Interim Injunctions - C.T. Dent Ltd v Atias

Author dozenist Licence CC BY-SA 2,5 Source Wikimedia













Chancery Division (Mr James Mellor QC) C.T. Dent Ltd v Atias and another [2020] EWHC 2720 (Ch) (14 Oct 2020) 

This was an application for interim injunctive relief in an action for breach of fiduciary duty, wrongful interference with property, infringement of copyright, infringement of the sui generis database right and misuse of confidential information. The claimant was CT Dent Ltd ("Dent"), a dental scanning company. The defendants were Kfir Yizhaq Atias ("Mr Atias") a former director of Dent and Dental Scan Ltd ("Scan"), a company that Mr Atias founded on 9 Sept 2020. The application came on before Mr James Mellor QC sitting as a judge of the High Court on 2 Oct 2020, He granted injunctions on 5 Oct 2020 and gave his reasons in C.T. Dent Ltd v Atias and another [2020] EWHC 2720 (Ch)  on14 Oct 2020.

The Facts
Until 2 Sept 2020, Mr Atias was one of three directors of Dent. The others were Shlomo Shani and Meir Sahar.  Until their divorce in 2016, Mr Atias's sister was married to Mr Sahar. After the divorce relations between Mr Atias and the other directors deteriorated.  In 2019 Mr Atias and his family moved to Isreal.  He tried to manage the company from Israel but relations with the other directors became increasingly strained.  On 20 Aug 2020, the remaining directors delivered Mr Atias an ultimatum.  He resigned his directorship on 2 Sept 2020.  At about the same time Dent lost its access to computer services that had been provided by a third party.  It was also presented for a first time with a bill for the use and maintenance of certain software that it believed that it owned by the author of the software claiming ownership of the programs.   Consultants and staff were approached and offered jobs with Scan after being warned that Dent was going down.

Mr Mellor's Findings
The learned deputy judge summarized his findings on the evidence  at paragraph [58] of his judgmentL

"The evidence which has emerged so far as to what Mr Atias was doing before his resignations and subsequently is probably only the proverbial tip of the iceberg. However, his almost total lack of proper co-operation with the Claimant's reasonable requests, his evasive and misleading responses and his grievances with the remaining directors of the Claimant which manifest themselves in his stated aim of destroying the Claimant lead to the conclusion, in my view, that the Claimant needs the fullest degree of protection in respect of its electronic records including in particular its Software, Database, client data and employee data. Mr Atias has had full opportunity to copy the Software, the Database along with any other documents or data which he might have considered might prove useful in setting up his competing business. Use of those materials or any parts which might be considered useful would, in my view, result in irreparable damage to the Claimant. On the Defendants' side, it was very difficult to see how they would suffer any irreparable damage by the grant of the Access Order, the Delivery Up Order or the Interim Restraints contained in my Order of 5 October 2020 and this point was reflected in the main theme of their opposition – which was that the relief was unnecessary."

The Order
The relief that Mr Mellor granted is annexed to the transcript of the judgment.  It is a very useful precedent for similar cases.  It is 4 parts:
  • The Access Order:   to  "take such steps as are necessary to provide the Claimant or its appointed representatives with full access to and control of the database, website, email server and electronic file systems relating to the Claimant's business";
  • The Delivery up Order: the return of certain items of company property that Mr Atias had used as a director of the company;
  • The Interim Restraints Order:  restraining Mr Atias from accessing the computer systems or their contents except to the extent necessary to  comply with the 'access' provisions of the order, making any use of any materials falling within the 'delivery up' provisions except to the extent necessary to comply, providing any materials falling within the 'delivery up' provisions above to any person other than the claimant; making use of any software derived from the company's core software or incorporating any part of its code, or provide any such software to any person other than the Claimant; and soliciting the business of, deal with, or enter into or fulfil any contract with, any person who is, or was at any point in the 12 months prior to 2 Sept 2020, a customer of the claimant; and
  • The Imaging Order:  an order for Mr Atias's electronic devices, and any online accounts which have been used by him for any commercial purpose in the last 12 months, to be imaged by an independent computer specialist.
Mr Mellor acknowledged at paragraph [2] that the relief that he had granted was extensive but he explained why in paragraph [59]:

"Since Mr Atias has given so many assurances which have turned out to be either incorrect or highly misleading, so his assurances that he has not copied anything cannot be taken at face value. He seems to have conducted himself without the slightest regard for his fiduciary duties whilst he remained a director of the Claimant. Indeed, he seems to have operated on the basis that the business was 'his', and his to do with as he chose, without having regard to any legal constraints. His stated objectives to destroy the Claimant and, in effect, to resurrect the business in his new company indicate there is a clear risk that he may have copied whatever data of the Claimant he thought might prove useful in his new venture. "

Principles
In respect of the access, delivery up and interim restraints elements of his order, Mr Mellor applied the following principles which were derived from the Lord Diplock's speech in American Cyanamid Co (No 1) v Ethicon Ltd  [1977] FSR 593, [1975] AC 396, [1975] 1 All ER 504, [1975] 2 WLR 316, [1975] UKHL 1, Mr Justice Chadwick's judgment in  Nottingham Building Society v Eurodynamics Systems [1993] FSR 468 as endorsed by Lord Justice Phillips in Zockoll Group Ltd v Mercury Communications Ltd  [1997] EWCA Civ 2317, [1998] 1 FSR 354, [1998] FSR 354 and the decision of the Privy Council in National Commercial Bank Jamaica Ltd v. Olint Corp Ltd (Jamaica) [2009] UKPC 16, [2009] 1 WLR 1405, [2009], 1 CLC 637, [2009] Bus LR 1110, [2009] WLR 1405:

"1) The overriding consideration is which course is likely to involve the least risk of injustice if it turns out to be "wrong" in the sense of granting an interlocutory injunction to a party who fails to establish his right at trial (or would fail if there was a trial) or, alternatively, in failing to grant an injunction to the party who succeeds (or would succeed) at trial.
(2) In considering whether to grant a mandatory injunction, the court must keep in mind that an order which requires a party to take some positive step at an interlocutory stage, may well carry a greater risk of injustice if it turns out to have been wrongly made than an order which merely prohibits action, thereby preserving the status quo.
(3) It is legitimate, where a mandatory injunction is sought, to consider whether the court does feel a high degree of assurance that the claimant will be able to establish this right at a trial. That is because the greater the degree of assurance the claimant will ultimately establish his right, the less will be the risk of injustice if the injunction is granted.
(4) But, even where the court is unable to feel any high degree of assurance that the claimant will establish his right, there may still be circumstances in which it is appropriate to grant a mandatory injunction at an interlocutory stage. Those circumstances will exist where the risk of injustice if this injunction is refused sufficiently outweigh the risk of injustice if it is granted."

In respect of the imaging order, Mr Mellor took account of the Court of Appeal's recent decision in TBD (Owen Holland) Ltd v Simons and others  [2020] WLR(D) 508, [2020] EWCA Civ 1182 which I discussed in The Court of Appeal Revisits Search Orders - TBD (Owen Holland) Ltd v Simons and Others on 10 Sept 2020.

Costs
The deputy judge awarded costs to Dent to be assessed by detailed assessment on the standard basis and ordered the defendants to make an interim payment of £50,000 before the end of October.

Further Information
Anyone wishing to discuss this case or interim injunctions generally may call me on 020 7404 5252 during office hours or send me a message through my contact form.

Comments

Popular posts from this blog

Copyright - Ashley Wilde Group Ltd. v BCPL Limited

Copyright in Photographs: Temple Island Collections and Creation Records

What to do about the new Practice Direction - Pre-Action Conduct