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Injunctions and Trade Secrets

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Thanks to Michael Reed, Employment Legal Officer at the Free Representation Unit, for preparing this case summary

How should the courts deal with interim injunction applications relating to ex-employees' use of confidential information?

The High Court addressed a number of important questions in ESL Fuels Ltd v Fletcher. The Defendants worked as senior executives for ESL before setting up Prema Energy Ltd to produce Prema 35. The Claimant sought an interim injunction to prevent this on the basis that Prema 35 was manufactured using ESL's trade secrets.

The Defendants argued that, when considering the status quo, the relevant date was when the claim was served. By then Prema was already selling Prema 35, implying that no interim injunction should be granted. The High Court disagreed, concluding that the relevant status quo was the position before the most significant recent change. In this case, the state of affairs before the Defendants set up in competition with Claimant.

In relation to whether the courts should consider the merits of the underlying case before deciding on an interim injunction application, the Defendants argued that, following Lansing Linde Ltd v Kerr, the court should make some assessment of the merits. The court should not focus solely on the question of whether there was an issue to be tried.

The High Court concluded that the first limb of the American Cyanamid test was the relevant issue, namely, was there a serious issue to be tried? But this did not preclude considering any clear conclusion on the merits that could be reached at the preliminary stage. In this case no such clear preliminary conclusion could be reached.

Despite the status quo favouring the Claimant, the balance of convenience favoured the Defendants. There was a real risk of Prema being "strangled at birth" if it were prevented from doing business until the case was resolved. A limited interim injunction, preserving the confidentiality of the manufacturing process, was granted to protect the Claimant. But, on the basis that the Defendants had given an undertaking to preserve the profits pending the outcome of the case, they were not prevented from selling Prema 35.