Proactive Group Holdings Inc & Anor v HJ 2024 Limited & Ors

Interim restraints protecting confidential information, clients and employees may be granted where there is a serious issue to be tried and the claimant’s case appears strong, particularly where the restraint may substantially expire before trial.

The court may make a preliminary assessment of the merits when applying the balance of convenience. Contractual restrictions must protect legitimate business interests and be no wider than reasonably necessary. Disclosure orders requiring a defendant to identify its own wrongdoing are exceptional and should not ordinarily replace the normal pleading and disclosure process.

The claimants sought interim injunctions against a former chief executive and a former sales director, and against a company established by them. The application concerned alleged misuse of confidential client information, solicitation of clients and employees, breach of restrictive covenants, and conspiracy.

The court considered restrictions in a director services agreement and an employment contract, including confidentiality, non-solicitation and non-compete provisions. It also considered applications for delivery up, witness statements confirming compliance, and disclosure of client contacts and communications.

1. Interim injunctions. The court applied the principles in American Cyanamid v Ethicon Limited [1975] AC 396. There were serious issues to be tried in relation to all the injunctions. Because the restraints were likely to expire before trial, the court also made a preliminary assessment of the merits in accordance with Lansing Linde Ltd v Kerr [1991] ICR 428 (CA) and Planon Limited v Gilligan [2022] EWCA Civ 624.
2. The claimants had strong claims that confidential information included non-public client renewal dates, prices and discount structures. The relevant clauses were sufficiently precise, proportionate and no wider than reasonably necessary to protect legitimate business interests.
3. The six-month client and employee restrictions in the director services agreement were reasonable. The twelve-month client non-solicitation restriction in the employment contract was also reasonable, given the defendant’s client-facing role, access to client systems and the annual nature of the client contracts.
4. The court rejected the argument that the non-compete clause was void merely because competitor was undefined. The business operated in a narrow sector, making the scope sufficiently clear. The court also treated the omission of the number preceding months in the employee non-solicitation clause as an accidental drafting omission, provisionally reading it as 24 months. Prophet v Huggett [2014] EWCA Civ 1013 was distinguished because the ambiguity in the present clause required a different analysis.
5. Damages were inadequate for both sides. Loss of clients, reduced renewal prices, staff disruption and uncertainty about the consequences of solicitation were difficult to quantify. The balance of convenience favoured the claimants, and there had been no culpable delay. The claimants’ cross-undertaking in damages was adequate.
6. Orders for delivery up and confirmation by witness statement were granted. The request for a client list and copies of communications was refused. Such disclosure was exceptional and should be sought through the ordinary pleading and disclosure process, applying Aon v JLT [2010] IRLR 600 (QB).