Company fails to stop former employees setting up rival business

A waste management company has failed to get a court injunction preventing former employees from allegedly copying its business model and setting up as a rival.

Mark Aspin Director and Head of Dispute Resolution reports on this recent case.

The case involved Waste Managed Ltd.

It made allegations of unlawful means conspiracy, misuse of confidential information, breach of contract and breach of fiduciary duty against former employees who had set up a rival company.

The matter was to go to trial but in the meantime, Waste Managed sought an interim injunction, prohibiting the new company from using or disclosing confidential information or the confidential business model until the full hearing could take place.

It provided projections suggesting it would become insolvent if relief was not granted.    

According to Waste Managed, its business model was made up of elements that might be publicly available information or common business practice on an individual basis but, taken as a whole, comprised a confidential business model.

It alleged that the employees had conspired to set up a rival company that replicated its model and deprived it of business.

The High Court refused the application.

It held that Waste Managed had not done enough to establish that there was a serious issue to be tried, that the employees had replicated the confidential business model for their rival business.

Its case was highly inferential, with several gaps that would need to be filled by disclosure and by evidence at trial. Even if that conclusion was wrong, the balance of convenience weighed against granting injunctive relief. 

First, although damages would not be an adequate remedy for Waste Managed, it might not be an adequate remedy for any of the employees either.

Second, the court was not persuaded by the modelling and projections that purported to show that the company would become insolvent if the injunction was not granted.

If you would like more information about the issues raised in this article or any aspect of litigation and protecting your business please contact Mark on 01228 516666 or click here to send him an email.