Commercial High Court issues injunction against ex-employees of DIMO

Through a comprehensive order dated June 22, 2018, 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 making use of and disclosing confidential and commercially sensitive business information belonging to DIMO.

DIMO, which is the plaintiff of the action, had complained through the plaint to the Commercial High Court that the first and second defendants, who were employed in the Storage and Material Handling Department of the plaintiff as Sales Manager and Product Manager, are using the confidential and commercially sensitive business information belonging to the plaintiff to unlawfully compete with the plaintiff’s business through setting up a rival business named ‘M&M Solutions (Pvt.) Ltd’.

Vide the plaint, the plaintiff submitted to the court that the plaintiff’s business is highly specialized in nature and the confidential and commercially sensitive business information of the plaintiff has been unlawfully used by the defendants to secure orders from the plaintiff’s customers that the defendants handled during their employment with the plaintiff.

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

On the first instance, Justice Samayawardhena (when his lordship was sitting in the Commercial High Court) 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 the interim injunction inquiry before the learned Commercial High Court Judge Ruwan Fernando, who inquired the matter in detail and also having assessed the plaintiff’s confidential information contained in the flash drive, issued a 42 page-long judgment, analysing the fundamentals of law on confidential information and unfair competition, decided that on prima facie level, the defendants have 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.

The learned Judge Fernando has referred to Faccenda Chicken vs. Fowler (1987) Ch 117 and Catepillar Logistics Services (UK) Limited 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 prices did not amount to trade secret.

The 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 (Pvt.) Ltd vs. Chief Minister, Sabaragamuwa Provincial Council CA Writ No. 85/2013 and Felix Dias Bandaranayake vs. State Film Corporation 1981 (2) SLR 218.

The learned judge held that the defendants have acted in breach of NDA and if former employees are allowed to use the confidential or undisclosed businesssensitive 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 the court by Romesh de Silva, President’s Counsel.

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