Reported Cases

SG&R Valuation Services v Bourdais & others

Queen's Bench Division, Administrative Court

Cranston J

12 May 2008

Employment – Contract of service – Breach of contract – Injunction – Claimant company discovering disclosure of confidential information by directors to competitor – Certain directors tendering notices of resignation – Directors being suspended and required to serve garden leave until expiry of notice periods – Claimant obtaining order to prevent further misuse of confidential information by directors – Directors delivering up confidential information pursuant to interim order – Claimant applying for further injunctive relief – Whether directors could be compelled to serve garden leave until expiry of notice periods – Whether directors could be restrained from commencing new employment with a competitor.

The first, second and third defendants worked for the claimant, an international consulting and advisory company which specialised in the hotel industry. By 2007, the defendants had all become directors. In March 2008, the first and second defendants tendered their notices of resignation, which, according to their respective employment contracts, was a three month period. Almost immediately after receiving the notices of resignation, the claimant discovered that the directors had endeavoured to appropriate confidential information for the benefit of the fourth and fifth defendants, which were its competitors. The email trails indicated that the directors had in mind, inter alia, a 'mass resignation of employees having a maximum negative impact on the claimant.' The directors were subsequently suspended and ordered to remain at home on 'garden leave' until their notice period expired. No express provision had been made in the employment contracts for the imposition of garden leave; instead the claimant contended that it had acted upon a power which was implied by law, and that that power could be exercised regardless of whether the directors had a 'right to work' or were 'ready and willing to work'. The claimant subsequently made a without notice application, seeking an order to prevent the further disclosure of confidential information to the fourth and fifth defendants. The order sought was granted but was made subject to undertakings. Those were given from both the claimant, which promised to pay remuneration to the directors, and from the directors who agreed to pay damages, in the event of breach. Several days later, the information sought was delivered up. The claimant subsequently applied for further interim relief.

It fell to be determined whether the first and second defendants could be required to serve garden leave during the course of their period of notice and, accordingly, be restrained from commencing new employment with a competitor.

The court ruled:

In the instant case, it had been reasonable and proper for the claimant to have required the first and second defendants to be placed on garden leave until the expiry of their three-month notice periods. Although there had been no express power in the employment contracts for such a course to be taken, the breach of contractual and other duties, for instance in the misuse of confidential information, meant that the directors, applying settled principles, had not been ready or willing to work. In some respects, the directors had demonstrated a hostility towards the claimant so as to have forfeited their right to work. It followed that the first and second defendants remained subject to their duties under the employment contract, and that the relief sought would be granted.

Accordingly, judgment would be entered in the claimant's favour.

Miles v Wakefield Metropolitan District Council [1987] 1 All ER 1089 applied.

Selywn Bloch QC and Daniel Tatton-Brown (instructed by Magrath LLP) for the claimant.

John Davies QC (instructed by DLA Piper UK LLP) for the first, second and third defendants.

Stuart Hornett (instructed by Charles Russell LLP) for the fourth and fifth defendants.

Robert Chan Barrister.