BDM Grange Ltd v Parker & Others

Priestley J, High Court Auckland
CIV 2005-404-993, 31 March 1995

Here the plaintiff cosmetics distribution company sought an interlocutory injunction against its former managing director (the first defendant) alleging (inter alia) misuse of confidential information and breach of fiduciary duty. The evidence suggested that the first defendant, while still managing director, had reached an arrangement with an Australian company, the third defendant, to establish a New Zealand company (the second defendant). The first defendant would then be employed as its CEO. There was also evidence of approaches or discussions between the first defendant (while still employed) and one of the plaintiff’s significant customers Fine Fragrances. Fine Fragrances was said to be dissatisfied with the plaintiff’s performance - a fact that the first defendant appeared not to have drawn to the attention of the plaintiff’s Board.

The plaintiff sought a springboard injunction:

(a) To prevent the first and second defendants from distributing products of both the third defendant and Fine Fragrances. This was on the principle that a party in breach of an employment contract or some fiduciary relationship should not profit from that (Schilling v Kidd Garrett Limited [1977] 1 NZLR 243; Bradford & Bingley Plc v Holden [2002] EWHC 2445);

(b) To prevent the defendants from dealing with Fine Fragrances for a period sufficient to enable the plaintiff to see if it could salvage its relationship.

By the time of the hearing the defendant had given undertakings not to deal with some 43 of the plaintiff’s suppliers and customers. So the key aspect of the case was the extent to which the injunction should extend to dealing with Fine Fragrances and with the third defendant.

The Court by a very small margin declined to grant the wider injunction. It was influenced by the wide ranging undertakings given and that, as yet, there were no adverse findings of fact against the defendants. However the Court was prepared to grant an injunction for a period of one month to restrain the defendants from dealing with Fine Fragrances. This was to give the plaintiff a one month window within which it might try to salvage its long-time distribution arrangement with that company.