The Pulse Group Ltd and Another v O Reilly and Another

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 17 February 2006
• Neutral Citation: [2006] IEHC 50
• Docket Number: [No. 497 P/2006]
• Court: High Court
• Date: 17 February 2006

[2006] IEHC 50

THE HIGH COURT

[No. 497 P/2006]

PULSE GROUP LTD & PULSE MARKETING SERVICES LTD v O'REILLY & EYE GEN LTD T/A BRANDO

BETWEEN

THE PULSE GROUP LIMITED AND PULSE MARKETING SERVICES LIMITED

PLAINTIFFS

AND

CIARAN O'REILLY AND EYE GEN LIMITED TRADING AS "BRANDO"

DEFENDANTS

WALLIS BOGAN & CO v COVE 1997 IRLR 453

FACCENDA CHICKENS LTD v FOWLER 1987 1 CH 117 1986 1 AER 617

SCHAUENBURG INDUSTRIES LTD & ORS v BOROWSKI & ORS 1979 101 DLR 3D 701

EMPLOYMENT

Contract

Injunction - Interlocutory injunction - Breach of contract - Duty of fidelity - Restraint of trade - Whether breach of fiduciary duty of director - Whether implied covenant preventing disclosure of confidential information short of trade secret after employment ceased - Whether breach of employment contract after contract ceased -Whether fair issue to be tried - Whether damages an adequate remedy - Wallis Bogan & Co v Cove (1997) IRLR 453 and Faccenda Chickens Ltd v Fowler [1987] 1 Ch117 applied -Interlocutory relief refused; defendants directed to deliver up all materials relating to plaintiff's business (2006/497P -Clarke J - 17/2/2006) [2006] IEHC 50The Pulse Group Ltd and Pulse Marketing Services Ltd v Ciaran O'Reilly and Eye Glen t/a Brando

Facts: Following the resignation of the first named defendant as the Chief Executive Officer of the plaintiffs, a company, the second named defendant, which was set up by the first named defendant and three other persons commenced trading by offering advertising services. The plaintiffs contended that the first named defendant was in breach of his contract of employment and his fiduciary duty and they sought to restrain the defendants from interfering with or otherwise contacting suppliers, contractors, distributors or employees of the plaintiffs or from using, information relating to the plaintiffs’ business.

Held by Clarke J. in refusing the relief sought:

1. That there was a fair issue to be tried as to whether there was an improper use by the second named defendant of the plaintiffs’ resources. Furthermore, there was a fair issue to be tried to the effect that the first named defendant was guilty of a breach of his obligations of fidelity and good faith towards the second named plaintiff while he remained in their employment and was a director of the company. However, there was not a fair issue to be tried to the effect that any breach occurred after that relationship ceased.

2. That damages would be an adequate remedy for any wrong that might be established by the plaintiffs.

Reporter: L.O’S.

Mr. Justice Clarke

1. Introduction

2 1.1 The plaintiffs are companies involved in the advertising business. The first named plaintiff is the majority shareholder of the second named plaintiff. As the difference between the two plaintiffs is not material to the issues which I have to decide at this stage I will refer to either or both plaintiffs as "Pulse".

3 1.2 The first named defendant ("Mr. O'Reilly") had been Chief Executive Officer of the second named plaintiff until he resigned on 30th January, 2006 in circumstances to which I will refer in some more detail later in the course of this judgment. The second named defendant ("Brando") is owned partly by Mr. O'Reilly and partly by three other persons. It has, in recent months, commenced trading by offering advertising services.

4 1.3 Pulse contends that Mr. O'Reilly was in breach of his contract of employment and his fiduciary duty in relation to the manner in which the business of Brando was established. In those circumstances Pulse seeks to restrain Mr. O'Reilly and Brando from interfering with or otherwise contacting suppliers, contractors, distributors or employees of Pulse or from using, in any fashion whatsoever, information relating to Pulse's business. For clarity a list of such persons and bodies was scheduled to the documentation

5 1.4 An interim order in the above terms was made by Finlay Geoghegan J. on 2nd February, 2006. The matter came on for hearing before me at the interlocutory stage on Thursday 9th February (having been adjourned from Monday 6th February with the interim order continuing).

6 1.5 At the conclusion of the hearing on the 9th I indicated that I would inform the parties of the result of the hearing on the following day (Friday 10th February) but would defer giving a reasoned judgment for some days thereafter. On Friday 10th February I indicated that I was not prepared to make an interlocutory order in terms of the interim order previously given by Finlay Geoghegan J. However I did indicate that I was prepared to make an interlocutory order that would require the return of any confidential information or property of Pulse which might be in the possession of either defendant.

7 1.6 The purpose of this judgment is to set out the reasons for coming to those views. It is necessary to turn first to the allegations made against both Mr. O'Reilly and Brando for the purposes of determining whether Pulse had established a fair issue to be tried and, as will become clear, the extent of any such possible claims.

2. The Alleged Breaches

2 2.1 There is no doubt but that Mr. O'Reilly was involved with the Brando project for at least a number of months while he remained Chief Executive of Pulse. On the evidence currently before the court it would appear that Brando commenced trading in September 2005. It would appear that there are four equal shareholders in Brando. They are Mr. O'Reilly, Mr. Darren McGrath who is the Managing Director of Brando, a Mr. Brendan O'Flaherty, and a Mr. Damien Ryan. It would appear that Mr. O'Reilly is a non-Executive Director of Brando while Mr. O'Flaherty and Mr. Ryan hold no office in the company.

3 2.2 It is clear that Mr. O'Flaherty was significantly involved in Pulse and is described in much recent publicity material as a significant member of the Pulse team acting as Creative Director. There appears to be some dispute as to whether he was an employee or carried out his duties on a contract basis. Whichever may turn out to be the case it does not appear, on the evidence currently available, that Pulse (other than, of course, Mr. O'Reilly) was aware of Mr. O'Flaherty's involvement with Brando.

Mr. Ryan is the principal of "The Money Show" which is a client of both Pulse and Brando and it is the establishment of contractual relations by that company (together with some others) with Brando which, Pulse says, gives rise to breach of obligation. Mr. Ryan is also, it would appear, the principal of a number of the other scheduled companies in relation to which contact is sought to be restrained.

2 2.3 It would also appear that Brando operated, for much of its history, from the same premises as Pulse on foot of an agreement entered into on behalf of the second named plaintiff (acting through Mr. O'Reilly) for a sub-letting of a portion of Pulse's premises. It does not appear that Mr. O'Reilly informed his fellow directors in the second named plaintiff that the subletting which he had entered into on behalf of Pulse was with a company in which he had an interest. This was undoubtedly imprudent and arguably unlawful. There can be little doubt but that it has contributed to the air of suspicion which surrounds the events giving rise to these proceedings.

3 2.4 Furthermore there was evidence before the court to the effect that while both companies were trading from the same premises, resources of Pulse were, on occasion, used by Brando. This is denied. It is obviously not possible at this interlocutory stage to resolve such conflicts of fact. I should...