Conspiracy
Cases
Toppin v Feron
High Court of Justice.
King’s Bench Division
10 June 1909
[1909] 43 I.L.T.R 190
Palles L.C.B. Johnson J.
June 9, 10, 1909
In a prosecution for “wrongfully and without legal authority besetting,” where the intention of the defendants is in question, the Justices are entitled to receive and act upon evidence of previous acts of the accused. The justices should consider the character of the meeting and all the circumstances of the case, and determine whether the parties were acting merely for the purpose of peacefully obtaining or communicating information, or of peacefully persuading any person to work or abstain from working.
Case stated. At a Petty Sessions held at Cork Police Court, in and for the County Borough of Cork, on Feb. 17, 1909, James Feron and four other persons were summoned at the suit of Henry Toppin, D.I., R.I.C., for “that they, the said defendants, on Nov. 30, 1908, at King Street, at and in the said County Borough, did, with a view to compelling Messrs. Dobbin, Ogilvie & Co., Ltd., to do an act which they had a legal right to abstain from doing, to wit, to take again into their service David Rogan and Timothy Meighan, wrongfully and without legal authority beset the premises of the Palace Theatre, Cork, Ltd.” At the hearing before the magistrates a preliminary objection was made on behalf of certain of the defendants that the summons was bad on its face and disclosed no legal offence, as the word “person” in sub-s. 4 and other sub-sections of s. 7 of the 38 & 39 Vict., c. 88 (the Conspiracy and Protection of Property Act, 1875), did not include a corporation. The magistrates held against the contention. The following facts were proved before the Justices:—(1) Sir Alfred Dobbin was a director of Dobbin, Ogilvie & Co., and also of the Palace Theatre, Ltd., Cork. (2) On Nov. 11, 1908 Dobbin, Ogilvie & Co. dismissed from their employment two carters named Timothy *190 Meighan and David Rogan. (3) On Nov. 12, 1908, two of the defendants, Patrick Lynch and Richard Cody, called upon Sir Alfred Dobbin and urged him to reinstate the two dismissed carters, as the strike in connection with the City of Cork Steam Packet Co. had been settled. (4) Sir Alfred Dobbin declined to reinstate the dismissed men. (5) On Nov. 17, 1908, in King Street, near the Palace Theatre, one of the defendants, Patrick Lynch, said in the presence of four or five other persons—“We will make Sir Albert Dobbin bleed through the pocket for this; he has brought it on himself.” (6) On the same evening there was a picket moving up and down opposite the back entrance to the Palace Theatre, and two of the defendants, Patrick Lynch and Richard Cody, were there, the first-named leaning against the theatre door. Another defendant, Denis Dorgan, caught a boy who was going into the theatre, shoved him away, and told him to go home. Dorgan, who was removed by the police from the footpath, then joined the picket. (7) On the same evening James Feron and Patrick Lynch were seen speaking to persons entering the Palace Theatre, and the police cautioned them that they were acting illegally and were causing an obstruction. Feron left, but Lynch remained and denied that he was causing an obstruction, and said that the performers at the theatre were going to strike on the following night. (8) On Nov. 24, 1908, there was a picket walking up and down opposite the entrance to the Palace Theatre, and James Feron, Patrick Lynch and Richard Cody were in the picket, and were causing an obstruction on the footpath and on the street. Patrick Lynch was asking people going into the theatre if they had free passes, and Richard Cody was taking or pretending to take notes. (9) On the same date at a public meeting held in North Main Street, Cork, James Feron, Patrick Lynch and Richard Cody made speeches, Lynch asking the people to boycott Sir Alfred Dobbin and those persons who displayed his advertisements in their windows; Cody asked the people to boycott the Palace Theatre, and said that the picket would be kept up until Sir Alfred Dobbin was brought to his knees; and he further advised the picket to arm themselves on the following night, and to be fully prepared to meet the police if they were attacked. (10) On Nov. 25, 1908, Cody was outside the Palace Theatre, and said—“Stand aside, citizens, and let me take the names of the people coming out of the Palace Theatre.” (11) On Nov. 26, 1908, there were 205 person; in the picket outside the Palace Theatre, and later on 262 persons. James Feron, Patrick Lynch and Richard Cody were with the picket, and were informed by District Inspector Toppin that in his opinion they were acting illegally in picketting the Palace Theatre, and they replied they would continue picketting until Sir Alfred Dobbin gave in and reinstated the men. (12) On Nov. 30, 1908, there was outside the Palace Theatre a picket of at first from nine to twenty-two men, afterwards increasing to about 230 men, Fernon, Lynch and Cody being with the picket, and several witnesses swore that on this date—Nov. 30, the only date in the summons—there was no breach of the peace, and that everything was quiet and orderly. It was tated by the complainant, District Inspector Toppin, on cross-examination by the defendants’ solicitor, that on Nov. 26, 1908, at the Cork Police Court, on an application to bind Patrick Lynch and Richard Cody to keep the peace and to be of good behaviour, the aforesaid defendants entered into a guarantee not to obstruct the public street or footpath when picketting, and not by word or act to incite to violence, and that thereupon the application to bind was withdrawn. The defendants’ solicitor objected to the reception of evidence as to the occurrences on Nov. 17 and 24, as irrelevant to the charge in the summons which was for Nov. 30, 1908. The magistrates, however, overruled the objection and decided to admit the evidence. It was further contended on the part of the defendants that, under the provisions of the Trades Disputes Act of 1906, they were entitled to picket the premises of the Palace Theatre, and also Dobbin, Ogilvie & Co.’s premises, for the purpose of peacefully persuading the staffs of these establishments to leave their employment, and that the picket was there for that purpose, and that no breach of the peace occurred on the date in question. The magistrates, by a majority (the resident magistrate dissenting), dismissed the summons on the merits upon the following grounds:—“(1) That as the application on Nov. 25, 1908, to bind certain of the defendants to the peace and to be of good behaviour for the occurrence of Nov. 24, 1908, had been withdrawn on the said defendants entering into the guarantee already referred to of Nov. 25, 1908, the facts deposed to as having taken place previous to the withdrawal of that application should not be now acted upon by the magistrates; (2) that the picketing at the Palace Theatre on Nov. 30, 1908, the only date charged in the summons, was, as admitted by the complainant and all the other witnesses examined as to that date, peaceful in character, and that the defendants had done nothing contrary to law upon that date, and that there was no evidence to show that the defendants were not lawfully acting under the provisions of the Trades Disputes Act, 1906, s. 2 (1).” The resident magistrate dissented on the ground *191 that the evidence as to the occurrences on Nov. 17 and 24, 1908, should be acted on as showing that the object of the picketing on Nov. 30, 1908, was not for the purpose of peacefully persuading the staffs referred to, but was a wrongfully besetting of the premises for the purpose charged in the summons, and the defendants were not, therefore, protected by the provisions of the Trades Disputes Act, 1906. The question for the Court was whether the majority of the Justices were right in their said decision.
Dudley White (for the prosecutor).—The magistrates should have acted upon the evidence of the acts on Nov. 17 and 24, as it is evidence going to show their intention and the purpose of the subsequent meeting.
Reardon (for the respondents).—We do not rely on the point raised as to the word “person” not including corporation. But we rely strongly on the Trades Disputes Act, 1906, s. 2 (1). The defendants were simply engaged in “picketting.”
Palles, L.C.B.
[Preventing people going into the theatre is not, I think, within the saving clause of the Act.]
“Working,” we say, means carrying on any business transaction. They were there for the purpose of persuading the people not to deal with Sir Alfred Dobbin.
Palles, L.C.B., in delivering judgment, said that the case was quite clear. The Court were of opinion that the magistrates were quite wrong on two different matters. They were clearly wrong when they said in the case stated that the facts deposed to as having taken place on Nov. 24 should not now be acted upon owing to the guarantee that had been entered into. In reference to transactions of that kind, where the Court was obliged to find the mind and intention of the parties, they were at liberty to refer to antecedent transactions to ascertain what was the intention of the parties, and, therefore, in that first ruling of the magistrates, in which he was extremely glad to see the resident magistrate did not concur, his Lordship was plainly of opinion they were wrong in point of law. As to the second ground of their decision, his Lordship was of opinion that even if they were to put out of consideration what took place prior to Nov. 30, yet, having regard to the number of persons who were assembled there, evidently for the purpose of coercing and intimidating Sir Alfred Dobbin into doing an act which he did not wish to do, and which it was his lawful right to refuse to do, the mere character of that meeting, its numbers, and the mind in which the people went there, were all evidence that they were not acting lawfully—that they were not acting merely for the purpose of peacefully obtaining or communicating information or of peacefully persuading any person to work or abstain from working. Taking all the circumstances of the case into consideration, as the magistrates ought to have done—viz., the evidence in the case before Nov. 30, and the evidence of the acts on Nov. 30—his Lordship was of opinion there was a very strong case against these parties showing that they were acting illegally. The result was that the Court must declare its opinion that the justices were wrong in their decision in point of law; the case would be remitted to the justices to do therein as might be just and consistent with the above declaration.
Leathem v Craig
Supreme Court of Judicature.
Court of Appeal.
1 May 1899
[1899] 33 I.L.T.R 85
Lord Ashbourne C., Porter M.R., Walker, Holmes L.JJ.
Action instituted by Mr. Leathem, a butcher of Lisburn, against five members of the Journeymen Fleshers’ and Butchers’ Assistants Association, to recover damages for maliciously procuring certain persons to break contracts into which they had entered with the plaintiff, and not to enter into other contracts with the plaintiff, and for maliciously enticing certain workmen in the employment of the said persons to leave the service of their employers, and to break their contracts of service with intent to injure the plaintiff, and to prevent the said persons from carrying out their contracts with the plaintiff; and for maliciously and wrongfully intimidating the said persons, and coercing them to break their contracts with the plaintiff, and intimidating the servants in their employ, and coercing them to leave their employment; and for unlawfully conspiring together and with certain other persons to do the acts aforesaid, with intent to injure the plaintiff. The case was tried at Belfast Summer Assizes, 1896, before FitzGibbon, L.J., and resulted in a verdict for the plaintiff. The Queen’s Bench Division (Palles, C.B., dissenting) upheld that verdict, and the defendants appealed. The plaintiff incurred the enmity of the defendants by employing some men who were not members of the defendants’ association, and refusing to dismisss them when requested. The plaintiff attempted to come to an agreement with the defendants’ association, and attended a meeting of theirs, where he practically offered to pay the dues requisite to have his non-union men admitted to the association, but the association refused to admit them. The defendants then called out the plaintiff’s union assistants and induced one of them to break his contract of service. The plaintiff, however, alleged another and more serious element of loss arising from the successful efforts of the defendants to prevent his customers dealing with him. Some evidence was given as to these, but attention may be concentrated on one. His principal customer was a Belfast merchant called Munce, who had dealt with him in a large way for several years. The plaintiff was in the habit of delivering large quantities of meat every week to Munce which were invariably paid for in due course. The defendants determined to induce Munce to withdraw his custom from the plaintiff, and he, yielding to a threat that his assistants would be otherwise called out, telegraphed to the plaintiff to cease sending him meat. Munce was the plaintiff’s best customer, and the evidence clearly showed that the action of the defendants caused him to withdraw his custom from the plaintiff, and the real ground of large damage was the driving away of the plaintiff’s best customer by the combined action of the defendants and their deliberate damage of the most lucrative part of his trade. In *85 addition his name was put in a Black List under circumstances fully detailed in evidence. Fitz-Gibbon, L.J., when charging the jury told them to ask themselves the question whether the action of the defendants was or was not taken for the purpose of injuring Leathem in his business as distinguished from being action for the legitimate advancement of the interest of the men themselves. He pointed out that “maliciously” meant with intent to injure as distinguished from advancing the men’s own interest. He also told them that in calculating damages they were to consider money injury to the plaintiff in his business, but in considering the amount they were not bound to confine themselves to £ s. d.—that could be proved. He left three questions to the jury:—
First, did the defendants, or any of them, maliciously induce the plaintiff’s customers to refuse to deal or continue to deal with the plaintiff?
Second, did the defendants, or any of them, maliciously conspire to induce the plaintiff’s customers and servants not to deal with plaintiff or not to continue in his employment, and whether the persons thereby induced did so?
Third, did the defendants Davey, Downey, and Shaw, or any of them, publish the Black List with the intention of injuring the plaintiff?
The jury answered the first and second questions in the affirmative against all the defendants, assessing the damages at £200. They also answered the third in the affirmative against the three defendants named therein, assessing the damages at £50. In the argument on appeal it was conceded that no separate damages could be given on the third question, and it was therefore disregarded in the consideration of the case.
Representation
O’Shaughnessy, Q.C.; Campbell, Q.C., M.P.; MacInerney, Q.C.; and M’Grath, for the defendants (appellants).
Sergeant Dodd, Gordon, Q.C.; and Chambers, for the plaintiff (respondent).
Cases cited.
Temperton v. Russell, L. R. [1893], 1 Q. B. D. 715;
Kearney v. Lloyd, 26 L. R. Ir. 269;
Mogul Steamship Co. v. M’Gregor [1892], App. Cas. 25;
Allen v. Flood [1898], App. Cas. 1.
Lord Ashbourne, C. (having stated the facts).—The case of Allen v. Flood had not been decided in the House of Lords at the time of the trial, and the argument addressed to us substantially amounted to a contention that the decision of the House of Lords had rendered it impossible to uphold the verdict in the present case, and had practically swept away the authority of Temperton v. Russell, on which the plaintiff might have otherwise relied.
The case of Temperton v. Russell was unquestionably very like the present in its essential particulars. [His Lordship here read the headnote of Temperton v. Russell, L. R. (1893) 1 Q. B. D. 715.] It was tried before Collins, J., and he left the following questions to the jury:—
(1) Did the defendants, or any of them, maliciously induce the persons named, or any of them, to break their contracts with the plaintiff? (2) Did the defendants, or any two or more of them, maliciously conspire to induce the persons named and others not to enter into contracts with the plaintiff, and were such persons thereby induced not to make such contracts? The jury found for the plaintiff against all the defendants on both heads, with £50 damages in the first, and £200 damages in the second.
Before considering how far this decision is affected by the judgment of the House of Lords in the case of Allen v. Flood, I must refer to the case of the Mogul Steamship Company v. M’Gregor & Co., where the House of Lords laid down what could not be charged as a conspiracy to injure. The facts of that case are important. Owners of ships, in order to secure a carrying trade exclusively for themselves, and at profitable rates, formed an association and agreed that the number of ships to be sent by members of the association to the loading port, the division of cargoes and the freights to be demanded should be the subject of regulation, that a rebate of 5 per cent. on the freights should be allowed to all shippers who shipped only with members, and that agents of members should be prohibited on pain of dismissal from acting in the interest of competing shipowners; any member to be at liberty to withdraw on giving certain notices. The plaintiffs, who were shipowners excluded from the association, sent ships to the loading ports to endeavour to obtain cargoes. The associated owners thereupon sent more ships to the port, underbid the plaintiffs, and reduced freights so low that the plaintiffs were obliged to carry at unremunerative rates; they also threatened to dismiss certain agents if they loaded the plaintiffs’ ships, and circulated a notice that the rebate of 5 p.c. would not be allowed to any person who shipped cargoes on the plaintiffs’ vessels. The plaintiffs having brought an action for damages against the associated owners alleging a conspiracy to injure the plaintiffs, the Court held, that since the acts of the defendants were done with the lawful object of protecting and extending their trade, and increasing their profits, and since they had not employed any unlawful means, the plaintiffs had no cause of action. It will thus be seen that the case of Temperton v. Russell is very like, whilst the Mogul case is very unlike, the present, but each throws a flood of light on the principles which should guide our decision.
In the case of Allen v. Flood, Flood and Taylor, the plaintiffs, were employed as shipwrights by the Glendall Iron Company on the terms that they might be discharged at any *86 time. The jury found that Allen, the defendant, maliciously induced the company to discharge Flood and Taylor from the company’s employment, and not to engage them, and that each had suffered £20 damages. The case when finally presented for decision was not one of conspiracy or unlawful combination. None of the noble and learned Lords who concurred in the opinion of the majority laid it down that their decision would apply to a case of conspiracy, and several of them expressly guarded themselves against their judgments being quoted as applicable to a case of conspiracy.
Lord Herschell said, “I put aside the case of conspiracy.” Lord Macnaghten said, “The decision in this case can have no bearing on any case which involves the element of oppressive combination.”
Lord Shand also expressed the same opinion very clearly, and pointed out that the defendant’s motive was to further the interest of those he represented and not to do mischief to the plaintiffs in their lawful calling.
How does the decision of Allen v. Flood affect the authority of Temperton v. Russell? How does it necessarily compel us to regard the case as no longer entitled to weight? It leaves entirely untouched and unshaken the larger part of that case—that in respect of which £200 damages was awarded for conspiracy.
Here the jury has expressly found that the defendants maliciously conspired to induce the plaintiff’s customers and servants not to deal with the plaintiff and not to continue in his service, and that he was damaged thereby to the extent of £200.
FitzGibbon, L.J., was careful to explain what was meant by “maliciously,” and the jury found as a fact that the defendants acted with the motive and intention to injure and punish the plaintiff, and not to advance their own interests, or to further their own trade objects.
The Mogul Steamship Company Case shows how carefully the law protects all legitimate trade competition, and that the law will not allow it to be interfered with because the combination which is formed for legal purposes is styled a conspiracy. On the other hand, the case of Temperton v. Russell shows that where the elements of a real conspiracy to injure exist the law will not deny relief to a man who is thereby damaged.
I am unable to concur in the argument founded on s. 3 of the Conspiracy and Protection of Property Act, 1875. I cannot regard the acts of the defendants as being done in contemplation and furtherance of a trade dispute; and I am also impressed by the view of Andrews, J., that the enactment deals with criminal responsibility only, and not with the right of redress for civil wrongs. I am unable to find anything in the case of Allen v. Flood to apply to a case of conspiracy like the present. I can see nothing to justify our sending the case for a new trial. The verdict for £200 damages must be upheld, and the decision of the Queen’s Bench Division for that amount affirmed, and this appeal dismissed with costs.
Porter, M.R., Walker and Holmes, L.JJ., concurred.
Nunan v Amalgamated Society of Carpenters
Circuit Case.
7 July 1904
[1904] 38 I.L.T.R 202
Gibson J.
Limerick, July 7, 1904
A workman is not liable for refusing to work with, and thus preventing the employment of, another workman who has been expelled from his trades’ union if there is no evidence of conspiracy. Neither are the union or its officials, who have expelled him, liable on a charge of con *202 spiracy where there is no evidence to connect their action directly with his fellow-workman’s refusal to work with him.
Giblan v. National Amalgamated Labourers Union of Great Britain and Ireland, [1903] 2 K. B. 600, distinguished.
Civil Bill appeal from a dismiss granted in the above case by the County Court Judge of Limerick.
The plaintiff was a member of a Limerick Branch of a trades’ union. By the rules of the branch any member was automatically expelled if he became indebted to the society in a sum of £1 6s. or over, but could again become reinstated on payment of an entrance fee. The plaintiff, being indebted in a greater sum than this amount, partly for subscriptions and partly for a fine, was expelled from his branch, and thereby lost his card of membership. The defendant Reddin was secretary of the branch, and had taken a part in having the plaintiff fined and expelled. By the “working rules of the master builders and workmen in Limerick,” which had been drawn up on compromise as the result of a strike, it was provided that no master should employ a non-society man so long as he could obtain a sufficient supply of society men. The plaintiff, being out of employment, applied to Gough, a master builder, for work, and Gough employed him to work at the Presentation Convent, Limerick, Gough not being then aware that the plaintiff was no longer a member of the union. Berkeley, another workman in Gough’s employment, who was a member of the same union, but not of the same branch as the plaintiff, knowing that the plaintiff had been expelled, came to Gough and said—“Pay me, if you job this man.” Gough then asked the plaintiff for his card of membership, and, as he was not able to produce one, subsequently refused to employ him. Gough deposed in evidence that with a view to complying with the above-mentioned “working rules” he would not have employed the plaintiff if he knew he was a nonsociety man. Berkeley deposed that he had been told by many people of the plaintiff’s expulsion, but could not remember any of their names. The plaintiff now sued — (1) the union; (2) Reddin; (3) Berkeley, for a conspiracy to prevent him from obtaining employment.
P. Lynch, for the plaintiff.—This case is governed by Leathem v. Quinn, [1901] A. C. 495; Giblan v. National Amalgamated Labourers’ Union, [1903] 2 K. B. 600. The defendants have conspired to prevent the plaintiff from earning his living.
C. Doyle, for the defendants. There was no conspiracy in this case. The facts fall within the principle of Allen v. Flood, [1898] A. C. 1.
Gibson, J.
This action is supposed to be based on Leathem v. Quinn. The action is against three persons—(1) an artifical person, the society; (2) Reddin, the secretary of the society; (3) Berkeley. The plaintiff was in trouble with his society, and when he came before the meeting he was informed that he had been fined £2. But on the occasion when the fine was imposed the plaintiff was not informed that he was being fined. I doubt whether he was lawfully fined on that occasion, for I think that his omission to ask two men with whom he had been working for their cards—which was the reason alleged for fining him—was not a sufficient reason. But I am not here to interpret the rules of this society. The plaintiff admits that he owed twenty-two weeks’ subscription of two shillings, whilst if he owes twenty-six shillings he is excluded automatically. In the month of June he met Mr. Gough, and Gough said he would give him a job at the convent. He went to the convent, and Gough came down, after having had a conversation with Berkeley “Pay me,” said Berkeley, “if this man goes to work.” In consequence of that, Gough came down and said to the plaintiff—“Where is your card?” The plaintiff had not a card to show. Gough, therefore, put him off till the morning, and said that he should then see his card. Gough says he thought he had his card when he employed him. Is there any evidence of conspiracy? It is quite sufficient, even if there is no evidence of malice, if they illegally interfered with him. I have only seen “the working rules of the master builders and workmen” According to them a master builder is not at liberty to employ non-society men if there is a sufficient supply of society men. There is here no evidence of corporate action on the part of the society. Reddin may have acted illegally in putting him out, but that does not make them liable, because he is not responsible for what has since happened. Reddin is not therefore liable, nor are the other members of the society. What is the position of Berkeley when he refused to act with a nonsociety man? A man who refuses to act with non-society men does not thereby incur liability. Unless there is a clear authority to the contrary, I do not think the case has been established. Giblan v. National Amalgamated Labourers Union has been cited. But there the facts were different. Here there is no ground for a charge of conspiracy. The case falls within Allen v. Flood, and not Leathem v. Quinn. I affirm the decision of Judge Adams, and dismiss the case, with costs.
Sweeney (Pauper) v Coote.
House of Lords.
16 April 1907
[1907] 41 I.L.T.R 117
Lord Loreburn L.C., Earl of Halsbury Lords Macnaghten, James of Hereford Robertson, Atkinson, Collins
April 16, 1907
The appellant, a Roman Catholic, was appointed to give instruction in the Carntall National School under Presbyterian management. The respondent called a meeting of parents, at which several of those present came to an arrangement with him to withdraw their children from the Carntall school. The result of this was to cause the plaintiff, whose salary depended upon the amount of a capitation grant, to suffer loss. The Court of Appeal having held that on the evidence the respondent did combine with others to withdraw children from the school, causing the appellant to suffer loss, yet, that the object of the combination not being unlawful, or attained by unlawful means, the appellant had no cause of action:
Held, on appeal to the House of Lords, that the evidence did not show that there was a common design, or a combination between the respondent and others, intentionally to damage the appellant:
Per Lord Loreburn, L.C.—The opinion on matter of fact of a judge of first instance ought not to be set aside without grave reasons:
Per Earl of Halsbury.—If there had been such a combination it would not have formed a ground of action.
Appeal in formâ pauperis from an order of the Court of Appeal, dated Dec. 8, 1905 (Lord Ashbourne, L.C., FitzGibbon and Holmes, L.JJ.), who had (Walker, L.J., dissenting) reversed an order, at the trial, of Barton, J., dated May 17, 1905, who had restrained the respondent from unlawfully conspiring to prevent, by undue pressure, parents sending their children to the school at which the appellant was manual instructress, and had granted an inquiry as to damages. The case is reported in [1906] 1 Ir. R. 51. The respondent, William Coote, was the father of pupils attending the National School at Carntall, Co. Tyrone. The manager, teacher, and committee of the school were Presbyterian, as were the majority of the pupils and their parents. The school had, previously to 1904, had attendance sufficient to obtain the services of an assistant teacher, and at that time a considerable number of Roman Catholic pupils, including the appellant, Rose F. Sweeney, were on the roll. The parish priest obtained the management of a neighbouring National School, whereupon so many Roman Catholic pupils were withdrawn from the Carntall school as to deprive it of the services of an assistant teacher. The appellant was one of those pupils who left the school. In March, 1904, the appellant was appointed, with the approval of the National Education Board, by *117 the Presbyterian minister to give manual instruction, chiefly in sewing, in Carntall school, and entered upon her duties as such. On Sunday, March 6, feeling having arisen among a section of the inhabitants, large crosses were tarred upon the meeting and schoolhouses; but there was no evidence that the respondent took any part in those acts. The respondent, a local auctioneer, and ruling elder of the church, who was the father of pupils attending the National School, summoned a meeting of parents of children, the latter asking them not meanwhile to withdraw their children. Eleven persons attended this meeting on March 8, the majority of whom agreed to withdraw their children from the National School. The evidence was to the effect that the respondent went round at the meeting to ascertain the views of those present as to withdrawing their children from the school. He said he appealed to those present to come to some agreement, and expressed the hope that appellant would not be interfered with, and that he did not ask any people to withdraw their children. On March 9 more than twenty children left, of whom eleven were girls. The remuneration of the appellant, as manual instructress by a capitation grant, depended upon the number of female pupils at the school. On Nov. 24, 1904, the writ in the appellant’s action for conspiracy with Alexander Smitten and John Robinson and other persons to injure the appellant in her business and employment was issued.
Lord Loreburn, L.C.
This is one of the cases in which I desire to say as little as I can, because I feel that this is a sad story, and I do not wish to aggravate any of its features by unnecessary allusions. It is an action for conspiracy, and no other ground is relied on. In such a proceeding it is necessary for the plaintiff to prove a design common to the defendant and to others to damage the plaintiff without any just cause or excuse. That, at all events, it is necessary to prove. Now, a conclusion of that kind is not to be arrived at by a light conjecture; it must be plainly established. It may, like other conclusions, be established as a matter of inference from proved facts, but the point is not whether you can draw that particular inference, but whether the facts are such that they cannot fairly admit of any other inference being drawn from them. In my opinion it has not been proved that there was a design intentionally to damage the plaintiff, although I think the intention may have been to make a protest, which may be thought reasonable or unreasonable, against the course which had been taken, nor do I see evidence of combination between the defendant and others. I will only add two observations. The first is that I am not prepared to assent to all the propositions that are laid down in the judgments of the Irish Court of Appeal; and the second is that I hope that this case will not be regarded as indicating that the opinion on a matter of fact of a judge of first instance ought to be set aside without grave reasons. The judge of first instance has opportunities which no other Court has of arriving at a just conclusion with regard to the facts, and I think it is always necessary that there should be strong ground before he is overthrown as to the inferences at which he arrives. But in this case I think there was strong ground, and that the conclusion of the Court of Appeal was right.
Earl of Halsbury.
I am of the same opinion. In one sense I agree with the view which the Lord Chancellor has suggested. On the other hand, I feel some difficulty in dealing with the case, because it seems to me there is no evidence of the facts on which reliance is placed here—that is to say, no evidence of such facts as would, under any circumstances that have been suggested, give a ground for action. To put the matter plainly, what is suggested is that there was a combination between the defendant and some others (I observe there is a vagueness about stating who the co-conspirators were) to bring about the dismissal of this lady. My first objection is that I think, whether it would form a ground of action or not, that it is not established by the facts put in proof. If it were true that there had been such a combination, and if the object was what is suggested, to cause her to be dismissed, not upon any ground of personal objection to her, or any spite or ill-will to her, but upon the ground that in the view of the parents and of the persons procuring the combination it was an undesirable thing for a Roman Catholic to be put in that position, I am of opinion that that would form no ground of action. But the difficulty I have in dealing with it is that I think it fails in the beginning. There is no sufficient evidence of any combination. There is no evidence upon which I think any Court ought to rely, even if it were a ground of action, for saying that in this *118 case there is any proof of the combination in the sense in which it is necessary for there to be a combination in order to form the ground of an action for conspiracy. In contenting myself, as I do, with saying that I think there is no evidence, I wish to guard myself against its being supposed that I should think that there was a cause of action, even if the proposition which has been put forward by the learned counsel were established—namely, that there was a combination to do this thing. It appears to me, under the circumstances, it would be impossible to contend that it was not the perfect right of any parent to take that view, however unreasonable it might be; and, if he took that view, it was perfectly competent to him to consult other parents in the same place, and ask them to aid and assist him in doing what was within his right—namely, to withdraw the children from the school, although the effect might be that it would cause the dismissal of the school mistress. Therefore, while I content myself with saying that I think there is no evidence of the broad proposition which is put forward—namely, that this was done as a combined act—on the other hand it must not be supposed that if what was suggested had been proved—namely, that there was that combination—I, at all events, would be of opinion that that would form a ground of action at law.
Lord Macnaghten expressed his agreement with the judgment of Lord Ashbourne in the Court of Appeal.
Lord James of Hereford concurred.
Lord Robertson stated that like Lord Ashbourne, he could see no trace of conspiracy.
Lord Atkinson.
I concur that the decision of the Court of Appeal in Ireland was right, and that there is no evidence to sustain the cause of action declared—namely, an agreement “to prevent by undue pressure, inducement, and influence, divers persons from exercising their lawful right of sending their children to” the school “according to their free choice, liberty, and will;” nor do I think there is evidence of facts to sustain the other causes of action which have been suggested in the course of the argument both here and in the Court of Appeal.
Lord Collins concurred.
Attorney-General v Edward Conway
Supreme Court of Justice.
9 November 1925
[1926] 60 I.L.T.R 41
Kennedy C.J., Sullivan, Hanna JJ.
Nov. 9, 1925
Sergeant John Lynch, officer of the Detective Division of the police, witness for the State, deposed that in consequence of information received by the Detective Division he proceeded, on Thursday, May 21, to No 17 Spring Garden Street, North Strand, the premises of Edward Conway. Being informed that defendant was not at home, he made a search of the premises, which proved to be a yard over which was a railway bridge of the Great Northern Railway, with a stable at the back of the yard. During the search Lynch found twelve sacks of wheat on the premises, all of them being new sacks. Upon being informed of Conway’s residential address Lynch sent another officer to the address for him while he himself remained at the yard. Later Officer Byrne returned with Conway, and Lynch told the latter that he had found the sacks of wheat and asked him if he could give an account of them. In reply Conway refused any information, stating that he would say nothing. Thereupon the officers brought him to Store Street Police Station and detained him there, where he made a remark that he had been in the market all day and had not seen the wheat up to that time. Between the hours of 11 and 12 o’clock on the following night Lynch, accompanied by Superintendent Ennis and Officer Byrne, met Smyth, another of the prisoners at the West Road near the North Strand. They told him that they were police officers and that they were inquiring into larcenies of wheat from the company’s granaries. After some hesitation Smyth made a statement that all the carters were delivering stuff at the yard and that he had been there only once with Nangle, and that Switzer, the storeman, or others of the storemen had given them the wheat to deliver. Smyth was also detained at Store Street Police Station. Early the following morning Detective Officer Lynch went to 23 Merchants’ Cottages, Wharf Road, the residence of Switzer, close to one of the granaries called “the Silos.” Upon being questioned Switzer said he knew nothing about the larceny of wheat from the granaries, and refused to say anything else. Lynch arrested Switzer and took him with Smyth to the Bridewell. When brought to the Bridewell the prisoners were charged with conspiracy to steal wheat and were cautioned. Smyth made a statement there which was read over to him and which he signed, saying that he had been employed at the Merchants’ Warehousing Co for the past six years, and for the past two years had been in charge of a motor lorry, while Christopher Nangle was in charge of the goods About a month previous to this time Nangle had told him to be at Silos at one o’clock. He went at the said time and found Switzer at the store. They loaded the sacks of wheat or oats into the lorry, and Smyth *41 drove it to Conway’s yard, where it was unloaded. Two days afterwards he was given £2 by Nangle for the job. Some time later Nangle asked him to go again, but Smyth refused. This statement of Smyth was read over to Switzer, who also made and signed a statement saying that he had been employed for the past eleven years by the Merchants’ Warehousing Co. as storeman, and that his job was to load the cars going out. He had loaded the car referred to in Smyth’s statement. Early next morning Nangle was arrested, and upon being brought to the Bridewell also made a statement in which he said that he had been employed at the Merchants’ Warehousing Co. since 1916, and for the last two years had been working on a lorry with Smyth. He had heard a rumour that Conway of Spring Garden Street was getting a lot of wheat from carters. They had met Conway in the street about a month ago and asked him if he would buy some wheat. Conway replied that he might do so. A few days later Switzer told them to go to the Silos at 1 o’clock. They went with their lorry, and ten sacks were loaded on to it from the loft. Switzer was on the loft. They brought the sacks to Conway’s and were paid £4. Later Switzer asked them to go again and they refused. Being cross-examined as to whether there was any attempt at concealment of the wheat in Conway’s yard, Detective Officer Lynch said the sacks had been covered with zinc and a tarpaulin cover and were stored under the railway arch in Spring Garden Street. As the railway is quite waterproof, it was suggested that the zinc and covering were put over the sacks for the purpose of concealment. After an absence the jury brought in a verdict finding Edward Conway guilty on the first and third counts. Switzer was found guilty on the first and second counts, and Nangle guilty on the first and second counts. Smyth was recommended to mercy. Certificate of appeal was granted to Edward Conway that the two questions set out in the certificate might be discussed—viz.: (1) Whether there was evidence to support the findings and verdict of the jury. (2) Whether, on the application of counsel for Edward Conway for a direction that there was not sufficient evidence, or any evidence, to go to the jury against the said Edward Conway, the Court ought to have directed the jury accordingly The appeal came into Court on Monday, 9th November, 1925, before Kennedy, C.J., Sullivan and Hanna, JJ., sitting in the Court of Criminal Appeal.
Maguire, K.C., and Sherry, for appellant, asked for a direction on the grounds that there was no evidence against Conway on any of these charges that could be sent before the jury. The first charge was that on the 1st May, 1924, and on divers days between that date and the 22nd May, 1925, they conspired together to steal grain. The only evidence of any kind upon this charge is the statement, deposed to by Sergeant Lynch, which was made by Smyth and Nangle. These being unsworn statements and none of them being evidence against Conway, counsel submitted that the conspiracy charge must fail. There was no evidence to identify Conway with a conspiracy as between these men. The latter were in a different position The second charge was that they on 23rd April stole two tons of wheat the property of the Merchants’ Warehousing Co., Ltd. There was no evidence whatever, it was submitted, against Conway of stealing wheat on that day. The statement of Smyth was not evidence against Conway. The third charge was that Conway on 25th April, 1925, received two tons of wheat the property of the Merchants’ Warehousing Co., Ltd., knowing the same to have been stolen Exactly the same remarks applied. The only evidence was that of Smyth, who said he drove it to the yard. That was how the evidence stood in these three charges. There was no evidence that identified the wheat found in the yard as being the property of the Merchants’ Warehousing Co., Ltd. Again there was no evidence to prove that the wheat found in Conway’s yard was stolen wheat. The statements of Smyth, Nangle and Switzer were inadmissible as against Conway, and on these grounds the case should have been withdrawn from the jury (Rex v. Newson, [1909] 2 Cr. App. Rep., p. 44; Rex v. Pearson, [1908] 1 Cr. App Rep., p. 77.)
Bewley, K.C. (with him Carrigan, K.C.) said it was only natural to expect that nobody could come to court and say that, out of a supply of from 20,000 to 30,000 tons of grain stored in these granaries, the sacks found in Conway’s yard were stolen from the granaries. The charge was that Conway conspired with others to steal. The persons with whom he was alleged to have conspired were persons who upon their own evidence said that they stole. That was not evidence against Conway, but there was evidence in the suspicious nature of his conduct in connection with the grain. Suspicious circumstances were evidence of guilty knowledge and there were many suspicious circumstances connected with Conway’s conduct in the matter:—(1) This said Conway was not known to have dealt in wheat previous to these dates. (2) There was found in his yard *42 property corresponding to the property stolen from the Merchants’ Warehousing Co., Ltd. (3) It was found concealed, under an arch, with a sack and a galvanised iron cover. (4) Conway was unable to explain the possession of this first class quality grain. Counsel referred to the case of Rex v. Leom Sbarra, 13 Crim. App Rts. p. 118, the head note of which states that “the circumstances in which property is received may in themselves be sufficient proof that it was stolen and that defendant knew the fact.” Lord Justice Darling in delivering judgment in that case said:—“Arguments of a philosophical character have been addressed to us whether knowledge that the goods were stolen goods is enough to prove that the goods were in fact stolen, and at what point knowledge merges into belief. The Court desires to express the law in the following terms: The circumstances in which the defendant receives goods may of themselves prove that the goods were stolen, and further that he knew it at the time when he received the goods. It is not a rule of law that there must be other evidence of the theft. We have come to the conclusion that the circumstances here are enough to prove that the goods had been stolen.” Counsel submitted that this case had direct bearing on his argument that the suspicious nature of the movements of Conway were sufficient to prove guilty knowledge sufficient to turn this knowledge into belief, and sufficient to convict him of the charges preferred against him, without regard to any other evidence.
Kennedy, C.J. (delivering the considered judgment of the Court):
We are agreed that there was not sufficient evidence to show that the wheat found in Conway’s yard was the wheat stolen from the Merchants’ Warehousing Co., Ltd., and that being so the charges preferred against Conway must fail and the verdict of the Dublin Circuit Court (Criminal) must be quashed.
Sidney Taylor v. Philip Smyth
[1991] IR 191
Lardner J.
20th December 1988
These proceedings concern a property known as Taylor’s Grange, situate near Rathfarnham, County Dublin, which prior to 1972 was owned by the plaintiff in fee simple. By a lease dated the 18th April, 1972, it was demised, for a term of 21 years from the 1st October, 1971, subject to a yearly rent of £5,000 and the covenants and conditions therein contained, by the plaintiff to Grange Hotel Company Ltd. (hereinafter called “the company”), which was incorporated in that year with the object of carrying on the business of a hotel at Taylor’s Grange. The plaintiff was at all material times beneficially entitled to 50% of the issued share capital of the company and the company thereafter carried on the business of a hotel in the premises. By an indenture of mortgage dated the 28th May, 1973, the respective interests of the plaintiff and of the company in the property became charged with the payment of all monies owing by the plaintiff to the fourth defendant (“the bank”), viz. £28,036.44 on the 8th July, 1974. Subsequently, by two separate written guarantees dated the 25th October, 1972, and the 18th December, 1973, the plaintiff guaranteed the repayment to the bank of all monies up to certain amounts owing or to become owing by the company to the bank with interest thereon as therein provided. By the 9th July, 1974, the company owed the bank sums in excess of £40,000. In the month of August the company was making losses and was in financial difficulties and on the 10th August, 1974, it entered into a written agreement with the first defendant, Mr. Smyth, whereby he was put into possession of the premises known as Taylor’s Grange Hotel, as caretaker, upon terms that he should pay all the outgoings “attendant upon the hotel” and should be entitled to the income accruing therefrom for a period initially described as ending on the 12th September, 1974, and upon certain other terms which are not material. Since the 10th August, 1974, Mr. Smyth has continued in occupation and possession of this property where he has been carrying on the business of a hotel.
Then by a written agreement dated the 12th September, 1974, Mr. Smyth agreed to purchase for the sum of £40,000 from the plaintiff the freehold of this property upon terms, inter alia, that the purchase was subject to the existing charge on the freehold in favour of the bank, that Mr. Smyth would cause the bank to release and indemnify the plaintiff against all guarantees by him in respect of his own or the company’s indebtedness to the bank. Subsequently and before completion of this agreement by Mr. Smyth to purchase, by virtue of several instruments in writing dated the 25th March, 1975, the second defendant, Kape Investments Ltd. (hereafter “Kape”), a company controlled by Mr. Smyth, acquired by assignment the bank’s interest in the mortgage dated the 28th May, 1973, and under the guarantees already referred to and thereupon Kape called upon the plaintiff to pay to it the sums owing under the said indenture of mortgage and the said guarantees. Subsequently the above agreement of the 12th September, 1974, for the purchase of the property by Mr. Smyth was rescinded by an agreement in writing dated the 15th April, 1975, between the plaintiff and Mr. Smyth upon certain terms and conditions not material to this action. The plaintiff then on the 26th September, 1975, instituted proceedings entitled: The High Court 1975 No. 3757P. Between Sidney Taylor, plaintiff, and Philip Smyth, Kape Investments Limited, and Northern Bank Limited, defendants, in which he claimed inter alia that he had been induced to enter into the rescission agreement by certain false and fraudulent misrepresentations made to him by Mr. Smyth. The plaintiff in that action claimed:
(a) an injunction restraining Kape or any other defendant from exercising any of the mortgage powers whether for sale or otherwise arising under or by virtue of the indenture of mortgage dated the 28th May, 1973;
(b) an indemnity from Mr. Smyth and the bank against all claims by Kape on foot of the said mortgage or on foot of either of the guarantees dated the 25th October, 1972, and the 18th December, 1973;
(c) damages against Mr. Smyth for misrepresentation and breach of contract;
(d) damages against the bank for breach of contract.
Mr. Smyth and Kape by their defence and the bank by its defence contested the allegations in the statement of claim and pleaded that it disclosed no cause of action against the defendants. It is not necessary for the purpose of my decision in the present proceedings to give any more extended account of the issues raised by the pleadings in the 1975 action because that action was settled by a written agreement to compromise (hereinafter called “the consent”) signed on behalf of all the parties and dated the 20th June, 1980, and expressed to be made in the proceedings numbered High Court 1975 No. 3757P. As the present action directly relates to this compromise agreement, that is the consent, I must refer in some detail to its terms. Clauses 1 to 8 provided as follows:
“1. The plaintiff shall sell and the first defendant (or his nominee) shall purchase the lands and premises at Taylor’s Grange in the County of Dublin now comprised in Folio 879F County Dublin which were the subject of the agreement for sale made between the same parties and dated the 12th September, 1974. The property is being sold in fee simple subject to and with the benefit of the lease dated the 18th April, 1972, and made between Sidney Taylor of the one part and Grange Hotel Ltd. of the other part, for a term of 21 years from the 1st October, 1971, subject to the yearly rent thereby reserved and the covenants and conditions therein contained, but otherwise freed and discharged of all incumbrances including any claims of Thomas Taylor brother of the plaintiff. The plaintiff further agrees and undertakes to give his consent and do all other acts and things that may be necessary to enable the sale of the said leasehold interest in the said lands which has already been negotiated between the official liquidator of Grange Hotel Ltd., and which has been approved by the Court, to proceed and to be carried through to completion. Such consent shall be given by the plaintiff forthwith on payment by or on behalf of the first defendant to the plaintiff’s solicitors as stakeholder of the agreed deposit in respect of the purchase of the freehold interest in the said lands.
2. The first defendant shall pay to the plaintiff the sum of £95,000 for the said lands and premises (one quarter of which said sum shall be paid by way of deposit to the solicitors for the plaintiff pending completion of the sale), and in addition the first and second defendants shall release and discharge the plaintiff from all sums now due and owing by the plaintiff to them or either of them and shall release all securities and guarantees held by them or either of them to secure payment of the said debts. The sale should be completed on or before the 15th July, 1980, when the balance of the purchase monies shall become payable by the first defendant (or his nominee) to the plaintiff. Should completion of the sale be delayed beyond that date by reason of any default on the part of the first defendant, interest on the amount of the purchase monies for the time being unpaid shall become payable at the rate of 22% per annum from the date when it should have become due and payable but for such default as aforesaid until the date of payment.
3. Outgoings on the property to the date of completion (other than the rent reserved by the said lease of the 18th April, 1972) shall be payable by the first defendant. The plaintiff waives and abandons all claims for arrears of rent under the said lease up to the present time and down to the date for completion of the sale of the property.
4. The plaintiff and the first and second defendants mutually agree to withdraw and discontinue all other proceedings now pending between them with no order as to costs. The first and second defendants accept responsibility for any fees and expenses of a receiver appointed on their application over the rents and profits of the lands.
5. The third defendant acknowledges that no monies are now due and owing to it by the plaintiff.
6. The plaintiff unreservedly withdraws all allegations of fraud, misrepresentation or breach of contract against the defendants and each of them.
7. All further proceedings in this action are to be stayed and suspended save as may be necessary for the implementation of these terms of settlement. Any party shall be at liberty to apply to the Court to receive this consent and liberty shall be reserved to all parties to apply to the Court as may be necessary.
8. On the implementation of the terms of the settlement as referred to in this consent this action to be dismissed as against all three defendants,
with no order as to costs. Each party shall bear their own costs of this action and of all other proceedings which have hitherto taken place between them (including the costs of the issue tried in these proceedings in respect of which costs were awarded against the plaintiff), and the first defendant waives his claim against the plaintiff in respect of the amount awarded to him by way of salvage payments on the trial of the said issue.”
At this point it is worth noting that the consent was not simply an agreement between the plaintiff and Mr. Smyth or his nominee for the sale of Taylor’s Grange in fee simple. There was an agreement for such a sale. It was to be free from incumbrances and subject to and with the benefit of the lease of the 18th April, 1972. There was a term that the plaintiff as lessor would give his consent to the sale of the said leasehold which had already been negotiated by the official liquidator of Grange Hotel Ltd. and approved by the High Court in winding up proceedings and that such consent should be given forthwith on payment by Mr. Smyth of the agreed deposit in respect of the sale of the freehold interest. Then there was a term that Mr. Smyth and Kape should release and discharge the plaintiff from all sums then due and owing by him to them and that they should release all securities and guarantees held to secure the payment of such debts. This provision relatesinter alia to the mortgage and the two guarantees. Then there was a term that the plaintiff waived and abandoned all claims for arrears of rent due under the lease. And there was a term whereby the plaintiff and Mr. Smyth and Kape agreed to withdraw and discontinue all other proceedings then pending between them. Further, the bank acknowledged that no monies were then due and owing to it by the plaintiff.
Following upon this consent Mr. Smyth’s solicitor by letter dated the 11th July, 1980, sent a cheque to the plaintiff’s solicitors for £23,750 to be held by them as stakeholder. Under cover of a letter dated the 17th July, 1980 – a date after the agreed closing date – and he sent requisitions on title, a draft transfer for approval and a draft statutory declaration for the purposes of the Family Home Protection Act, 1976, and gave notice that Kape had been nominated by Mr. Smyth to purchase the property and enquired about the discharge of the lis pendens registered against the property in favour of the plaintiff’s brother, Thomas Taylor. There was no reply to this letter and Mr. Smyth’s solicitor then wrote a further letter dated the 11th August, 1980, to which by letter of the 12th August, 1980, the plaintiff’s solicitors replied stating that they hoped to reply shortly. Then by letter of the 19th August, 1980, Mr. Smyth’s solicitor called on the plaintiff “to complete this transaction within 21 days from the date of this letter” and in this respect making time of the essence of the contract. This letter referred to the sale of the fee simple of Taylor’s Grange. On the 16th September, 1980, not having had a reply to this, Mr. Smyth’s solicitor wrote again giving notice to the plaintiff that his clients “Philip Smyth and Calder Investments Ltd. hereby rescind the contract entered into in the settlement of the High Court proceedings which provided for the purchase of the freehold interest from your client” and requesting repayment of the deposit within seven days. On the 18th September, 1980, the plaintiff’s solicitors wrote that they would reply within two days and on the 26th September they sent replies to the requisitions on title and requested that a draft deed of purchase be sent. To this Mr. Smyth’s solicitor replied by letter dated the 7th October referring to the notice of rescission of the agreement for sale of Taylor’s Grange that had been sent and repeating the demand for repayment of the deposit. By a second letter of the same date they gave notice that Kape proposed selling the freehold interest in the property by exercising its power of sale as mortgagee. On the 10th October, 1980, the plaintiff’s solicitors replied that as stakeholders they were unable to return the deposit without their client’s consent and stated: “With the greatest respect our observation . . . is that your client is not entitled to deal with the matter on the lines which you have indicated in recent correspondence.” On the 23rd October they wrote again to say that the plaintiff was in a position to complete the sale of the freehold and suggesting a closing date on Thursday or Friday of “the coming week”. To this Mr. Smyth’s solicitor replied by letter of the 3rd November, 1980:”My clients stand by their action in this matter and will not entertain at this late stage any proposals to reinstate the contract.” They also contested that the plaintiff was in a position to complete the sale on three grounds, namely, that no settlement agreement had been made of Barclays Bank’s claim as mortgagee; that Mr. Sidney Taylor had not reached any agreement with the claim to an interest in the property of his brother, Mr. Thomas Taylor, and reference was also made to Mr. Taylor’s liability to a Mr. Yapp. By letter of the 3rd November, 1980, the plaintiff’s solicitor, Mr. O’Mahony rejected these contentions and again called upon Mr. Smyth’s solicitor to agree a date for closing the sale as soon as possible. On the 10th November Mr. MacAnAilà refused this request and asserted “there is no contract between Mr. Taylor and Mr. Smyth or Kape Investment Company Ltd. nor has there been since my client served notice of rescission.” After this date in some further correspondence the parties continued to adhere to the positions they had taken up – the plaintiff disputing the right of Mr. Smyth and Calder Investments Ltd. to rescind the contract of sale.
The next step was that a special summons issued on the 10th March, 1981, entitled in the matter of the Vendor and Purchaser Act, 1874, in which Philip Smyth and Calder Investments Ltd. were plaintiffs and Sidney Taylor was defendant. The plaintiffs in those proceedings claimed a declaration (a) that a contract embodied in the consent dated the 20th June, 1980, for the sale of the lands and premises of Taylor’s Grange for £95,000 had been validly rescinded, and (b) that those plaintiffs were entitled to the return of their deposit of £23,750. This summons was heard by Costello J. on the 22nd June, 1981, when he made an order declaring that “the said contract had been validly rescinded”. From this order Mr. Sidney Taylor appealed to the Supreme Court which by order dated the 25th January, 1984, allowed the appeal, discharged the order of Costello J., dismissed the special summons and ordered the plaintiffs in those proceedings to pay the defendant’s costs.
Counsel for the parties in the present proceedings agree that the Supreme Court gave no formal statement of its reasons for this decision. Mr. John Blayney S.C. (now Mr. Justice Blayney) had appeared on the hearing of the appeal for Mr. Sidney Taylor and gave evidence before me of his recollection of the Supreme Court’s decision. He says the Supreme Court decided that Mr. Smyth had not been entitled to rescind the contract with Mr. Taylor as part of the contract had already been performed by Mr. Taylor by his giving his consent to the assignment to Mr. Smyth of the leasehold interest in the property. Mr. Justice Blayney’s evidence on this has not been challenged by anyone and it and the order made by the Supreme Court constitute the only material or information before me concerning the decision of the Supreme Court. In these circumstances it seems to me that the present case must be considered in the context that the contract for the sale of the property which was comprised in the compromise agreement of the 20th June, 1980, between the parties was not effectively rescinded by the first and second defendants’ notice of rescission in September, 1980.
Following the decision of the Supreme Court, Mr. Sidney Taylor instituted the present proceedings by plenary summons dated the 28th April, 1981. The pleadings have been amended on several occasions. The plaintiff claims:
(1) That in purporting to sell Taylor’s Grange Calder Investments Ltd. breached the terms of the consent and further breached it after the said rescission was declared invalid by the Supreme Court by failing and refusing to complete the purchase of Taylor’s Grange.
(2) That Calder Investments Ltd., by contracting to purchase Taylor’s Grange and taking a conveyance, dealt with Kape in a manner which it knew was inconsistent with the agreement of Mr. Smyth and Kape with the plaintiff and was guilty of inducement of breach of contract.
(3) That Mr. Smyth, Kape and Calder Investments Ltd. wrongfully conspired to deprive the plaintiff of his title to Taylor’s Grange by arranging for it to be sold from Kape to Calla Investments Ltd. (“Calla”) in breach of the terms of the consent.
(4) That as a result the plaintiff has suffered damage and loss.
The plaintiff claimed certain declarations and an order for specific performance of Mr. Smyth’s agreement to purchase Taylor’s Grange. These claims were contested on a number of grounds by the defendants. At the trial counsel for the plaintiff restricted the plaintiff’s claim to one for damages for breach of contract and tort. In these circumstances it is not necessary to consider the full defences as originally pleaded. The grounds on which Mr. Smyth has contested the present claim are:
(1) That the sale was not completed because of want of title in the plaintiff;
(2) that the plaintiff was never at any material time ready or willing to complete the sale;
(3) that the terms of the consent are severable and divisible and despite Kape’s exercise of the power of sale remain valid and enforceable between the plaintiff and Mr. Smyth;
(4) that Mr. Smyth has not been guilty of the alleged conspiracy or wrongful act as alleged;
(5) that the plaintiff has not suffered any loss or damage.
And then Mr. Smyth counterclaims for:
(1) Rescission of the agreement for sale of Taylor’s Grange;
(2) repayment of the deposit of £23,750;
(3) a declaration that the other provisions of the consent remain valid and enforceable between the plaintiff and him.
The second defendant, Kape pleads:
(1) That it did not cease to be a mortgagee or to have a power of sale in respect of Taylor’s Grange;
(2) that it was an express or an implied term of the consent that any release or discharge by it of the plaintiff’s debt was conditional upon the completion of the sale of Taylor’s Grange on or before the 15th July, 1980, or alternatively within a reasonable time;
(3) that at all material times the plaintiff had not completed and was incapable of completing the sale;
(4) that the consideration for Kape’s release of the plaintiff’s debt, namely the completion of the sale, had wholly failed;
(5) that it was not guilty of any breach of contract or other unlawful act as alleged.
The third defendant, Calla, by its defence pleaded:
(1) That it was entitled to the full legal and beneficial interest in the premises as a result of Kape’s exercise of its power of sale and Calla’s purchase of the premises from Kape by way of public tender for a sum of £105,000 and its subsequent registration in the Land Registry as full fee simple owners;
(2) that the plaintiff had not suffered the alleged or any loss or damage;
(3) that Calla had suffered loss and damage by being unable owing to the plaintiff registering a lis pendens against the premises, to borrow £35,000 on a mortgage of the premises to be spent on enhancing and developing the premises for which Calla claimed damages.
During the course of the trial on the application of counsel I dismissed the plaintiff’s claim against Calla and the counterclaim by Calla and reserved the question of that defendant’s costs. The fourth defendant, the bank, undertook by counsel to submit to whatever order the court might make in this action and did not otherwise take part in the proceedings.
The issues joined in the pleadings to which I have referred have during the trial been significantly reduced and narrowed by counsel in their submissions. I have already noted that the plaintiff no longer claims an order for specific performance but confines his claim to damages for breach of contract and tort. Mr. Gill on behalf of Mr. Smyth submitted that the net issue was whether the plaintiff’s conduct by delay had been so unreasonable as to justify Mr. Smyth treating it as a repudiation of the contract. He did not rely on the rescission notice of the 16th September, 1980. And he accepted that that notice constituted a wrongful repudiation by Mr. Smyth in September, 1980. He submitted that the last reasonable date for completion of the sale was the 13th November, 1980, at which time he contended the plaintiff was not able to complete.
Mr. McCann in his submissions for Kape relied on the fact that Mr. MacAnAilÃ’s letter of the 19th August, 1980, making time of the essence of the contract was sent on behalf of Calder Investments Ltd.; that his letter of the 16th September, 1980, purported to rescind only the contract for the sale of the freehold; that the draft transfer was in favour of Calder Investments Ltd. and that the plaintiffs in the vendor and purchaser summons were Mr. Smyth and Calder. He contended that Kape, having purchased the mortgagee’s interest for a large sum in the 1970s which had not been paid off, in September and October, 1980, was in the position that its security was about to become seriously devalued by Taylor’s Grange losing its licence to sell intoxicating liquor and becoming an unlicensed guesthouse and that at this time the plaintiff was guilty of unreasonable delay which had entitled Mr. Smyth and Calder Investments Ltd. and Kape to treat the contract as at an end.
Much of the evidence and the argument in the case has been concerned with the agreement for sale of the freehold of Taylor’s Grange and the matters and events in relation to it which it is alleged were so unreasonable as to entitle the defendants to treat the agreement as at an end. It seems to me that it is essential to a decision of the issues to bear in mind that the agreement for sale of the freehold was part of a more extensive agreement which was intended and expressed as a compromise of several matters at issue in the 1975 action. That consent provided for the dismissal of the plaintiff’s action against all three defendants with no order as to costs and for a waiver by Mr. Smyth of his claim against the plaintiff of the amount awarded to him for salvage payments he had made. It involved the plaintiff giving his consent as lessor to the assignment of the leasehold vested in the company, Taylor’s Grange Ltd., and his waiving all claims for arrears of rent. It included an agreement that other proceedings pending between the parties should be withdrawn without any order as to costs. It provided that Mr. Smyth and Kape would accept responsibility for the fees and expenses of a receiver appointed by the High Court on their application over the rents and profits of Taylor’s Grange. It involved the plaintiff withdrawing all allegations made by him against each defendant of fraud, misrepresentation and breach of contract. It included an acknowledgment by the Northern Bank Ltd., as fourth defendant, that no monies were due and owing by the plaintiff to the bank.
The question I must consider is whether in regard to an agreement to compromise of this extensive scope Mr. Gill is correct when he contends that unreasonable delay by the plaintiff in completing the sale of the freehold occurred which entitled the parties to treat that part of the consent, which provided for the sale of the freehold, as having been repudiated.
Firstly, was there unreasonable delay by the plaintiff? Before he was in a position to complete there were at least two matters to be resolved, namely, securing a withdrawal by his brother Thomas Taylor of his claim to an interest in the property and of the lis pendens he had registered against it and securing a settlement of Barclays Bank’s claim as judgment mortgagee against the property. I think as a matter of probability that Mr. Taylor was not in a position to complete until the beginning of December, 1980. I conclude that having regard to what required to be done after the 20th June, 1980, to effect performance of the contract for sale, this was an unreasonable delay in all the circumstances.
The next question is whether this unreasonable delay in regard to the completion of the sale of the freehold entitled Mr. Smyth, Kape and Calder Investments Ltd. to treat the agreement for sale as repudiated. In other words was the agreement for sale of the freehold capable of being regarded as an independent contract and as severable from the compromise agreement as a whole? The answer to this seems to me to depend upon whether on the true construction of the whole contract it is to be regarded as a number of considerations for a number of acts, a series of separate contracts, or whether the separate elements of consideration are to be regarded as an entire agreement. It is helpful to consider whether in this case the severance of the contract of sale of the freehold can be effected without altering the general character of the contract or whether the removal of this part of the consent would have required the consent to be remodelled, something which the court cannot do: see Re Davstone Estates Ltd.’s Leases [1969] 2 Ch. 378. The first and second defendant’s case involves not only the deletion of the contract for sale of the freehold but also of the provision in clause 2 for the release of the mortgage security and the provisions in clauses 7 and 8. It is essentially a question of the intention of the parties as expressed or necessarily to be implied. A consideration of the nature of this contract and of its terms leads me to conclude that its various provisions were intended to be a settlement or compromise agreement which comprehended them all; that they were interdependent and were intended to constitute an entire contract. In my judgment the agreement for sale of the freehold is not severable from the other terms of the consent.
It was not contended by any of the defendants that the unreasonable delay of the plaintiff in completing the sale of the freehold should by itself properly be regarded as a repudiation of the entire consent. Mr. Smyth and Kape have indeed asserted the continued existence of other terms of the settlement. So the question of the repudiation of the consent considered as an entire agreement does not arise. Nonetheless perhaps I should state my view in relation to the effect which the plaintiff’s delay could be regarded as having. It seems to me that the correct principle to be applied in determining whether delay by one party in performing an obligation under a contract, where (as in this case) the contract must be considered entire but there are a number of heterogeneous obligations to be performed, entitles another party to treat it as a repudiation, is to consider the effect of the breach upon the contract as a whole and whether the effect of the delay (here in completing the sale of the freehold) deprived the innocent parties of substantially the whole benefit of the contract: see the observations of Diplock L.J. in Hong Kong Fir Shipping Co. Ltd. v. Kawasaki Kisen Kaisha Ltd. [1962] 2 Q.B. 26. If it has this effect the innocent parties in addition to any remedy in damages would be entitled to be discharged from any further obligation. But if the breach does not have this effect, its consequences can be remedied only by an award of damages. One of the matters urged on behalf of Kape was that in September and October, 1980, the delay in completing the sale of the freehold had put the licence attached to the hotel at risk and that this threatened the value of Kape’s security. I am not satisfied that during these two months the position in regard to the licence had significantly deteriorated from what it had been since 1975. It certainly does not seem to me to justify Mr. Smyth or Kape treating the contract for sale as repudiated.
Having regard to the nature of the consent, that it was intended to settle the 1975 action and all other pending proceedings between the parties; that there were a number of terms whose performance was effected and achieved by the agreement to them of the relevant parties (e.g. the plaintiff’s agreement to waive all claims for arrears of rent); that there was at least one other term – the plaintiff giving his consent as lessor to the assignment of the leasehold interest – which was separately performed by the plaintiff, I am unable to conclude that the defendants were, as a result of the plaintiff’s delay in completing the sale of the freehold, deprived of substantially the entire benefit of the consent agreement. Consequently they were not entitled to treat the consent agreement as having been repudiated.
Having regard to my conclusions on severability of the contract and the effect of the plaintiff’s delay, in my judgment the first and second defendants were not at any relevant time entitled to elect to treat the agreement for sale as having been repudiated and by doing so they were themselves guilty of breach of contract.
When they wrongly concluded that they were entitled to treat the contract for sale as repudiated, Kape then purported to exercise a power of sale as mortgagee and to sell Taylor’s Grange to Calla Associates Ltd. in November 1980. The consent of the 20th June, 1980, had in clause 2 provided that in addition to the payment of £95,000 for the lands and premises “the first and second defendants should release and discharge the plaintiff from all sums now due and owing by the plaintiff to them or either of them and should release and discharge all securities and guarantees held by them or either of them to secure payment of the said debts.” These words are clearly apt to include the mortgage of the 18th May, 1973, and the sums due on this mortgage and the sums due on the foot of the guarantees of the 25th October, 1972, and 18th December, 1973. So long as clause 2 formed part of a subsisting contract between the parties it disentitled the first and second defendants from exercising the mortgagee’s power of sale under the mortgage. Further, in my view the purported exercise of the power by Kape as mortgagee to sell the property to Calla Associates Limited constituted a breach of clause 2 of the consent.
It is also well established that where proceedings between parties are settled by an agreement to compromise, such as the consent here, the agreement to compromise constitutes a new and independent contract between the parties made for good consideration and the original rights of the parties and causes of action become superseded by the compromise agreement: see Green v. Rozen [1955] 1 W.L.R. 741; MacCabe v. Joynt [1901] 2 I.R. 115; O’Mahony v. Gaffney [1986] I.R. 36.
As a result of Kape’s purported exercise of its power of sale as mortgagee of the property to Calla Associates Ltd., a company controlled by Mr. Smyth, Calla Associates Ltd. has since the 18th December, 1980, been registered as full owner in fee simple of the lands. The plaintiff does not now seek to set aside this sale. In these circumstances it seems to me that the defendants have received (albeit by transactions which involved breaches of clause 2 of the consent) substantially the full consideration to which they were entitled under that contract. It is true that I have found that the plaintiff’s delay in completing the sale of the freehold was unreasonable so as to constitute a breach of the consent contract. But I am not satisfied that this delay in fact was the cause of any loss or damage to the defendants. After the 19th September, 1980, I find that the defendants’ purported rescission of the contract for the sale of the fee simple and their subsequent continued adherence to that position was the real and effective reason for non-completion. Further, none of the defendants except Calla has in their pleadings claimed that they suffered loss or damage as a result of Mr. Smyth’s breach of contract and Calla’s counterclaim for damages has with its consent been dismissed during the course of the trial.
There remains the plaintiff’s claim for damages for breach of contract and for conspiracy. Of the purchase price of £95,000 for the fee simple of Taylor’s Grange the plaintiff received the deposit of one quarter, namely £23,750, but has never been paid the balance of £71,250. This constitutes a very substantial part of the consideration he was entitled to receive by the completion of the contract for sale and of which he has been at a loss since 1980. He is in my judgment entitled to recover this sum as damages for breach of contract against Mr. Smyth and Kape.
The plaintiff’s claim for damages is also laid in tort, namely for conspiracy to procure a breach of contract. I am satisfied in all the circumstances established in evidence that Mr. Smyth and Kape combined together to effect an unlawful purpose namely to procure the breaches of contract to which I have already referred. If necessary, therefore, I hold that the plaintiff is entitled to damages for conspiracy as well as for breach of contract. The decree will be against the first and second defendants jointly and severally.
There remains the plaintiff’s claim for interest. If the contract had been performed the plaintiff would have been paid the balance of the purchase money about December, 1980. Eight years have now elapsed during which he has been out of his money and Mr. Smyth through his nominee Calla Associates Ltd. has been in possession of the property. Where damages are recoverable it is generally upon the principle of restitutio in integrum, of the plaintiff being placed so far as possible in the same position as if the breach had not occurred. It seems to me in this case to be just and fair that the plaintiff should recover interest for some of the period during which he has been deprived of the balance of the purchase money.
Clause 2 of the consent, having provided that the sale should be completed on or before the 15th July, 1980, when the balance of the purchase money should become payable by the first defendant, (or his nominee) then provided
“Should completion of the sale be delayed beyond that date by reason of any default on behalf of the first defendant, interest on the amount of the purchase money for the time being unpaid shall become payable at the rate of 22% per annum from the date when it should have become due and payable but for such default as aforesaid until the date of payment.”
Compared to current levels of interest and bank overdraft rates 22% per annum may seem an almost penal level, though even three or four years ago this would not have been the case and I do not think I should so regard it. There is a further consideration. The plaintiff was, as I have found, guilty of unreasonable delay in being unready to complete before early December, 1980. Then it is said by Mr. McCann for Kape, that in regard to the appeal in the matter of the vendor and purchaser summons to the Supreme Court there was delay by the plaintiff of seven months in relation to the books of appeal and there was a further delay by him in providing security for costs between the 1st November, 1984, the date of the first notice of motion for security for costs, and the end of May, 1987, when security was furnished by him. I think these are factors properly to be taken into account in determining the period of Mr. Smyth’s default for which interest should be allowed.
In all the circumstances, I will award interest on the sum of £71,250 at the rate of 22% per annum for a period of five and a half years against Mr. Smyth. The total award for damages will be for the sum of £145,840.44.
Supreme Court
Finlay C.J.
5th July 1990
I agree with the judgment to be delivered by McCarthy J.
Hederman J.
I agree.
McCarthy J.
In his judgment in the High Court, Lardner J. detailed the somewhat complicated facts underlying these proceedings. Whilst the notices of appeal challenge in detail many of the inferences drawn from the facts as he found them, it is not suggested therein nor in the course of the hearing itself that any of the primary facts found by him are not open on the evidence. I therefore gratefully accept the summary of facts set out in his careful and comprehensive judgment delivered on the 20th December, 1988.
By agreement between the parties, the arguments on the hearing of this appeal were first presented on behalf of Kape. Mr. Brady S.C. submitted that Lardner J. was wrong in:
(1) the finding of conspiracy;
(2) the finding of breach of contract;
(3) the assessment of damages;
(4) the order over for costs.
In supporting these submissions, in part, Mr. Callanan, counsel for Philip Smyth, stated that his client is sensitive to what is termed the opprobrium of being found party to a civil conspiracy. This, I think, springs from an understandable but mistaken belief that the word “conspiracy” in this context has overtones of the criminal law. This is not so. If a tort or a breach of contract be committed by two or more persons or bodies who agree to do the particular act or to do it in a particular way, who act, as it is said, in concert, then there is a conspiracy which may, in circumstances that I shall later outline, be an actionable wrong. If opprobrium there be, it derives more from the nature of the wrong agreed to be done rather than from the agreement to do it; this is all the more so where, as here, the conspiracy is alleged between Mr. Smyth as an individual and one or other or more of the companies which he controls, a question to which I now turn. It is argued that since, apart from the banks, the several companies involved in the transaction where wholly controlled by Mr. Smyth, he cannot, in law, so to speak, conspire with himself. He, it is said, is “the sole controlling agent and mind”.
1. Conspiracy
(a) The legal fiction. The principle defined in Saloman v. Saloman & Co. [1897] A.C. 22, which was a case of a “one man” company, has been qualified on many occasions but, as I understand it, remains the law – that a company legally incorporated does not cease to be an independent legal entity, separate and distinct from the individual members of the company, simply because it is wholly controlled by one individual. But, it is said, Mr. Smyth cannot conspire with himself, which is the reality of the allegation insofar as it is said that he conspired with Kape, with Calla, or with Calder all of which companies he controls; reliance is placed upon a decision on trial made by Nield J. in Reg. v. McDonnell [1966] 1 Q.B. 233 where a criminal charge of conspiracy was brought against the defendant and it was contended that there could be no conspiracy because there were not two persons and two minds involved. Nield J. emphasised that it was not a company which was being proceeded against but an individual defendant and, of course, that it was a criminal trial. He concluded at p. 246 that, whilst an indictment for a common law conspiracy to defraud would lie against a limited company, “the true position is that a company and a director cannot be convicted of conspiracy when the only human being who is said to have broken the law or intended to do so is the one director, and that is the situation in the present case.”No authority was cited in support of extending this proposition to an action for civil conspiracy. In principle, it would seem invidious, for example, that the assets of a limited company should not be liable to answer for conspiracy where its assets had been augmented as a result of the action alleged to constitute the conspiracy. Essentially, it would be permitting the company to lift its corporate veil as and when it suits. The matter is not devoid of authority. In Belmont Finance (No. 1) v. Williams Furniture [1979] Ch. 250, Williams Furniture owned City Industrial Finance which owned Belmont, whose majority directors were the seventh and eighth defendants. Four other defendants owned Maximum and wanted to purchase Belmont. They agreed to sell Maximum to Belmont for £500,000 and to purchase Belmont from City Industrial for £489,000. The Belmont directors resolved to implement this agreement and the transaction was completed. Belmont went into liquidation and its receiver sued alleging that the value of Maximum was only £60,000 but that the price of £500,000 for Maximum had been arrived at to enable those four defendants to purchase Belmont with money provided by Belmont, in contravention of the Companies Act. It was held that since Belmont was a victim of the alleged conspiracy and the essence of the agreement was to deprive it of a large part of its assets, the knowledge of its directors that the agreement was illegal was not to be imputed to Belmont merely because they were directors of Belmont. Therefore, Belmont was not a party to the conspiracy. The trial judge had held that the claim in conspiracy failedin limine on the ground that one party to a conspiracy to do an unlawful act cannot sue a co-conspirator in relation to that act. In the course of his judgment, Buckley L.J. said at p. 260:
“I shall deal first with the conspiracy claim. The plaintiff company’s argument is to the following effect: on the allegations in the statement of claim, the agreement was illegal, and they say that an agreement between two or more persons to effect any unlawful purpose, with knowledge of all the facts which are necessary ingredients of illegality, is a conspiracy; and we were referred to Crofter Hand Woven Harris Tweed Co. Ltd. v. Veitch [1942] A.C. 435 and Reg. v. Churchill (No. 2) [1967] 2 A.C. 224. The agreement was carried out, and damaged the plaintiff company.
In the course of the argument in this court counsel for the first and second defendants conceded that the plaintiff company is entitled in this appeal to succeed on the conspiracy point, unless it is debarred from doing so on the ground that it was a party to the conspiracy, which was the ground that was relied on by the judge.
The plaintiff company points out that the agreement was resolved on by a board of which the seventh and eighth defendants constituted the majority, and that they were the two directors who countersigned the plaintiff company’s seal on the agreement, and that they are sued as two of the conspirators. It is conceded by Mr. Miller for the plaintiff company that a company may be held to be a participant in a criminal conspiracy, and that the illegality attending a conspiracy cannot relieve the company on the ground that such an agreement may be ultra vires; but he says that to establish a conspiracy to which the plaintiff was a party, having as its object the doing of an illegal act, it must be shown that the company must be treated as knowing all the facts relevant to the illegality; he relies on Reg. v. Churchill (No. 2) [1967] 2 A.C. 224.
The plaintiff in its reply denies being a party to the conspiracy and, says Mr. Miller, it would be for the defendants to allege the necessary knowledge on the part of the plaintiff company. But he further submits that even if the plaintiff company should be regarded as a party to the conspiracy, this would not debar it from relief; and he relies on Oram v. Hutt [1914] 1 Ch. 98.”
The point now under consideration in this appeal did not expressly arise in Belmont Finance (No. 1) v. Williams Furniture [1979] Ch. 250, but it must underlie the entire of the argument and judgment in it. The basis of that case was that the separate legal entity of the company may, in law, conspire with those directors who, in effect, control it. In Lennard’s Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd. [1915] A.C. 705 Viscount Haldane L.C. said at p. 713:
“. . . a corporation is an abstraction. It has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person of somebody who for some purposes may be called an agent, but who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation.”
That was in the context of the company seeking to take advantage of the limitation of liability under s. 502 of the Merchant Shipping Act, 1894. It is much quoted with particular emphasis upon the subsequent words “his action must, unless a corporation is not to be liable at all, have been an action which was the action of the company itself within the meaning of s. 502.” But the controlling director cannot, in law, be the only director, and all of the directors are responsible for what the company does. Apart from authority, in principle I see no reason why the mere fact that one individual controls the company of limited liability, should give immunity from suit to both that company and that individual in the case of an established arrangement for the benefit of both company and individual to the detriment of others. If such were the case, it would follow that a like arrangement to the advantage of two companies of limited liability, both controlled by the same individual would give an equal immunity from suit to both companies, and so on. I recognise the force of the reasoning by Nield J. in Reg. v. McDonnell [1966] 1 Q.B. 233; I express no view in regard to his conclusion save to point out the obvious – it was a criminal case.
In the course of argument on the hearing of the appeal counsel for Kape expressly contended that it, Kape, was “independent of Mr. Smyth”. His amended
defence denies “that he conspired with the second and third defendants or either of them, or with any other person, and each particular of conspiracy alleged is hereby denied as if set forth and traversed seriatim.” No plea was made to the effect that there could not be a conspiracy between this defendant and any or all of the companies which he controls, two of them being the second and third named defendants; such a contention is not reflected in any part of the judgment of Lardner J.; nor does it surface in the detailed notice of appeal save that ground no. 16 alleges “that the learned trial judge erred in fact and in law in holding that the first and second defendants conspired together for an unlawful purpose and in holding that there had been a conspiracy between the first and second defendants and in awarding the plaintiff damages for such conspiracy.” In my view, although this point was not taken on behalf of the respondent, it is not now open to the first defendant to found an argument such as I have sought to outline. In any event it is unsound in principle.
(b) The intent of the conspirators. Kape contends that unless the intention was to harm the plaintiff, rather than to protect the legitimate interests of Mr. Smyth under his personal and varied corporate hats, there can be no actionable conspiracy.
In order to set the scene for consideration of this submission, it is necessary to refer to the decision of this Court, (Henchy, Hederman and McCarthy JJ.) in Smyth v. Taylor heard on the 24th and 25th January, 1984, and in respect of which evidence was given on the trial of this action by Mr. John Blayney S.C. (now Mr. Justice Blayney). This evidence was summarised in his judgment by Lardner J.; I have the advantage of my notes of the argument and of the judgment delivered by Henchy J. Suffice it to say that it was held that rescission could only be granted when it was possible to restore the status quo – in effect, that the consent of the 20th June, 1980, could not be subdivided, rescinding part and leaving the balance in existence, and further, part of the contract had already been performed by Mr. Taylor by his giving consent on the 18th July, 1980, to the assignment of the leasehold. It had, therefore, to be accepted that the consent dated the 20th June, 1980, had to be construed as a single agreement with a number of different provisions; if it were to be rescinded at all it had to be rescinded as a whole, and, in the circumstances, this could not be done. Further, the letters in August and September, 1980, purporting to make time of the essence of the contract did not lawfully have that effect.
In Dillon v. Dunne’s Stores (Georges Street) Ltd. (Unreported, Supreme Court, 20th December, 1968), a case of alleged false imprisonment, Ó Dálaigh C.J. said at p. 10 of the transcript:
“It was moreover submitted on behalf of the Dunnes and the company that conspiracy to commit a tort is not an independent tort. The plaintiff’s submission that it is a tort is novel and without precedent. If one considers the difference between conspiracy in criminal law and the tort of conspiracy it will, in our opinion, become clear why there is no room in civil law for the independent tort of conspiracy to commit a tort.”
The Chief Justice then quoted a passage from Lord Simon in Crofter Hand Woven Harris Tweed Co. Ltd. v. Veitch [1942] A.C. 435, at pages 439 – 440. He went on to say:
“The ‘conspirators’ would, in effect, have committed the tort. It is therefore easy to see why the common law has not found the need to find a place for conspiracy to commit a tort as an independent tort. Instead of having ‘conspirators’ the common law has been satisfied with joint tortfeasors. . . . On such argument we have heard we favour the view that there is not a tort of conspiracy to commit a tort; but in the circumstances of this appeal it is not necessary to express a concluded view on the matter.”
In their text book, Irish Law of Torts, Messrs. McMahon and Binchy, in reviewing Dillon v. Dunne’s Stores (Georges Street) Ltd. (Unreported, Supreme Court, 20th December, 1968), comment that “in the light of subsequent decisions in which proceedings for conspiracy have been litigated without any discussion as to the existence of the tort, it is safe to assume that the view tentatively favoured by the Supreme Court in Dillon’s case has been quietly interred.” In McGowan v. Murphy (Unreported, Supreme Court, 10th April, 1967), Walsh J. stated:
“If the defendants combined to procure the expulsion of the plaintiff from the trade union and in so doing had as their sole or main purpose or object the injuring of the plaintiff and the plaintiff suffered damage by reason of it, the defendants would be guilty of the actionable tort of conspiracy, even if the expulsion was not in breach of the rules of the union. To that extent a combination of persons in such circumstances is in a less favoured position than an individual doing the same act. . . . If, however, the real purpose of the combination was not to injure the plaintiff but to defend the interests of the trade union by maintaining discipline then no wrong was committed and no action will lie even though damage to the plaintiff resulted provided that the means used were not in themselves unlawful.”
Much reliance was placed by this appellant upon the English decisions in Lonrho Ltd. v. Shell Petroleum (No. 2) [1982] A.C. 173 and Lonrho Plc v. Fayed [1990] 2 Q.B. 479; the defendants, it is said, were in the present case solely motivated to protect their own interests, in this instance their financial interests and the intoxicating liquor licence – that the damage caused, if damage was caused, was incidental to their conduct motivated in that fashion. In Lonrho Plc v. Fayed it was held, on a preliminary point of law, that where conspiracy is not alleged, the tort of unlawful interference in the trade of another does not require proof that the defendant acted with the predominant purpose to injure the plaintiff rather than to further his own financial ends.
“Until the decision in Lonrho Ltd. v. Shell Petroleum (No. 2) [1982] A.C. 173 it was, we think generally believed than an agreement to do an unlawful act or to use unlawful means was actionable at the suit of any party at whom it was aimed and who suffered foreseeable damage as a result of the agreement being put into effect.”
See the judgment of Slade L.J., in Mettall & Rohstoff v. Donaldson Inc. [1990] 1 Q.B. 391 at p. 452. The English Court of Appeal there examined the history of the tort of conspiracy, so called, and, after an exhaustive review of authority, including the observation at p. 602 that “[e]ven a speech of Lord Diplock is not to be construed like a statute”, concluded that it makes no difference if the acts which A and B agree to perform, and pursuant to the agreement do perform, would if done by either of them alone be lawful or tortious or criminal. There can in English law be no tortious conspiracy actionable at the suit of C unless the sole or predominant purpose of A and B in making the agreement and carrying out the acts which caused damage to C is to injure C. There is no tortious conspiracy if A and B’s sole or predominant purpose is to protect their own commercial interests even if the means employed to that end are tortious or criminal: (see the cited submission for the defendant at p. 595). As appears from a note in 106 Law Quarterly Review 223 (1990), leave to appeal was granted in Mettall & Rohstoff [1990] 1 Q.B. 391 but the case was settled. Lord Diplock’s speech in Lonrho Ltd. v. Shell Petroleum (No. 2) [1982] A.C. 173 upon which the appellant Kape placed such reliance, is much criticised in the L.Q.R. note where the author, John Eekelaar, comments at p. 224:
“it would be hard to defend an outcome in which conspirators who have caused injury by unlawful means are allowed to escape liability for conspiracy if they show that they were predominantly motivated by intention to further their own interests, but are caught if each conspirator is sued as an individual tortfeasor under the tort of unlawful interference in trade. It would be a strange reversal of the common perception that combination strengthens the hands of wrongdoers. Nor can the distinction be defended on the ground that the wrong in conspiracy is inchoate, for the plaintiffs can sue only for damage actually inflicted. The major advantage in framing the action in conspiracy when unlawful means are used is evidential.”
In any event the law in Ireland is clear. In Connolly v. Loughney and McCarthy (1952) 87 I.L.T.R. 49, Dixon J. stated at p. 51:
“A conspiracy, that is the agreement or combination of two or more people . . . was actionable if its object was unlawful or, even though its object was lawful, unlawful means were contemplated or used to attain it.”
In Mcgowan v. Murphy (Unreported, Supreme Court, 10th April, 1967) Walsh J. said at p. 4 of the transcript:
“If, however, the real purpose of the combination was not to injure the plaintiff but to defend the interests of the trade union by maintaining discipline then no wrong was committed and no action will lie even though damage to the plaintiff resulted provided that the means used were not in themselves unlawful.” (emphasis added)
In Meskell v. Coras Iompair Éireann [1973] I.R. 121 Walsh J. said at p. 134:
“In the present case one may assume for the purpose of the decision that the object of the agreement between the defendants and the trade unions was the well-being of the defendants and of the unions, and even of the members of the unions. The complaint made here is that the means adopted to achieve
this end were unlawful. If that is so, then there was a conspiracy. To infringe another’s constitutional rights or to coerce him into abandoning them or waiving them (in so far as that may be possible) is unlawful as constituting a violation of the fundamental law of the State; in so far as such conduct constitutes the means towards an end which is not in itself unlawful, the means are unlawful and an agreement to employ such means constitutes a conspiracy. . . . The decision in the Crofter Case [1942] A.C. 435 does not in any way indicate that, because the predominant purpose of an agreement is not unlawful, the agreement cannot amount to a conspiracy even if unlawful means are used.”
Meskell v. Coras Iompair Éireann [1973] I.R. 121 was a case where the unlawful means derived from the infringement of the constitutional rights of the plaintiff; that circumstance does not affect the principle related to the use of unlawful means amounting to an actionable conspiracy. If the observations of Lord Diplock in Lonrho Ltd. v. Shell Petroleum (No. 2) [1982] A.C. 173 as construed in Mettall & Rohstoff v. Donaldson Inc. [1990] 1 Q.B. 391 correctly state English law, then I would hold that our legal paths must in this regard go their separate ways. In McMahon and Binchy, Irish Law of Torts, the authors cite (pp. 444, 445 and 446) the passages from Connolly v. Loughney and McCarthy (1952) 87 I.L.T.R. 49, Meskell v. Coras Iompair Éireann [1973] I.R. 121 and McGowan v. Murphy (Unreported, Supreme Court, 10th April, 1967) to which I have referred and under the heading of “Unlawful Means” state that even though a combination does not get together to commit an unlawful act it may still be guilty of the tort of conspiracy if it adopts unlawful means. In the second edition to this valuable work, having cited from Lonrho Ltd. v. Shell Petroleum (No. 2) in the context of an unlawful means conspiracy, the authors refer to the role of the Constitution as recognised in Meskell v. Coras Iompair Éireann [1973] I.R. 121. In my opinion if there be a combination to use unlawful means to achieve a particular aim, that is an actionable conspiracy, whether or not such means amount to an infringement of constitutional rights. I would emphasise that it is the very combination itself that strengthens the hands of the wrongdoers. It is entirely logical that what is actionable when done by unlawful means such as procuring a breach of contract, is actionable against an individual, even though his purpose be solely one of self interest; it should not cease to be actionable when done in combination by a group with a like purpose. In my view the law is correctly stated in McGowan v. Murphy (Unreported, Supreme Court, 10th April, 1967). If conspiracy be inchoate it is difficult to see how it can have caused damage, a necessary ingredient of every tort. If it be executed, then the cause of action derives from the execution whether it be because of the unlawful nature of the act done or the unlawful means used. Neither of these circumstances, however, would warrant condemning the existence of the tort itself if for no other reason than because of its evidential features. Here, the damage caused is primarily alleged to be due to the unlawful means used – procuring a breach of contract. The issue of conspiracy seems to be one more related to the supposed opprobrium than to its effect on Mr. Smyth’s pocket or the assets of the companies which he controls. I turn to the contractual issue.
2. Breach of Contract.
Kape was not a party to the vendor and purchaser summons; the letter of the 19th August, 1980, purporting to make time of the essence of the contract was sent on behalf of Calder Investments Ltd., the nominated purchaser; the purported rescission was only of the contract for the sale of the freehold which was to be transferred to Calder. Therefore Kape in September and October, 1980, was on serious risk about its security if the intoxicating liquor licence was lost and Kape, as well as the others, it is argued, were then entitled to treat the contract as at an end. There was unreasonable delay but Lardner J. in the court below rejected the idea that that delay in completing the sale of the freehold should by itself properly be regarded as a repudiation of the entire consent; indeed the defendants did not so contend. He concluded that during the two months in question (September and October, 1980) the position in regard to the licence had not significantly deteriorated from what it had been since 1975 and, at p. 156: “It certainly does not seem to me to justify Mr. Smyth or Kape treating the contract of sale as repudiated.” It followed that since Mr. Smyth and Kape had elected to treat the agreement for sale as having been repudiated, they themselves were in breach of contract; as a result of the series of events, the defendants, by transactions involving breaches of contract, have acquired substantially the full consideration to which they were entitled under the contract. Neither of these two defendants have claimed that they suffered loss or damage as a result of the plaintiff’s breach of contract and such a claim by Calla was dismissed with their consent during the course of the trial.
The key is the conclusion by Lardner J. that these defendants were not entitled to treat the contract as repudiated – that the plaintiff’s conduct did not amount to a repudiation. Whilst grave criticism may be expressed of the plaintiff’s conduct, indeed of his misconduct, of his arrogant failure to carry out his obligations under the consent, in my view there is ample support for the learned trial judge’s conclusion that his conduct, however unreasonable on its face, did not entitle these defendants to treat as repudiated a contract which obliged them to pay £95,000 for the lands of which their nominee is the fee simple owner and for which they have only paid a deposit of 25%, the repayment of which is part of Calla’s counterclaim. Since the 18th December, 1980, Calla has been registered as full owner in fee simple of the lands and the plaintiff does not seek to set aside this sale; the defendants, as Lardner J. held, have received substantially the full consideration to which they were entitled under that contract. These proceedings had commenced on the 28th April, 1981, but the statement of claim was amended in November, 1987, and the amended defence was delivered thereafter. Since
unlawful means, a breach of contract, was used by the defendants the tort of conspiracy was established. This disposes of the appeal on liability.
3. Quantum
No issue arises as to the plaitniff’s entitlement to the balance of the purchase price save that the property was subject to the mortgage to Barclays Bank and, consequently, it is said the plaintiff would have only received £51,500. The short answer to that proposition was that it is the plaintiff’s business in his relationship with Barclays. Lardner J. analysed the claim for interest including, in particular, clause 2 of the consent. Whilst the plaintiff was prima facie entitled to interest over the eight year period that had elapsed between December, 1980, and December, 1988, when judgment was delivered, and the defendant Smyth through Calla has been in possession of the property, in all the circumstances he restricted the awarded interest to a period of five and a half years but at the rate specified in the consent. I can find no error in the approach made by the learned trial judge and I would affirm the assessment accordingly.
4. The order for costs
In the High Court it was ordered that the plaintiff recover against the first and second defendants, Smyth and Kape, the costs when taxed and ascertained such costs to exclude the costs of the claim for specific performance, and that Kape pay the plaintiff the costs reserved by orders made on application for security for costs and for an extension of time concerning delivery of a reply, and that Calla recover from the plaintiff the costs of the action when taxed and ascertained and that Northern Bank Ltd. recover against the plaintiff its costs of the action when taxed and ascertained with an order over in favour of the plaintiff against the first and second defendants, Smyth and Kape.
Mr. Smyth appealed against the order for costs made against him and against the order over; Kape appealed against the order for costs against it and in particular against the order concerning the two applications of that defendant for security for costs and also appealed against the order over. The plaintiff appealed against the order awarding costs to Calla against the plaintiff.
(a) There is no arguable ground against the plaintiff being awarded the general costs of the action against the first and second defendants.
(b) The costs of the motions for security: the Court has not been provided with any note of any reason stated by the learned trial judge in respect of the award of these particular costs; there is before the Court material by way of affidavit concerning the applications for security.
None of this material nor any of the brief arguments advanced in this regard appear to me to warrant interference with the order made.
(c) The order over: It was entirely necessary that Northern Bank Ltd. be named as a party and be bound by the result. That being so and the plaintiff having succeeded in the action the order over must stand.
(d) Calla’s costs: Here the argument is that the defendant, Mr. Smyth, in effect, is each of the other defendants. It was not, it is said, for the plaintiff to try to identify under which thimble the forensic pea was to be found. At the end of the evidence, when Mr. Comyn successfully applied to strike out the allegation of fraud against Calla, Lardner J. dismissed the action against that defendant and reserved the question of its costs until later. Calla was not a party to the consent of June, 1980; in the original statement of claim as filed it was alleged that Calla was at all material times aware that under the terms of the consent Kape had agreed to release the mortgage. In the amended statement of claim it was alleged at paragraph 20:
“In contracting to purchase Taylor’s Grange and in taking a conveyance of it from Kape, Calla dealt with Kape in a manner which it knew was inconsistent with the agreement of Mr. Smyth and Kape with the plaintiff as contained in the consent, and was thereby guilty of inducement of breach of contract whereby the plaintiff has suffered damage and loss in the amount set out in paragraph 18 above.
Further and in the alternative Mr. Smyth, Kape and Calla wrongfully conspired to deprive the plaintiff of his title to Taylor’s Grange by arranging for it to be sold by Kape to Calla in breach of the agreement contained in the consent, and the plaintiff has thereby suffered damage and loss in the amount set out in paragraph 18 above.”
As I have already mentioned, it was only this defendant who claimed damages in his counterclaim. In the reply to that defendant’s defence and counterclaim it was alleged that the registration of the transfer had been procured by fraud. In the light of such an allegation it is difficult to see how this defendant could fail to secure an order for costs against the plaintiff, unless there was some underlying impropriety. This defendant was separately represented by solicitor and counsel and the plaintiff must bear the costs of it.
(e) The question of an order over in respect of Calla’s costs: It cannot be raised here.
QBE Management Services (UK) Ltd v Dymoke & Ors (UK case)
[2012] EWHC 80 (QB) (27 January 2012)
The Hon. Mr Justice Haddon-Cave:
INTRODUCTION
Expedited trial
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- On 28th April 2011 the First, Second and Third Defendants resigned from employment with the Claimant and said that they intended to commence a start up business with the Fourth Defendant. Their resignations were followed by a spate of eight further resignations by employees of the Claimant in the next three months, all of whom expressed an intention to join the Fourth Defendant.
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- On 25th August 2011 Mr Justice Parker granted the Claimant an interim injunction against the Defendants and ordered a speedy trial. On 18th October 2011 Mr Nigel Wilkinson QC, sitting as a Deputy High Court Judge, granted the Claimant further interim relief. On 28th October 2011 the Court of Appeal rejected the Defendants’ application to appeal the latter order and confirmed the need for an expedited trial.
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- An expedited trial of the Claimant’s claim against the Defendants for final injunctive and other relief took place before me between 2nd and 23rd November 2011. In order that the parties should know where they stood as soon as possible, I gave my decision on the last day of the Michaelmas term, 21st December 2011, granting the Claimant ‘springboard’ relief until 28th April 2012. These are the reasons for my decision.
Background
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- The case arises in the context of Protection & Indemnity (“P&I”) marine insurance. It concerns a well-known P&I entity called ‘British Marine’. British Marine was founded in 1876. It originally comprised a small group of mutual insurance clubs offering Hull insurance to owners of steamers and sailing ships on a mutual basis. It subsequently expanded and migrated into other types of insurance, including P&I, Defence and Collision cover.
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- Today, British Marine remains a key specialist player in the marine insurance market, underwriting P&I and Hull and Machinery (“H&M”) for small and medium sized ships up to about 10,000 GRT. Following de-mutualisation in 2000, British Marine became a fixed-premium insurer. It is the most prominent P&I insurer outside the International Group of P&I Clubs (“IG”). The IG comprises the 13 major P&I Mutuals who together insure some 90% of the world’s tonnage. British Marine’s only significant rival in the niche fixed premium sub-10,000 GRT market is Shipowners Mutual P&I Association (“Shipowners P&I”). British Marine’s history as a mutual meant that it had a loyal following and a high rate of renewals.
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- In 2005 British Marine was acquired by QBE Insurance Group (“QBE Group”). QBE Group is a large insurer and re-insurer which operates in some 49 countries and has over 13,500 employees worldwide. It has its headquarters in Australia. QBE Group’s UK employees are employed by a subsidiary service company, QBE Management Services (UK) Limited (“QBE”), the Claimant in this action. The trading name ‘British Marine’ has been retained and the entity now forms part of the Marine, Energy and Aviation Division of QBE European Operations which employs some 2,800 employees. In June 2010, British Marine moved from its long-established offices at Walsingham House in Seething Lane in the City, where it had been for 25 years, to the headquarters of QBE European Operations at Plantation Place in Fenchurch Street.
The Parties
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- The First, Second and Third Defendants were employed by QBE in the British Marine part of its European Operations. The First and Third Defendants were already employed by British Marine at the time of its acquisition by QBE Group in 2005. The First Defendant, Charles Dymoke, joined British Marine in 2003, became Head of P&I Underwriting in 2005 and was named P&I Portfolio Manager in January 2011. The Second Defendant, John Hearn, joined British Marine in 2006 and was the third most senior underwriter after Mr Dymoke and Tim Harris, the Head of British Marine. The Third Defendant, Steven Kirk, joined British Marine in 2001 and was a senior figure in the Claims Department.
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- The Fourth Defendant, PRO Insurance Solutions Limited (” PRO “), is a large provider of support and resources to insurance and re-insurance operations. It has offices in the USA and Europe, including London. It is a wholly-owned subsidiary of TAWA plc (“TAWA”) which specialises in acquiring run-off portfolios of insurance and re-insurance companies. PRO is the service provider to TAWA.
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- Following their resignations on 28th April 2011, Mr Dymoke and Mr Hearn were put on ‘garden’ leave until the expiry of their respective six-month and three-month employment contract notice periods. Mr Kirk was required to remain working in the Claims Department until the expiry of his three-month employment contract notice period.
Further resignations
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- The trio of resignations of Mr Dymoke, Mr Hearn and Mr Kirk on 28th April 2011 was followed by a further spate of eight resignations from British Marine in the next three months, as follows: (i) James Kent on 27th May 2011; (ii) Kevin Healy on 31st May 2011; (iii) Richard Linacre on 1st June 2011; (iv) James Petrie on 8th June 2011; (v) Vicky Clarke on 11th July 2011; (vi) Gillian Cooper on 12th July 2011; (vii) Shiladitya Bose on 15th July 2011; and (viii) Carl Gill on 4th August 2011. These resignations comprised five people from the P&I Underwriting Department (Mr Kent, Mr Healy, Mr Petrie, Ms Clarke and Ms Cooper) and three from the Claims Department (Mr Linacre, Mr Bose and Mr Gill). All eight employees resigned in order to join with PRO at the new venture being set up with Mr Dymoke, Mr Hearn and Mr Kirk. Mr Healy, however, subsequently had a change of heart and returned to British Marine. Three other British Marine employees who were also approached to join PRO at this time refused and remained at British Marine. They were Matthew Ginman and Carl Glover, both Assistant P&I Underwriters, and Gerald Hamerston, a Senior Claims Adjuster.
First injunction
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- The interim injunction granted by Mr Justice Parker on 25th August 2011 had three effects: (i) it enforced Mr Dymoke’s ‘garden’ leave and duty of good faith and fidelity until final termination of his employment on 27th October 2011; (ii) it enforced of the non-competition covenants of Mr Hearn and Mr Kirk until their expiry on 27th October 2011 and 27th January 2012 respectively; and (iii) it prohibited PRO from inducing a breach of contract by Mr Dymoke, Mr Hearn and Mr Kirk. Mr Justice Parker also gave directions for disclosure and a timetable for a speedy trial.
Disclosure
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- Following Mr Justice Parker’s order for disclosure, the Claimant received some 55 lever arch files of documents from the Defendants. The Claimant said that examination of this disclosure revealed a very different picture from the one which it had hitherto been led to believe, that the First, Second and Third Defendants had simply been head-hunted by the Fourth Defendant. The Claimant’s case was that the disclosure showed substantial unlawful conduct by the Defendants in four respects. First, broad-scale solicitation by Mr Dymoke, Mr Hearn and Mr Kirk. Second, substantial misuse of confidential information belonging to British Marine in order to assist the new venture. Third, solicitation by them of British Marine’s broker customers. Fourth, a failure to disclose to British Marine management any of these activities or the setting up of a rival competitor.
Second injunction
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- The Claimant contended that the Defendants had not told the full story in evidence put before the Court responding to the original injunction application and sought further, wider relief. The Claimant contended that the documents showed that the Defendants had obtained a major ‘springboard’ advantage for their new venture, by reason of months of concealed unlawful conduct and numerous breaches of express duties of subsisting contracts of employment.
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- On 18th October 2011, QBE sought a second interim injunction from Mr Nigel Wilkinson QC, sitting as a Deputy High Court Judge, widening the scope of the previous order to embrace the other resignations and extending the protection until trial on a ‘springboard’ relief basis, restraining the Defendants from what the Claimant said would be shown to be an unfair competitive advantage gained over QBE. Mr Nigel Wilkinson QC noted that the witness statements served by the Defendants appeared to have “shifted significantly” in their content since the disclosure and granted the further interim relief. As stated above, on 28th October 2011 the Court of Appeal dismissed the Defendants’ appeal against Mr Nigel Wilkinson QC’s order.
The parties’ rival contentions
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- The Claimant contended that the resignations were part of a careful, covert and concerted plan, hatched by Mr Dymoke and Mr Hearn whilst still employed by QBE in 2010, to ‘rip the heart out’ of the underwriting and claims handling business of British Marine and transfer it in to a new vehicle of their own. QBE said that the plan was ‘nurtured and covertly advanced’ by Mr Dymoke and Mr Hearn through the solicitation of fellow employees (starting with Mr Kirk) and broker clients and the misuse of confidential information; that the aim was to poach the core underwriting and claims teams at British Marine and pitch for British Marine’s book of business from the new entity; that the launch of the new entity with financial and insurer backing was only possible because of ‘numerous abuses and breaches’ of Mr Dymoke, Mr Hearn and Mr Kirk’s contracts of employment and duties of fidelity and, in Mr Dymoke’s case, fiduciary duties; that PRO were privy to, instrumental and implicated in, much of what was going on; and the new venture, which was originally called “Phoenix” but re-named “Lodestar”, had thereby gained an unlawful ‘head start’. Accordingly, the Claimant sought a final injunction preventing further unlawful conduct until the ‘springboard’ advantage had expired, together with enforcement of the various restrictive covenants and damages.
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- The Defendants contended that the picture painted by the Claimant was unfair and incorrect, both in its detail and as to the overall nature of what had taken place during the period early 2010 to mid 2011. Mr Hearn had long harboured a desire to set up his own marine insurance business. He and Mr Dymoke had had early discussions in 2010 which mutually led them to aspire to set up a new venture together. Mr Hearn had discussed it with Mr Kirk who asked to be involved and they did enlist his assistance. They also used the limited services of Mr Kent at a couple of meetings with third parties. There were only ever vague discussions with other employees. At no stage, however, was there any ‘solicitation’ of employees. There was some use of British Marine’s documentation for the proposed competitive venture but it was limited and it was, in the main, not confidential. In so far as Mr Dymoke and Mr Hearn did cross any permissible line, such transgressions were minor and could not possibly justify the ‘springboard’ relief sought. The reality was that morale at British Marine was low in 2010 and such was the status and following of Mr Dymoke, Mr Hearn and Mr Kirk that their resignations from British Marine on 28th April 2010 inevitably triggered the exodus from British Marine of the other employees which in fact occurred in the next three months. In so far as there were any breaches by way of non-disclosure to management, the consequence would simply have been that Mr Dymoke and Mr Hearn would have been put on ‘garden’ leave earlier and there would have been an earlier start up.
THE EMPLOYMENT CONTRACTS
First Defendant: Charles Dymoke
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- Mr Dymoke joined British Marine in 2003. He was first appointed as Co-Head of the P&I Underwriting Department. On retirement of his co-head in 2005, Mr Dymoke became solely responsible for P&I at British Marine. His title in 2011 was ‘P&I Portfolio Manager’. All the P&I underwriters reported to him. He in turn reported to the Head of British Marine, Tim Harris, who in turn reported to the Chief Underwriting Officer, Mr Colin O’Farrell. Mr Dymoke was obliged to give six months’ notice prior to termination, during which period he was placed on ‘garden’ leave. His employment ended on 27th October 2011.
(a) Under Clause 3.1 Mr Dymoke agreed diligently and faithfully to perform such managerial, administrative and other duties as were associated with his role or such other duties as may reasonably be assigned to him. He also undertook to use his best endeavours to promote and protect the interests of the Group.
(b) Under Clause 3.2, Mr Dymoke agreed that he would “fully and properly disclose to the Board and the Managing Director all of the affairs of the Group of which he is aware“.
(c) Under Clause 3.4. he agreed not to be directly or indirectly interested in any manner in other business except for two limited exceptions which do not apply in the present case;
(d) By clause 12.1 he agreed not to make use of or divulge to any person, “and to use his best endeavours to prevent the use, publication or disclosure of” any information of a confidential or secret nature as defined (without limitation of time, see clause 12.3);
(e) Clause 15.4 of Mr Dymoke’s contract of employment provided:
“The Company may, at its absolute discretion, require the executive not to attend his place of work for the duration of any notice period and may relieve the Executive of some or all of his contractual duties during that period (“Garden Leave”). All of the Executive’s rights, duties and obligations under the agreement shall continue to apply during any period of Garden Leave.“
(f) Clause 16 contained various post-employment protective covenants including the non-solicitation or enticement of employees for a period of 12 months from the date giving notice of termination of employment, i.e. until 28th April 2012 (see further below).
Fiduciary Duty
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- There was an issue as to whether, in addition to his express contractual duties and duties of good faith and fidelity, Mr Dymoke also owed a fiduciary duty to the Claimant. The test as to the existence of fiduciary duties in the employment sphere was succinctly stated by Elias J. in Nottingham University v Fishel [2000] ICR 1461 at 1493E-J as follows:
“… in determining whether a fiduciary relationship arises in the context of an employment relationship, it is necessary to identify with care the particular duties undertaken by the employee, and to ask whether in all the circumstances he has placed himself in a position where he must act solely in the interests of his employer.”
(Cited and applied by Burton J. in PMC Holdings Limited v Smith and others (Unreported, 23 April 2002).)
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- Mr Dymoke held a senior and important position in British Marine. He played a pivotal role in the P&I part of the business. He was responsible for all the P&I underwriters, including Mr Hearn. He was equivalent to a desk head. Although not a statutory director of the Claimant, he had been a statutory director of the company which was the original employer of the British Marine staff, British Marine Management Ltd. P&I had been divided into Syndicates A and B but these were merged under Mr Dymoke. He was the most senior executive within the British Marine Business after the Head of British Marine, Mr Harris, and its Chairman, Mr Robert Johnston.
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- Mr Dymoke also had a high level of trust placed in him by the Claimant. He was the sole P&I representative on the Divisional Management Committee. As such, he was given access to sensitive business information, quarterly accounts, financial performance information, claims data and information relating to broker relationships and performance against targets. He was also involved in developing and implementing QBE’s strategic business plans.
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- For all these reasons, in my judgment, Mr Dymoke did owe a fiduciary duty to the Claimant in the context of his contract of his employment. In coming to this conclusion, I have put to one side Mr Dymoke’s alleged admission to this effect at a meeting with Mr O’Farrell on 6th April 2010 (which was denied by him).
Summary of Mr Dymoke’s duties
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- Accordingly, therefore, in my judgment, Mr Dymoke owed three principal duties to the Claimant. First, a duty to act in good faith in the best interests of the Claimant, which included, as an incidence thereof, a positive duty to inform the Claimant in a timely manner of any activity, actual or threatened, which might damage the Claimant’s interests. Second, a duty to use his best endeavours to promote and protect the interests of the Group of companies of which the Claimant formed part. Third, a duty not to place himself in a position in which his interests, or any duties owed by him to any third party, might conflict with the interests or duties owed by him to the Claimant;
Second Defendant – John Hearn
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- Mr Hearn joined British Marine in 2006 as a senior underwriter in the P&I Division of British Marine. He was the next most senior underwriter under Mr Dymoke. He resigned with Mr Dymoke and Mr Kirk on 28th April 2011. He was required to give three months’ notice of termination, during which period he was placed on ‘garden’ leave. His employment ended on 27th July 2011.
(a) Under clause 3(c), an obligation inter alia to use all reasonable endeavours to promote the interests and reputation of the Claimant and other companies in the corporate group;
(b) Under Clause 3(d) to “…keep the Company fully informed of your conduct of the business, finances or affairs of the Company, and any Group Company or any division or Syndicate in a prompt and timely manner.” (Mr Hearn accepted that this included an express reporting obligation in relation to his conduct of the business, finances or affairs of the Company).
(c) By clause 4, it was provided:
“(a) You must devote the whole of your time, attention and abilities during your hours of work for the Company to your duties for the Company. You may not, under any circumstances, whether directly or indirectly, undertake any other duties, of whatever kind, during your hours of work for the Company.
(b) You may not, without the prior written consent of the Company engage, whether directly or indirectly, in any business or employment which is similar to or in any way connected or competitive with the business of the Company outside your hours of work for the Company.“
Clause 4 also obliged Mr Hearn to bring this clause to the attention of any future employer or contractor.
(d) By clause 8, Mr Hearn agreed not to:
“(a) disclose or use for purposes unconnected with your Employment any Confidential Information which is imparted or otherwise made available to you or learnt by you whilst in Employment to any unauthorised person…”;
(b) copy or reproduce in any form… or allow others access to copy or reproduce any documents… on which Confidential Information may from time to time be recorded or referred to; or
(c) remove from the Company or any Group Company’s premises any Documents.”
Third Defendant – Steven Kirk
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- Mr Kirk was employed in British Marine’s Claims Department, latterly as Claims Service Manager. He reported to the Claims Manager, Paul Sheppard, who in turn reported to the Director of Claims, Gary Crowley. Mr Kirk was the most technically able within the claims team and dealt with the larger and more complex claims. Other members of the team would come to him for advice.
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- Mr Kirk also resigned on 28th April 2011. Unlike Mr Dymoke and Mr Hearn, however, he was not placed on ‘garden’ leave but required by QBE to remain working until the expiry of his three month notice period on 27th July 2011. QBE now says that it would not have done so if it had known of the true extent of Mr Kirk’s prior activities with Mr Dymoke and Mr Hearn.
Post-termination restraints
(a) Non-competition and other covenants
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- Mr Hearn, Mr Kirk, Mr Kent, Mr Linacre, Mr Petrie, Ms Clarke, Ms Cooper and Mr Gill, were subject to post-termination restraints in the form of standard covenants covering (i) non-competition, (ii) non-dealing with customers, (iii) non-solicitation of customers, (iv) non-enticement of employees and (v) non-representation as follows:
“Restrictions after Termination of Employment (only for staff on 3 or 6 months notice)
(a) Since you have obtained and are likely to obtain Confidential Information relating to the business of the Company or any Group Company and personal knowledge and influence concerning clients and customers of the Company or any Group Company in the course of your employment with the Company, you hereby agree with the Company that you will not during your Employment or:-
(i) For a period of 6 months from the Termination Date either on your own account or for any person, firm or company directly or indirectly be employed or engaged anywhere within the United Kingdom in any capacity involving substantially similar duties for any other person, firm or company in competition with the Company or any Group Company without the prior written consent of the Company; or
(ii) For a period of 6 months from the Termination Date either on your own account or for any person, firm or company directly or indirectly have any dealings in relation to the supply of goods or services dealt with by the Company or any Group Company for whom you have provided services under your contract of employment with any customer (including but not limited to any insured, broker and/or intermediary, whether actual or prospective) of the Company or Group company with whom you dealt, in the 12 months prior to the Termination Date; or
(iii) For a period of 6 months from the Termination Date either on your own account or for any person, firm or company directly or indirectly in relation to the supply of goods or services dealt with by the Company or any Group Company for whom you have been provided services under your contract of employment solicit or endeavour to solicit or entice the custom of any customer (including but not limited to any insured, broker and/or intermediary, whether actual or prospective) of the Company or any Group Company with whom you dealt in the 12 months prior to the Termination Date; or
(iv) For a period of 6 months from the Termination Date either on your own account or for any person, firm or company directly or indirectly solicit or entice away or endeavour to solicit or entice away from the Company or any Group Company any person who was an agent, consultant or Key Employee during the 12 months prior to the Termination Date with whom you had personal contact or dealings in the 12 months prior to the Termination Date; or
(v) From the Termination Date will not in the course of carrying on any trade or business or for the purpose of carrying on or retaining any business or custom represent or otherwise indicate any present or past association with the Company or any Group company.”
Mr Dymoke’s post-termination restraints
“16.1 Subject to Clause 15.2, the Executive will not within the period of 12 months after the date on which notice of termination of his employment is given by or to the Executive, whether directly or indirectly and whether alone or with any other person, either as a principal, shareholder, director, employee, agent, consultant or otherwise:
(a) interfere with, tender for, canvas, solicit or endeavour to entice away from the Company the business of any person who at the date of termination of the Executive’s employment or during the 12 months immediately preceding that date was, to the knowledge of the Executive, a customer, client or agent of, or supplier to, or had dealings with the Company;
(b) supply, carry out, undertake or provide any product or any service similar to those with which the Executive was concerned during the period of 12 months immediately preceding the termination of the Executive’s employment to or for any person who, at the date of the termination of the Executive’s employment or during the period of 12 months immediately preceding that date was a customer, client or agent of, or supplier to, or was in the habit of dealing with the Company;
(c) be employed by, or enter into partnership, interfere with, solicit or endeavour to entice away the employment of, or employ or attempt to employ or negotiate or arrange the employment or engagement by any other person of, any person who to the Executive’s knowledge was, at the date of the termination of the executive’s employment, or in the period of 12 months immediately preceding that date had been a senior employee of the Company and with whom the Executive had personal dealings during that period;
(d) solicit, interfere with, tender for or endeavour to entice away from the Company any contract, project or business, or renewal of any of them, carried on by the Company which is currently in progress at the date of the termination of the Executive’s employment or was in the process of negotiation at that date and in respect of which the Executive had contact with any customer, client or agent of or supplier to the Company at any time during the period of 12 months immediately preceding the termination of the Executive’s employment.
16.2 None of the restrictions contained herein shall prohibit any activities by the Executive which are not in direct or indirect competition with any business being carried on by the Company at the date of termination of the Executive’s employment.”
-
- It will be seen that Mr Dymoke’s post-termination restrictions did not include a non-competition covenant per se. His contract was in different form since it had been entered into before the acquisition of British Marine by QBE and then transferred to QBE under TUPE. He was subject, however, to a six-month notice period and 12 month restrictions from the date of giving notice. This meant that the Claimant was entitled to put him on six months ‘garden’ leave until 28th October 2011, and to enforce his above post-termination restrictions until 28th April 2012. In practice, therefore, the post-termination restrictions on Mr Dymoke were even more extensive than his more junior colleagues.
STRUCTURE OF BRITISH MARINE
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- I now set out the overall structure of the British Marine underwriting and claims departments and the relative positions of Mr Dymoke, Mr Hearn and Mr Kirk and other personnel who resigned. This is best explained by the two organograms below. The Chairman of British Marine was Robert Johnson. The Chief Underwriting Officer was Colin O’Farrell.
Underwriting department
Claims department
THE FACTS
Disclosure all important
-
- This is a case in which disclosure has been all important. The 55 bundles of documents received by the Claimant were whittled down to some 16 lever-arch files before the Court, comprising 7,000 pages of documents. Much of this documentation comprised contemporaneous exchanges between the Defendants themselves. It is evident that Mr Dymoke, Mr Hearn and Mr Kirk did not envisage that many of their candid exchanges would see the light of day. These contemporaneous documents tell their own story. It is a story which accords closely with the Claimant’s case. For convenience and ease of reference, I refer to documents by their page number in th Trial Bundle, e.g. (1234).
Witnesses
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- Without exception, I preferred the evidence of the Claimant’s witnesses to that of the Defendants’ witnesses. The Defendants’ witnesses’ evidence, for the most part, flew in the face of the contemporaneous documents. Their explanations were generally improbable, disingenuous or simply risible. It is clear that, having resigned and burnt their boats, the Defendants’ main witnesses gave evidence to suit their case. They had no answer, however, to the version of events that emerged clearly from the contemporaneous documents. For the Claimant, Mr O’Farrell, Mr Healy and Mr Ginman were impressive witnesses. The latter two were frank about their early ambition to be part of the new venture and their subsequent change of heart.
-
- Cases such as the present are necessarily fact sensitive and fact dense, as the authorities make clear. It is necessary, therefore, for the Court to embark on a careful and detailed analysis of the evidence. In carrying out this exercise, it is useful to bear in mind Goff L.J.’s guidance in The Ocean Frost [1985] 1 Lloyd’s Rep 1 at 57 as the importance of contemporaneous documents when considering the credibility of witnesses’ evidence. It is also useful to have in mind Lord Bingham’s guidance in “The Judge as Juror: The Judicial Determination of Factual Issues” (“The Business of Judging”, Oxford 2000, pp. 3ff; Current Legal Problems, Vol. 38 Stevens & Sons Ltd 1985 p 1 – 27).
First half of 2010 – Mr Hearn approached Mr Dymoke
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- At some stage during the first half of 2010, discussions began between Mr Hearn and Mr Dymoke about setting up a new P&I venture together. Mr Hearn first approached Mr Dymoke with the idea. Mr Hearn had long harboured an ambition to run his own P&I business. He had been involved in a previous start up which had gone into run-off, namely Markel P&I (formerly Terra Nova). He remained determined to fulfil his dream and try again when the time was right. He described himself as a “calculated risk taker”.
-
- Mr Dymoke said in evidence that he was not sure how the discussions with Mr Hearn first came about, but, since he and Mr Hearn worked opposite each other, it was perfectly possible for them both suddenly to realise they wanted to start up a new business together without any solicitation on either part. This sort of telepathy, however, seems unlikely, and one particular piece of evidence points strongly to Mr Hearn taking the initiative and soliciting Mr Dymoke. In May 2010, Mr Hearn wrote to Mr Dymoke about their respective salaries and status at the new venture, praising Mr Dymoke’s abilities and saying: “This is why I singled you out as the person I would want to partner in a venture such as this.” (2315). It was not an immaculate conception.
-
- Mr Healy said that he had known Mr Hearn for many years and knew of Mr Hearn’s longstanding ambition “to do his own thing” one day. I accept Mr Healy’s evidence that he also had had various conversations with Mr Hearn when they them were out of the office fetching a sandwich or having a cigarette, and from May 2010 onwards believed that it was only a matter of time before Mr Hearn started a new venture. Mr Healy himself told Mr Hearn that he would be interested in joining such a venture if there was a sufficient financial incentive and stability.
-
- The discussions between Mr Dymoke and Mr Hearn probably began in earnest around the time of the office move from Walsingham House to Plantation Place in June 2010. There was much grumbling around this time about the move and Mr Dymoke had made his disapproval clear. From this moment onwards, in my judgment, both Mr Hearn and Mr Dymoke were in breach of their express and implied obligations under their contracts of employment: Mr Hearn for solicitation of another employee and breach of his duty of fidelity; Mr Dymoke for not reporting the approach to his superiors and for breach of his fiduciary duty. Their breaches were compounded by their subsequent unlawful covert activities over the next 12 months.
-
- Mr Dymoke admitted that discussions continued between them in what he described as “very vague terms” until October 2010. Their ensuing discussions were, however, anything but vague. Far from being a mere ‘pipe dream’ around the office water cooler, they quickly developed into detailed private discussions about a firm project which they were determined should rapidly take shape. And this, indeed, is what happened.
-
- Leading Counsel for the Defendants, Mr Selwyn Bloch QC submitted that it would not necessarily have been a breach for a more junior employee like Mr Hearn to solicit a more senior employee like Mr Dymoke. I disagree. Whilst the reverse is more normal, there is nothing in any of the authorities to suggest that unlawful solicitation can only occur where there is an authority gradient. It all depends on the facts of each particular case. In this case, it was Mr Hearn who first approached Mr Dymoke with the idea (see above).
‘Critical mass’ required
-
- Mr Hearn and Mr Dymoke were all too aware that previous attempts at P&I start-ups had not been a success. Indeed, Mr Hearn had himself already had personal experience of a failed start-up (see above). There were some competitors to British Marine in the P&I Fixed Premium market but they lacked size and capital backing. As the Phoenix Business Plan, which Mr Hearn and Mr Dymoke subsequently drafted, put it:
“[W]hilst there are a number of other small ships P&I providers offering basic cover none can match the limits of liability ([British Marine] USD500,000,000 and [Shipowners P&I] USD7,400,000,000) and service offered by [British Marine] and [Shipowners P&I]. In fact most alternatives provide limits of USD25,000,00 and comprise of 6-7 staff!” (1694)
-
- Mr Hearn and Mr Dymoke recognised, from the outset, that ‘critical mass’ was vital if a new venture in the small ships P&I fixed premium world was to have any chance of success. Critical mass meant three things in this context. First, sufficient numbers of experienced and suitably qualified personnel to provide the right standard of service to compete with the two established players on both the underwriting and claims handling side. Second, a sufficient injection of initial capital to enable the start up to be funded properly from the outset (in the event, PRO were prepared to provide US$3.1 million by way of start-up costs). Third, sufficient financial backing by way of security to enable the new venture to offer to match the limits of liability of at least British Marine (in the event, US$100 million was secured by Royal Sun Alliance as the first line, and a further four lines of US$100 million were sought to take the total figure to US$500 million in order to match British Marine’s figure).
-
- Mr Hearn and Mr Dymoke also recognised that these three elements were inter-dependent. Security providers and venture capital providers would be reluctant to put up the requisite security and capital unless and until they were satisfied that the right teams of underwriters and claims personnel were available, amenable and likely to be recruited to staff the new venture. Equally, employees of the right calibre and experience would naturally be reluctant to leave their existing employment to join a new venture unless and until they were sure it was going to be viable and well-provisioned in terms of both security and capital. It was going to be crucial to recruit impressive underwriting and claims teams in order to have credibility with the right financial backers and vice-versa.
Twin-track approach
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- These considerations drove their thinking and planning for the new venture. Essentially, they developed a twin-track approach. First, preparing what Mr Dymoke called a “powerful case” by way of a business plan to persuade prospective backers to put up the requisite security and seed capital for the venture. This involved essentially looking outwards, i.e. to capital and security providers such as PRO and Royal Sun Alliance (“RSA”). Second, meanwhile, approaching the best people to make up the requisite underwriting and persuading them to come on board the venture. This involved essentially looking inwards, i.e. to their own Underwriting and Claims Departments.
June 2010 – move from Walsingham House and morale
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- The middle of 2010 was a fertile time for such a project. In June 2010 British Marine were forced to leave their old offices at Walsingham House in the City where they had happily been for many years, and move to QBE’s large offices at Plantation Place in June 2010. The move was not universally popular amongst British Marine employees and morale undoubtedly suffered. Plantation Place itself drew such epithets as “the Glass Palace” and “Azkaban” (viz. the high-security wizard prison in Harry Potter). As mentioned above, Mr Dymoke, in particular, was against the move. He made his views known and told people around the office that morale was “at an all-time low”. There was also some disgruntlement in some quarters at this time regarding remuneration packages falling behind what other companies were offering, problems with career progression and the fact of being taken over by a large, impersonal organisation like QBE. Mr Dymoke’s influence on office morale at the time was more baleful than beneficial. Low morale would suit his and Mr Hearn’s subsequent purposes.
August to September 2010 – first steps
-
- The first documented instance of Mr Hearn and Mr Dymoke taking active steps to explore the project is on 16th August 2010 when Mr Hearn sought advice from Robin Stow and Barry Buchan at the insurance brokers, Neuman Martin and Buchan (“NMB”), as to general figures for setting up a business and received some ball park figures from NMB (1683-1687). There is also some evidence of Mr Dymoke making some sort of initial approach to a third party around this time to discuss the raising of capital for a new business (2892).
October 2010 – Mr Kirk approached
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- A new P&I venture needed not just an underwriting team but also a credible claims team to handle the claims arising out of the business underwritten by the underwriters. Mr Dymoke and Mr Hearn particularly wanted Mr Kirk on board at an early stage because he could bring the British Marine claims team with him. Thus it was in October 2010 that Mr Dymoke approached Mr Kirk directly and invited him to become involved in putting together the plan for the new start up. (Much later, in July 2011, Mr Dymoke and Mr Hearn became concerned that Mr Kirk might “do the dirty” on them and decide at the last minute to stay at British Marine, and they considered recruiting Mr Hearn’s wife instead).
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- The pre-disclosure letter from the Defendants’ solicitors, Messrs Morgan Lewis, to the Claimant’s solicitors Mayer Brown dated 17th June 2011 stated that Mr Dymoke and Mr Hearn first spoke to Mr Kirk about their new venture in January 2011 (609). This was incorrect. It is clear (and now admitted) that Mr Kirk was approached four months earlier in October 2010.
October 2010 – the draft Staff Table
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- On 11th October 2010, Mr Dymoke e-mailed to Mr Hearn at his wife’s e-mail address what he described as a “first stab” of a table comprising a list of staff and projected salary and travel and entertainment costs (“the Staff Table”) (1980). It is an important and illuminating document. The Staff Table was headed “Project Phoenix”. It had four columns with the following headings left to right: “Underwriting Staff”, “Assistants”, “Claims” and “Others”. Each heading had underneath it a list of initials divided horizontally into three phases: “Phase 1”, “Phase 2” and “Phase 3” with proposed salaries and estimated costs. I set out below for convenience a simplified version of the Staff Table:
Project Phoenix | ||||
Underwriting | Assistants | Claims | Others | |
Phase 1 | CD JH MH |
CG JP |
SK CG |
LD |
Phase 2 | DM DB |
MG | GH SB |
|
Phase 3 | KH JK |
RL |
-
- Of the 16 sets of initials listed, it was common ground that 14 corresponded to then current employees of British Marine: “CD” (Charles Dymoke), “JH” (John Hearn), “DB” (David Bamberger), “KH” (Kevin Healy), “JK” (James Kent), “CG” underwriting (Carl Glover), “CG” claims (Carl Gill), “JP” (James Petrie), “MG” (Matthew Ginman), “SK” (Steven Kirk), “GH” (Gerald Hamerston) “SB” (Shiladitya Bose), “RL” (Richard Linacre) and “LD” (Laura Davies). It was also common ground that the other two sets of initials, “MH” and “DM”, related respectively to Matthew Hunt, who had resigned from British Marine in October 2010 to join Shipowners P&I, and David Mahoney who was an employee of NMB.
Project Phoenix | ||||
Underwriting | Assistants | Claims | Others | |
Phase 1 | Charles Dymoke John Hearn Matthew Hunt |
Carl Glover James Petrie |
Stephen Kirk Carl Gill |
Laura Davies |
Phase 2 | David Mahoney David Bamberger |
Matthew Ginman | Gerald Hamerston Shiladitya Bose |
|
Phase 3 | Kevin Healy James Kent |
Richard Linacre |
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- On the face of it, the Staff Table represented a very significant footprint on British Marine’s P&I underwriting and claims operations. On the P&I underwriting side (i.e. the first two columns), it listed Mr Dymoke, the effective head of the P&I underwriting, together with four out of six Underwriters and three out of seven Assistant Underwriters. The only senior Underwriters not on the list were Mr Oakley and Mr Harris. On the claims side (i.e. the third column), it listed the three most senior P&I claims people, Mr Kirk (Claims Services Manager), Mr Gill (Assistant Claims Manager), and Mr Hamerston (Senior Claims Adjuster), together with two out of five P&I Claims Adjusters. Laura Davies (in the fourth column) was Mr Dymoke’s secretary whom he shared with Mr Harris.
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- The Claimant contended that the Staff Table was, in effect, a staff recruitment plan that Mr Dymoke and Mr Hearn were to put into effect over the coming months. Mr Dymoke said that the Staff Table was merely “indicative” of the kind of staff they would like to employ and the sort of costs they were likely to incur and it was easier to work this out using an existing team they knew.
Staff Table was a ‘target’ list
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- I reject Mr Dymoke’s explanations for the draft Staff Table. The draft Staff Table was quite clearly the first stab at a ‘target’ list. It identified real people by their initials. It was, in reality, a shopping list of the actual key staff in British Marine’s P&I Underwriting Department and Claims Departments that Mr Dymoke and Mr Hearn ideally wanted to take with them to form their new venture if possible. It was not merely ‘indicative’ of the type and levels of staff. It was a careful, tiered and time-phased blueprint of the precise British Marine employees they were going to approach and entice. And so it proved.
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- Mr Dymoke and Mr Hearn’s own contemporaneous e-mail exchanges are redolent with indications that they regarded the individuals listed as potential recruits to be targeted. In Mr Dymoke’s covering e-mail dated 11th October 2010, he said “I have added JK”, clearly referring to Mr Kent himself. In Mr Hearn’s response on 14th October 2010, he said a less expensive alternative might have to be considered because “CG” might not be “good enough value for the price” (1688). “CG” was clearly a reference to Mr Gill himself. The salaries indicated were what they were expecting to pay themselves and their colleagues who moved with them. On 9th November 2010 Mr Dymoke e-mailed Mr Hearn slightly revised figures for the Table stating: “It may be that you and I are being greedy but the fact remains we are the leaders and we are taking the risk and responsibility.”
October 2010 – The “Phoenix” Business Plan
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- It was necessary for Mr Dymoke and Mr Hearn to prepare a business plan in order to showcase to potential backers of the project. Substantial financial backing was required in the form of venture capital and security. In addition, a ‘platform’ provider was required to help run the business and provide logistical support. This is how PRO and the Royal Sun Alliance in due course came on the scene.
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- On 14th October 2010 Mr Hearn e-mailed to Mr Dymoke a draft business plan entitled “Project Phoenix” (1688). Mr Hearn explained it was very much in its formulative stages and asked for Mr Dymoke’s comments. Mr Hearn’s covering e-mails are revealing as to his actual thoughts and intentions when drafting. He candidly explained to Mr Dymoke: (i) He had not dealt explicitly with the effect Phoenix would have on British Marine “though it’s there reading between the lines”. (ii) He had left out the exit strategy and start-up timing since he thought this was something“better discussed face-to-face”. (iii) He had not mentioned the names of the underwriters and claims people that Phoenix would boast, but he had alluded to who they were as he thought it was important that“RSA know who they are dealing with, where they are currently employed and the [Gross Written Premium] for individuals concerned in order to get a feel for the potential…”. (iv) Appendix A, ‘geographical spread and vessel type by gross tonnage’, had been taken straight from British Marine’s material which did not need to be changed “as the make up of the book will be similar”. (v) Appendix B, ‘5 year business plan’, was based on British Marine’s current Gross Written Premium (“GWP”) and 2010 Business Plan (Version 35). (vi) His premium income figures were based on “each underwriter maintaining 50% of their existing book at 75% of it’s value” because Phoenix “may need to be 25% cheaper than the current price in order to obtain the business.”
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- The Executive Summary to the draft Phoenix Business Plan stated that there was a need for an alternative in the existing small ships P&I market. It was currently dominated by two specialist players, British Marine and Shipowners P&I. It stated that Phoenix would offer its clients key advantages including “Decades of Underwriting and Claims handling experience”, “USD 500,000,000 limit of liability” and “access to over 300 Correspondents worldwide”. Under the heading “Phoenix Model” it stated that it planned to establish itself as “market leader” within 5 years of start up, that business would be sourced on “a global scale” with access via “a worldwide network of brokers”. The Executive Summary continued: “Phoenix Underwriting have over 100 years P&I experience between them and have built up a global network of broking contacts, numerous who have already guaranteed their support for Phoenix.”
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- On the second page, under the heading “Outline of Phoenix’s origins and teams”, the draft stated: “Phoenix staff will mostly comprise of current/ previous BM and SOP employees and will feature the following:…”. There then followed a list of seven underwriters numbered “Underwriter 1” to “Underwriter 7”, each with precise details of their years of experience and GWP. The cumulative P&I underwriting experience of the first five underwriters was 103 years between them. The sixth had 40 years marine insurance underwriting experience. The seventh had 30 years experience of P&I broking. Footnotes stated Underwriter 2 would be free of any contractual commitment and able to start underwriting “from 4th March 2011″ and Underwriter 3 would be able to start underwriting “with immediate effect”. There then followed the words: “CLAIMS PROFILES TO BE PROVIDED” (see further below). The underwriters numbered 1 to 7 were not named but, as Mr Hearn explained in his covering e-mail to Mr Dymoke, were identifiable by their details. They were: (1) Mr Dymoke, (2) Mr Hearn, (3) Mr Healy, (4) Mr Hunt, (5) Mr Kent, (6) Mr Bamberger and (7) Mr Mahoney. All were current British Marine Underwriters, save for Mr Hunt who had already resigned and Mr Mahoney from NMB.
-
- Under the heading “Competition”, the draft said that none of the current alternatives matched British Marine or Shipowers P&I’s limits of liability or service and most had low limits and few staff. It said Phoenix would offer “[British Marine/ Shipowers P&I] style service, flexible cover and limits of USD500,000,000 backed by A rated security”. The figure of US$500,000,000 matched British Marine’s limit of liability.
Addition of Claims team details
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- Mr Kirk was quick to give his assistance with preparation of the Business Plan. On Saturday 28th October 2010, he e-mailed Mr Dymoke from holiday in Polzeath with curriculum vitae details of Mr Bose and Mr Linacre and suggested Mr Dymoke look at the QBE website for details of “GH, CG and SK” (i.e. Mr Hamerston, Mr Gill and Mr Kirk). He added “I will revert with Norsul and Riverdance tomorrow” (1744). This was a reference to two of the most major claims that British Marine had handled and of which he had details.
The Phoenix Business Plan – second draft
“Phoenix Underwriting have over 100 years P&I experience between them and have built up a global network of broking contacts. It is thought all will support Phoenix. However, discussions with only the phase 1 underwriters and claims staff have been held. They have already guaranteed their support for Phoenix. Phases 2&3 staff have not been specifically approached due to protective covenants but have hinted their support.” (amendments underlined)
The Phoenix Business Plan – third draft
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- On 7th November 2010 Mr Hearn e-mailed Mr Dymoke a third draft of the Phoenix Business Plan in which he deleted the passage which Mr Dymoke had added (see the underlining immediately above) with the explanation: “Charles[,] I’ve removed this part as I don’t think RSA need to know this and if they do we can discuss this face to face”. He also deleted the reference to Underwriter 7 because, as he explained in his covering e-mail, he had not discussed anything with Mr Mahoney at that stage and Mr Stow might ask questions. It should be noted that at a later stage Mr Mahoney re-appeared on the list.
-
- On 19th November 2010 Mr Hearn e-mailed Mr Dymoke a further version of the Phoenix Business Plan asking him to find and fill various figures and details. In relation to Appendix D he asked: “Charles – I couldn’t figure out how to obtain this information without raising suspicion. Can you lay your hands on the info?”. The Phoenix Business plan was populated with information and figures from British Marine’s records.
Time critical plan for mass exit
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- On the same day, 19th November 2010, Mr Hearn e-mailed to Mr Stow a timetable setting out precise details of when the employees should resign their jobs, when they would be “free of contractual obligations”, and when they could start with the new venture in order to achieve a projected 1st March 2011 start. It read:
“MAR Underwriters 4 & 7 plus secretary start
APR Underwriters 1, 2, 3, 5 and 6, all UW assistants & claims team resign
JUL Underwriters 2, 3, 5 and 6 plus all UW assistants & claims team start
OCT Underwriter 1 starts
JAN Underwriters 2, 3, 5 & 6 free of contractual obligations”
-
- It was a structured and time-critical plan whereby two Underwriters should resign in March 2011 (“Underwriters 4 & 7”, i.e. Mr Hunt and Mr Mahoney); and then all of the British Marine employees (“Underwriters 1, 2, 3, 5 and 6, all UW assistants & claims team”) should resign in April 2011. This was very much a “mass exit” approach. When this e-mail was put to Mr Dymoke during cross-examination, he merely said that he ‘hoped’ that the team identified in that e-mail would work together again. His and Mr Hearn’s plan was, however clear: to strip out the lion’s share of British Marine’s underwriting and claims-handling ability which would have substantially destabilised British Marine’s ability to operate in the market.
“Fantasy football”
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- Mr Hearn was asked about the list of underwriters and claims people in the Business Plan who were clearly identifiable as British Marine employees. His explanation was colourful but risible. He said he took the view that it was easier to use real names in the list of underwriters and claims people but it was “a bit like a fantasy football or fantasy cricket, fantasy rugby, where you create a team using real people but the team, in fact, is fictional”. He denied that it was his ideal team and said the lists were “just a reference”.
-
- I reject Mr Hearn’s evidence that he and Mr Dymoke were merely playing “fantasy football”. This was a real game in which they had real players in mind to target (except they were not lawfully on the transfer market). His explanation failed to account for the fact that it was Mr Dymoke who first started using real names in the draft Staff Table (see above) and that he had told Mr Dymoke that he had been careful merely to ‘allude’ to the employees whom the new venture would “boast” (see above). Furthermore page 2 of the Business Plan expressly admitted “Phoenix staff will mostly comprise of current/ previous [British Marine] and [Shipowners P&I] employees and will feature the following:…”.
Co-incidences
-
- The case is, moreover, full of co-incidences which are only rationally explainable on the basis that the draft Staff List and draft Business Plan lists of British Marine underwriters and claims handlers were always intended by the Defendants to be the intended targets to be enticed away from British Marine. I highlight three such co-incidences in particular.
-
- Second, it was no co-incidence that over the next few months all those listed on the Staff Table and Business Plan were variously approached, tapped on the shoulder, or spoken to by Mr Dymoke, Mr Hearn and/or Mr Kirk, about the new venture and encouraged and asked to be ready to resign from British Marine and join when the time came (see further below).
-
- Third, it was no co-incidence that every one of the 16 people on the list was contacted by Mr Leo Gibbons by the head hunters TPD employed by PRO and offered employment in the new venture, except the secretary, Ms Davies. By contrast, those not on the list but in prominent positions at British Marine, e.g. Mr Oakley and Mr Harris, were never contacted by Mr Gibbons and never offered jobs at the new venture (see further below).
December 2010 – Phoenix Business Plan given to PRO
-
- On 13th December, after further drafting and refining, a full final version of the Phoenix Business plan was presented to PRO and its parent company, TAWA. It was a substantial and impressive document. It ran to some 24 pages and included several Appendices (1877 ff.). Under the heading “Phoenix Management Structure” it set out lists of “Underwriters 1-6” and “Claims handlers 1-5” with several notes at the bottom of the page. One read: “The first 6 underwriters are currently responsible for writing over USD100m gross written premium“. This was plainly a reference to real, not imaginary, underwriters, i.e. the five British Marine underwriters who were clearly identifiable from their details, plus Mr Hunt. A second note referred to underwriter 4 being as being free of any contractual obligations and “can start underwriting from 4th March 2011″. This was clearly a reference to Mr Hunt.
Underwriting | Claims |
Charles Dymoke John Hearn Kevin Healy Matthew Hunt James Kent Carl Glover James Petrie Matthew Ginman David Bamberger |
Stephen Kirk Carl Gill Gerald Hamerston Richard Linacre Shiladitya Bose |
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- The following points also should be noted about the Phoenix Business Plan submitted to TAWA. (i) The references to “historic business performance” were plainly references to British Marine business, and the figures used were figures solely pertaining to the P&I part of British Marine which were not in the public domain, and so there had clearly been resort to confidential information to draw this up. (ii) Under the heading “Coverage”, the terms and conditions relied upon were expressed to be the British Marine terms and conditions (1888). (iii) “Appendix A – Five year underwriting Forecast” was based on the business forecast for British Marine. (iv) “Appendix B – Split of Account by Vessel and Region” matched exactly or almost exactly the British Marine figures. (v) The Phoenix Business Plan projections were for $32 million in new business in the first year of operation. This was clearly calculated on the basis, and plainly only attainable if, departing British Marine employees took their respective books with them and retained 50% of the book at 75% of the premium. In my judgment, the Defendants’ witnesses explanation that $32 million could be achieved on new business alone was unrealistic. I accept Mr Healy’s evidence that the Defendants’ figures did not stack up and the success of the new venture depended on the demise of British Marine.
-
- The Defendants’ witnesses had no credible explanation for the various drafts of the “Project Phoenix” Business Plan or the co-incidences listed above. The Business Plan was, on its face, plainly aimed at recruiting actual British Marine employees with their respective books and GWP and (as it expressly stated) “targeting” British Marine’s business. This is what the Defendants then set about meticulously putting into effect.
‘Three bells on the fruit machine’
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- On 13th November 2010, Mr Hearn and Mr Healy had dinner together at the Boat Yard Restaurant in Leigh-on-Sea, together with their respective wives. I accept Mr Healy’s recollection of this dinner. He said that Mr Hearn had said that, if British Marine were left with limited staff, Mr O’Farrell might eventually look to ‘strike a deal’ with their new venture on the book of business. Mr Hearn described this as a “three bells on the fruit machine” scenario. Mr Healy also said that they joked over dinner about “the size of our villas and being next door to each other“. Mr Hearn denies saying any of this, but it has the ring of truth about it.
-
- I also accept Mr Healy’s evidence that, by this stage, he had been made aware by Mr Hearn of who was, and was not, part of the new venture (Mr Harris and Mr Oakley were not) and Mr Hearn kept him abreast of the conversations he was having with the other British Marine employees who were to be part of the new team.
‘Mass exit’
-
- It was clear that, at this stage, a “mass exit” of British Marine employees was the preferred option for Mr Dymoke and Mr Hearn and the best outcome in financial terms. Mr Stow advised this would yield US$100 million GWP (1793). In his e-mail response on 24th November 2011 Mr Dymoke said that he would “love” this to be the case, but thought their backers should work on a more conservative scenario. In an e-mail dated 8th January 2011 which had as its subject heading “Great Escape”, Mr Dymoke said: “We are talking about an massive exit [sic] and we need to have everything in place.” (1943). The perceived key to success was to set up a ‘turn-key’ vehicle which they could all walk in to upon leaving British Marine. The initial launch date was 1st March 2011 but this subsequently slipped to 1st November 2011 (see below).
Dual
-
- In December 2010, Mr Dymoke and Mr Hearn met with a company called Dual who were their choice as backers and platform providers. Dual were, however, sceptical of the new venture. Dual thought that the financial projections were overly optimistic and expressed concern that, save for one employee who would be out of contract by 4th March 2012, the remainder would be prevented “from touching any piece of their existing employer’s business for 9-12 months”. Dual queried how much of what they were currently writing could realistically be “brought over” (1841). In an attachment to an e-mail to Mr Dymoke dated 10th December 2010 (1841-2) Mr Hearn discussed the pros and cons of a mass exit: “I can see [Dual’s] argument to take them in one go before the current employers pay big salaries to keep them, but we will end up with 50 per cent of them with nothing to do.” He also said this regarding Dual’s concern that there was likely to be a legal reaction by QBE: “[T]hey paid US$204m for the company in 2006, when GWP was US$121m with a pre-tax profit of US$29.6m. At that time, just over 50% of the book was P&I, so they’re unlikely to take such a move lying down. We must factor a significant litigation risk into our thinking.”
Royal Sun Alliance
-
- Mr Dymoke and Mr Hearn also approached RSA as a potential backer to provide start up monies. RSA were and remain a major competitor of QBE. RSA had bid unsuccessfully for the British Marine business when it was sold to QBE in 2005. RSA had an investment process which required potential projects to pass three ‘gates’. I accept Mr Healy’s evidence that he was told by Mr Hearn that the Phoenix Project passed the first two RSA gates but failed the third because RSA became concerned at the restrictions contained in Mr Dymoke and Mr Hearn’s employment contracts.
-
- RSA subsequently emerged, however, in early 2011 as a potential security capital platform provider for “Project Phoenix”. RSA already provided capital security for Osprey P&I. Osprey was a fixed premium business, but much smaller than British Marine. It wrote about $25 million of business and, therefore, was only about one-sixth of the size of British Marine. Talks with RSA about the provision of security for “Project Phoenix” began in earnest in the new year. These talks were facilitated by PRO. It was to this end that Mr Kirk and Mr Kent attended meetings in March 2011 with RSA to discuss the technical aspects of “Blue Cards” and security (see further below).
New Year Greetings
-
- Mr Dymoke sent a special New Year e-mail greetings message to six people in his office. The message and list of addressees speaks volumes about the state of play on 31st December 2010. His message simply read: “2011 will be great!”. The addressees were Mr Hearn, Mr Glover, Mr Petrie, Mr Kent, Mr Healy and Mr Bamberger, i.e. the precise British Marine underwriting team who had been chosen to move to the new venture (and whose initials and details featured in the Staff List and Phoenix Business plan). Mr Dymoke had little explanation for this message in cross-examination save to say: “Well, it was in my mind that it was likely that those people would be part of the team in the — in due course“. It was clear, in my judgment, that they had all been well ‘tapped up’ by Mr Dymoke and Mr Hearn by this stage and enticed to join Phoenix after the launch in the New Year.
-
- Mr Dymoke had some concerns that Mr Linacre and Mr Gill might meanwhile be poached by RSA and Osprey which he expressed in the “Great Escape” e-mail to Mr Kirk on 8th January 2011: “I am sure that RSA see that the [British Marine] business is the bigger prize in any case. Of much more concern to me is that idea that Richard [or] Carl do not hold their nerve and wait for Phoenix…” (1943)
January 2011 – PRO active
-
- Dual dropped out of the picture leaving PRO as potential backers and ‘platform’ providers. In an internal e-mail dated 4th January 2011 to David Vaughan, the CEO of PRO and Gilles Erulin the CEO of TAWA, Mr Linnell reported enthusiastically: “This is an MGA opportunity. There is a formidable team of underwriters who wish to start up their own show. The team is 16 in total, seven of which are active underwriters – fixed premium Protection & Indemnity facility… We have found them a legal adviser for determining the risks of their current employment contracts.” (1904). Mr Linnell weakly attempted in his oral evidence to suggest that he was not talking here about a real team and PRO were only expecting to buy the talents of Mr Dymoke and Mr Hearn. This was palpably untrue. PRO knew from its earliest engagement with this project that they were buying the “formidable” team comprising mostly British Marine employees that Mr Dymoke and Mr Hearn had assembled. This was the whole point. This was what made it such a worthwhile MGA opportunity.
-
- On 20th January 2011, a meeting took place between Mr Dymoke, Mr Hearn, Mr Stow and Mr Linnell, together with other representatives of PRO and TAWA, to discuss Project Phoenix. TAWA management had put together a Power Point for the meeting (1964 ff.). The agenda included: “Objective, Time frame, Litigation risk, Financial models, Platform, TAWA/ NewCo Partnership, Next steps”. The Power Point highlighted under the heading litigation risk the following:
“Litigation risk
– Development of a strategy to mitigate current potential for litigation:
– against TAWA
– against employees
– Options:
– Bombshell
– Dribs & drabs
– Open approach
– Brokered deal – planned with 3rd party”
-
- The Power Point reveals PRO’s real concern at the litigation risk and its thinking as to the various ways of handling the problem. The references to “bombshell” and “dribs and drabs” options were references respectively to the option of a “mass exit” of British Marine employees in one go, or the option of resignations in stages as envisaged in the original Staff Table. I reject Mr Linnell’s evidence that the Power Point was merely a draft aide memoire and not used or circulated.
‘Soft departure’ plan
-
- PRO’s concerns led to a change in tactical thinking by Mr Hearn and Mr Dymoke. They reverted to the plan of rolling out the resignations from British Marine in stages rather than a mass exit. The former would be less conspicuous. Mr Hearn therefore drew up what he called a plan showing“a “soft” departure from QBE” which he e-mailed to Mr Dymoke and Mr Stow on 23rd January 2011. He explained that he had added three more Assistant Underwriters “in the shape of the two girls and one other” (1971-1972) (emphasis added). Note the definite article. He was clearly referring to Ms Skinner and Ms Clarke who were Assistant Underwriters in his department who reported to him. Mr Hearn’s ‘soft departure’ plan is another telling document to which the Defendant’s witnesses had no answer. It comprised a detailed timetable with departures of Underwriters, Assistant Underwriters and Claims personnel listed in waves against four dates in 2011, March, July, August and October 2011, designated by acronyms and numbers, i.e. “UW1-6” (Underwriters 1-6), ” UWA1-7″ (Assistant Underwriters) and “CL1-5” (Claims personnel). Each has a salary level marked against them. The four waves are as follows: (i) against March were listed “UW3” and “UW4”; (ii) against July were listed “UW2” and “CL1” and “CL2”; (iii) against August were listed “UW5”, “UW7” “UWA1”, “UWA2” and “CL4”; and (iv) against October were listed “UW1”, “UW6” “UWA3”, “UWA4”, “UWA5”, “UWA6”, “CL3” and “CL5”.
Underwriters (“UW1-6”) |
Assistant Underwriters (“UWA1-7”) |
Claims (“CL1-5”) |
(1) Mr Dymoke (2) Mr Hearn (3) Mr Mahoney (4) Mr Hunt (5) Mr Bamberger (6) Mr Healy (7) Mr Kent |
(1) Mr Glover (2) Mr Petrie (3) Mr Ginman (4) Ms Skinner (5) Ms Clarke (6) AN Other |
(1) Mr Kirk (2) Mr Gill (3) Mr Hamerston (4) Mr Linacre (5) Mr Bose |
-
- It is no co-incidence that Mr Hearn had Underwriters 3 and 4 (Mr Hunt and Mr Mahoney) joining the new venture first in March 2011 since they were employed by other companies and not subject to British Marine restrictions. Equally, Mr Hearn saw Underwriter 2 (himself) not coming free until July 2011 since he was on three months’ notice (his joining salary was to be £180,000), but Mr Dymoke not being able to join the new venture until October 2011 since he was on six-month’s notice (his joining salary was quoted as £200,000). Mr Dymoke had no real answer in cross-examination by Leading Counsel for the Claimant, Mr David Reade QC, as to the obvious import of this document (1972):
“Q. If you turn the page to 1972, do you see now the same individuals you’ve identified before, the underwriters 1 through to 6 and the claims handlers, now they’re being recruited to roll out over a passage of time between March and October?
A. Yes.
Q. Same plan, get them all out, but now you’re going to do it in a way that reduces your litigation risk.
A. The plan is simply that — yes, I mean, October, No — yes. Not so much to reduce the litigation risk but this is all for the purposes of cashflow, that’s what we’re trying to achieve.
Q. Sorry, purposes of what, sorry?
A. To try to understand what cashflow we were going to have.
Q. I understand why you’re working out the cashflow, but we saw earlier that you had one exit. We can see the meeting with TAWA where there are concerns about litigation risk, and after it you seem to shape your plan in a different way: dribs and drabs. Because that reduces the risk.
A. Well, I don’t know if it does reduce any risk. But that’s — it’s there. So that’s what we did.“
Solicitation, enticement and ‘tapping up’
-
- I am satisfied that all those on the ‘soft departure’ list were unlawfully solicited or enticed to become part of the new venture. I find as a fact that each of 13 British Marine employees listed, namely, Mr Kent, Mr Healy, Mr Oakley, Mr Bamberger, Ms Clarke, Mr Ginman, Mr Glover, Mr Petrie, Ms Skinner, Mr Gill, Mr Hamerston, Mr Bose and Mr Linacre, were ‘tapped up’ and recruited to the plan, one way or another, by Mr Dymoke, Mr Hearn and/or Mr Kirk at various times between Summer 2010 and April 2011, i.e. during the currency of these three Defendants’ actual employment by QBE. I also find that Mr Hunt was approached by them, probably whilst he was still an employee of British Marine. Mr Mahoney was also approached at some stage.
-
- It is not possible to be precise about when all these approaches took place and in what precise circumstances. I am quite satisfied, however, such approaches did take place and took place covertly, at various times and in various places, inside and outside the office. A number of the approaches have been admitted (see further below). The approaches would have involved a mixture of blandishments and assurances by Mr Dymoke, Mr Hearn and Mr Kirk: blandishments that the defectors had been specially chosen to be part of the ‘new’ organisation which was to arise from the ashes of the old; assurances that a critical mass of the best people would be leaving and the requisite financial backing and security provision was already, or would be, in place. The discussions were initially on a ‘need to know’ basis and kept to a tight circle; but gradually the circle of those ‘in the know’ was widened as momentum and confidence increased and more people on the list were ‘tapped up’ and brought into the picture. It clearly became common currency amongst some of them in the office itself. As Mr Linacre candidly said in his evidence, Mr Kirk communicated with him in the office as to how the ‘project’ was going with a simple thumbs up or a thumbs down.
-
- It is clear that some of those listed were well on board by 31st December 2010, viz. Mr Dymoke’s cheerful New Year message to Mr Hearn, Mr Glover, Mr Petrie, Mr Kent, Mr Healy and Mr Bamberger (see above). The details of the Phoenix Business Plan were initially kept close to the inner circle of Mr Dymoke, Mr Hearn and Mr Kirk and their NMB advisor, Mr Stow. But, by the end of January, Mr Dymoke was prepared to have the Phoenix Business Plan shared with what he called ‘Tier 2’ people. By the end of March it is likely that everyone on the list was fully in the know and on board. On 25th March 2011 Mr Dymoke e-mailed Mr Hearn and Mr Kirk as follows: “[T]here is no doubt that we have all been speaking with our colleagues and we all know that strictly speaking there have been breaches of contract (albeit they will be difficult to prove, I hope).” (2082). Unfortunately, Mr Dymoke did not allow for the rigours of litigation disclosure and cross-examination.
Admissions about soliciting following disclosure
-
- Mr Reade QC was right to submit that the substantial disclosure put an entirely different complexion on the case and showed the true scale of what had been going on. Mr Hearn had no real option but to admit at trial speaking to Mr Petrie, Ms Skinner, Ms Clarke, Mr Glover, Mr Kent and Mr Hunt about the new venture. His admissions, however, do not sit happily with his previous evidence to the Court or the Defendant’s stance prior to disclosure as summarised by their solicitors, Morgan Lewis, in a letter of 17th June 2011 (600): “Mr Dymoke and Mr Hearn did speak to Steven Kirk about the new venture in January 2011. They have not spoken to any other QBE employee about the new venture and have refused to engage in such conversations“.
-
- Mr Hearn started having discussions with Mr Healy about the project in Summer 2010. He told Mr Healy he was also having similar discussions with Mr Hunt. i.e. well before the latter resigned from British Marine in October. Mr Hearn also shared details with Mr Healy about his discussions and negotiations with NMB, RSA and PRO.
-
- Mr Dymoke’s early witness statements do not appear to have been entirely frank on the question of soliciting. Mr Dymoke was certainly directly involved in recruiting Mr Petrie, Mr Ginman and Mr Kent to the project, as well as other British Marine employees on the list. Mr Petrie admitted that Mr Dymoke had asked him if he would be interested in being involved in the new venture and he said ‘yes’. Mr Dymoke started speaking to Mr Mahoney about the project in July 2010. I reject Mr Dymoke’s somewhat disingenuous evidence that, in so far as he approached people in the office, it was only about “a” venture and not “the” venture, or that this makes any practical difference. I have no doubt that he, Mr Hearn and Mr Kirk made it quite plain that something definite and serious was being planned and that all those approached were going to be offered jobs in the new venture.
Mr Kent
-
- There was a dispute about whether it was Mr Healy who first recruited Mr Kent and whether a particular conversation took place on the tube or outside a City pub. Mr Kent said that the first he knew about the new venture was when Mr Healy told him about it during a conversation on the tube from Monument to St Pancras at lunchtime in December 2010. Mr Healy was adamant that he only spoke to Mr Kent about the venture once he knew that Mr Kent was already aware of it and on board and he did this outside the Corney & Barrow pub beside Monument Station in December 2010 with Mr Hearn present. In so far as it matters, I accept Mr Healy’s recollection of events as more likely.
-
- At all events, Mr Kent was clearly on board by Christmas 2010 and was quickly drawn in to positive involvement with the new venture. Mr Kent was recruited by Mr Dymoke and Mr Hearn to provide actual practical assistance in furthering the project. At their request and inducement, Mr Kent attended two meetings with them in March 2011 and was asked to share his technical expertise and knowledge about ‘Blue Cards’ and computer systems with RSA. ‘Blue Cards’ are an important ingredient in marine insurance: they are compulsory evidence of P&I Club cover and certification of insurance required by the international liability and compensation regimes and conventions adopted by the International Maritime Organisation (IMO). Mr Kent’s technical knowledge of computer underwriting systems was also used to help further the project when he attended a demonstration of “Websure” software by an organisation called R&Q. I reject his evidence that he was not promised a role in any new venture by Mr Dymoke and Mr Hearn.
Mr Johnston
-
- The scale of Mr Dymoke and Mr Hearn’s ambition and confidence in their ability to entice whomsoever they wished away from British Marine is evidenced by the fact that even the Chairman of British Marine, Mr Robert Johnston, was approached. On 2nd May 2010 Mr Dymoke e-mailed Mr Hearn and Mr Kirk agreeing that it would be good to have Mr Johnston on board and saying: “I have arranged to meet him. It is difficult because secrecy is essential!!” (2163). A handwritten attendance note in Mr Dymoke’s handwriting suggested that the meeting was not altogether fruitful.
Solicitation of brokers
-
- I am also satisfied that Mr Dymoke, Mr Hearn and Mr Kirk also began soliciting British Marine’s brokers and clients whilst still employed by British Marine or on ‘garden’ leave. The words in the Phoenix Business Plan boasting of “a global network of brokers, numerous who have already guaranteed their support for Phoenix” were not merely a ‘puff’. I have no doubt that these words were based on some solicitation and sounding out of brokers and clients which had already taken place and they intended was going to take place in the future.
-
- It is fair to say that the evidence on this part of the case was fairly patchy. This is probably merely an indication of the difficulty of policing this sort of conduct. There was, however, sufficient evidence to justify a finding that there was some solicitation of British Marine’s brokers by Mr Dymoke, Mr Hearn and Mr Kirk whilst they were still employed by British Marine. Mr Hearn had contacts with brokers from his home telephone number (2584). Mr Dymoke observed in April 2011: “All our current customers are the “ownership” of QBE” (2153). Whilst on garden leave Mr Dymoke contacted a Dutch P&I broker saying that he was “still alive“. Mr Kirk also had drinks with a large Egyptian producer and broker and Mr Dymoke joined them for dinner. I do not accept that this dinner was merely social and involved discussion of the state of Arsenal football club and non-work related matters. On 11th July 2011, Mr Hearn forwarded to PRO Insurance a list of brokers (2649). On the same day there were discussions about Mr Dymoke having a meeting with one of these brokers somewhere “discrete” out of the city such as the Captain Cook or Prospect of Whitby pubs (2657). On 19th July 2011 Mr Hearn requested a copy of PRO’s expenses declaration form “as we will undertake a fair bit of entertainment in the next few weeks and probably start firming up travel plans” (2805).
The name “Phoenix”
-
- It was no co-incidence that the name “Phoenix” was chosen for the new venture. A ‘phoenix’ (F?????) is a mythical sacred firebird which immolates itself and its nest, at the end of its 500 to 1,000 year life-cycle and a new, young phoenix with a similar plumage arises from the ashes. In my judgment, this was precisely what Mr Dymoke and Mr Hearn planned, and hoped, would be the fate of British Marine and their destiny at the new venture.
-
- Mr Dymoke said in cross-examination by Mr Reade QC that he had thought of the name “Phoenix” whilst watching Harry Potter with his children and it had nothing to do with the Greek or Persian mythological bird. If he did watch “Harry Potter and the Order of the Phoenix” (the fifth film in the successful series), I have no doubt that the symbolism was not lost on him and was what attracted him to the name.
“I appreciate that you are both keen on the Phoenix name but, I’m not so sure and it has not received a great reaction from the (safe) people I have mentioned it to. I don’t think that Phoenix means that something has failed, rather that something has reached the end of it’s natural life. I’m of the opinion that this is what is happening to BM (sadly) and I see it as our job to carry on the spirit of BM forward albeit in a different capacity.“
Return to Walsingham House
-
- It was no co-incidence that a return to the original nest at Walsingham House was planned for Phoenix. It appears to have been Mr Dymoke who initiated enquiries as to whether the much-loved former offices of British Marine, were available for Phoenix (3276). He believed that a return to Walsingham House would send a “fantastic message to the world” (3279), a view which Mr Hearn shared, as he commented in May 2011: “I remain keen on Phoenix due to the connotations it will provide. More so now we have also secured [Walsingham House].” There also was to be an overlap in the floorspace at Walsingham House that Phoenix and PRO would occupy.
-
- In my judgment, Mr Reade QC was quite right to submit that the evidence showed a consistent desire by the Defendants, manifest over many months, to replicate the business of British Marine, not just in its book and its employees, but in its ethos and in the very bricks and mortar in which the new venture was to be launched and to operate.
‘Batphones’ and home e-mail addresses
-
- There were high levels of secrecy employed by the Defendants. Mr Dymoke, Mr Hearn and Mr Kirk were determined to keep all their communications inter se and with other internal and external parties about Project Phoenix well out of sight of QBE management or anyone at British Marine who might not be “safe” as Mr Kirk called it. From an early stage, they habitually communicated about Phoenix only using their home or wives’ e-mail addresses or what they called “bat phones” or “safe phones” (pay-as-you-go mobiles). The high level of secrecy was consistent with the high level of planning that Project Phoenix required.
-
- The process of sharing the details of the scheme with the anointed team was incremental. Thus, on 8th January 2011 Mr Dymoke wrote to Mr Hearn: “If you think that the Phoenix plan should be shared with “Tier 2″, I would prefer you to wait until the end of January and then we must have a lunchtime meeting to discuss exactly what we say. Confidentiality is, and remains, paramount.” (1943)
Computer wiping
-
- There was also a great deal of covering of computer tracks. On 5th February 2010 Mr Dymoke e-mailed to himself at his home e-mail address some 60 pages of documents, including a copy of Mr Hearn’s contract of employment and a draft of the Phoenix Business Plan. The next day, on 6th February 2010, Mr Dymoke e-mailed Mr Hearn, Mr Kirk and Mr Robin Stow of NMB:
“Subject: New mail
I have spent some considerable time this w/e cleaning my computer – this e-mail address is a new, more secure address.” (2050)
-
- Mr Dymoke sought to suggest there was “nothing sinister” about this; but his elaborate explanation about his TalkTalk ISP frequently breaking down and needing to set up a “more secure” Gmail address, lacked credibility; and he gave no real explanation as to why he had spent the weekend “cleaning” his computer. It is no coincidence that the three addressees were the inner circle of the Phoenix project. There were also indications of later e-mail exchanges being deleted at Mr Dymoke’s suggestion so that QBE would not see them. This reinforces the picture that Mr Dymoke knew very well what he was doing was wrong.
RSA ‘due diligence’ process and ‘FSA approval’ process
-
- The model for “Project Phoenix” developed with RSA was one of delegated authority with a managing general agency agreement. This meant that the security provider, RSA, would give Mr Dymoke and Mr Hearn et al delegated underwriting and claims authority as employees of PRO. The eventual plan was for the business to be handed to a ‘NewCo’ under PRO, with PRO as the intermediary.
-
- In order to be satisfied that it was appropriate to grant such delegated authority, RSA needed first to carry out a detailed due diligence process on PRO and TAWA. This was a laborious process which took much longer than anticipated. It involved the preparation and putting in place of the whole gamut of P&I quotation, renewal, pricing and claims handling procedures needed to run a full P&I business. It also involved RSA knowing who would be the actual underwriters and claims handlers to whom such delegated authority would be granted.
-
- PRO had their own Financial Services Authority (“FSA”) approval but it was limited to permission to conduct a run-off business. PRO did not have approval to conduct a live P&I underwriting business itself and required specific FSA approval to do so. The need for FSA approval in this context was driven by “Solvency II” which required insurance carriers and Managing General Agents (“MGA”) to have satisfactory processes and procedures in place, failing which higher capital requirements might be required. This too proved a laborious process. An application for FSA approval was not made until June 2011 and final approval did not come through until October 2011.
-
- There were, therefore, two separate processes which had to be gone through in order to progress the start up of the new business and put in place both RSA as the security provider granting delegated authority and PRO as the authorised carrier. These two processes were (i) the RSA due diligence procedure and (ii) the FSA approvals procedure. To satisfy these two processes it was necessary for Mr Dymoke, Mr Hearn and Mr Kirk to have resort to British Marine’s information and data in breach of their confidentiality obligations (see further below).
Warranty
-
- In April 2011, Mr Dymoke, Mr Hearn and Mr Kirk gave a warranty to TAWA that the Phoenix Business Plan was true and attainable (2103), i.e. in effect that they could deliver both British Marine’s underwriting and claims teams and business book. I reject the suggestion that this was merely a warranty of some financial spreadsheets rather than the Phoenix Business Plan. In any event, the former reflected the latter. They must have felt that they could be relatively confident in giving such a warranty since they had approached all those on the list and got positive responses from them.
Resignations and ‘Recruitment’ process
April 2011 – appointment of TPD as head hunters
-
- The appointment by PRO of TPD as recruitment agents to do the actual head hunting was a ‘fig leaf’ designed to give the appearance of an arm’s length process. In fact, the recruitment process was a sham from beginning to end. Mr Dymoke, Mr Hearn, Mr Kirk and Mr Linnell played a controlling role behind the scenes throughout the recruitment process in May, June and July 2011. At all material times TPD and its executive, Mr Leo Gibbons, were simply going through the motions of conducting an open selection process. In reality, TPD and Mr Gibbons were working to a ‘shopping list’ of pre-selected candidates provided to them by the Defendants. The whole recruitment process, including the list of employees to be ‘recruited’ by TPD to the new venture, was pre-ordained.
-
- The genesis of the idea of appointing head hunters as a device can be traced back to the formulation of the ‘exit strategy’ in December 2010. As Mr Hearn had indicated in his e-mail of 10th December 2010 following his discussions with Mr Stow and Dual: “We also [talked] about exit strategy and the need for Dual to appoint a headhunter, thus keeping us within the bounds of our contract!!” (1840).
-
- On 16th April 2011, Mr Hearn had written to Mr Dymoke regarding the start dates for Mr Mahoney and Mr Hunt and discussed “Timing of departures (other staff)” and “Scripts for staff if faced with QBE management questions/offers (pressure)” (2151). The whole resignation and recruitment process was effectively scripted and controlled by Mr Dymoke and Mr Hearn.
-
- TPD and Mr Gibbons were not an obvious choice for a recruitment job of this nature. TPD had no previous experience of handling either underwriting or claim handling recruitments in the P&I field, whereas there were other recruitment agencies that specialised in this area. Mr Gibbons was working for a lower than normal fee. TAWA were a big client for Mr Gibbons and TPD and it appears he and TPD were somewhat captive, or beholden, to PRO and TAWA as they were involved in several other projects with these clients and seemed prepared to do their bidding. Mr Gibbons said in evidence “I had no preconceived ideas as to how the new vehicle was going to be staffed.” This was untrue. His notes of his earlier meeting with Mr Linnell on 19th April 2011 record Mr Linnell under the heading “Phoenix” saying TAWA“…want to appoint us to complete”, i.e. complete a process already begun.
-
- Mr Dymoke, Mr Hearn and Mr Kirk’s resignations took place on Thursday 28th April 2011, the day before the Royal Wedding. It is no co-incidence that on the very next working day after the long holiday weekend, Tuesday 3rd May the following things happened: (i) Mr Hunt and Mr Mahoney called Mr Linnell apparently out of the blue, but apparently already knowing that PRO Insurance was the new employer and Mr Linnell immediately put them in touch with the head hunters TPD (2166); (ii) Mr Hearn e-mailed PRO and said that he and Mr Dymoke could supply a list of the remainder of the team the next day (2168); (iii) Mr Kirk and Mr Dymoke discussed the order in which the claims handlers should leave; (iv) Mr Linnell had a meeting with Mr Gibbons and PRO gave TPD a copy of the Business Plan. I reject Mr Dymoke’s explanation that he and Mr Hearn simply told PRO and TPD the level of experience of the people they wanted and “it was up to them to populate it for the new venture”. In Mr Hearn’s e-mail of 3rd May 2011 to PRO referred to above, he wrote in the context of discussion with Donna Holland at PRO and accommodation at Walsingham House: “We also discussed the remainder of the team and she will arrange for contracts to be drafted for all concerned (we can supply a list to Mark/ Keith tomorrow) so that we can move swiftly. She will need prospective start dates, we need to decide who joins and when.” (2168). Mr Hearn sent an e-mail on 9th May 2011 to Mr Gibbons purportedly giving him a list of potential underwriters’ names “that should be considered with regards to the population of Phoenix” (2208) none of which comprised British Marine underwriters. This was, however, in my view, a transparent and a self-serving attempt to cover his tracks, as indeed was the strange exhortation at the end “Good luck!”. It is no co-incidence that the e-mail followed on the heels of a telephone conversation between Mr Hearn and Mr Gibbons.
TPD’s work sheet
-
- Most damning is TPD’s work sheet for “Project Phoenix” (3968). It records the timing of contacts made and meetings arranged with potential recruits by Mr Gibbon’s assistant at TPD, Mr Thompson. This document is striking. It lists the following 18 mostly familiar names: “(1) Dymoke, (2) Hearn, (3) Kirk, (4) Hunt, (5) Mahoney, (6) Kent (7) Healy, (8) Oakley, (9) Bamberger, (10) Clarke, (11) Ginman, (12) Glover, (13) Petrie, (14) Skinner, (15) Gill, (16) Hamerston, (17) Bose, (18) Linacre”. It is no co-incidence that the underwriting and claims staff marked as ‘contacted’ and ‘interviewed’ on the work sheet was materially identical to the ‘soft departure’ list drawn up by Mr Hearn (see above). The only odd name out is that of Mr Oakley, but against his name is a blank showing no contact was made and the entry “Await advice before approach” (3968).
-
- It was no co-incidence that Mr Gibbon’s assistant, Mr Thompson, approached the exact four British Marine claims handlers on the list, and only those claims handlers, but also contacted them in the precise order recommended by Mr Kirk in his e-mail of 3rd May 2011. In that e-mail he also said he had “no objection” to Mr Hamerston but he was “definitely the weakest” (2169). Mr Kirk admitted that there were “about 600 claims handlers in the P&I market” and that it did not matter whether they were mutual or fixed.
-
- It was no co-incidence that TPD contacted, interviewed and offered jobs to those who feature on the ‘soft departure’ list and did not bother contacting British Marine employees such as Mr Duck, Mr Watcham and Ms Edwards who were P&I claims handlers of the same seniority as Mr Bose and Mr Linacre but who did not feature on the list. Mr Gibbons’s explanation, that these British Marine employees may not have answered their telephones, was risible. The TPD work sheet did not even mention them, let alone record any attempt to contact them.
-
- Mr Gibbons said that candidates’ contact details in the work sheet were taken from British Marine’s website. Mr Ginman’s telephone number as posted on the website was, however, wrong by one digit but it appeared correctly in the TPD work sheet. I infer that Mr Gibbons was not being frank and those details were in fact supplied by one of the Defendants.
-
- PRO and Mr Linnell tried to give the impression of distance and that as far as they were concerned the recruitment process was ‘arms length’. This was disingenuous. It is clear that PRO and Mr Linnell instructed and set the agenda for Mr Gibbons and TPD. PRO instructed Mr Gibbons and TPD to recruit those identified in the Phoenix Business Plan which listed the background and experience of the candidates (c.f. 2614). PRO also passed on messages to TPD, including, for instance, that Mr Dymoke was keen to progress both Mr Linacre and Mr Kent (2442). Mr Linnell’s evidence in his first witness statement resisting the first injunction application was less than candid. He said: “[Messrs Dymoke and Hearn] did not at any time have any involvement or contact with individuals (other than the Third Defendant) to discuss their involvement with the Fourth Defendant’s new venture and/or assist with the recruitment of further employees from within the Claimant’s business or elsewhere“ (emphasis added).
-
- In early May 2010, PRO gave TPD instructions to “aggressively” target British Marine (2174). On 10th to 12th May 2011 various of the listed British Marine staff were contacted by TPD. I accept Mr Ginman’s evidence that the ‘interviews’ conducted by TPD were less than rigorous. His C.V. was not even read, or read in any depth, before he was handed his offer letter. Mr Gibbons surprisingly admitted that none of the British Marine candidates had a competitive interview.
-
- The only non-British Marine employees contacted by TPD (other than Mr Hunt and Mr Mahoney) were to fill gaps left after rejections by first choice British Marine candidates. Thus, when Mr Healy refused Pro’s offer, PRO were left an underwriter short. Mr Linnell said that Mr Hearn then met Mr Collins, and having decided he was suitable, handed him over to Mr Linnell and Mr Gibbons to be ‘interviewed’ and taken through the formal recruitment process. British Marine were also looking to recruit Mr Collins to fill one of the gaps left by the exodus. Thus, Mr Hearn was knowingly competing with British Marine for Mr Collins whilst still on ‘garden’ leave.
End Result – net impact on British Marine
-
- The impact on British Marine of the posse of planned resignations was designed to have a major destabilising effect on British Marine. The end result of the ‘recruitment’ process was, however, not quite what the Defendants had hoped for. When QBE and Mr O’Farrell began to get wind of the scale of the defections which began to unfold in the weeks following 28th April 2011, they began to take defensive action in the form of offers of higher salaries and promotions to some of those who had resigned or were being approached. Mr O’Farrell was successful in retaining Mr Ginman, Mr Glover, Mr Bamberger and Mr Hamerston and in tempting Mr Healy to revoke his resignation and return to British Marine.
-
- The exodus of a net six staff from the Underwriting Department and four staff from the Claims Department, nevertheless, left large holes at British Marine. Inevitably significant and lasting damage had been done to British Marine, in terms of structural integrity, reputation, skills and knowledge base, disruption, as well as lost ground in the market.
-
- The impact on the structure of British Marine can best be illustrated by the following highlighted organograms. It will be seen that the impact would have been worse but for the defensive measures taken by QBE and Mr O’Farrell to persuade staff who had been approached to stay. The first organogram is for the Underwriting Department:
CONFIDENTIALITY
-
- I now turn to consider specifically the question of confidentiality. Mr Dymoke, Mr Hearn and Mr Kirk were subject to the usual confidentiality clauses in their contracts (see above). QBE contended that there had been wide-scale breach and abuse by Mr Dymoke, Mr Hearn and Mr Kirk of their confidentiality obligations, both in terms of unauthorised disclosure to third parties and also use of British Marine bespoke documents and templates to produce materials for “Project Phoenix”.
(1) British Marine Business Plan;
(2) British Marine Underwriting Reports;
(3) CALM IT Application and Database;
(4) Papers for weekly P&I meetings;
(5) British Marine Claims Handling Procedure;
(6) British Marine P&I Quotation Procedure;
(7) British Marine Reinsurance Notes and Updates;
(8) British Marine P&I Renewal Procedure;
(9) British Marine Insurance Policies
(10) British Marine Quotation Template;
(11) British Marine Price Processing Document;
(12) Charterers’ P&I Quotation Procedure;
(13) British Marine Quotation Template: Major Claim/ Movement Update, Reserve Summary, File Review Check List and New Beneficiary Form.
(14) Underwriter Rationale Summary;
(1) Section 5: average insurance profit figures and net loss ratios and claims details;
(2) Section 9: underwriting management;
(3) Appendix A: 5-Year underwriting forecast;
(4) Appendix B: 5-Year Projections;
(5) Appendix D: general increases.
Misuse of British Marine’s data and materials
-
- There is no doubt that, over a period of many months, Mr Dymoke, Mr Hearn and Mr Kirk set about secretly milking British Marine’s materials and using them as a quasi-reference library from which to copy, clone and extract information, templates and data in order to draw up the raft of documents they needed to get “Project Phoenix” off the ground.
-
- A few references from the contemporaneous correspondence give the flavour of this covert process at work. On 19th November 2010 Mr Hearn asked Mr Dymoke if he could “lay his hands” on the information to put in section 5 and Appendix D of the draft Phoenix Business Plan, adding in relation to the latter “I couldn’t figure out how to obtain this information without raising suspicion.” (1477). On 24th November 2010 Mr Dymoke e-mailed Mr Hearn and Mr Kirk: “So far as our department results are concerned, I am playing with fire giving the precise results but have been as daring as I can. I can expand if you wish when we meet.” (1804). On 5th February 2011 Mr Dymoke e-mailed himself at his private e-mail address 15 times with numerous documents including the British Marine Quote Template (1981-1988) and Standard Increases (2049a-b) before he “cleaned” his computer (2050). On 14th March 2011 Mr Kirk e-mailed to himself at his private e-mail address the British Marine Provision of Security for P&I Claims (3315a-p).
British Marine Business Plan
-
- The above categories of documents under consideration were the subject of a detailed Scott Schedule of comments by both sides as to their confidentiality, materiality and actual use. In broad terms, the Claimant’s position was the 14 categories of document contained a large amount of useful, confidential or even highly confidential information belonging to British Marine, which had been systematically lifted, used and disseminated by Mr Dymoke, Mr Hearn and Mr Kirk for their own unlawful purposes. The Defendants accepted that some of the categories of document were confidential, e.g. the British Marine Business Plan, but said that much of the information was either in the public domain or was capable of being recreated with time and effort or very little of it was memorable.
Analysis
-
- My views on the confidentiality issues can be summarised as follows. First, the 14 categories of document contained a considerable amount of confidential information not in the public domain. In particular, the British Marine Business Plan contained confidential and price-sensitive information, including combined operating ratios, capital figures, expenses and acquisition costs. Importantly, it was used to populate Appendix A of the Phoenix Business Plan with figures (see below).
-
- Second, the Phoenix Business Plan was riddled with British Marine confidential information, in particular in the following parts: Section 5: average insurance profit figures and net loss ratios; Section 5: claims details; Section 9: underwriting management; Appendix A: 5-Year underwriting forecast (from figures in the British Marine Business Plan); Appendix B: 5-Year Projections; and Appendix D: general increases.
-
- Fourth, copies of the Phoenix Business Plan were sent to PRO, RSA and the FSA at various stages. It formed a fundamental vehicle for securing the necessary financial backing and support of PRO and RSA for Project Phoenix. To this extent, the whole process of getting PRO and RSA on board was fundamentally tainted.
-
- Fifth, the process of drawing up the Phoenix Business plan and other documents necessary for RSA backing and due diligence and FSA approval would have been much more difficult and, in any event, would have taken many months longer. Mr O’Farrell said: “I don’t think they would have got anywhere close to RSA backing had they started with a blank sheet of paper.” RSA were, however, keen to lay their hands on British Marine, having lost out to QBE in 2005. For this reason, the Defendants probably would have succeeded in getting RSA’s backing eventually.
-
- Sixth, the CALM IT (Computer-Aided Liability Management Information Technology) Application and Database would have provided access to a wealth of general confidential information regarding insured, ship, cover, pricing and renewal details as well as a library of British Marine Precedent clauses. There is direct evidence of misuse of the CALM IT system. On 17th June 2011, Mr Kirk had Mr Linacre e-mail to him at his home e-mail address some of the steel cargo clauses on CALM (2578). I do not accept his somewhat elaborate explanation about needing the clauses to deal with a dispute with a Turkish owner. There seems no good reason why he did not use his remote work e-mail and ask the underwriting department to send him the full relevant policy.
-
- Seventh, sections of British Marine standard documents such as the British Marine P&I Quotations Procedures were lifted word-for-word and used as the basis for the equivalent Phoenix documents and those required for the RSA. I do not accept the Defendant’s argument that these templates were “idiots’ guides” or publicly available or easily re-created. They would have been similar to those used by other P&I firms, but in some respects subtly bespoke to British Marine and the product of incremental drafting.
-
- Ninth, there was little detail or particularisation, however, of (i) what might be termed ‘trade secrets’ or ‘highly confidential’ information which was memorable, or (ii) evidence of the more junior British Marine employees in either the Underwriting or Claims Departments having access to ‘trade secrets’ or ‘highly confidential’ information, such as to justify the enforcement of non-competition covenants against them (see further below).
Conclusion on misuse
THE LAW
(1) The Obligation of Good Faith and Fidelity
The contractual duty of fidelity
(1) It is indisputable that an employee owes his employer a contractual duty of ‘fidelity’, but how far it extends will depend on the facts of each case (per Lord Green MR in Hivac v Park Royal [1946] Ch 169 at 174).
(2) The more senior the staff the greater the degree of loyalty, fidelity and diligence required (per Openshaw J. in UBS Wealth Management (UK) Ltd v Vestra Wealth LLP [2008] IRLR 965 at paragraph [10]).
(3) The first task of the court is to identify the nature of the employee’s obligations of fidelity and then to decide whether the employee’s activities are in breach (per Moses L.J. in Helmet Integrated Systems v Tunnard [2007] IRLR 126 at paragraph [32]).
(4) The mere fact that activities are described by an employee as ‘preparatory’ to competition does not mean that they are legitimate (per Moses L.J. I Helmet Integrated Systems v. Tunnard [2007] IRLR 126 at paragraph [28]).
(5) It is a breach of the duty of fidelity for an employee to recruit or solicit another employee to act in competition (see British Midland Tool v Midland International Tooling Ltd [2003] 2 BCLC 523).
(6) Attempts by senior employees to solicit more junior staff constitutes particularly serious misconduct (Sybron Corp v. Rochem Ltd [1984] Ch 112).
(7) It is a breach of the duty of fidelity for an employee to misuse confidential information belonging to his employer (see Faccenda Chicken Ltd v Fowler [1987] Ch 117).
(8) The court should ask whether the activities in which the employee is engaged affect his ability to serve his employer faithfully and honestly and to the best of his abilities (see Shepherds Investments Ltd v. Walters [2007] IRLR 110 at paragraph [131]).
‘Team moves’ or ‘poaching’
-
- In Shepherd Investments Ltd and Anr v Walters & another [2006] EWHC 836 (Ch), Etherton J. held that when former directors and employees set up a competing business, diverting business opportunities and misusing confidential information, they had acted in breach, not only of their fiduciary obligations, but also their implied obligation of fidelity, from the moment that they procured the services of attorneys in the Cayman Islands to set up the rival business. On the facts of that case, Etherton J, held that a former employee was also in breach of obligations as a fiduciary, whether or not he was to be regarded as a director, and that he was in breach of his duty of fidelity.
“I cannot accept that employees, in particular senior managers, can keep silent when they know of planned poaching raids upon the company’s existing staff or client base and when these are encouraged and facilitated from within the company itself, the more so when they are themselves party to these plots and plans. It seems to me that that would be an obvious breach of their duties of loyalty and fidelity to [their employer]“.
-
- In Kynixia v. Hynes [2008] EWHC 1495 Wyn Williams J. said at paragraph 283:
“I simply do not see how one can be acting as a loyal employee when one knows that three senior employees (including oneself) may transfer their allegiance to a group of companies which includes a competitor and yet not only fail to divulge that knowledge but also say things which would have the effect of positively misleading the employer about that possibility.“
-
- In Tullett Prebon plc v. BCG Brokers LP [2010] IRLR 648 Jack J. said at paragraphs 68-69:
“[A] desk head must not do anything to assist the recruitment of his desk… Where a desk head decides that he is in favour of the recruitment of his desk and thereafter assists the recruitment in such small or large ways as may arise, he is in plain breach of his duty: he has crossed the line between observing his duty to his employer and acting in the interest of his employer’s rival.“
“Discussions between employees as to proposed concerted competitive activity will rarely if ever be acceptable, given the near-inevitable damage to the employer as a result of such concerted activity. It remains possible that a discussion between close friends at a similar level within the business as to the potential of working together in the future would give rise to no breach. In such circumstances, neither employee would be soliciting the other and neither would be encouraging the other to terminate their employment with the employer. However, as set out in the British Midland Tool case, once an irrevocable intention to compete is formed, resignation and disclosure of the intention is probably the only certain means of avoiding a breach.”
Defendants’ reliance on Searle v Celltech [1982]
“The law has always looked with favour upon the efforts of employees to advance themselves, provided that they do not steal or use the secrets of their former employer. In the absence of restrictive covenants, there is nothing in the general law to prevent a number of employees in concert deciding to leave their employer and set themselves up in competition with him.“
-
- The potency of this passage has, however, atrophied in the past 30 years. It has also been stigmatised in the textbooks. The excellent textbook, Brearley and Bloch on Employee Covenants and Confidential Information (3rd Edition), states that Searle now has to be approached with some caution and explains that the second sentence of the above passage is now of “doubtful value” (paragraph 3.54) and will not often reflect the true position because of “the way team moves are generally planned and effected ” (paragraph 3.59).
“There is an argument that mere employees [as opposed to fiduciaries] may be entitled to have preliminary discussions with other employees [1] for whom they have no responsibility and [2] over whom they exert no control or influence to discuss a future outside the business. If those individuals then [3] resign as soon as their plan is irrevocably formed (and [4] avoid misuse of confidential information, [5] solicitation of clients, exclusive suppliers or other employees and [6] are careful to avoid misleading their employers, whether as to the reasons for their departure or as to their intentions, they may commit no breach of their duty of fidelity. However, [7] any more senior employee will be at serious risk of breach by a failure to alert their employer to a nascent commercial threat.” (numbers in brackets added)
Defendants’ reliance on Lonmar Global Risks Ltd v West [2011]
-
- Mr Bloch QC also placed some reliance on a recent passage of Hickinbottom J. in Lonmar Global Risks Ltd v West [2011] IRLR 138 at paragraph 151:
“Generally … an employee is under no obligation to report to his employer his own misconduct …Bell v Lever Brothers [1932] AC 161), or the misconduct of his fellow employees (Sybron v Rochem [1983] IRLR 253); nor is he under a restraint from legitimate preparation for himself engaging in future competition with his employer (Tunnard), or informing another employee of his plans to do so and offering him a potential job in that competitor in the future (Tither Barn v Hubbard (EAT/532/89 (Wood J), unreported, 7 November 1991). If it is not unlawful for an employee to inform a fellow employee of plans to set up in competition, and (without inciting him to breach his contract with his current employer) offer him a job in the future, then the employee to whom such matters are confided cannot sensibly be under a general obligation to inform his employer of those plans and offer.”
-
- I respectfully doubt whether the above dicta of Hickinbottom J. accords with the main direction of travel of recent cases in this developing area of law. The law has clearly moved on since Tither Barn and Celltech. It does not appear, however, that Hickinbottom J. had the benefit of being referred to relevant cases such as UBS Wealth Management or Tullett Prebon or British Midland Tooling (supra). Nor did he have cited to him any of the cases in Goulding supporting the passage at [2.164] (see above), namely Sanders v Perry [1967] 1 WLR 753, Marshall v Industrial Systems and Control Ltd [1992] IRLR 294, Adamson v BSL Cleaning Services [1995] IRLR 193.
-
- I also respectfully doubt whether Bell v Lever Brothers did determine the question of whether an employee is under an obligation to report to his employer his own misconduct. In Item Software (UK) Ltd v Fassihi [2004] IRLR 928, Arden L.J. said at paragraph [55] and [56] that Bell does not in fact determine this point. Moreover, as the authoritative Brearley and Bloch states at [4.154]:
“In the case of both [fiduciaries and ‘mere’ employees], a duty of disclosure exists where it relates to the misdeeds of colleagues, at least where there is an ongoing threat to the business – even if disclosure would inevitably lead to the disclosure of the wrongs of the disclosing employee himself.”
-
- In any event, in my view, the above passage of Hickinbottom J. does not help the Defendants here because on the facts in the present case (i) the Defendants engaged in “illegitimate preparations” for future competition and (ii) did “incite” each other to breach their contracts with their current employer.
Meaning of ‘solicitation’
-
- Counsel debated the meaning of ‘solicitation’. Mr Bloch QC cited Sweeney v. Astle [1923] NZLR 1198 and Equico Equipment Finance Ltd v. Enright Employment Relations Authority 2009 AA 2412/09 5158060 and suggested that HHJ Simon Brown QC in Baldwins (Ashby) Limited v. Maidstone QBD, 3 June 2011 (unreported) correctly added a requirement that there must be a “direct and specific appeal” in the context of solicitation of customers rather than a more general approach (paragraphs [22-27]).
-
- I do not think that this case will turn on nice definitions of the meaning of ‘solicitation’. Nevertheless, for the sake of good order, in my view, HHJ Simon Brown QC did not “add” any requirement but merely echoed the language of Cotton L.J. in the time-honoured test in Trego v Hunt [1896] AC 7 which requires that there should be a “specific and direct” appeal. In any event, in my view, allowing for the different context, a helpful recent statement of the test for present purposes is that cited by HHJ Simon Brown QC at paragraph [22] namely Equico Equipment Finance Ltd v. Enright Employment Relations Authority (at paragraph [32]):
‘”In my view, “canvas” is synonymous with soliciting. Both words involve an approach to customers with a view to appropriating the customer’s business or custom. I consider a degree of “influence” is required. There must be an active component and a positive intention.”
Fiduciary duties
-
- A fiduciary has a duty of disclosure. There was an issue between the parties as to how far this extended. The Defendants relied on a decision of Falconer J. in Balston v Headline Filters [1990] FSR 385 to argue that a director was not in breach of his fiduciary duties in failing to disclose his intention to set up a competing business because:
“[386] … an intention by a director of a company to set up business in competition with the company after his directorship has ceased is not to be regarded as a conflict in interest within the context of the principle, having regard to the rules of public policy as to restraint of trade, nor is the taking of any preliminary steps to investigate or forward that intention so long as there is no actual competitive activity, such as, for instance, competitive tendering or actual trading.“
“[89] A director’s duty to act so as to promote the best interests of his company prima facie includes a duty to inform the company of any activity, actual or threatened, which damages those interests. The fact that the activity is contemplated by himself is, on the authority of Balston’s case, a circumstance which may excuse him from the latter aspect of the duty. But where the activity involves both himself and others, there is nothing in the authorities which excuses him from it. This applies, in my judgment, whether or not the activity in itself would constitute a breach by anyone of any relevant duty owed to the company.”
“[81] A director would be under a duty to alert his fellow board members to a nascent commercial threat to the future prospects of the company, and that duty would be all the greater (and certainly no less) when he himself was planning to be part of the threat.”
“[89] A director who wishes to engage in a competing business and not disclose his intentions to the company ought, in my judgment, to resign his office as soon as his intention has been irrevocably formed and he has launched himself in the actual taking of preparatory steps.”
-
- As will be apparent from the passages above quoted, Hart J. distinguished Balston on the basis that it was limited to the situation where the director was intending to compete on his own, i.e. without any involvement with other employees or directors of the employer. I respectfully agree with his approach. There is a world of difference between a fiduciary, or any other employee for that matter, acting alone to advance their careers and a situation where they act knowingly in concert with other employees in the organisation to set up in direct competition with their employer.
-
- Furthermore, a fiduciary’s duty of disclosure is not a separate, stand-alone duty but a tributary flowing from a fiduciary’s mainstream duty to act in good faith. As Arden L.J. explained in Item Software (UK) Ltd v Fassihi (supra) in the context of a director fiduciary (the other two members of the Court agreeing on the issue of disclosure):
“[41] For my part, I do not consider that it is correct to infer from the cases to which I have referred that a fiduciary owes a separate and independent duty to disclose his own misconduct to his principal or more generally information of relevance and concern to it. So to hold would lead to a proliferation of duties and arguments about their breadth. I prefer to base my conclusion in this case on the fundamental duty to which a director is subject, that is the duty to act in what he in good faith considers to be the best interests of his company. This duty of loyalty is the ‘time-honoured’ rule: per Goulding J in Mutual Life Insurance Co of New York v Rank Organisation Ltd [1985] BCLC 11, 21. The duty is expressed in these very general terms, but that is one of its strengths: it focuses on principle not on the particular words which judges or the legislature have used in any particular case or context. It is dynamic and capable of application in cases where it has not previously been applied but the principle or rationale of the rule applies.”
“The net effect of the decisions in Fassihi and Helmet Integrated Systems would appear to be that:
(1) A fiduciary, and in particular a director, will owe a duty to disclose his own misconduct whenever he in good faith considers that misconduct prejudices the best interests of his employer or the company in question;
(2) There is no overriding rule that this duty cannot apply in the case of an employee fiduciary, indeed the position in that regard is ‘clear’; but
(3) In respect of mere employees, there is only a contractual duty to report on other employees, and even then only when in all the circumstances such a duty can be inferred from the nature of the employment.”
“In summary, given the conflicting first instance decisions and the running of the current judicial tide against directors, the working assumption must be that directors and senior employees ought to disclose: (a) any action at all, if taken by others, that will lead to competitive activity; and (b) any action of their own, as soon as the irrevocable intention to compete is formed (unless they resign immediately).”
(2) Inducing Breach of Contract
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- The leading case on inducing breach of contract is OBG Ltd v. Allan [2008] 1 AC 1. The Defendants relied on Lord Hoffmann’s judgment in OBG Limited to submit that actual knowledge is required for a finding of inducing breach of contract, i.e. the Claimant had to show that PRO had had actual knowledge that it was inducing the other Defendants to act in breach of contract. The Defendants point to paragraph [39] where Lord Hoffmann says:
“[39] To be liable for inducing breach of contract, you must know that you are inducing a breach of contract. It is not enough that you know that you are procuring an act which, as a matter of law or construction of the contract, is a breach. You must actually realize that it will have this effect. Nor does it matter that you ought reasonably to have done so.”
-
- If one reads on in his judgment, however, Lord Hoffmann goes on to make it clear that ‘knowledge’ includes turning a ‘blind eye’. Having earlier cited, with approval, Emerald Construction Co Ltd v Lowthian [1966] 1 WLR 691 where Lord Denning MR dealt with ‘reckless indifference’, Lord Hoffmann states at paragraph [41]:
“[41] It is in accordance with the general principle of law that a conscious decision not to inquire into the existence of a fact is in many cases treated as equivalent to knowledge of that fact“.
-
- In Aerostar Maintenance International Ltd v. Wilson [2010] EWHC 2032 (Ch), para. [163] Morgan J. usefully set out the five steps necessary for a finding of inducing breach of contract:
“[1] first, there must be a contract, [2] second, there must be a breach of that contract, [3] thirdly, the conduct of the relevant defendant must have been such as to procure or induce that breach, [4] fourthly, the relevant defendant must have known of the existence of the relevant term in the contract or turned a blind eye to the existence of such a term and, [5] fifthly, the relevant defendant must have actually realised that the conduct, which was being induced or procured, would result in a breach of the term.” (numbers added).
(3) Conspiracy to injure
-
- The basic tenets of an actionable conspiracy to injure are set out in Kuwait Oil Tanker Co SAK v. Al Bader [2000] 2 All ER (Comm) 271 at para [108] per Nourse L.J.:
“[108] ...A conspiracy to injure by unlawful means is actionable where the claimant proves that he has suffered loss or damage as a result of unlawful action taken pursuant to a combination or agreement between the defendant and another person or persons to injure him by unlawful means, whether or not it is the pre-dominant purpose of the defendant to do so.“
-
- So long as each individual conspirator knows the central facts and entertains the same object it is not necessary that all conspirators join the agreement at the same time (Kuwait Oil at paragraph [132]). The requirement for knowledge includes ‘blind-eye’ knowledge (see Bank of Tokyo v. Baskan Gida [2009] EWHC 1276 (Ch) at paragraphs [837– 840]).
-
- The Defendants must intend to injure the Claimant. However, the ‘intention’ element of the tort is satisfied if injury to the Claimant is the inevitable consequence of the benefit to the Defendant. As Lord Nicholls said in his ‘explanatory gloss’ to the general rule at paragraph [167] of OBG (supra):
“[167] Take a case where a defendant seeks to advance his own business by pursuing a course of conduct which he knows will, in the very nature of things, necessarily be injurious to the claimant. In other words, a case where loss to the claimant is the obverse side of the coin from gain to the defendant. The defendant’s gain and the claimant’s loss are, to the defendant’s knowledge, inseparably linked. The defendant cannot obtain the one without bringing about the other. If the defendant goes ahead in such a case in order to obtain the gain he seeks, his state of mind will satisfy the mental ingredient of the unlawful interference tort.”
(4) The Duty of Confidence
-
- As part of his general duty of fidelity, an employee owes a duty of confidence to his employers. There was an issue between the parties as to extent to which an employer must be required to particularise the relevant confidential information and its misuse, in order to justify the enforcement of non-competition covenants against his employees.
-
- The answer to this issue lies in understanding the rationale behind the particularisation rule. It is to enable the court to be satisfied that the claimant has a legitimate interest to protect. This was explained by Aldous L.J. in Scully (UK) Ltd v Lee [1998] IRLR 259 at paragraph [23]:
“[23] [T]he confidential information must be particularised sufficiently to enable the court to be satisfied that the plaintiff has a legitimate interest to protect. That requires an inquiry as to whether the plaintiff is in possession of confidential information which it is entitled to protect… Sufficient detail must be given to enable that to be decided but no more is necessary.” (emphasis added).
-
- In Thomas v Farr [2007] IRLR 419, Toulson L.J. expressly approved of Aldous L.J. in Scully (supra) and added at paragraph [42]:
“[42] Provided that the employer overcomes that hurdle, it is no argument against a restrictive covenant that it may be very difficult for either the employer or the employee to know where exactly the line may lie between information which remains confidential after the end of employment and the information which does not. The fact that the distinction can be very hard to draw may support the reasonableness of a non-competition clause.
“Part of Mr Thomas’s case was that he had no recollection of any truly confidential information after he left Farr. The judge did not accept that evidence. He found that, while Mr Thomas would not be able to recall the details of every transaction, it was likely that for key clients and for important aspects of the insurance he would be able to recall key figures and percentages and strategies. I can see no proper basis on which that finding of fact can be challenged. I would only add that if it had been the case that, as events turned out, Mr Thomas was unable to recall any truly confidential information after leaving Farr, that could afford a reason for the court not granting an injunction in support of the non-competition clause. It would not follow that the clause was unreasonably in restraint of trade at the time of his appointment.”
-
- In Farr the claimant, a former managing director of the defendant firm of insurance brokers in a niche market, challenged the enforceability of a 12-month covenant restraining him working for a competitor in the same geographic area as he had worked in for the defendant. At nisi prius, the judge held that a 12-month covenant in this niche market was justified and the Court of Appeal upheld his decision.
-
- The time for considering whether there is a protectable interest with regards to confidential information is the date at which the contract was entered into. It should be noted that the duty of confidence exists as an equitable obligation which may affect third parties (such as PRO). Thus, where a third party knows that confidential information has been imparted to it in breach of an obligation of confidence to the original confider it may be open to sanction. This extends to a third party that is ‘wilfully ignorant’ of the likelihood that the information was obtained in breach of confidence: Royal Brunei Airlines v. Tan [1995] 2 AC 378 at page 389.
(5) The Non-Competition Covenants
-
- The Claimant sought direct and indirect enforcement of the non-competition covenants. The Claimant sought to enforce the non-competition covenants of Mr Hearn and Mr Kirk directly (although it should be noted that Mr Hearn’s covenants had expired just before the trial on 27th October 2011); and to enforce the non-competition covenants of Mr Kent, Mr Linacre, Mr Petrie, Ms Cooper, Ms Clarke and Mr Gill indirectly, by way of prohibition of the Defendants’ inducement of their breaches of contract. The Defendants contend that all the non-competition covenants were void as being in unlawful restraint of trade. The Claimant pointed out that the Defendants had changed their stance since they had previously said that the non-competition covenants of Mr Hearn and Mr Kirk would be honoured.
Employer’s burden of proof
General Principles
-
- The general principles as regards the enforcement of covenants was usefully summarised by the Court of Appeal in FSS Travel and Leisure Systems v Johnson [1998] IRLR 382 in the judgment of Mummery L.J. at paragraphs [29–34]:
“(1) The court will never uphold a covenant taken by an employer merely to protect himself from competition by a former employee.
(2) There must be some subject matter which an employer can legitimately protect by a restrictive covenant. As was said by Lord Wilberforce in Stenhouse Ltd v Phillips [1974] AC 391 at p.400E (cited by Slade L.J. in the Office Angels [1991] IRLR 214 case, supra):
‘The employer’s claim for protection must be based upon the identification of some advantage or asset inherent in the business which can properly be regarded as, in a general sense, his property, and which it would be unjust to allow the employee to appropriate for his own purposes, even though he, the employee, may have contributed to its creation.’
(3) Protection can be legitimately claimed for identifiable objective knowledge constituting the employer’s trade secrets with which the employee has become acquainted during his employment.
(4) Protection cannot be legitimately claimed in respect of the skill, experience, know-how and general knowledge acquired by an employee as part of his job during his employment, even though that will equip him as a competitor, or potential employee of a competitor, of the employer.
(5) The critical question is whether the employer has trade secrets which can be fairly regarded as his property, as distinct from the skill, experience, know-how, and general knowledge which can fairly be regarded as the property of the employee to use without restraint for his own benefit or in the service of a competitor. This distinction necessitates examination of all the evidence relating to the nature of the employment, the character of the information, the restrictions imposed on its dissemination, the extent of use in the public domain and the damage likely to be caused by its use and disclosure in competition to the employer.
(6) As Staughton L.J. recognised in Lansing Linde Ltd [1991] IRLR 80 … the problem in making a distinction between general skill and knowledge, which every employee can take with him when he leaves, and secret or confidential information, which he may be restrained from using, is one of definition. It must be possible to identify information used in the relevant business, the use and dissemination of which is likely to harm the employer, and establish that the employer has limited dissemination and not, for example, encouraged or permitted its widespread publication. In each case it is a question of examining closely the detailed evidence relating to the employer’s claim for secrecy of information and deciding, as a matter of fact, on which side of the boundary line it falls. Lack of precision in pleading and absence of solid evidence in proof of trade secrets are frequently fatal to enforcement of a restrictive covenant…”
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- As Mummery L.J. said, the critical question is whether the employer has “trade secrets” which can be fairly regarded as his property, as distinct from the “skill, experience, know-how, and general knowledge” which can fairly be regarded as the property of the employee to use without restraint for his own benefit or in the service of a competitor.
General approach
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- The general approach the Court should adopt when considering the enforceability of the non-competition covenants was set out in Norbrook Laboratories (GB) Limited v Adair [2008] IRLR 878 at paragraphs [38] to [46] and can be summarised as follows:
(1) The Court must determine what the covenant means, properly construed.
(2) The Court must then consider whether the former employer has shown on the evidence that it has legitimate interests requiring protection in relation to the employer’s employment.
(3) Once legitimate protectable interests are shown, the covenant must be shown by the former employer to be no wider than reasonably necessary.
(4) Even if the covenant is held to be reasonable, the Court will decide whether, as a matter of discretion, the injunctive relief sought should in all the circumstances be granted having regard, amongst other things, to its reasonableness at the time of trial.
(5) The burden is on the covenantee to establish that the restraint is no greater than reasonably necessary for the proper protection of protectable interests.
(6) Reasonable necessity is to be assessed from the perspective of reasonable persons in the position of the parties at the time that the contract was entered into or varied and having regard to the contractual provisions as a whole and to the factual matrix to which the contract would then realistically have been expected to apply (paragraph [48]).
(See also the guidance in Office Angels v Rainer-Thomas and O’Connor [1991] IRLR 214 (CA) summarised by Laddie J. in Countrywide Assured Financial Services Limited v. Smart et al. [2004] EWHC 1214 at para. [8])
Assessing reasonableness
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- I refer also to the useful guidance by Cox J. in TFS Derivatives Ltd v. Morgan [2005] IRLR 246 at paragraphs [36-38] as to the correct approach to the question of assessing reasonableness of covenants:
“...In assessing reasonableness, there is essentially a three-stage process to be undertaken.
[1] Firstly, the court must decide what the covenant means when properly construed. [2] Secondly, the court will consider whether the former employers have shown on the evidence that they have legitimate business interests requiring protection in relation to the employee’s employment. In this case, as will be seen later on, the defendant concedes that TFS have demonstrated on the evidence legitimate business interests to protect in respect of customer connection, confidential information and the integrity or stability of the workforce, although the extent of the confidential information is in dispute in relation to its shelf life and/or the extent to which it is either memorable or portable.
[3] Thirdly, once the existence of legitimate protectable interests has been established, the covenant must be shown to be no wider than is reasonably necessary for the protection of those interests. Reasonable necessity is to be assessed from the perspective of reasonable persons in the position of the parties as at the date of the contract, having regard to the contractual provisions as a whole and to the factual matrix to which the contract would then realistically have been expected to apply.“
“[I]f, having examined the restrictive covenant in the context of the relevant factual matrix, the court concludes that there is an element of ambiguity and that there are two possible constructions of the covenant, one of which would lead to a conclusion that it was in unreasonable restraint of trade and unlawful, but the other would lead to the opposite result, then the court should adopt the latter construction on the basis that the parties are to be deemed to have intended their bargain to be lawful and not to offend against the public interest.“
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- In TFS Derivatives, the Court enforced a non-competition clause (with some blue-pencilled removal of some unreasonably wide wording). It did so on the basis of the closeness of contacts that were formed between employees and their broker contacts and the confidential information to which the employee would have been exposed. The Court emphasised in particular the difficulty of policing other forms of protection (see paragraph [84] of the Judgment).
Other points
“The Court cannot say that a covenant in one form affords no more than adequate protection to a covenantee’s relevant legitimate interests if the evidence shows that a covenant in another form, much less far reaching and less potentially prejudicial to the covenantor, would have afforded adequate protection”.
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- It will be seen it is only if the Court finds that a “much less far-reaching” covenant would have afforded adequate protection is it likely to regard the existing restriction as unreasonable. The exercise is not a marginal one, otherwise Courts would be faced with a paralysing debate in every case about whether a covenant with x days shaved off would still provide adequate protection.
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- In Faccenda Chicken Ltd v Fowler [1987] Ch 117, the Court of Appeal drew a distinction between confidential information and “highly” confidential information. Whilst the distinction is not always easy to divine, the importance is that the former is generally not protectable after employment but the latter is being of a different category and akin to a trade secret.
Analysis of enforceability of non-competition covenants
(1) Confidentiality;
(2) Client connections; and
(3) Stability of workforce.
Ground (1): ‘Confidentiality’
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- The Defendants complained that the Claimant had failed sufficiently to plead and particularise the confidential information relied upon. The Claimant sought to rectify this prior to trial by listing 13 specific categories of documents in Mr O’Farrell’s statement which are said justified the non-competition covenant. This list was further expanded and particularised in the Scott Schedule prepared during the hearing relating to 14 categories (see above). The Defendants denied that these documents amounted to ‘trade secrets’ or were sufficiently confidential information to justify a post-termination non-competition covenant restriction.
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- The following points are pertinent as regards the ‘confidentiality’ justification. First, a number of the documents were fairly basic business procedure documents which were not, by their nature, particularly sophisticated or secret, and, in any event, would be capable of recreation by the Defendants and ex-employees using their own skill and knowledge given enough time and effort (viz. the five standard British Marine documents relied upon by the QBE, namely the British Marine P&I Quotations Procedure, P&I Quotations Procedure, P&I Renewal Procedure, Pricing Processes and Marine Claims Handling Procedure).
-
- Second, many of the documents contain material that would be remarkably unmemorable, e.g. as to details of some 10,000 ships, and which would not be capable of independent recollection or afford much practical advantage since such details would normally require updating or broker or shipowner verification before a renewal (viz. the CALM IT database, the Insurance Policies, the Underwriting Reports, the papers provided for the weekly P&I meetings, the Reinsurance Notes and Updates, and Underwriter Rationale Summary).
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- Fourth, much of the information in the documents is underwriter-focussed and not particularly relevant to those with claims roles (viz. the P&I Quotations Procedure; the Underwriting Reports, the data provided with the minutes of the weekly P&I meetings, the General Increase Records, the Underwriter Rationale Summary, the Charterers P&I Quotations Procedure, the P&I Renewal Procedure and the British Marine Pricing Process).
Ground (2): ‘Client connections’
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- The P&I world is very much a relationship-driven business. There is a step change, however, between being an assistant or deputy underwriter and being the Underwriter. It is the Underwriter who is the key figure and to whom shipowners and brokers have primary regard. It is the Underwriter who forms the closest relationships with clients. There was some evidence of assistant and deputy underwriters at British Marine travelling to visit clients abroad as part of their career development path to becoming underwriters (e.g. Mr Petrie travelled as the sole representative of the British Marine underwriting to his specialist areas in Bulgaria and the Far East). The evidence was, however, thin and did not demonstrate such regular contacts by assistant or deputy underwriters as to give rise to close client relationships of the type enjoyed by their more senior underwriting colleagues.
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- As regards claims personnel, they too have client contact and are not simply ‘back-office’. British Marine prided itself on its claims handling service. There was some evidence of claims personnel travelling on occasion to visit clients (e.g. Mr Linacre travelled to Holland, Belgium, Turkey and Bangladesh on business to see brokers and advise assureds on claims and claims protection). The evidence was, again, limited and did not demonstrate the building up of strong client relationships by personnel in the claims department. There was some evidence regarding the difficulty of ‘policing’ extra-curricular client contacts and unlawful enticement to transfer business but this evidence was not particularly conclusive.
Ground (3): Stability of workforce
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- The Defendants contended that this ground was not open to the Claimant because it did not feature in the preamble to the restrictive covenants clause in the employee’s contracts as one of the ‘legitimate business interests’ which it was intended that the restrictive covenants should protect. The preamble only referred to two legitimate business interests: (i) the fact that employees had obtained or were likely to obtain “Confidential Information” relating to the business of the company in the course of their employment; and (ii) the fact that employees had obtained or were likely to obtain “personal knowledge and influence concerning clients and customers” of the Company in the course of their employment (see full quotation from the Employment Contracts above). The preamble made no mention of ‘workforce stability’ or any other ground.
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- Accordingly, the Defendants argued, the Claimant cannot now be permitted to rely on other grounds to seek to justify or buttress the non-competition covenants, such as the stability of its workforce. In support of this contention, the Defendants cite the following passage of Sir Christopher Slade in Office Angels at paragraph [39]:
“In a case where the wording of a covenant restricting competition by an employee after leaving his employer’s service does not specifically state the interest of the employer which the covenant is intended to protect, the court is, in my judgement, entitled to look both at that wording and the surrounding circumstances for the purpose of ascertaining that interest, by reference to what would, objectively, appear to have been the intentions of the parties. However, in a second category of case where the employer, who proffers the covenant for the employee’s acceptance, chooses specifically to state the interest of the employer which the covenant is intended to protect, the employer is not, in my opinion, entitled thereafter to seek to justify the covenant by reference to some separate and additional interest which has not been specified. An employee who is invited to enter into a covenant of this kind may wish to take legal advice as to its validity and effect before he accepts it. His legal advisers will, in my opinion, be entitled to give him such advice on the basis of the stated purpose of the covenant, if any such purpose is stated.”
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- The Claimant submitted that the principle enunciated by Sir Christopher Slade does not apply in this case because the preamble to the non-competition covenant is not exclusive and the stability of a workforce is not a “separate and additional” ground but merely a matter of ‘common sense’ arising in almost all employment relationships. The Claimant pointed to TFS Derivatives Ltd (supra) contending the preamble to the restrictive covenants protecting ” sensitive information”, “clients” and “goodwill” but proved no bar to Cox J. holding that ‘workforce stability’ was an additional legitimate business interest justifying the protection. In my judgment, however, TFS Derivatives is of limited assistance to the Claimant on this point. There the defendant conceded that stability of the workforce was one of the legitimate interests to protect, and the curtilage of the preamble was not in issue. Nor was the Court referred to the above passage of Sir Christopher Slade in Office Angels (supra).
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- The wording in the present case falls within Sir Christopher Slade’s second category, namely an employer, who has proffered various covenants for the employee’s acceptance, has chosen specifically to identify the interest or interests which the covenants were intended to protect. There is no reason as a matter of language (or common sense) why the parties should not have expressly referred to ‘stability of workforce’ as a legitimate interest requiring protection, in the same way as other general interests like e.g. ‘goodwill’. In any event, protecting ‘stability of workforce’ is “separate and additional” to ‘confidentiality’ and ‘client relations’. Furthermore, where the language and identification of the particular legitimate business interests to be protected is clear (as it is here), there are no grounds for justifying a departure from normal rule of construction, i.e. inclusio unius est exclusio alterius. Putting the matter colloquially, as it was in Countrywide Assured Financial Services Limited v. Smart (supra), if an employer nails his colours to the mast, he is stuck with those colours and that mast.
Non-competition covenants are not enforceable
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- For the above reasons, in my judgement, the Claimant has not discharged its burden of proof and justified the enforcement of non-competition covenants against the eight British Marine employees in question on any of the three bases put forward. Accordingly, I therefore decline to grant this aspect of the relief sought. Given my conclusions on ‘springboard’ relief, however, it makes little practical difference to the result (see further below).
No issue as to other post-termination covenants
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- No issue arises as to the operation post-termination of the other covenants. Morgan Lewis, on behalf of the Defendants, gave repeated assurances on 7th and 17th June 2011 and subsequently in July and August, that their clients would comply with their contractual obligations to the Claimant (601-602, 609-612, 652, 663 and 665) and only latterly took issue with the non-compete covenants. Similarly, on 6th July 2011 PRO gave an undertaking that it would not induce individual Defendants to breach their contractual obligations to the Claimant (515-516). Rightly, no issue was taken with any of the other covenants.
(6) Springboard
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- Second, the purpose of a ‘springboard’ order as Nourse L.J. explained in Roger Bullivant v Ellis [1987] ICR 464 is “to prevent the defendants from taking unfair advantage of the springboard which [the Judge] considered they must have built up by their misuse of the information in the card index“ (at page 476G). May L.J. added that an injunction could be granted depriving defendants of the springboard “which ex hypothesi they had unlawfully acquired for themselves by the use of the plaintiffs’ customers’ names in breach of the duty of fidelity” (at 478E-G). The Court of Appeal upheld Falconer J.’s decision restraining an employee who had taken away a customer card index from entering into any contracts made with customers.
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- Third, ‘springboard’ relief is not confined to cases of breach of confidence. It can be granted in relation to breaches of contractual and fiduciary duties (see Midas IT Services v Opus Portfolio Ltd., unreported Ch.D, Blackburne J. 21/12/99, pp. 18-19), and flows from a wider principle that the court may grant an injunction to deprive a wrongdoer of the unlawful advantage derived from his wrongdoing. As Openshaw J. explained in UBS v Vestra Wealth (supra) at paragraphs [3] and [4]:
“There is some discussion in the authorities as to whether springboard relief is limited to cases where there is a misuse of confidential information. Such a limitation was expressly rejected in Midas IT Services v Opus Portfolio Ltd, an unreported decision of Blackburne J made on 21 December 1999, although it seems to have been accepted by Scott J in Balston Ltd v Headline Filters Ltd [1987] FSR 330 at 340. In the 20 years which have passed since that case, it seems to me that the law has developed; and I see no reason in principle by which it should be so limited.
In my judgment, springboard relief is not confined to cases where former employees threaten to abuse confidential information acquired during the currency of their employment. It is available to prevent any future or further economic loss to a previous employer caused by former staff members taking an unfair advantage, and ‘unfair start’, of any serious breaches of their contract of employment (or if they are acting in concert with others, of any breach by any of those others). That unfair advantage must still exist at the time that the injunction is sought, and it must be shown that it would continue unless retrained. I accept that injunctions are to protect against and to prevent future and further losses and must not be used merely to punish breaches of contract.”
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- Fifth, ‘springboard’ relief should have the aim “simply of restoring the parties to the competitive position they each set out to occupy and would have occupied but for the defendant’s misconduct” (per Sir David Nicholls VC Universal Thermosensors v. Hibben [1992] 1 WLR 840 at [855A]). It is not fair and just if it has a much more far-reaching effect than this, such as driving the defendant out of business [855A],
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- Seventh, ‘springboard’ relief is not intended to punish the Defendant for wrongdoing. It is merely to provide fair and just protection for unlawful harm on an interim basis. What is fair and just in any particular circumstances will be measured by (i) the effect of the unlawful acts upon the Claimant; and (ii) the extent to which the Defendant has gained an illegitimate competitive advantage (see Sectrack NV. v. (1) Satamatics Ltd (2) Jan Leemans [2007] EWHC 3003 Flaux J.). The seriousness or egregiousness of the particular breach has no bearing on the period for which the injunction should be granted. In this regard, it is worth bearing in mind what Flaux J, said at paragraph [68]:
“[68] I agree with Mr Lowenstein that logically, the seriousness of the breach and the egregiousness of the Defendants’ conduct cannot have any bearing on the period for which the injunction should be granted – what matters is the effect of the breach of confidence upon the Claimant in the sense of the extent to which the First Defendant has gained an illegitimate competitive advantage. In my judgment, Mr Cohen’s submissions seriously underestimate the unfair competitive advantage gained by the Defendants from access to the Claimant’s “customer list” and ignore, in any event, the impact (if the injunction were lifted) of actual or potential misuse of other confidential information such as volume of business or pricing information. It is important in that context to have in mind that the Claimant maintains in its evidence that all the information said to be confidential remains confidential.” (emphasis added)
ANALYSIS – SPRINGBOARD RELIEF
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- This is an overwhelming case on the facts. Whatever the precise tests on the law, in my judgment, there could not be a clearer case for ‘springboard’ relief than the present case. The facts of this case are in many respects stronger than any of the recent quartet of case cited above, i.e. Shepherd Investments, UBS Wealth Management, Kynixia, or Tullett Prebon (supra). I set out my analysis below.
The Project Phoenix plan
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- Project Phoenix was, in its conception, simple and ruthless: to ‘hollow out’ by stealth British Marine’s underwriting and claims teams and move them across, together with their books and clients and data, to a new ready-made turn-key vehicle, financed by PRO, secured by RSA with up to US$500m cover, owned and controlled by the Defendants, which would steadily acquire British Marine’s business, starting with the 2012 renewals. The model to be used of delegated underwriting and claims authority and a managing general agency agreement was a matter of form and did not materially alter the fact that this was intended to be the spirit of British Marine ‘rising like a Phoenix from the ashes’, back in its original offices, Walsingham House, with most of its key people but with a different name, “Lodestar”. The Defendants’ plan was effectively to acquire British Marine’s business by stealth and without paying for it.
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- Project Phoenix was, in its execution, a remarkable feat of planning, plotting, organisation and secrecy, carried out over 12 months from July 2010 to July 2011. It was carried out during the course of actual employment. It would have been a considerable tribute to the formidable abilities of Mr Dymoke and Mr Hearn but for the fact that it necessarily involved them in numerous, repeated and continual breaches of their duties of fidelity, duties of confidentiality, fiduciary duties and other contractual duties owed to their employers, QBE, and inducing many others into their tangled web.
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- Mr Bloch QC accused Mr Reade QC of viewing and presenting every fact and document through the ‘prism’ of dishonesty, when there were other perfectly innocent explanations for them. The problem is that any process of ratiocination in this case leads inexorably to the same conclusion. In my judgment, everything points to the Defendants having been engaged, over many months, in a careful, concerted and covert campaign of unlawful behaviour with the illegitimate aim of acquiring British Marine’s people and business.
Breaches by Mr Dymoke, Mr Hearn and Mr Kirk
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- There was unlawful conduct by Mr Dymoke, Mr Hearn and Mr Kirk in four main respects. (1) First, broad-scale solicitation by Mr Dymoke, Mr Hearn and Mr Kirk during the currency of their employment, initially of each other, and then of other key British Marine underwriting and claims employees, to join the new venture. (2) Second, substantial abuse and misuse of materials and confidential information belonging to British Marine in order to assist in the process of getting financial backing from PRO, security provider for the new venture from RSA and FSA permission. (3) Third, significant solicitation of British Marine’s broker customers with a view to encouraging them to give their future business to the new venture. (4) Fourth, a complete failure to disclose any of these activities to British Marine management, notwithstanding they were aimed at setting up a new venture in direct competition with British Marine.
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- In my judgment, Mr Dymoke’s obligations under Clause 3.2 of his contract and his obligations as a fiduciary meant that from that moment he was approached by Mr Hearn in mid-2010 with the proposal to set up a new venture together in direct competition with British Marine, he was obliged to ‘come clean’ and immediately inform Mr Harris and/or Mr O’Farrell. It was also incumbent upon him to alert QBE Group management as soon as the threat of a significant number of British Marine underwriters and claims handlers jumping ship and moving en bloc to a brand new start up competitor became a possibility. Mr Dymoke himself acknowledged that it was part of his responsibility to warn the Claimant about the possibility of Mr Hunt moving to Shipowners P&I and to try and prevent this from happening. The coup that he was seeking to achieve by enticing a large number of employees away to a start-up competitor was a much greater threat than this. When asked why he did not warn QBE Group management he simply said candidly: “Well, it’s quite evident that I was potentially going to be that competitor.” His only explanation was that he would not wish to tell QBE Group that he was ‘going for an interview’ with another employer. But his activities with Mr Hearn and Mr Kirk were a far cry from a mere interview. He said: “I wasn’t drawing up a whole load of people and making sure that they were targeted. That wasn’t what I was doing”. But that is precisely what he was doing, in concert with Mr Hearn and Mr Kirk.
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- Mr Dymoke, Mr Hearn and Mr Kirk took full advantage of the time that they were employees of QBE: (i) by using their senior positions to exert influence over subordinate employees in order to foment those employees’ resignations from QBE; (ii) by lifting British Marine’s confidential information to which they had access by reason of their status within the company or other British Marine materials in order to use them for their future venture; (iii) by negotiating with backers such as PRO and RSA from a position where they had access to whatever information and materials were required to secure their support; and (iv) by contacting some of British Marine’s existing broker and client base and securing their support for their future venture. These are classic ‘springboard’ advantages that could never have been achieved but for their unlawful conduct whilst still employed by QBE, and could never have been realised if Messrs Dymoke, Hearn and Kirk had not been able to start setting up their new venture until when their employment had terminated and their covenants had run their course (see further below).
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- The present case shares similarities with the facts of Kynixia (supra) where the defendants were senior employees who planned to transfer their allegiance to a competitor and misled the claimant leading up to and during their exit interviews. Cases such as Tullett Prebon plc make it clear that the Courts will not sanction raids on teams of staff, particularly those led by desk heads or their equivalents, such as Mr Dymoke, Mr Hearn and Mr Kirk. The tide of recent cases runs against this sort of conduct.
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- It should also be emphasised that all this unlawful activity by Mr Dymoke, Mr Hearn and Mr Kirk took place during their actual employment or garden leave. Further, the competitive vehicle was the defendant employees own creation. To this extent, the facts of this case are a fortiori many of the current authorities.
Not merely preparatory
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- The conduct here of Mr Dymoke, Mr Hearn and Mr Kirk went way beyond what could properly or rationally be described as ‘preparatory’. It was not simply taking time off individually to attend the odd interviews with new prospective employers, or individually exploring how to set up a new business and discussing with financial backers. As stated above, it was concerted, covert action by them over many months to further a detailed plan, conceived jointly, to ‘rip the heart’ out of their own employer’s business by setting up a new entity outside, comprising a virtual ‘mirror business’ in direct competition with their employer, using their own employer’s key people and materials, which it was intended would be pretty much on a ‘ready-to-go turn-key’ basis, with all the requisite financial backing, security and even offices fully negotiated, signed and sealed.
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- If one asks the basic question whether or not the activities in which the employee was engaged affected his ability to be able to serve his employer faithfully and honestly and to the best of his abilities (Shepherds Investments Ltd v. Walters, supra), there really is only one answer: Mr Dymoke, Mr Hearn and Mr Kirk could not possibly claim to be faithfully serving British Marine and QBE when conducting themselves in the manner outlined above. They were actively trying to destroy British Marine and re-create it elsewhere for their own benefit.
Summary of breaches
(1) Mr Hearn approached Mr Dymoke with a view to them leaving the employment of QBE and setting up a business venture together in competition with the British Marine business of QBE staffed by present employees of QBE. Mr Dymoke and Mr Hearn then agreed that they would set up a new business venture in direct competition with QBE using present employees of QBE.
(2) Mr Dymoke and Mr Hearn sought Mr Kirk’s participation in the venture and the latter then gave his assistance.
(3) Mr Dymoke, Mr Hearn and Mr Kirk planned to acquire QBE’s underwriting and claims employees and brokers for the benefit of their new venture.
(4) Mr Dymoke, Mr Hearn and Mr Kirk serially approached numerous QBE employees and sought their agreement to become involved in the competing business and required them to keep silent about the new venture thereby inducing them to breach their own contracts of employment to QBE.
(5) Mr Dymoke, Mr Hearn and Mr Kirk approached some of QBE’s brokers.
(6) Mr Dymoke, Mr Hearn and Mr Kirk sought the assistance of QBE’s employees in helping set up the new venture and thereby induced them to breach their own contracts of employment, in particular, Mr Kent, who lent his active assistance to the project.
(7) Mr Dymoke, Mr Hearn and Mr Kirk attracted and negotiated investment and insurance backing for the new venture using a business plan which contained much QBE confidential information relating to the British Marine business of QBE.
(8) Mr Dymoke, Mr Hearn and Mr Kirk further attracted and negotiated investment backing from PRO and insurance backing from RSA on the basis that they would bring a hand-picked team of British Marine underwriters and claims handlers with them who would be able to bring across ‘their’ book, or part of it, to the new venture.
(9) Mr Dymoke, Mr Hearn and Mr Kirk misused confidential information of QBE and QBE materials for the purposes of carrying out the plan, in particular, negotiating and setting up security facilities for the new venture provided by RSA.
(10) Mr Dymoke, Mr Hearn and Mr Kirk engaged in steps to negotiate and secure a security facility from RSA on the basis of the appointment of the new venture as a managing agent.
(11) Mr Dymoke, Mr Hearn and Mr Kirk competed for staff for the new venture (i.e. Mr Collins).
(12) Mr Dymoke, Mr Hearn and Mr Kirk did not report any of their above actions or wrongdoing to QBE at any stage; and, indeed, at all material times, Mr Hearn and Mr Kirk sought to conceal their above unlawful activities and plans from QBE.
PRO’s role and liability
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- From an early stage, Mr Linnell and PRO were very well aware of the obstacles and restrictions that the British Marine contracts of employment placed in the way of Mr Dymoke, Mr Hearn and Mr Kirk and the other targeted British Marine employees and Project Phoenix and the litigation risks they were all running in pursuing Project Phoenix. Despite this, however, PRO were determined to press ahead (i) regardless of the numerous breaches of contract they would induce, (ii) regardless of the damage it would cause to British Marine and (iii) regardless of the risk of serious litigation (which has come to pass). It is clear that decisions were taken at the highest level. Mr Linnell reported direct to the CEO of TAWA, Mr Gilles Erulin, and the COO of TAWA and CEO of PRO, Mr David Vaughan (1903).
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- At all material times, Mr Linnell and PRO played a full and active role in Project Phoenix. This involved supporting Mr Dymoke’s, Mr Hearn’s and Mr Kirk’s unlawful activities, both logistically and financially, in order to seek to bring Project Phoenix to fruition as planned under the noses of QBE Group management. PRO understood they were getting the cream of the underwriting team identified in the Phoenix Business Plan (1903). PRO knew that Mr Dymoke was a very senior employee of British Marine. Mr Linnell admitted that PRO were given the contracts of employment of the British Marine staff identified in the British Marine “very early on”. PRO knew that the process of getting Project Phoenix up and running involved pitching to RSA, a competitor of QBE, and the cloning of large numbers of British Marine documents. PRO gave the order “aggressively to target the staff of British Marine” (3963). PRO knew that the recruitment process by TPD was a sham and the process of extracting the British Marine personnel was being orchestrated by Mr Dymoke, Mr Hearn and Mr Kirk whilst still employed by British Marine (see further below).
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- In my judgment, this was a ‘knowing inducement’ case. At all material times, PRO knew exactly what they were doing. A ‘blind eye’ is, however, enough to give rise to liability for inducing breach of contract. It is enough if, as here, PRO had “the means of knowledge which they deliberately disregarded”; or “deliberately sought to get [the] contract terminated, heedless of its terms, regardless whether it was terminated by breach or not” (see Emerald Construction, supra, Lord Denning at pp. 700-701). Even indifference to whether or not the intended departure of employees is lawful or not is sufficient to give rise to liability for inducing breach of contact (see Tullett Prebon, supra, at para [178]).
(1) PRO agreed to back and enter into the new venture knowing that Mr Dymoke, Mr Hearn and Mr Kirk intended to bring with them QBE employees, brokers and confidential information for use in that business, or being wilfully blind to the unlawful implications of the business plan, the implementation of which they were supporting, facilitating and funding.
(2) PRO’s financial backing for the new venture was given on the basis of a business plan unlawfully conceived by Mr Dymoke, Mr Hearn and Mr Kirk to ‘lever out’ the P&I business from British Marine, or a substantial part of the same.
(3) At all material times PRO knew of the contractual obligations owed to QBE by Mr Dymoke, Mr Hearn and Mr Kirk and Mr Kent, Mr Linacre, Mr Petrie, Mr Gill, Ms Cooper and Ms Clarke, or were wilfully blind to them, and that the implementation of the business plan would necessarily involve numerous breaches by these employees of their contractual obligations to their employer, QBE.
Conspiracy to injure
DEFENDANTS’ ARGUMENTS
Limited breaches of fidelity
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- The first was regarding breach of the duty of fidelity. He accepted that Mr Dymoke and Mr Hearn had ‘crossed the line’ into what he called ‘impermissible preparations’ but submitted only in three limited respects, namely: (i) using British Marine’s documentation for the proposed competitive venture, whether confidential or not; (ii) using the limited services of Mr Kent to advise RSA at two meetings and attend a meeting with a potential software provider; and (iii) inviting Mr Kirk to join the venture, enlisting his assistance and encouraging him to stay on board when he had doubts in April 2011. Mr Bloch QC argued that these three breaches could not conceivably have given the Defendants a significant head start.
-
- His second argument was regarding breach by non-disclosure. Mr Bloch QC also said that there was no obligation to disclose one’s own breaches of the duty of fidelity to one’s employer but accepted that there might be (i) a duty to disclose other employee’s breaches even if this involved indirect disclosure of one’s own breach; (ii) a duty to disclose breaches of fiduciary duty if one was a fiduciary; and (iii) a duty to disclose a threat to the business irrespective of any breach of contract. He again argued, however, that any failure to disclose these matters could not conceivably have given a head start, and any misuse of British Marine’s documents, for instance, would only have given a transient advantage.
-
- The short answer to both these arguments is that they fly in the face of the weight of the facts and ignore the sheer scale of the breaches and unlawful and covert conduct by the Defendants that took place over many months which were all specifically aimed at targeting British Marine’s key personnel and its book of business (see above).
Causation defences
(A) No proof of causation by particular breaches
-
- In my judgment, however, the correct approach is not to look simply at the individual breaches seriatim or in isolation, but to have regard to the totality of conduct complained of and ask whether the cumulative effect thereof is such as to have caused loss, damage or disadvantage to the Claimant. On this basis, there is no question in this case that some 12 months of unlawful activity acting in concert put the Defendants at a major advantage and caused commensurate loss, damage and disadvantage to QBE. In short, by their unlawful conduct, the Defendants stole a march on the Claimant.
(B) ‘Springboard’ advantage illusory
-
- The Defendants’ second causation argument was even if Mr Dymoke and Mr Hearn and Mr Kirk had done the right thing and ‘fessed up’ about their intentions to QBE management as early as October 2010, the likely consequence would have been that (i) all three would immediately have been put on garden leave, (ii) Mr Hearn and Mr Kirk would have been free of their three-month notice period plus their three-month post-termination constraints by April 2011, (iii) Mr Dymoke would have been free of his six-month notice period plus his six-month post termination constraints by October 2011, and, ergo, (iv) the end result would have simply meant an accelerated timetable of preparations for the new venture. For these reasons Mr Bloch QC asserted the Claimant’s case on a ‘springboard’ advantage having been gained is illusory.
-
- The short answer to this second causation point is, as Mr Reade QC for the Claimant rightly submitted, that the matter has to be tested on the basis that there was no wrong-doing whatsoever on the part of Mr Dymoke, Mr Hearn and Mr Kirk at any stage either prior to or after their notional resignations until the end of their ‘garden’ leave and restrictive covenant obligations, i.e. no solicitation, no enticement, no use of confidential information to prepare a business plan, no secret negotiations with potential backers of a rival business partners etc. On this hypothesis of entirely lawful behaviour throughout, Mr Dymoke, Mr Hearn and Mr Kirk would have been locked into a period of stasis and unable to further their plans until the effluxion of all their contractual obligations and restrictions. Moreover, it is entirely possible that Mr Kirk might have been persuaded to stay given his later reticence. In these circumstances, in my judgment, it is unlikely (to put it no higher) that they would have been in a more advanced position than they were in fact by reason of their months of covert activity.
‘Pied Piper’ Defence
-
- The third argument raised by Mr Bloch QC was the ‘Pied Piper’ defence. He argued that, such was the respect and esteem in which Mr Dymoke and Mr Hearn were held in the office, if they had resigned in October 2010 to form a new venture, a substantial number of their colleagues at British Marine would inevitably have followed, including those who did in fact subsequently resign.
-
- In my judgment, this is not correct. There was no inevitability about it. It is true that Mr Dymoke and Mr Hearn were charismatic and dynamic figures and commanded great respect and loyalty amongst their more junior colleagues in the office. It is also true that morale at British Marine was not good in 2010, partly due to the move from Walsingham House and partly due to some unhappiness about remuneration packages and other issues. In my judgment, however, the malaise was not such that if Mr Dymoke and Mr Hearn had jumped ship, this would inevitably have triggered a mass exodus of disaffected British Marine employees loyal to them. One or two like Mr Linacre, who had a particular loyalty to Mr Kirk, might have followed, but any haemorrhaging would certainly not have been anywhere near the scale which it was subsequently discovered the Defendants had orchestrated. It is likely that Mr O’Farrell and other senior management at QBE would, in any event, have taken defensive measures to stem any trickle. Mr O’Farrell did, in fact, do so albeit somewhat belatedly in May 2011 when he and QBE realised the serious scale of covert solicitation that had already gone on. These defensive measures did have the effect of keeping figures such as Mr Healy and Mr Ginman in the fold.
-
- The further fatal problem with this ‘Pied Piper’ argument is that, like the second causation argument (see above), it too fails to take account of the need to test the matter on the assumption of entirely lawful music being sounded by those playing the pipes. The likelihood is that Mr Dymoke and Mr Hearn would have stood alone in splendid isolation for some time if they had started merely with a green field site. This was amply demonstrated by the following piece of cross-examination by Mr Reade QC of Mr Kent:
Q. Suppose that Mr Dymoke and Mr Hearn, without offence to them, were starting a business in a green field with nothing other than their skill and aptitude, and no financial backing. You would never have accepted a job with them, would you?
A. That’s correct.
Q. And it had to be the case, did it not, that they had to have a business that had sufficient financial support to command the security of providing the sort of salary that you wished to be paid from the beginning?
A. They would have needed that, that’s correct.
REMEDY – SPRINGBOARD RELIEF
-
- In my judgment, damages would not be an adequate remedy and ‘springboard’ relief is appropriate in this case. Only an injunction could properly protect the Claimant from the advantage which the Defendants have gained by their meticulous and sustained campaign of unlawful actions aimed at targeting British Marine’s people and business for so long a period.
-
- The launch of the new venture, particularly this side of annual renewals on 20th February 2011, could have led to significant damage to British Marine’s business interests and position in the market. Such damage would have been difficult to quantify and potentially irreversible. It may only take one telephone call with a broker or a client to cause a shift in loyalties and the transfer of business, particularly as the new venture will have the advantage of operating with many ex-British Marine staff. The destination of lost business would not in all cases be known. Furthermore, any enquiry into damages would be heavily dependent on evidence to be provided by the Defendants and their co-operation to establish the extent of any calculable losses.
Defendants’ assertions of lawfulness untrue
-
- The Defendants’ behaviour set out above in detail in this judgment must be viewed in the context of the Defendants’ assertion that they had never been in breach of contract or ever engaged in unlawful conduct. On 17th June 2011, for instance, the Defendants’ solicitors, Messrs. Morgan Lewis asserted that the Defendants’ previous conduct had been lawful and said “our clients believe that they have complied with their contractual obligations” (609). It is now abundantly clear from the disclosure and the evidence that this was simply untrue. The Defendants had engaged in over 12 months of remorseless unlawful activity which involved numerous breaches of contract and was specifically targeted at the Claimant and its business which at all material times the Defendants sought to hide from the Claimant. Mr Nigel Wilkinson QC’s instincts were entirely right when granting further interim relief (see above).
Length of springboard
-
- I turn to consider length of the ‘springboard’, i.e. the period and scope of the injunctive relief to be granted. The Court must assess the actual advantage gained by wrongdoers as a result of their unlawful activities and grant appropriate relief. Springboard injunctive relief is for unlawfully ‘stealing a march’ on competitors. The essential question is therefore: how much of a march have the Defendants in this case, in fact, stolen on the Claimant as a result of their wrongdoing? This depends on both the length and tensile strength of the ‘springboard’ itself and gauging the relative advantage gained by its use. The Claimant contends for injunctive relief until June/ July 2012.
(1) First, the appropriate measure for the length of a springboard injunction is the length of time that it would have taken the wrongdoer to achieve lawfully what he in fact achieved unlawfully, relative to the victim.
(2) Second, it must be emphasised that the exercise is a relative one and any advantage must be measured as such. Wrongful activities may have both a positive and negative effect, i.e. benefiting the wrongdoer whilst simultaneously harming the victim. Thus, for instance, the unlawful poaching of key staff is likely to advantage the wrongdoing party whilst disadvantaging the victim who has lost key staff and may have to recover lost market ground.
(3) Third, it is relevant to look at the period of time over which the unlawful activities have in fact taken place. The relationship of this period with the length of any springboard relief is, however, kinetic not linear.
(4) Fourth, there may be many different factors at play during the period of unlawful activity materially affecting the advantage gained which may, or may not, obtain in similar assumed circumstances of purely lawful activity. These factors might include, for instance, (i) the advantage of soliciting junior employees whilst still being employed and in positions of power, compared with the trying to recruit as an ex-employee, (ii) the advantage of stealth and secrecy, so that management are unaware and do not take defensive measures, and (iii) conversely, the advantage sometimes of being able to work speedily and not having to be covert.
(5) Fifth, the nature and length of the ‘springboard’ relief should be fair and just in all the circumstances.
Relevant considerations
-
- The unlawful activity started at the latest in July 2010 when Mr Hearn first approached Mr Dymoke with definite intent. They did not, however, start working in earnest on the Phoenix Project until August 2010 when they first sought the assistance of NMB in putting together figures and approached a third party for funding. There was a great deal of activity that then took place covertly without QBE being aware which included enlisting Mr Kirk, soliciting the key employees in their British Marine and claims teams, putting together the Phoenix Business Plan, finding the right financial backers, pitching to PRO and RSA, preparing the base documentation and the FSA application and negotiating financial terms.
-
- The Defendants were originally aiming at a launch date for Project Phoenix of 1st March 2011 which subsequently slipped to 1st November 2011. Even the latter date might have been somewhat optimistic, however, given a slower than expected RSA due diligence process and the fact that the FSA only granted approval in October 2011.
-
- Mr Hearn, Mr Kirk and Mr Dymoke would not have been able to start working on many of these tasks until the expiry of their contractual restrictions. Released from the shackles of employment contracts, however, and the need to act covertly, these able and ambitious individuals would have been able to work more quickly and effectively in the open.
-
- There were, however, many pieces of the jigsaw puzzle to be put in place which required a concerted effort of the three of them leading the project. Their ‘pulling power’ with junior employees at British Marine may not have been so potent once no longer employed. Their ability to persuade PRO and RSA that they had a ready made team prepared to jump ship less obvious. This, in turn, might have slowed the willingness of British Marine staff to take the plunge.
-
- Part of the plan seems to have been to use Mr Hunt and Mr Mahoney as advance ‘outriders’ to help with early marketing prior to the arrival of the main cohort of ex-British Marine employees arriving; and it is for this reason that the comment was made that the “spotlight” might well fall on them (2402). But, in my view, it would be unfair to allow the Defendants to use them to establish some sort of a ‘bridgehead’ for similar reasons to those enunciated by Openshaw J.’s in UBS v. Vestra (supra) at [32]).
-
- The most important date in the calendar year is 20th February 2012 when over 70% of renewals take place. The Defendants main aim was to have “Lodestar” up and running in time to take advantage of these 2012 renewals. This was the main prize and advantage which the Defendants sought unfairly to gain. But for their unlawful activities, however, the Defendants would have stood little chance of a set up and launch this side of the 2012 renewals. In my judgment, to allow the Defendants to launch “Lodestar” before the February 2012 renewals would be highly injurious and unfair to QBE and allow them to gain materially from the unlawful advantage which they should not have gained in the first place.
Springboard relief granted until 28th April 2012
-
- In my judgment, taking all the relevant factors into account, it would be fair and just in all the circumstances to grant ‘springboard’ relief to QBE until 28th April 2012, i.e. just over two months after the February 2012 renewals and 12 months after the resignations of Mr Dymoke, Mr Hearn and Mr Kirk.
LOSS AND DAMAGE
-
- In view of my conclusion that damages would not be an adequate remedy in this case and ‘springboard’ relief by way of a final injunction is appropriate, the only remaining question is whether there was loss and damage occasioned which falls to be considered and compensated quite apart from the matters to which the final injunction relates.
-
- It is not disputed that recruitment and retention costs are foreseeable losses that flow from the Defendants’ actions, that is to say the costs the Claimant reasonably expended by way of defensive measures in order (i) to retain staff who might have been tempted to follow the exodus and (ii) to recruit new staff to fill the gaps left by those who had resigned to join PRO.
-
- The Defendants’ ‘soft departure’ strategy (i.e. of resignations being rolled out over a period of time) worked. It took some time for QBE management to wake up to the full scale of the defections taking place. I do not, however, accept that Mr O’ Farrell is to be criticised for being a bit slow off the mark, other than with the benefit of hindsight. The trio of resignations on 28th April 2011 came out of the blue; and given the lack of success of previous attempts at start-ups, it was reasonable for Mr O’Farrell and QBE Group management to suppose that any further departures in the wake of the trio would be limited. The Defendants’ successful campaign of secrecy regarding Project Phoenix kept QBE management pretty much in the dark. Those who resigned were unforthcoming and did not even disclose the name of their new employer. As Mr O’Farrell explains, PRO’s name was discovered by chance when Mr Harris spotted the contract for one of the departing employees on the printer by his desk.
-
- When the true picture began to emerge, however, it was clear that rapid action had to be taken and the company cheque book had to be opened in order to try to stem the outflow. This meant shoring up the existing employee base as quickly as possible and seeking to persuade those who had resigned to return. In the event, Mr Ginman, Mr Glover, Mr Bamberger and Mr Hamerston were persuaded to stay but, of those who actually resigned, only Mr Healy was persuaded to change his mind and revoke his resignation.
(A) Retention costs
-
- The Claimant claimed for pay rises given to retain staff amounting to £73,238.53 which included a bonus to Mr Healy of £25,000. Pay rises were offered to all relevant staff and backdated to 1st June 2011 (save for Mr Kent who said he had made up his mind to leave). These were by way of advance pay rises and only claimed up to January 2012 when pay rises would normally have been given in any event. There was no general practice of offering mid-term pay rises at British Marine. In my judgment, the staff retention costs of £73,238.53 were reasonably incurred.
(B) Recruitment costs
-
- The Claimant claimed recruitment expenses totalling an estimated £214,837. There were 10 vacancies to fill. Mr Gibbons confirmed that 18% was a reasonable agent’s fee for recruitment of permanent staff. In the circumstances, it was reasonable and necessary for QBE to offer salaries in excess of market rates. The Claimant needed to recruit staff quickly to fill the gaps to maintain confidence and clients and prevent a further collapse. To date, I understand that something like half of the vacancies have been filled. In my judgment, the staff recruitment costs of £214,837 were properly incurred.
(C) Claims adjuster costs
-
- The Claimant claimed £25,955.28 in respect of the cost of employing a temporary claims adjuster from July 2011 to January 2012. Given the disruption that the spate of resignations caused and the need to keep work ticking over, in my judgment, it was reasonable for the Claimant to employ a temporary claims adjuster and the figure of £25,955.28 is reasonable.
Summary of damages
RESULT
Postscript
- I would like to pay tribute to solicitors and counsel on both sides for the impressive way in which they got this matter ready for trial in short order, for the skill, thoroughness and elegance with which both side’s cases were presented and for the constructive atmosphere in which the hearing was conducted throughou
Sean Cotter v Canon Joseph Ahern and others
1975 No. 3401P
High Court
25 February 1977
[1976-7] I.L.R.M. 248
(Finlay P)
25 February 1977
FINLAY P
delivered his judgment on 25 February 1977 saying: The plaintiff in this case claims damages against the first named defendant Canon Ahern for breach of a contract to appoint him principal of Ovens National School in County Cork and against the remaining defendants for procuring the breach of the contract and for conspiracy.
The plaintiff is a primary school teacher, the defendant, Canon Ahern, is a parish priest and was in 1974 manager of the Ovens National School, and the second, third, fourth and fifth named defendants who are all primary school teachers are respectively chairman, vice-chairman, treasurer and secretary of the Cork city branch of the Irish National Teachers Organisation.
I find the facts proved or admitted before me to be as follows.
The plaintiff who is a native of Cork qualified as a primary teacher in 1954 and has since that time with a short interruption of under two years taught in various schools in Ireland.
In 1963 he was appointed to Schull National School in County Cork where he remained for nine years, ending as principal of a two teachers boys school.
In 1972 he obtained an appointment as assistant at a larger school at New Inn, Lower Glanmire and moved home with his wife and family to the outskirts of Cork city.
After a short period he was offered the post of vice-principal in that school by the manager. The plaintiff was at that time and had for many years been a member of the INTO and he was then by that organisation referred to a rule of the organisation namely rule 115F which in effect provided that no member of the organisation could accept appointment as a vice-principal if he was not the longest standing teacher in the school other than the principal without a special decision of the executive council of the INTO.
The plaintiff stated in evidence that he was visited by Mr Collins who was then the representative of the Cork City and County Branches of the INTO on the executive council and by another high ranking official. He asserted that he asked for a definite ruling as to whether he should accept or refuse the post of vice-principal which had been offered to him but was merely referred by these persons to the rule which I have quoted. The manager of the school had informed the plaintiff at the time of offering him this appointment as vice-principal he *251 was not prepared to appoint to that post another teacher in the school who would through junior in experience to the plaintiff as a primary school teacher have in fact had longer service in the New Inn school.
The plaintiff apparently then did accept the appointment but was then requested by the INTO to submit to the arbitration of the executive council the question as to whether he should or should not have accepted the appointment. In his own words the plaintiff decided that he would not get a square deal from such an arbitration and at the end of the year 1972 he resigned from the INTO and retained his appointment as vice-principal of the New Inn National School.
The present defendant members of the INTO then made what they described to me as repeated representations to the Bishop of Cork with the purpose of getting the plaintiff removed from his position as vice-principal of New Inn School but were unsuccessful in this objective.
In April 1974 the defendant, Canon Ahern, advertised in the daily newspapers the post of principal of Ovens National School. The plaintiff applied for this post in response to that advertisement and sent particulars of his qualifications and experience.
His name amongst others was submitted by Canon Ahern to the Department of Education and in reply the canon received the following letter dated 17 May 1974:
With reference to your recent letter regarding the post of principal teacher of the above named school, I am to say that, of the candidates for this post whose names you submitted to the Department, the following are regarded by the Department as possessing the standard of general suitability considered desirable for the post. Their names are given in alphabetical order and not in any order of merit.
The letter then continued with a list of eight names of which the plaintiff was one and of which Denis Lynch was another. This letter on the evidence before me arose from the following regulations and procedures.
Rules for national schools under the Department of Education were made by the Minister for Education on 22 January 1965 and concurred in by the Minister for Finance in so far as they affected financial matters on 11 February 1965. These rules do not appear to be a statutory rule and order nor do they purport to have been made under any particular statutory power. They are however accepted on the evidence before me as the basis of the management and staffing of national schools at the dates material to this action.
Rule 15(1) of these rules provides as follows:
The manager of a national school is charged with the direct government of the school, the appointment of the teachers, subject to the Minister’s approval, their removal and the conducting of the necessary correspondence.
*252
Rule 18 provides as follows:
1
(a) The managers are required to submit without delay all proposed changes of teachers to the Department for approval. They are also required to notify all proposed changes of teachers to the inspector.
(b) If a manager appoints a teacher without prior official approval the Minister may refuse payment of salary for any service given by such teacher.
2. On the appointment of a principal, vice-principal, assistant teacher or junior assistant mistress other than the appointment of a temporary teacher for a brief period the manager must enter into an agreement with the teacher on one of the official forms provided for the purpose. There are four forms of agreement numbers 1, 2, 3 and 4. Copies of these forms are available from the Department as required.
3. If an agreement has not been executed with a newly appointed teacher payment of salary may be suspended until an agreement has been executed.
Subsequent to the making of these rules a circular was issued to the managers of national schools by the Department of Education in January 1969 and reads as follows:
Appointment of principal teachers of schools with a staff of four or more teachers.
With a view to ensuring as far as possible that only the most suitable persons are appointed to positions as principal teachers of schools with the staff of four or more teachers the following procedure will apply in future to the making of appointments to such positions in all schools other than those conducted by religious orders.
1. Each vacancy for a post as principal teacher of a school with a staff of four or more teachers is to be advertised and the names of the applicants and particulars of their present employment are then to be forwarded to the Department of Education Primary Branch.
2. Having assessed the general suitability of the applicants for each appointment the names of those who are considered most suitable for appointment as principal teacher will be notified in alphabetical order to the manager.
3. Arrangements have been made in the Department to have the applicants assessed promptly and it is hoped that replies will issue to managers within a week or at the latest a fortnight.
4. All communications in the matter between managers and the Department will be regarded as confidential.
5. It is not proposed to alter any of the existing rules regarding the appointment of principal teachers in national schools.
The Ovens National School in 1974 was a school with a staff of four or more teachers and this circular and the procedure created by it therefore applied to it.
As a result of this circular and its interpretation I am satisfied on the evidence of Mr Callanan, an official of the Department of Education, that a system evolved whereby on the proposal of the manager of a national school to appoint a principal, having advertised for applicants, he submitted particulars of all those who had applied to the Department and the Department then ‘short listed’ those applicants in alphabetical order and provided that the manager subsequently *253 decided to appoint one of those short listed, the sanction of the Minister to such appointment was automatic and a formality.
Whilst therefore the original rules of 1965 remained technically unaltered the situation had been achieved in which in effect the Minister’s approval to the appointment of a person as principal teacher of a school to which this circular applied was given as a blanket approval of a number of candidates before the final selection by the manager rather than as an approval of a single name sent to him although his technical sanction of the single name finally prososed still was issued.
On 3 June 1974 the defendant, Canon Ahern, sent for the plaintiff and interviewed him. He informed the plaintiff that he was in fact the second selection he had made out of the list of candidates submitted to him but that the first selection upon being offered the post had refused it. He then informed the plaintiff that he, the canon, was prepared to offer to him, the plaintiff, the post of principal at the Ovens National School provided that the plaintiff was prepared to take up his appointment on 1 July 1974. The plaintiff agreed to accept the appointment and to take up duty on that date and the canon then wrote in the presence of the plaintiff the following letter which he handed to the plaintiff which was dated 3 June 1974.
Dear Mr Sean Cotter
It affords me great pleasure to appoint you to principalship of Ovens School. You will take up duty 1 July, 1974.
Joseph Ahern PP.
Upon receiving this letter and in effect this appointment the plaintiff returned to the manager of the New Inn School and arranged with him by agreement that he would be absolved from the necessary length of notice which he should have given which would appear to have been three months and would be freed by the manager of that school from his position so as to take up duty as principal of Ovens National School on 1 July 1974.
One of the by now unsuccessful candidates for the post of principal of Ovens National School was Mr Denis Lynch who was at the time an assistant teacher in the school. The defendant, Canon Ahern, apparently out of courtesy informed Mr Lynch of the fact that he had been unsuccessful in his candidature and that he, the Canon, had decided to appoint Mr Cotter, the plaintiff, and this information was conveyed to Mr Lynch on 5 June 1974.
Mr Lynch on the evidence before me then sought an interview with Mr O’Seaghda one of the defendants herein. He informed Mr O’Seaghda that he had failed in his application to become principal of Ovens National School and Mr O’Seaghda informed him that that was a matter for the manager who was entitled to appoint who he liked. Mr Lynch then informed Mr O’Seaghda that *254 the man who had been appointed was Mr Cotter who was not a member of the INTO and in his own words Mr O’Seaghda then said that that was a different case altogether.
It would appear that Mr O’Seaghda then advised Mr Lynch to inform the defendant Canon Ahern of the fact that Mr Cotter was not a member of the INTO and further to inform him that by reason of that fact there would be a frailty or deficiency of insurance connected with his appointment or service in the school. This last piece of advice apparently arose from the fact that it was the view of Mr O’Seaghda that upon his cesser as a member of the INTO the plaintiff, Mr Cotter, would no longer be covered by the group insurance which that organisation took out on behalf of their members against claims for negligence or assault against school teachers. I am satisfied on the evidence that upon receiving this advice Mr Lynch did in fact visit the defendant Canon Ahern upon the following day which would have been 6 June 1974 and informed him of these two facts in addition informing him, the Canon, that a number or some of the parents whose children attended the school were dismayed at the fact that Mr Lynch had been overlooked.
As a result of this interview Canon Ahern sent for Mr Cotter and informed him of what had been said to him by Mr Lynch. There is some conflict of evidence as to what occurred at this interview but I am satisfied that whereas the Canon did not expressly request Mr Cotter to withdraw from his acceptance of the position of principal teacher and certainly did not suggest that he was in any way prepared or willing to cancel that appointment he did enquire from Mr Cotter as to whether Mr Cotter would think over the position which he was taking having regard to the opposition which was now forming against it. Mr Cotter undertook to think over this situation and to return to the canon on the following Sunday, which would apparently have been 9 June 1974 with his decision.
Immediately after this interview with the defendant Canon Ahern, the plaintiff went and visited the defendant Mr Motherway at his school, he being the secretary of the local branch of the INTO. He informed Mr Motherway of the fact that he had been appointed by Canon Ahern to the post of principal teacher in the Ovens National School, of the fact that the opposition was being made to that appointment on the basis that he was not a member of the INTO, gave to Mr Motherway who had not then been an official a brief résumé of his dispute with the INTO which had occured in 1972 and stated that he had now decided that the best way of approaching the problem was to rejoin the INTO. Mr Motherway merely informed him that the person to whom any application for joining the INTO should be made was not him, the secretary, but rather the treasurer Mr O’Seaghda who was also the organising secretary for the area. It would appear that at this interview the plaintiff either read to or proffered to Mr Motherway to be read by himself the letter which had been handed to him by *255 Canon Ahern on 3 June 1974.
Between the visit by Mr Lynch to Mr O’Seaghda on the afternoon of 5 June and this interview between the plaintiff and Mr Motherway on the afternoon of 6 June considerable activity had taken place in the ranks of the defendants as the officers of the Cork city Branch of the INTO. By the morning of 6 June 1974 it had been decided that a delegation from that branch or from the officers of that branch should visit Canon Ahern and both the secretary Mr Motherway and the chairman of the branch, Mr Hurley, had telephoned the general secretary of the INTO, Senator Brosnahan to enquire as to whether the appointment of Mr Cotter to the post of principal had already been sanctioned by the Department. Senator Brosnahan would appear to have made this precise enquiry to the Department of Education without enquiring as to whether under the procedure laid down by the circular, of which, of course, he was aware, the listed names had been notified as being suitable, and was informed that no single name had been proposed by Canon Ahern for appointment as principal of Ovens National School. He conveyed that information both to Mr Hurley and Mr Motherway and apparently also advised them that it was in order for them to intervene and to make representations to Canon Ahern. Upon receipt of that information and prior to the meeting between the plaintiff and Mr Motherway it had been decided by the four defendants concerned that they would visit Canon Ahern and that they would bring with them as well Mr Collins who though not a member of the Cork City Branch was a member of the INTO and was the delegate or representative of both Cork City and County Branches on the executive council. All five persons met near the residence of Canon Ahern at Ovens. I am satisfied on the evidence that Mr Motherway had informed the other three defendants on the way out to that meeting of his interview with the plaintiff and in particular of the fact that the plaintiff asserted he had a letter which he stated confirmed that he had actually been appointed as principal of the school by Canon Ahern.
Before going to see Canon Ahern the four defendants and Mr Collins first visited the retiring principal of the school, a Mr McSweeney, whose wife was also an assistant teacher at it, and informed him of the position and of the decision of the manager of the school to appoint Mr Cotter as principal teacher. According to them Mr McSweeney expressed dissatisfaction with this appointment, as did his wife who was a teacher at the school. It was then decided that by reason of the age of Canon Ahern, who was then a man in his middle seventies, it would be inappropriate for all five persons to visit him and three members of the group went to visit the defendant Canon Ahern. They were the chairman, Mr Hurley, the vice-chairman, Mr Garvey, and the treasurer and organising secretary, Mr O’Seaghda.
There are substantially two accounts of the visit that followed. One is from the evidence of the defendant Canon Ahern which was taken on commission and which is somewhat brief and shows signs of some forgetfulness or at least *256 reserve in recollection. The other is the account of two defendants who were present at the interview. There is not any very substantial conflict between these various accounts of the interview though some disparity in emphasis and inference arises.
I am satisfied that what happened at this interview may thus be summarised.
The defendants informed Canon Ahern who they were, and indeed they were known to him, and of the positions they held in the Cork City Branch of the INTO. They also informed him of their dissatisfaction with his decision to appoint Mr Cotter, the plaintiff, as the principal of the school and expressed the view that the other teachers in the school might find it displeasing and difficult to work with him. They further expressed to him the point of view that some or many of the parents of the school who were members of trade unions might find it unsatisfactory to have what was described as an unassociated teacher as the principal of the school. They mentioned again the point which had been mentioned by Mr Lynch, that Mr Cotter, not being a member of the INTO would not derive the benefit of their group insurance and that the school might therefore in those circumstances be inadequately or insufficiently insured. It would appear that during these various representations the defendant Canon Ahern did not give any indication of his point of view and in particular did not give any indication of a willingness to cancel or change his decision to appoint Mr Cotter. Mr Hurley the chairman of the branch then enquired of the defendant Canon Ahern as to whether he had obtained the approval of the Bishop of Cork to the appointment of Mr Cotter as the principal teacher. It would appear to be common knowledge and in a sense confirmed by the evidence on commission of the defendant Canon Ahern that it was a rule or regulation of the diocese that the manager of a national school who was also a parish priest was required to seek and obtain the approval of the Bishop of Cork to the appointment of any particular individual, certainly to the position of principal, possibly to any position in the school. Canon Ahern apparently replied to this query that he had not yet sought the approval of the bishop and Mr Hurley then mentioned that the delegation there present were prepared that evening to go to the Bishop of Cork and make representations against the appointment of the plaintiff Mr Cotter. Upon this information being afforded to the defendant Canon Ahern by the defendant Mr Hurley, on the evidence of Mr Hurley, which I accept, the canon immediately stated that he would cancel the appointment of the plaintiff provided that those persons present came back to him with their representations in writing. This does not exactly accord with the evidence given by the defendant Canon Ahern on the taking of his evidence on commission for he there stated that his request for the making of these representation in writing was because he was hard of hearing and was afraid lest he might have misunderstood or not heard some of the representations that were being made. I prefer the recollection of Mr Hurley and I am satisfied that in terms of the sequence of events it was *257 immediately after the reference by the delegation to their intention of visiting the Bishop of Cork that the defendant Canon Ahern expressed for the first time his willingness to cancel the appointment of the plaintiff Mr Cotter.
The deputation then withdrew and having met together after a period of about two and a half hours returned and delivered to the defendant Canon Ahern the following letter. It was written by the secretary Mr Motherway on the official note paper of the Cork City Branch of the INTO.
Very Reverend Canon
We understand that you have offered the position of principal of Ovens NS to Mr Sean Cotter of New Inn NS. (Lower Glanmire) as from 1 July 1974.
We expect that you are not aware that the said Mr Cotter is not a member of our organisation.
Subsequent to his appointment to New Inn he accepted the post of vice-principal. This was deemed by the Arbitration Committee of District 12 (Cork City and County) to be unworthy conduct under the terms of rule 115F of Rules and Constitution of the INTO.
In these circumstances we respectfully suggest that the proposed appointment of Mr Cotter is ill-advised.
Yours Respectfully.
Brendan Hurley, Chairman. T.N. Garvey, Vice-chairman,
T.S. O’Seaghda, Treasurer, Finbarr Motherway, Secretary.
Then on the evidence of the defendants themselves on their returning with this letter to the defendant Canon Ahern he stated that ‘while you gentlemen have been writing I have been writing also’ and he showed them then a letter which he had written to the plaintiff dated 6 June 1974 which reads as follows:
Dear Mr Cotter,
This evening some three representatives from the INTO called and handed me the enclosed document to read. At the time I appointed you to the principalship of Ovens NS I did not know what the enclosed document contained. Under the circumstances I am now cancelling the appointment made with you on last Tuesday the 4/6/74.
Yours truly
Joseph Ahern PP
The defendant, Canon Ahern, then apparently having shown or read the letter to the defendants, enclosed it in an envelope addressed to Mr Cotter and asked them to post it for him. At the same time he apparently informed them that he had now decided to appoint instead Mr Denis Lynch the assistant teacher in the school who had originally contacted Mr O’Seaghda and at the same time handed *258 to them an advertisement for insertion in the Cork Examiner of the post of assistant teacher and both of these letters were subsequently posted. Upon receipt of this letter the plaintiff, Mr Cotter, fortunately persuaded the manager of New Inn School to absolve him from his resignation which he had tendered to him on 3 June. It was then, I am satisfied on the evidence, too late for the plaintiff to apply for any other principal post in any primary school and he continued on in New Inn. In or about May 1975 he applied for a number of principal posts which were advertised in the Cork area. To some of these he received no reply at all but to one, that of St Peter’s and Paul’s in the City of Cork, he received a reply and had an interview with the manager who was the parish priest of that parish Father Ryan. In fairness the plaintiff informed Father Ryan of his dispute with the INTO and though Father Ryan had expressed a willingness to appoint him to the post he said he would check this matter with the INTO and would reserve his decision until he had done so.
I am satisfied on the evidence that he did check the matter with the INTO and interviewed some of the defendant members of that organisation. They expressed a total unwillingness to accede to any appointment of Mr Cotter to that post and Father Ryan then wrote informing the plaintiff of the fact that he could not appoint him. As a result the plaintiff eventually applied for and accepted the post as principal of a national school in Bray where he is still serving but he was of course obliged to sell his house in Cork and move himself, his wife and family to Bray in order to take up and carry on with that post. As a result he suffered losses with which I will later deal.
From those facts as proved I have made the following inferences. I am satisfied that the purpose and intention of the activity by the four defendant members of the INTO was to try and ensure that a situation arose as far as their efforts could achieve it whereby every teacher in their area would be a member of their organisation, the INTO which is in fact a registered trade union. I am further satisfied that they believed, probably quite sincerely, that if every teacher in every school was a member of the INTO they would be more likely to agree one with the other, and that they had also a feeling of resentment that teachers who were not members of the INTO should receive benefit from negotiations and betterments of the position of teachers in general achieved by that organisation. It would appear that the Cork City Branch of the INTO was particularly enthusiastic in the pursuit of this objective and in my opinion somewhat disturbingly circulated each year on the back of their ordinary balance sheet which was a statement of the financial affairs of their branch to which each member would normally be entitled, a list of teachers in the Cork City area who were not members of the organisation. In the list so circulated in 1974 there appeared amongst others the name of the plaintiff Mr Cotter. I can only view this particular activity as what might be described as an updated pointing of the finger at persons who had refused or were unwilling to join their trade union *259 organisation.
I am further satisfied that the intention and effect of the visiting by the officers of the INTO of the defendant Canon Ahern on the evening of 6 June 1974 was to use the most powerful persuasion available to them to try and prevent the appointment of the plaintiff to the post of principal of Ovens National School and that this was being done not on the basis of any lack of suitability arising from qualification, experience or character in the plaintiff to be the principal of a national school but solely upon the grounds that he was a person who had resigned from the INTO and who had up to that time at least refused to rejoin it. I am satisfied in particular that the reference by the delegation to the projected visit by them to the Bishop of Cork to protest against the appointment of the plaintiff as principal of Ovens National School was a subtly contrived representation likely to have the effect which it dramatically did have of changing the mind of the 70 year old defendant Canon Ahern as to whether he would persist with the appointment to which he had previously agreed.
On these facts and having made these inferences from them I have come to the following conclusions as to the application of the legal principles involved.
Liability of the defendant Canon Ahern
I am satisfied that the agreement made between this defendant and the plaintiff on 3 June 1974 which is witnessed by the letter written by this defendant to the plaintiff on that occassion must in the light of the other evidence with regard to the rules of national schools and to the rule of the diocese involving the question of approval by the Bishop of Cork be construed as an agreement by the defendant Canon Ahern to appoint the plaintiff to the position of principal of Ovens National School, he to commence his duties on 1 July 1974 and for the purpose of implementing that agreement bona fide and fully to seek the approval both of the Bishop of Cork to that appointment and the formal sanction of the Minister of Education as well.
On the evidence it is quite clear that having regard to the decision made by him on 6 June 1974 this defendant Canon Ahern neither sought the approval of the Bishop of Cork nor the sanction of the Minister for Education to the appointment of the plaintiff and was therefore in breach of his contract clearly made with the plaintiff on 3 June 1974.
Liability of the defendants Hurley, Garvey, O’Seaghda and Motherway
With regard to the liability of these defendants two issues arise. The first is as to whether they were guilty of procuring the breach which I have found was committed by the defendant Canon Ahern of his contract with the plaintiff and the second is as to whether they were guilty of actionable conspiracy.
With regard to the first issue on my finding that there was a contract and a breach of it two issues only remain, the first being as to whether that breach was *260 induced by these defendants and secondly as to whether at the time they induced it they were aware of the existence of the contract.
I am quite satisfied that these defendants induced the breach by the defendant Canon Ahern of his contract with the plaintiff. I believe that to have been the purpose of the visit by these defendants in the sense that it was their intention to prevent if at all possible the appointment of the plaintiff as principal of this school. An attempt was made on the part of these defendants to submit that they were offering only advice to the canon and that to some extent they were motivated more by concern with regard to the position of children who might have a claim against the principal teacher in respect of which he would not be insured. I am quite satisfied that there is no reality in either of these two contentions. If the purpose of these defendants was simply to convey information or in that sense advice only to the defendant Canon Ahern it could have been done by a simple letter or indeed, as far as they were aware, it had already been done by Mr Lynch conveying to the defendant the information that this plaintiff was not a member of the INTO and creating a doubt with regard to the validity of his insurance. The purpose of what might be described as a solemn deputation by three of these four defendants clearly was to exert the maximum pressure upon the defendant Canon Ahern. I am satisfied that on the evidence during the course of that interview these defendants pointed out to Canon Ahern that the sanction of the Minister had not yet been obtained and that in those circumstances he was free as they said to cancel the appointment. All this coupled with the representations they made and the manner in which they made them, in my view, was a clear inducing of him to break what I will for the moment describe neutrally as the arrangement he had made with the plaintiff.
These defendants asserted that having regard to the enquiry which they made on the morning of 6 June through the general secretary of the INTO they were satisfied that no binding agreement could exist between the defendant Canon Ahern and the plaintiff. I am not satisfied with this assertion. On the contrary I am satisfied that each of these defendants was well aware of the practical arrangements which then existed with regard to the appointment of principals of national schools. I am furthermore satisfied that they were well aware that if in fact the plaintiff had been short listed by the Department, the sanction of the Minister to his appointment would be a formality only. Great care on the evidence before me was taken by these defendants and indeed by the secretary of the INTO not to enquire as to whether this plaintiff had been short listed or not and equal care would appear to have been taken by these defendants themselves and in particular by Mr Motherway not to make any enquiry of the plaintiff with regard to the precise form of contract which he alleged and was clearly alleging existed between him and the first named defendant Canon Ahern. In all these circumstances I am driven to the conclusion that these *261 defendants were well aware that a decision had been made by the first named defendant to appoint the plaintiff, and that according to the usual procedures adopted for the making of such appointments, he, the first named defendant must have taken upon himself the implied obligation of seeking in a genuine and bona fide way the approval of the bishop if necessary and of the Minister for Education for that appointment. In these circumstances I am quite satisfied that these defendants were aware or ought to have known of the existence of a contractual arrangement between the defendant Canon Ahern and the plaintiff and that it was that contractual arrangement the breach of which they were seeking to procure. I am not satisfied that they can escape liability by relying on the technicality of the consent of the Minister for Education which had yet to be obtained nor by what I deem to be an overscrupulous avoidance of ascertaining the true facts lest they should be imputed to have knowledge which would be incovenient to their purpose. I am therefore satisfied that these defendants were guilty of the tort of procuring a breach of contract by the first named defendant with the plaintiff.
Quite apart from that tort I am also satisfied that these defendants were guilty of an actionable conspiracy.
In the case of Meskell v Córas Iompair Éireann [1973] IR 121 it was held that an agreement made between Córas Iompair Éireann and four trade unions who had members in the employment of that organisation whereby the contracts of employment of all the employees of Córas Iompair Éireann would be terminated by due notice and upon the expiry of that notice each employee would be offered immediate re-employment upon the same general terms but with a special and additional condition that he would be at all times a member of one of the trade unions, was (notwithstanding the fact that the purpose of that agreement may have been the advancement of the interests of the parties rather than an injury to the plaintiff who refused to accept re-employment upon such terms) an actionable conspiracy which entitled the plaintiff to damages against Córas Iompair Éireann. In the course of the judgment of the court, which was given by Walsh J and concurred in by the then Chief Justice, Ó Dalaigh CJ, and Budd J, the learned judge at p. 134 of the report stated as follows:
In the present case one may assume for the purpose of the decision that the object of the agreement between the defendants and the trade unions was the well-being of the defendants and of the unions, and even of the members of the unions. The complaint made here is the means adopted to achieve this end were unlawful. If that is so, then there was a conspiracy. To infringe another’s constitutional rights or to coerce him into abandoning them or waiving them (in so far as that may be possible) is unlawful as constituting a violation of the fundamental law of the State; in so far as such conduct constitutes the means towards an end which is not in itself unlawful, the means are unlawful and an agreement to employ such means constitutes a conspiracy. If damage results, it is an actionable conspiracy.
*262 Further at p. 135 of the same judgment Walsh J said as follows:
To exerise what may be loosely called a common law right of dismissal as a method of compelling a person to abandon a constitutional right, or as a penalty for his not doing so, must necessarily be regarded as an abuse of the common law right because it is an infringement, and an abuse of the Constitution which is superior to the common law and which must prevail if there is a conflict between the two. The same considerations apply to cases where a person is dismissed or penalised because of his insistence upon, or his refusal to waive, his right to dissociate. In each of these cases the injured party is entitled, in my view, to recover damages for any damage he may have suffered by reason of the dismissal or penalty resulting from his insistence upon exercising his constitutional right, or his refusal to abandon it or waive it.
Applying the principles of this decision and in particular the principles enunciated by Walsh J in the passages which I have just quoted I am quite satisfied that an agreement by two or more persons to prevent the appointment or promotion of a national teacher as part of a general campaign or objective to try and ensure that he and all other national teachers in any particular area or in the whole country will become and remain a member of a trade union is to seek to coerce or penalise that person into abandoning or waiving his constitutional right to dissociate and as such is an actionable conspiracy. As well therefore as the tort of procuring a breach of contract I am satisfied that these defendants are liable to the plaintiff in the tort of conspiracy for the damage which has flowed to him from their blocking or prevention of his appointment as principal of the Ovens National School.
Damages against the defendant Canon Ahern
The loss suffered by the plaintiff as a result of his failure to be ratified in the appointment of principal of Ovens National School on the evidence before me fell into two categories. It was not then possible for him successfully to apply for the principal teacher’s post in any other school but, as I have already indicated, he succeeded in retaining his position as vice-principal in the New Inn school. During the balance of that school year however, he suffered a loss consisting of the difference between the additional salary payable to a principal of a school the size of Ovens National School and the additional salary which he actually received as vice-principal of a school the size of New Inn school. The second heading of damage is that the plaintiff asserts that due to his failure to obtain this post as principal and due to his subsequent failure in May 1975 to obtain the post of principal of St Peter and Paul’s or any other school in Cork, it became necessary for him in order to achieve the rank and salary of a principal teacher to take up appointment where he presently is in a school in Bray and for that purpose it was necessary for him to transfer himself, his wife and his family from Cork to Bray and in so doing he incurred expenses. These consisted of the *263 cost of selling one house and buying another and the expenses connected with it, the cost of removal of his furniture and the cost of obtaining rented accommodaion pending the purchase of a house in Bray.
It was strenuously urged on behalf of this defendant, Canon Ahern, that assuming there was a breach of contract on his part it was in all ways equivalent or identical to a wrongful dismissal and that accordingly the damages must be confined to any loss of salary or emoluments which he suffered during the period in which it would have been lawful under the terms of the appointment if it had been made for notice to be given to him.
As I have already indicated, under the Rules for the Management of National Schools, upon the appointment of the plaintiff if it had remained uncancelled he would eventually have been required to sign one or other of the four forms of agreement which are scheduled to the rules. In fact on the evidence he would have almost certainly been asked to sign an agreement which is known as the green form. By virtue of the terms of that agreement either party, either the manager or the principal teacher would have been entitled without reason to terminate the employment by three months notice. In effect therefore the contention on behalf of the defendant Canon Ahern is that the damages recoverable against him should be confined to the loss arising from the difference in salary for a period of three months only and it is of course also further contended on his behalf that under no circumstances could the expenses or loss arising from the transfer by the plaintiff of himself and his family to Bray be damages recoverable against this defendant since apart from any other consideration they were caused not ultimately by his cancelling of the appointment but rather by the inability arising from the activity of the other defendants of the plaintiff to obtain an appointment in 1975 in Cork. I am satisfied that this latter submission is correct and that damage flowing to the plaintiff and arising from his transfer to Bray was not damage which could have been within the reasonable contemplation of the parties when they agreed to the appointment of the plaintiff in June 1974, and furthermore that it was damage directly arising from a novus actus interveniens, that is to say, the continued conspiracy of the other defendants to prevent the appointment of the plaintiff as a principal teacher in the Cork area resulting in their effective blocking of his appointment as principal of the school of St Peter and Paul’s in Cork.
I reject however the former submission. The appropriate principle to apply to the question of damages for this breach of contract seems to me to be no different and not in any way exceptional from the ordinary generally applicable principle. This is that the plaintiff should be entitled to the damage and loss suffered by him as a result of the natural and probable consequences of the breach by the defendant of the contract such damages being within the reasonable contemplation of the parties at the time of the making of the contract.
I am satisfied on the evidence before me that the defendant Canon Ahern in *264 entering into this contract in June 1974 was intending at least to provide an appointment of the plaintiff as principal of the school of which he was manager which would last for the school year and indeed it probably was within the contemplation of the parties that it should be, subject to the ordinary possibility of resignation or dismissal, a permanent post. It seems to me clearly to have been within the contemplation of both parties at the time they made that contract that it would certainly last for the school year and that if either of them wrongfully broke it the other would suffer such loss as would occur due to a failure on the one part to have available to him the post of principal for that school year and on the other part to have the services of the plaintiff as principal for that school year. It seems to me unreal and not in accordance with the facts proved before me to suggest that it was within the real contemplation of these parties that the appointment which the defendant was making on 3 June 1974 should last for a period of three months only or that he should find himself in the very middle of the school year with the necessity of obtaining and appointing a new principal teacher. I am therefore satisfied that this defendant is liable to the plaintiff in the amount of the difference of salary for the entire of the school year. The figure at which that is calculated was agreed between the parties and is the sum of £376.24.
Damages against the defendants Hurley, Garvey, O’Seaghda and Motherway
In so far as these defendants are liable to the plaintiff for the tort of procuring a breach of contract only they are, in my view, liable to him in damages for the natural and probable consequences of that tort. It could be argued, though, the point having regard to my findings, is somewhat academic, that the natural and probable consequences of procuring a breach of this particular contract would be confined to the loss by the plaintiff of the additional salary for the school year 1974 to 1975 and that it would not be a natural and probable consequence of the cancelling of this appointment that the plaintiff, having regard to his seniority and qualifications, would fail in the succeeding year to obtain a similar or as well paid appointment in the Cork area.
I have already indicated that the conspiracy entered into by the defendants, which was an actionable conspiracy, and as a result of which the plaintiff suffered damage, did not cease with their successful procuring of the breach by the first named defendant, Canon Ahern, of his contract with the plaintiff. On the evidence before me which was not in dispute it continued and was carried on to the extent of additionally succeeding in preventing the appointment in May 1975 of the plaintiff at least to one principal teacher’s post in the City of Cork. I am satisfied therefore that the natural and probable consequences of that conspiracy was indeed the successful achievement of the object of the conspiracy which had made it unlawful, namely the prevention of the appointment of the plaintiff as a principal to any school in the Cork City area *265 and that any expense or loss suffered by the plaintiff as a result of the necessity in order to maintain his promotional and salary position as a school teacher to move from Cork to another area is damage flowing from that conspiracy.
The amounts recoverable under this heading I find to be as follows:
Renting of accommodation in Bray
£320
Transport of furniture and belongings Cork to Bray
£150
Solicitors fees on the purchase of house in Bray
£592.95
Buildings Society solicitors fee on the obtaining of mortgage on house in Bray
£102.35
Solicitors fees on the sale of house in New Town
£197.25
Auctioneers fees on the sale of house at New Inn
£200.00
TOTAL
£1,562.55
Having regard to the provisions of s. 14 of the Civil Liability Act 1961 I am satisfied that the appropriate order which I should make is that I should give to the plaintiff judgment jointly against all five defendants for the sum of £376.24 being the difference in salary and that I should in addition give a separate judgment against the second, third, fourth and fifth named defendants jointly and severally for the sum of £1,562.55.
Contribution between the first named defendant and the second, third, fourth and fifth named defendants
An issue has also arisen in this case whereby the first named defendant Canon Ahern has claimed against the defendants Messrs Hurley, Garvey, O’Seaghda and Motherway contribution amounting to idemnity in respect of the damages which he might be liable to pay to the plaintiff.
As I have already indicated in this judgment I am quite satisfied that it was as a result of very considerable though subtle pressure applied by these four defendants to Canon Ahern that he cancelled the appointment of the plaintiff, and on the facts it is clear that he was not prepared to do that even though he had become aware of the position of the plaintiff in relation to the INTO until such time as the visit to him by the three persons on behalf of the four defendants and the representations then made to him. Furthermore I am satisfied on the evidence that during the course of that interview it was represented on behalf of these defendants to Canon Ahern that by reason of the fact that the sanction of the Minister to the appointment of the plaintiff had not yet been obtained he was free to cancel it, whereas I infer from the evidence concerning the interview between the plaintiff and this defendant Canon Ahern which had taken place earlier during that day he probably himself held before being informed of this by the officials of the INTO the more correct legal view that he was bound in contract as well as in honour to the plaintiff.
On these findings of fact I have come to the conclusion that the real and effective cause of the breach by the defendant Canon Ahern of his contract with the plaintiff was the action of the other four defendants in furtherance of their actionable conspiracy against the plaintiff. Having regard to these findings I am satisfied that this is an appropriate case in which the contribution of these four defendants to the defendant Canon Ahern should be in full and should be a contribution by way of indemnity. I accordingly so order.