AAA & Anor v CCC

Factual and Procedural Background

The appeal concerns an order made by HH Judge Eyre QC on 14 November 2019, granting a final injunction against the Defendant, Company C, restraining it from publishing or disclosing certain confidential information ("the Information") detailed in Confidential Schedule 1 ("CS1"). The injunction also prohibits Company C from making adverse or derogatory comments about the Claimants, Company A and Company B, and from damaging their businesses through disclosure of the Information or related matters.

The background involves a dispute between Company B and Company C, who were business partners, directors, and equal shareholders of Company A. Allegations of sexual harassment and sexual assault were made between the parties, contributing to a breakdown in their relationship and leading to potential claims including an unfair prejudice petition under the Companies Act.

On 31 August 2017, the parties entered into two agreements: a Settlement Agreement and Release ("SAR") involving Company A, Company B, and Company C, where Company C agreed to transfer his shares in Company A to Company B; and a separate Employee Compromise agreement ("EC") between Company C and Company A. Both agreements contained confidentiality provisions and covenants restricting disclosure and adverse comments.

The claimants alleged that between 2017 and 2019, Company C breached these agreements by making various serious allegations against Company A and Company B to authorities and threatening public disclosure, potentially damaging Company A's business and reputation. The claimants sought and obtained interim injunctive relief and then summary judgment, which was granted by the High Court judge.

Permission to appeal was granted on limited grounds related to the construction and clarity of the contractual provisions underlying the injunction.

Legal Issues Presented

1. Whether the contractual provisions in the Settlement Agreement and Release and the Employee Compromise justify the injunction granted against the Defendant.
2. Whether the terms of the injunction order are sufficiently clear and certain to operate as injunctions.
3. Whether the Defendant’s freedom of expression under Article 10 of the European Convention on Human Rights affects the grant of injunction relief.
4. Whether the injunction improperly grants enforceable rights to a party (Company B) who is not a party to one of the underlying agreements (the Employee Compromise).
5. Whether certain terms of the injunction, including phrases such as "purported information," "liable to identify," "adverse or derogatory comments," and "seek to damage," are too vague or uncertain to be enforceable.

Arguments of the Parties

Appellant's Arguments

• The allegations contained in Confidential Schedule 1 are not within the definitions of Confidential Information in the Settlement Agreement and the Employee Compromise, and thus the contractual basis for the injunction is lacking.
• Company B, not being a party to the Employee Compromise, has no cause of action to enforce its confidentiality or non-derogatory comment provisions, so paragraph 3(c) of the injunction is improperly granted in his favor.
• Several terms of the injunction order are vague and uncertain, including "purported information," "liable to or might identify," "adverse or derogatory comments," and phrases in paragraph 3(d), leaving the Defendant unclear about what conduct is prohibited.
• The injunction as to adverse or derogatory comments should not extend indefinitely beyond the period when Company B remains a director or employee of Company A.
• The inclusion of the phrase "release of any matter arising out of engagement with the Claimants" in paragraph 3(d) is obscure and adds uncertainty.

Respondents' Arguments

• The Information falls within the broad definitions of Confidential Information in the Settlement Agreement and Release, as it was obtained during Company C’s employment and directorship with Company A and is confidential to the business.
• The injunction is properly based on contractual covenants and is not dependent on the truth or falsity of the allegations; disclosure of true but confidential and derogatory information can still constitute breach.
• The non-derogatory comment injunction is enforceable and appropriately protects the interests of Company A and its directors and employees, including Company B while he remains a director or employee.
• The terms of the injunction follow established precedents and model orders, and the language used is sufficiently clear and certain in the context of the parties’ agreements and the commercial setting.
• The injunction includes a mechanism for the Defendant to apply to vary its terms, accommodating potential future changes in circumstances.

Table of Precedents Cited

Court's Reasoning and Analysis

The court acknowledged that many of the allegations in Confidential Schedule 1 were not explicitly included within the initial part of the definitions of Confidential Information in the Settlement Agreement and Employee Compromise. However, the court accepted that the Information was obtained during Company C's employment and directorship with Company A and was confidential to the business. The judge proceeded on the basis that even if the allegations were true and believed to be true by Company C, disclosure would still constitute a breach of the confidentiality and non-disparagement covenants.

The court rejected the appellant's argument that the contractual provisions were too vague or uncertain to enforce. It emphasized that the agreements were formal, professionally drafted, and entered into with legal advice, and that the language, though broad, was capable of clear meaning in context. The court analogized the wide ambit of the covenants to non-competition clauses in business goodwill sales.

Regarding the injunction protecting Company B, the court distinguished between the right to seek the injunction and the right to enforce it. While Company B lacked privity to enforce the covenant directly, Company A had standing to seek injunctive relief to protect its directors and employees, including Company B.

The court agreed that the injunction’s protection against adverse or derogatory comments should be limited to the period during which Company B remains a director or employee of Company A, and amended the order accordingly.

The phrase "release of any matter arising out of engagement with the Claimants" in paragraph 3(d) was found to add uncertainty and was deleted from the order. Other terms criticized as vague, such as "purported information" and "the allegations," were found not to cause uncertainty in context. The court also found the language of paragraph 3(b) consistent with model orders and sufficiently clear.

Overall, the court concluded that the injunction was properly founded on the contractual provisions and that the terms of the order were enforceable with the minor amendments indicated.

Holding and Implications

The court DISMISSED THE APPEAL except for two minor amendments to the injunction order:

• The injunction in paragraph 3(c) restricting adverse or derogatory comments about Company B is limited to the period during which Company B remains a director or employee of Company A.
• The concluding phrase in paragraph 3(d) regarding "release of any matter arising out of engagement with the Claimants" is deleted due to uncertainty.

The direct effect is that the original injunction remains largely intact and enforceable, protecting the confidential information and reputational interests of the claimants based on the contractual covenants. No new legal precedent was established, and the decision primarily clarifies the application and scope of confidentiality and non-disparagement clauses in settlement and employment compromise agreements within a commercial dispute context.