For the half-year to 31 December 2014, the IPKat's regular team is supplemented by contributions from guest bloggers Rebecca Gulbul, Lucas Michels and Marie-Andrée Weiss.

Regular round-ups of the previous week's blogposts are kindly compiled by Alberto Bellan.
Showing posts with label employment contract. Show all posts
Showing posts with label employment contract. Show all posts

Thursday, 6 December 2012

Model claimant wins as court throws book at booker

Secrets are valuable when
kept -- but fun when shared
Throwing the book at the booker?  Premier Model Management Ltd v John Bruce, Paulo Ribeiro Rosa Filho and Paulo Ribeiro Management Ltd, a decision of Deputy Queen's Bench judge Simon Crookenden QC from 29 November, has just reached the IPKat via a trawl of hidden treasures noted in the Lawtel subscription-only service. It may never surface on the BAILII database [update: it has now! You can access it here. A katpat to David Harris for spotting it], but it's a neat example of the enforceability of employment contract terms as a means of protecting a business against the untrustworthy behaviour of a significant and trusty employee.

Premier was a model agency, for which Bruce had worked as a booker [for an explanation of 'booker' in this context, click here.  The word is not a mis-spelling of 'hooker']. Under his contract of employment ,Bruce was restrained from engaging in competition with Premier both during his employment and for a further 12 months post-employment when he was bound by a non-solicitation clause which prevented him from soliciting Premier's employees and its models.  Additionally, a confidentiality clause restricted Bruce from disclosing any of Premier's confidential information either during or after his employment.

During the period in which Bruce, having resigned, was serving out his notice, Premier discovered that he had been emailing information about Premier, its models and its customers to his friend and partner Ribeiro, who had set up up a company (PRM) of which both Bruce and Ribeiro were directors. Premier, maintaining that PRM was competing with it, secured interim injunctive relief. Premier also alleged that Bruce had fraudulently inflated travel claims, thereby obtaining over £21,000 -- something which Bruce conceded he had done, adding that Premier had told him to.

At trial, Premier sought judgment against Bruce both for fraud and for breach of contract, as well as judgment against Ribeiro and PRM for inducing Bruce to breach his contract. The Deputy Judge held in favour of Premier on all counts.

First, he found that the contractual restrictions on Bruce's activities during and after his employment and the 12-month non-solicitation clause were both reasonable and enforceable.  Not just that, but the information relating to Premier's models [Merpel wonders: "vital statistics"?] was commercially valuable too and Premier was entitled to use restrictive covenants in order to nail it down [Katnote: since restraints on trade are prima facie unenforceable and have to be justified, whoever drafts them has to get the balance just right.  Restrain too much and the clause is useless; restrain too little and you fail to give your client adequate protection.  Valid restraints are easiest to get right where the commercial interest that needs protecting is a fairly static and predictable one, but quite tricky where a business is operating in a commercial environment in which technology, consumer expectations and other factors make it difficult to predict today what might be important to protect tomorrow].

On the facts there was overwhelming evidence that Bruce was in substantial breach of his contract of employment for around nine months before he gave notice. Adding to this the timing of his resignation and the start-up and incorporation of PRM, it was clear that, by the date of PRM''s incorporation if not earlier, it was the joint intention of Bruce and Ribeiro that he should play a part in the business. Moreover, he had misused Premier's confidential information and sought to solicit his employer's clients and customers.

Taking a leaf out of Eddie Irvine's book,
top model Catrice wouldn't get out of bed
for less than £25,000
Turning now to Ribeiro's liability, the court was satisfied that Ribeiro's willingness to accept Premier's confidential information amounted to an encouragement of Bruce to breach his employment contract. The relevant circumstances leading to this finding included the sheer volume of confidential information forwarded to Ribeiro by email, plus the steps taken by Ribeiro to set up a model agency business. Although Ribeiro did not reply to many of the emails, he did make positive responses on some occasion -- and by his responses and his failure to tell Bruce to stop supplying him with Premier's secrets he had encouraged Bruce in his breach of contract [Without the facts before him, this Kat cannot judge whether this finding was correct or not.  It seems to him, on the basis of the information before him, that Bruce was not induced to breach his contract since he had already decided to breach it without inducement.  This Kat is also uncomfortable with the notion that, by not telling Bruce to stop sending the confidential information, Ribeiro was somehow making himself liable for such an inducement: was this failure to say "stop it" the cause of his incurring liability for inducing breach, or merely part of a mosaic of circumstances which strengthened the judge's perception that inducement had taken place? It would be good to know].

PRM's liability for inducing breach of Bruce's employment and post-employment terms was the next issue under scrutiny.  Since, said the judge, that company was at all material times basically an emanation of the decision-making processes of Ribeiro either alone or in concert with Bruce, PRM was just as liable for inducing Bruce's breach of contract as Ribeiro was [This reasoning would seem to support the curious proposition that, if Bruce had set up PRM himself and exclusively controlled it, he could through medium of his own company be liable for inducing his own breach of contract].

Given the seriousness of an allegation of fraud, and the inherent improbability that a trusted employee would defraud his employer, cogent evidence was needed if the court were to satisfy it on a balance of probabilities [these being civil proceedings, where the burden of proof is lower than the 'beyond reasonable doubt' standard of criminal law] that fraud had been committed. Even so, the court was satisfied that Bruce had fraudulently fiddled his travel costs and had benefited to the tune of £21,020. Since Premier was duty-bound to refund to its clients the disbursements for which it had overcharged them in result of this fraud, the company had suffered loss for which Bruce was bound to compensate it.

Finally, injunctive relief was given, in much the same terms as the contractual restrictions that had already been imposed but breached.  The main differences were that (i) unlike the contract, which covered just Bruce, the injunctive restrictions now covered Ribeiro and PRM as well, and (ii) breach of a contract merely incurs civil liability, while failure to comply with the injunction is a contempt of court -- definitely not recommended.

More background on this case from the Evening Standard and Telegraph
Booker prize here
Have fun painting models here (a bit naughty) and here (not so naughty)

Wednesday, 7 November 2012

British court: "we can't enforce Russian secret service contract"

Kats know plenty about secrets
-- but they won't tell you what!
From time to time, businesses whinge about the failure of the European Union to provide a proper legal environment for them to trade with confidence, knowing that their innovations, their creations and their data are secure from the predations of third parties and insiders.  Many of these whinges are justified, but it is salutary to remember that, however bad things may seem in the New Europe, there are plenty of places where things are even worse.  Arguably, one such place is clearly the Russian Federation, as appears from jsc Tnk-BP Holding & Ojsc Tnk-BP Management v Lazurenko [2012] EWHC 2781 (Ch) (16 October 2012), a Chancery Division, England and Wales, decision last month of the Chancellor, Sir Andrew Morritt.

Ojsc Tnk-BP Management, a Russian oil company, engaged Lazurenko under a contract of employment which contained a confidentiality clause, as well as a dispute resolution clause which nominated the Russian courts and Russian law in the event that any dispute could not be resolved by direct negotiation. Lazurenko subsequently resigned from the company amid allegations of corrupt receipt of sums and Ojsc instituted proceedings in England to recover the allegedly pocketed cash. Lazurenko showed Ojsc two files containing documents which purportedly revealed corruption at a high level within the company, following which Ojsc alleged that Lazurenko was threatening to disclose the documents to third parties, including the media, in breach of confidence and in order to put pressure on Ojsc to settle the proceedings against him.

Things started well for Ojsc, which first secured an interim injunction restraining Lazurenko from disclosing the documents; a second order was then obtained, varying the first order to the extent that it now permitted disclosure to law enforcement agencies in the United Kingdom, the United States and Russia. However, Lazurenko applied to have the order set aside on the basis that the British courts had no jurisdiction or, even if they did have jurisdiction, that they should not exercise it. He also sought the setting aside of Ojsc's claim.

Sir Andrew Morritt discharged the interim orders and struck out Ojsc's claim.

First, he asked which system of law -- Russian or English -- was the applicable law under which Ojsc's claims fell to be determined.  If it was to be Russian law, what were the relevant principles to be applied? It was accepted by both sides that the contract of employment opted for Russian law for the purposes of the Contracts (Applicable Law) Act 1990. In any event, Article 6 of Regulation 593/2008 on the law applicable to contractual obligations ('Rome I') required the application of the laws of Russia since that was the country in which Lazurenko habitually carried out his work in fulfilment of his employment duties.  The law to be applied was therefore that of the Russian Federation.

The learned judge then looked to expert evidence as to what the Russian law actually provided.  From this exercise it was ascertained tha,t in order for confidential information to be protected as confidential, the holder of the commercial secret had to take special steps to preserve confidentiality.  These steps included the express identification of the information and the marking of it as beingconfidential. If this was not done, confidentiality was lost.

Now, turning to the facts, in this case there was no evidence to suggest, or even pleading to aver, that any of the documents contained any information which was marked confidential and therefore capable of being protected under Russian Law. What's more, Russian law made no provision for the grant of quia timet injunctions, whether on an interim basis or after a full trial, to restrain a threatened disclosure of confidential information. This being so, Ojsc had shown no cause of action or serious question to be tried in respect of its claim for interim quia timet restraint.

The IPKat wonders how many employers will be rushing to make Russian law their number one choice with regard to any contract with a confidential element to it, bearing in mind particularly that, not just in employment contracts but in know-how licences and other information-based consensual arrangements, there may be a constant flow of confidential information -- both in documented and non-documented formats -- and that it may be quite impossible to sustain the high level of discipline needed to have everything marked "confidential" before it stands a chance of being recognised as such by a court.

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