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Civil Procedure: How not to apply

In CEF Holdings and anr v Brian Mundey and 23 ors [2012] EWHC 1524 the Court set down useful guidelines on how to comply with the obligation to make full and frank disclosure on without notice or proper notice applications.

The multinational subsidiary Claimant companies ("CEF") obtained without proper notice injunctions to restrain the Defendants (D1 to D24) setting up in direct competition and harming their business. The Defendants sought to have the injunctions discharged on the grounds that (a) the employment clauses relied upon were unenforceable, (b) the test for springboard relief was not met, (c) the Court had no jurisdiction in respect of the non-England domiciled Defendants and (d) that CEF had failed to give full and frank disclosure.

The Court held that the employee recruitment restriction clause was unenforceable. The former employees - D3 to D19 would not know whom they could solicit as many of CEF′s employees were unknown to them. Even if the injunction identified the employees it would be unreasonably wide. It precluded D3 to D19 soliciting employees with whom they had no contact during their employment and to whom no loyalty was owed. The non-competition clause was invalid as protection was afforded under CEF′s customer protection clause. It had no geographical limitation and was too wide in its application as it prevented employees from having "any such interest" in another company.

No conspiracy or other wrongful conduct on the part of the Defendants was shown. Thus the test for spring board relief was not met. CEF had failed to establish the precise nature and period of any competitive advantage acquired by the Defendant Companies - D20 and D21. Additionally, there was no evidence that the Defendant employees had failed to give proper notice or were using CEF’s confidential information. Further there was no evidence that D20 and D21 were enjoying an unlawful advantage especially as they had not begun trading.

Under rule 10(3) of Schedule 4 of the Civil Jurisdiction and Judgments Act 1982 claims can only be brought against defendants in the jurisdiction they are domiciled. In particular, the rule applied to claims, such as the present, where the status of the Defendant as employee was "legally relevant" to the claim. Accordingly there was no jurisdiction to grant relief against the non-English Defendants.

Any application for an injunction must be based on facts, mere suspicion is not enough. CEF′s injunctions were granted without making proper disclosure and thus should be discharged. Without notice applications should only be granted in limited circumstances, namely where to give notice would frustrate the purpose of the injunction, or where there was some exceptional urgency, which meant there was no time to give notice. It would be prudent for an application without any or any proper notice to include a statement supported by facts explaining fully and honestly why proper notice could not have been given. Further, such statement should contain a statement setting out the duty to give full and frank disclosure and indicating how the duty had been complied with.

Elizabeth Dwomoh / 1st Jul 2012


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