A law firm that accused former staff of unlawfully setting up a rival business has failed with a High Court claim against them.
Liverpool-based CEL Solicitors brought proceedings against solicitor Mark Montaldo and finance director Thomas Blanchfield within weeks of their resignation in January this year.
CEL claimed that the defendants had incorporated their own firm, named MTCC, in August 2022 with a view to working in competition with CEL, and in doing so were in breach of their contractual and fiduciary duties.
The defendants accepted they had taken steps to establish their own firm – mostly initiated by Blanchfield – but submitted these were entirely permissible. They rejected suggestions that their proposed new business was in competition with CEL.
Sitting in Manchester, His Honour Judge Bever said the majority of the defendants actions in starting a new business, including speaking to the SRA and indemnity insurers, ‘do not cross the line’ into a breach of their fiduciary/statutory duties.
He concluded that the terms of the defendants’ contracts with CEL not to disclose any confidential information were ‘very wide’.
There were no allegations that the defendants had begun to trade elsewhere or to solicit CEL’s clients and no suggestion they were trying to lure CEL’s employees, the judge said.
The court heard that CEL directors Paul and Jessica Hampson had developed the firm into the national market leader for financial mis-selling and fraud. It wanted to develop the fraud business and asked staff – including Blanchfield and Montaldo – to sign non-disclosure agreements. Pitches were invited for financial backing for the project, which was won by Augusta, with Deminor Litigation Funding effectively the ‘runner-up’. The defendants accepted they met with Deminor after setting up their own company and that £1m of funding was proposed to them, but the judge said this did not give them a head start on creating a rival business.
The defendants stressed that they did not divert any business opportunities from CEL and that Deminor’s initial funding proposals had been rejected by CEL.
The judge said the fraud work undertaken by CEL was ‘straightforward and technically uncomplicated’, not requiring anything more than a basic understanding of legal principles involved. He added that the methods adopted by CEL to target prospective clients would have been ‘accessible to people with a knowledge and understanding of internet searches’.
‘I do not find that there was anything unique or indeed truly confidential about CEL’s offering which would justify contractual protection,’ said the judge. He also concluded that the purpose of arranging for members of staff to sign NDAs was to discourage them from competing with CEL, rather than to safeguard information or processes.
The judge accepted CEL’s submission that Blanchfield sent documents and information to his private email address, but they were not considered to be of a sensitive nature.
The judge dismissed claims for breach of contract, breach of statutory duty, unlawful means conspiracy and injunctive relief against MTCC.
