In Part I of this post, we focused on the UK Supreme Court’s recent decision in Vestergaard Frandsen and others v. Bestnet Europe Ltd. and others,  UKSC 31.
Although not binding authorities throughout the UK, two other recent decisions from lower courts in England and Wales are also notable with respect to employers’ protection of confidential or proprietary information in relation to former employees, particularly in the international context.
First, the Court of Appeal’s recent judgment in Fairstar Heavy Transport N.V. v. Adkins,  EWCA Civ 886, provides a notable illustration of an employer’s right to access emails relating to its business affairs that are in the possession of a former agent, even when those emails are stored on the former agent’s home computer.
In keeping with the multi-national context in which many businesses operate, Fairstar, a Dutch company, employed Adkins, an American citizen living in England, as its CEO. Although no express contract of employment existed between Fairstar and Adkins, Fairstar contracted for Adkins’s services under a written agreement with a company controlled by Adkins and registered in Jersey. (For our readers in the Garden State, that’s the Crown Dependency in the English Channel, not the home of Bon Jovi and Tony Soprano.) Following the termination of Adkins’s appointment as CEO, Fairstar initiated legal proceedings against Adkins in England, seeking access to the business-related emails on Adkins’s personal computer in England.
Following a hearing, a High Court judge granted judgment for Adkins, reasoning that Fairstar did not have a “proprietary right” to the emails on Adkins’s home computer under English law. On appeal by Fairstar, the Court of Appeal overturned the High Court’s decision. The principal judgment given by Mummery LJ. As the Court of Appeal reasoned, the issue of whether Fairstar had a “proprietary right” to the emails on Adkins’s home computer was irrelevant. Rather, the central issue in the case was Adkins’s agency relationship with Fairstar and its attendant legal obligations. According to the Court of Appeal, because Adkins was an agent of Fairstar, Fairstar, as principal, was entitled to require its agent to provide it with documents relating to its affairs, regardless of whether those documents resided on his home computer and regardless of whether the emails were “confidential.” Accordingly, the Court of Appeal concluded that the High Court judge should have issued an order for inspection of the emails on Adkins’s computer.
The Fairstar case well illustrates a remedy that employers can seek documents/emails where their former agents are in possession of emails and other documents that they created in the course of their relationship with the company. While it is always prudent to include clauses requiring the return of company property in any employment or agency contract, Fairstar is valuable precedent for companies who seek the return of company-related emails and other documents from their agents even in situations where no such return-of-property clause exists.
Second, the recent order from the High Court’s Chancery Division in Whitmar Publications Ltd. v. Gamage & Ors,  WHC 1881 (Ch) provides a helpful example of the factors that English courts consider when considering requests for injunctive relief against former employees who are alleged to have taken steps to compete with their employer while they were still employees. In that case, Whitmar, a publishing company, sought an interlocutory (i.e., preliminary) injunction against three former employees who had set up a competing company that Whitmar believed the employees had set-up while still employed by Whitmar.
At the hearing on its application for an injunction, Whitmar presented evidence that the former employees took impermissible “preparatory steps” to compete with Whitmar while still employed by Whitmar, including creating a new business entity of which they became shareholders and directors, identifying premises for the new business in the same town as Whitmar, and registering an internet domain name. In addition, Whitmar presented evidence that the former employees solicited two Whitmar employees to join their new venture, solicited business from Whitmar’s clients, misrepresented their intentions to Whitmar, informed an industry colleague that they would be setting up a competing business, removed a large number of business cards that they had obtained during their employment with Whitmar and then returned the business cards only after surreptitiously copying them, and used Linked-In contact information that they had gathered for Whitmar during their employment.
Issuing an order in favor of Whitmar, Peter Leaver QC, sitting as Deputy Judge of the High Court, concluded that, based on the preliminary evidence presented by Whitmar, Whitmar was entitled to injunctive relief. American lawyers may be familiar with the standard for obtaining a preliminary injunction under the Federal Rules of Civil Procedure, which generally requires the movant to show: (1) a substantial likelihood of success on the merits; (2) irreparable harm to the plaintiff unless the injunction issues; (3) that the threatened injury to the plaintiff outweighs the harm to the defendant if the injunction issues; and (4) that the injunction will not disserve the public interest. See, e.g., Ferrero v. Associated Materials, Inc., 923 F.2d 1441, 1448 (11th Cir. 1991). Under English law, the standard for granting an interlocutory injunction is similar, requiring the court to determine, as Peter Leaver QC articulated, “first . . . whether or not there is a serious issue to be tried, and, if there is, whether damages would be an adequate remedy, or whether the balance of convenience is in favour of granting the injunction sought.”
Applying these factors, Peter Leaver QC reasoned that, although he could only make a “preliminary assessment,” he had “no doubt that, looking at the evidence as a whole, there was a strong case that the Defendants were taking steps to compete against Whitmar for over a year. The steps that they were taking were not just preparatory steps. They were steps taken with more than just the intention to set up another company. They were active steps to compete.” Moreover, Peter Leaver QC observed that “[o]ne of the badges of competition in cases such as this is the secrecy with which those who are competing go about their business” and noted evidence in the record reflecting the former employees’ attempts to hide their activities. Accordingly, Peter Leaver QC held that Whitmar had a “very good chance” of succeeding at trial and granted Whitmar’s application for injunctive relief.
The Whitmar decision provides a helpful example of the type of evidence that can warrant injunctive relief under English law. As in any jurisdiction, employers with operations in the UK should take proactive and timely measures to investigate the activities of former employees who may be engaged in competition and consult with their legal counsel about appropriate litigation or non-litigation strategies to deter misuse of confidential or proprietary information.
With its international platform and offices in the United States, United Kingdom, China, and Australia, Seyfarth Shaw’s experienced team of lawyers assists companies with large multi-jurisdictional employment law projects of a strategic, compliance and transactional nature, including issues involving noncompetes and trade secrets. If you have any questions about the above, please contact Peter Talibart in the Firm’s London Office or your Seyfarth attorney.