Commercial High Court grants interim injunction against ex-employees of DIMO

Monday, 9 July 2018 00:00 -     - {{hitsCtrl.values.hits}}

  • Analyses law on confidential information through an extensive order

Through a comprehensive order dated 22 June, the Commercial High Court issued an interim injunction against two ex-employees of Diesel and Motor Engineering Plc (DIMO) namely Chathura Milinda Wickramasinghe and Buddika Malinda Kurukulasooriya, prohibiting them from making use of and disclosing confidential and commercially sensitive business information belonging to DIMO.  

The plaintiff DIMO had complained to the Commercial High Court that the first and second defendants who were employed in the Plaintiff’s Storage and Material Handling Department as the Sales Manager and Product Manager were using the confidential and commercially sensitive business information belonging to the plaintiff to unlawfully compete with the plaintiff’s business by setting up a rival business named M&M Solutions Ltd.

The plaintiff submitted to the Court that its business was highly specialised in nature and its confidential and commercially sensitive business information had been unlawfully used by the defendants to secure an order from the plaintiff’s customers that the defendants handled during their employment with the plaintiff.  

The plaintiff further complained that suddenly both defendants had resigned from DIMO on the same date and within a week of their resignation they had started the competitive business. The unlawful acts have been revealed through an email intended for the defendants which was inadvertently forwarded to the plaintiff.

On the first instance, Justice Samayawardhena pursuant to the plaintiff deposing the confidential information in a Flash Drive under a confidential cover, being satisfied on the facts pleaded on behalf of the plaintiff, granted the enjoining orders as prayed by the Plaintiff preventing both defendants directly or indirectly making use of and disclosing the confidential and commercially sensitive business information belonging to the Plaintiff.

Subsequently, the matter came up for Interim Injunction Inquiry before the Learned Commercial High Court Judge Ruwan Fernando, who inquired about the matter in detail and also having assessed the Plaintiff’s confidential information contained in the Flash Drive, issued 42 pages long judgment analysing the fundamentals of law on confidential information and unfair competition, decided that on a prima facie level the defendants had used the confidential or undisclosed information or sensitive business information of the Plaintiff in a manner contrary to honest commercial practices.

As set out in the order, the defendants have taken up a number of objections including that the defendants have not and do not engage in any acts complained by the plaintiff and that the alleged information is not confidential and amounts to usual knowledge, expertise and skill.

The Learned High Court Judge through an extensive order has analysed a vast area of Intellectual Property Law including Confidential Information, Non-Disclosure Agreements (commonly known as NDA), Restraint of Trade and Unfair Competition by citing several decided cases both local and international. Learned Judge Fernando has referred to Faccenda Chicken vs. Fowler (1987) Ch 117 and Catepillar Logistics Services (UK) Ltd. vs. Huesca de Cream 2010 EWCA Civil 156 as what constitute confidential information and upheld that in the absence of an express restrictive covenant, sales information and information relating to priced did not amount to a trade secret. Learned Judge has also considered a large number of decided cases including Finality Rentokil (Ceylon) Ltd. vs. Vivekanantha (1995) 2 Sri Lanka Law Report 346, Printers & Finishes Ltd. vs. Holloway (1965) 1 WLR 1, Billion Bay Apparels Ltd. v Chief Minister, Sabaragamuwa Provincial Council CA Writ No. 85/2013 and Felix Dias Bandaranayake v State Film Corporation 1981 (2) SLR 218. 

The judge held that the defendants have acted in breach of NDA and if former employees are allowed to use the confidential or undisclosed business sensitive information to their benefit against the interest of the Plaintiff, an irreparable loss and damage will be caused to the Plaintiff. 

The Plaintiff, DIMO Plc was represented by Dr. Harsha Cabral, President’s Counsel, who appeared with Counsels Nishan Premathiratne and Pravi Karunaratne instructed by Julius and Creasy Attorneys-at-Law. 

The Defendants Chathura Milinda Wickramasinghe and Buddika Malinda Kurukulasooriya were represented in Court by Romesh de Silva, President’s Counsel. 

The case will be called again on 6 September 2018 for pre-trial proceedings.