Competition

Case Note:  Prosoft Resources Ltd. v Griffiths

Jane Lambert

This case note first appeared on the Old Colony House website in May 2000

Last updated 21 Dec 2005

This was an application by a software house for an interim interdict to restrain a former employee from breaching a restrictive covenant. Although the result would probably have been the same in England the decision is instructive in revealing the somewhat different approach of the Scottish courts to cases of this kind.

The Covenant

The covenant restricted the employee from holding in the Grampian or Highland regions for 12 months any material interest in any person, firm or company which required or might reasonably be thought by the employer to require him to disclose or make use of any confidential information in order properly to discharge his duties to such person, firm or company.

"Confidential information" was defined very widely:

"all and any corporation information, marketing information, technical information and other information (whether or not recorded in documentary form or computer disc or tape, to which the company attaches an equivalent level of confidentiality or in respect of which it owes an obligation of confidentiality to any third party: -
which the executive shall acquire at any time during his appointment by the company but which does not form part of the executive's own stock in trade; and
which is not readily ascertainable to persons not connected with the company either at all or without a significant expenditure of labour, skill or money."

"Technical information" was defined as:

"all and any trade secrets, formulae, processes, inventions, designs, know-how discoveries, technical specifications and other technical information (whether or not recorded in documentary form or on computer disc or tape) relating to the creation, production or supply of any past, present or future product or service of the company."

It was common ground that the covenant was too wide but the judge accepted P's submission that it could be validated by severing the words "other information" and "to which the company attaches an equivalent level of confidentiality" as Lord Coulsfield had done in Living Design (Home Improvements) Ltd. v Davidson 1994 SLT 753 at 755.

The Facts
D left P on the 26 June 1996. In Feb 1999 he was retained as a consultant by one of P's former customers in which capacity he was likely to disclose or make use of information that he had acquired in P's service. P obtained interim interdict against D in Feb 1999 as a result of which D lost £5,000 in earnings since he could find no other work in his area. In this context, it should be noted that there is no obligation in Scotland for an applicant for an interim interdict to offer a cross undertaking in damages.

The Decision
Upon D's application to recall the interdict, the judge considered the strength of the case against him. He referred to Malden Timber Limited v McLeish 1992 SLT 727 where Lord Caplan had said at page 732:

"In a case where a pursuer can rely on a clear and established right or has apparently strong documentary support for his case, then the Court may well be able to conclude that the pursuer at least must have a good prospect of success and if that were the position the Court would surely hesitate to permit a situation where the pursuer's loss could be aggravated. However, the converse must be equally true. Where there are obvious problems in the pursuer's case either of fact or law the Court should be more careful about imposing a restriction on activities of the defender which prima facie are likely eventually to be shown to be lawful and proper. If the situation should be that the interlocutory determination will effectively decide the issues in the case, then the court should be even more reluctant to hand to the pursuer success on a plate if the position be that the prospect of the case being well founded is, to say the least, doubtful."

Lord MacLean recalled the interdict for the following reasons.

Reasons for the Decision

In his lordship's view, P had made out only a very weak case on the merits. P appeared to accept that D was simply using his accumulated knowledge and experience. There was no evidence that D had retained anything in his head that could be described as a trade secret. As for the balance of convenience, there was no possibility of resolving the action before the restraint expired. D would be unable to find other appropriate work locally. P would be compensated in damages were its claim well founded.

 

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