for a speedy trial.
• High Court of Justice, King’s Bench Division: Simon Tinkler, sitting as a Deputy High Court Judge, accepted limited undertakings on the return date but refused wider interlocutory relief and a speedy trial.
• High Court of Justice: Linden J had earlier granted interim relief concerning confidential information, competition and contact with the claimant’s clients.