Sietech Hearing v. Borland & Ors [2003] ScotCS 37 (19 February 2003)

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URL: http://www.bailii.org/scot/cases/ScotCS/2003/37.html
Cite as: [2003] ScotCS 37

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OUTER HOUSE, COURT OF SESSION

CA123/00

OPINION OF LORD MACFADYEN

in the cause

SIETECH HEARING LIMITED

Pursuers;

against

(FIRST) RUSSELL BORLAND, (SECOND) JAMES ELEY and

(THIRD) DIGITAL HEARING (UK) LIMITED

Defenders:

________________

Pursers: Clancy; Brodies, W.S.

Defenders: Beynon; Russell & Aitken

19 February 2003

Introduction

The pursuers, SieTech Hearing Limited, are a subsidiary of Ultratone Limited. The pursuers and Ultratone are both suppliers of hearing aids. With effect from early March 1999 the first defender, Russell Borland, and second defender, James Eley, resigned from their employment with the pursuers. Until that date the first defender had been employed by the pursuers as their Regional Executive for Scotland, and the second defender had been employed by them as a hearing aid dispenser. The third defenders, Digital Hearing (UK) Limited ("Digital"), are a limited company incorporated on 17 November 1998. The first and second defenders are directors of and shareholders in Digital. Since March 1999 at the latest, Digital have carried on business as suppliers of hearing aids in competition with the pursuers.

In this action the pursuers allege that when the first and second defenders left their employment they took with them certain property belonging to the pursuers, and made use of it in the course of the business of Digital. They conclude first for an order on the defenders for delivery of the property specified in Schedule 1 to the summons, which they say belongs to them and is in the possession of the defenders. Secondly, they conclude for delivery of the documents and computer records specified in Schedule 2 to the summons, which they say are in the defenders' possession in breach of the pursuers' copyright and database rights. Thirdly, they conclude for payment of damages by the defenders jointly and severally or severally in the sum of £400,000. That claim is made in respect of loss alleged to have resulted to the pursuers from breach on the part of the first and second defenders (for which Digital are also said to be responsible) of duties of good faith and confidence implied in their contracts of employment, as well as infringement of copyright and of database rights.

A proof before answer was allowed in respect of the merits of the case, reserving for future determination, if necessary, the quantification of the pursuers' claim for damages.

Background

The corporate structure of the group to which the pursuers belong was explained in evidence by their chairman, Christopher Paul Cartwright. Mr Cartwright has been involved in the hearing aid industry since 1958. He founded Ultratone. In 1980 Ultratone acquired the business carried on under the name Amplivox, and thereafter Ultratone traded under the name Amplivox as well as the name Ultratone. Later, Ultratone acquired the business of Siemens Hearing Instruments Ltd, and (as a condition of the acquisition) the name of that company was changed to SieTech Hearing Ltd in 1993. Mr Barry Downes was appointed managing director of SieTech. Although Ultratone and the pursuers are companies in the same group, the Amplivox/Ultratone business and the SieTech business compete with each other in the hearing aid market, offering a different product range, adopting differing marketing techniques and operating under different management (although Mr Cartwright constitutes a link between them). During the period immediately before the first and second defenders' departure from the employment of the pursuers, the board of directors of the pursuers comprised Mr Cartwright (Chairman), Mr Downes (Managing Director), and Mr Nigel Reeves (Director and Company Secretary). Shortly after their departure, Mr Downes resigned, and Mr Bernard Williams was appointed a director of the pursuers.

The first defender first became involved in the hearing aid industry in late 1990 when he entered the employment of Amplivox/Ultratone as a trainee. He qualified in December 1991. Thereafter, he continued to work for Amplivox/Ultratone, rising to the position of branch manager in Edinburgh. He was transferred to their Glasgow establishment and then left their employment in late 1994. He worked for another company for only a few weeks before he was persuaded by Mr Downes to join SieTech. He was appointed nominally as area manager, although he was the only employee of the pursuers then working in Scotland. At that time the SieTech branch shared premises in Royal Exchange Square, Glasgow, with the Amplivox branch. Contrary to the practice followed elsewhere, Mr Borland became manager of both the SieTech branch and the Amplivox branch. The number of dispensers gradually rose, and latterly there were about nine SieTech and nine Amplivox dispensers. The arrangement by which Mr Borland managed both the SieTech branch and the Amplivox branch in the same premises was not found to be satisfactory, and separate premises for a SieTech branch were obtained. The new SieTech branch - at Shaftesbury House, Waterloo Street, Glasgow - was opened in December 1997. Mr Borland ceased to manage the Amplivox branch, and became manager solely of the SieTech branch, as well as retaining the wider responsibilities of SieTech Regional Executive for Scotland.

The second defender joined Amplivox as a trainee in 1995. As such he worked under the supervision of one Gordon Wallace. When Mr Wallace left Amplivox to work for another company the second defender left with him. After about three months, however, he was offered a job with Amplivox or SieTech and chose to join SieTech. He entered their employment as a field dispenser, originally covering the Stirling/Falkirk/Perth areas. In summer 1998 he ceased to be responsible for the Perth area and took on part of the Glasgow area. From December 1998 he also had responsibility for the Ayrshire area.

Latterly neither the first nor the second defender had a contract of employment with the pursuers which contained any restrictive covenants regulating their conduct after termination of their contracts.

In the period which is relevant for the purposes of this action, the pursuers made contact with potential customers in a number of ways. The most significant was by advertising. Much of that advertising took the form of cards inserted in newspapers or magazines, containing advertising material and with a tear-off portion, or coupon, that any interested member of the public might use to contact the pursuers. Other forms included advertisements printed on one of the pages of a newspaper or magazine, which might list the pursuers' branches and day-centres, or might contain a coupon similar to those which formed part of card inserts. Branches were premises operated by the pursuers, at which inquiries might be made, and customers might be seen by appointment for examination and testing and, if they chose to buy a hearing aid or hearing aids, dispensing and fitting. The Glasgow branch was the only one in Scotland. Day centres were located in premises owned by opticians with whom the pursuers had an arrangement by which a hearing aid dispenser attended on specified days for the purpose of seeing customers there. There were several day-centres in Scotland. Most prospective customers were, however, seen at home by a field dispenser. The whole process of initial response to the potential customer's indication of interest, examination, testing, dispensing and fitting, together with any necessary after-care, was carried out by the field dispenser making visits to the customer's home. Initial appointments were arranged for each field dispenser by other staff of the pursuers. The manner in which that was done varied during the period relevant for the purposes of this action, and I shall return to the evidence on that point in due course. In addition to advertising, the pursuers sought to contact potential customers by direct mail-shot, having purchased lists (known as acquired mailing lists, or AMLs) from organisations which conduct "life-style surveys" and are able to compile lists of persons thought likely to be interested in a particular category of product. Potential customers who had responded to an advertisement or mail-shot were known as "prospects". The pursuers maintained their own records not only of customers (including customers who had placed but then cancelled an order), but also of prospects.

It is a matter of admission by the defenders in this case that the pursuers' lists of customers and prospects comprised trade secrets belonging to them at the time of the first defender's resignation from their employment (see Answer 15 of the defences).

The first defender intimated his intention to resign from the employment of the pursuers to Mr Downes on 26 February 1999. His account of how he communicated his intention to Mr Downes varied in an unsatisfactory manner in the course of his evidence, but there is no real doubt that, by one means or another, the message was conveyed on that date. His resignation was accepted by Mr Downes on 1 March with effect from 3 March. On the latter date, his personal audit (a process which included accounting for any property belonging to the pursuers which was in his possession at the date of his resignation) was completed by Mr Downes, who (somewhat unusually) travelled to the Glasgow branch for the purpose. The second defender's letter of resignation, which he sent to the first defender on 26 February 1999, was forwarded to Mr Downes, who accepted it on 1 March. His personal audit was carried out (in the normal way) at the pursuers' headquarters in Wilmslow, Cheshire, on 5 March.

Following the resignations, the management of the pursuers reached the conclusion that the first and second defenders had misappropriated information about the pursuers' customers and prospects in order to use that information for the purposes of the business of Digital. They based that conclusion on a number of factors, which will require to be examined in detail in due course. Mr Cartwright put Mr Williams in charge of investigating the position. That followed the resignation of Mr Downes as managing director of the pursuers, as a result of a disagreement (the latest manifestation of a longer-standing antagonism between him and Mr Cartwright) as to how the management of the Glasgow branch and the Scottish Region of the pursuers' organisation should be handled following the resignations. Mr Downes, against Mr Cartwright's express wish, had left the management of the branch in the hands of Kenneth Wilson, one of the dispensers, who was also Mr Borland's partner. In the end, Mr Cartwright insisted on the dismissal of both Mr Wilson and the second defender's wife, Janice Eley, who was also a dispenser in the pursuers' employment. Mr Downes was unwilling to dismiss them, and resigned his directorship and left the employment of the pursuers. Both Mr Wilson and Mrs Eley were dismissed by the pursuers on or about 5 March 1999 and entered the employment of Digital shortly thereafter. As I have said, Mr Williams took charge of the investigation of the suspected misappropriation of confidential information.

Although it will be necessary to return in some detail to a number of aspects of the way in which, prior to the departure of the first and second defenders from their employment, the pursuers conducted their business in general, and in Scotland in particular, it is convenient at this stage to take note of, and give an outline explanation of some of, the various categories of property which they seek to recover in this action. As I have already noted, the pursuers set out in Schedule 1 to the summons items of property which they claim (i) belongs to them and (ii) remains in the possession of the defenders. The items listed in Schedule 1 are as follows:

A laptop computer issued by the pursuers to the first defender for use in the course of his employment with them ("the laptop").
The pursuers' Scottish CNP cards ("the CNP cards"). CNP is a contraction of the words "consultation, no prescription" (or some such correlative words). CNP cards are audiogram cards on which a record is maintained of the personal details of prospects who have had a consultation with a dispenser, but for whom no hearing aid or aids have been prescribed. The details contained on such cards include hearing test results, the details of any product offered to the prospect, and his or her reason for declining to have a hearing aid prescribed.
The 0800 pads containing details of prospects who contacted the pursuers on their Scottish freephone number prior to 3 March 1999. The pursuers included in their advertisements a freephone telephone number which prospects might use to contact the pursuers to pursue an interest in their products and services. The telephone number was known as the 0800 number, because it began with those digits. The 0800 pads were notepads, in duplicate or triplicate, on which details of calls made to that number by prospects were recorded by members of the pursuers' staff.
Documents comprising weekly summaries of the information recorded on the 0800 pads.
Documentary records kept at the pursuers' Glasgow office prior to 3 March 1999 and comprising:

the source of sales data in respect of customers of the pursuers;
cancelled order forms;
returned pre-printed coupons (i.e. from newspaper or magazine advertisements or insert cards);
audiogram cards, and records of customers' medical details (including those for persons who were originally Amplivox/Ultratone customers). The inclusion of records relating to Amplivox/Ultratone customers arises out of an allegation made by the pursuers that Mr Borland retained a number of such cards when he ceased to be manager of the Glasgow Amplivox/Ultratone branch;
appointment cards for individual customers and prospects;
weekly appointment listings for dispensers (known, and hereinafter referred to, as TA5s);
cumulative appointment analyses (known, and hereinafter referred to, as TA9s); and
weekly and monthly sales figures for the pursuers' Scottish operations.

The first defender's personal diary for 1999, and the pursuers' Glasgow branch diary for 1998. The reference in the Schedule to the first defender's "personal" diary is potentially misleading. What is sought is not any diary he may have kept for personal, non-business purposes, but the business appointment diary relating exclusively to his activities as a dispenser kept in the Glasgow branch in the ordinary course of the pursuers' business there.
Back-up disks from the personal computer (PC) formerly located in the pursuers' Glasgow Office.

In Schedule 2 to the summons there are set out the documents and other records which it is claimed are possessed by the defenders in breach of the pursuers' copyright and database rights. The items listed in Schedule 2 are as follows:

All documents, computer records, databases or other means of storing information held by or on behalf of the defenders and containing information copied or derived from the laptop, the back-up disks or the documents itemised in Schedule 1.
All documents, computer records, databases or other means of storing information held by or on behalf of the defenders and containing:-

a list, or lists, of the names, addresses and other details of the pursuers' customers (including those who had cancelled orders or were CNPs (c.f. item 2 in Schedule 1 above)) as at 3 March 1999;
a list, or lists, containing names, addresses and other details of the pursuers' prospects as at the same date;
copies of correspondence to the pursuers' prospects;
source of sales data; and
any other information concerning the pursuers' customers and prospects as at 3 March 1999.

Following the pursuers' initial investigation of their suspicions of wrongdoing on the part of the defenders, they presented a petition under section 1 of the Administration of Justice (Scotland) Act 1972 seeking recovery of various documents, computer records and other items of property. An order for recovery of the items sought was granted on 24 March 1999. Two commissioners were appointed, and they executed the commission on 25 March 1999 at the respective homes of the first and second defenders and at the business premises of Digital. Although it is not necessary to go into detail at this stage, there is considerable overlap between the material sought to be recovered in the petition proceedings and the material in respect of which the pursuers seek decree of delivery in terms of the first and second conclusions in the present action. At the home of the second defender, the commissioner recovered a bundle of audiogram cards and a bundle of appointment cards. Otherwise, the commissioners did not recover the material which the pursuers sought to have recovered by means of that procedure.

The setting up of Digital

Digital was incorporated on 17 November 1998. The objects clause in the Memorandum of Association was in inter alia the following terms:

"The Company's object is to carry on business as a general commercial company of hearing aid audiologists ...".

The Memorandum was subscribed on 2 November 1998 by the first and second defenders, each for half of the company's share capital of 10,000 shares of £1 each. According to the second defender, the possibility of setting up a new business was first discussed between him and the first defender in about September or October 1998, and was being looked at more seriously "as we moved into 1999". The first defender, when asked about when he decided to leave the pursuers, said "By February 1999". Both of them sought to explain the earlier incorporation of Digital by saying that they liked the name, and wished to pre-empt its use by anyone else. They learned from the Registrar of Companies that a company called "Digital Hearing Ltd" had already been incorporated, but that the names "Digital Hearing (UK) Ltd" and "Digital Hearing (Scotland) Ltd" were available. Companies were incorporated using both of these names, but Digital Hearing (Scotland) Ltd has never traded. The first defender's evidence was that he had not by that date finally decided to leave the pursuers' employment, but had decided that, if he did set up on his own, Digital was the name he wished to use.

Apart from the date of incorporation of Digital, there were other pieces of evidence on which the pursuers founded in maintaining that the first and second defenders had been planning and preparing for the commencement of business in the name of Digital for some time before their resignations. Joyce Black, who worked in the branch office in Glasgow, said that in the course of the office Christmas night out in December 1998 the first defender told her that he was setting up a business on his own. He did not mention the name of the business, whether anyone else was involved or when it was to begin trading. She said that the first defender took her to see the proposed Digital premises in January or February 1999, and told her at that stage that his departure from the pursuers was being brought forward from June 1999. The first defender's evidence was that he first told Mrs Black that he was leaving in February, the office outing to which she referred being in that month rather than December. Her visit to the new premises was after he had resigned. Mrs Black's date for the disclosure was, however, supported by Moira Ramsay, who was also at the material time an employee in the pursuers' Glasgow office and is now an employee of Digital. She said she learned of the first defender's plans from him at about "the festive season" 1998. On this point I prefer the concurrent evidence of Mrs Black and Mrs Ramsay to that of the first defender. Mr Cartwright recalled a passing hypothetical question asked by the first defender (at a date not specified in evidence although it was averred to have been "in early 1999) to the effect: "Is there any reason why I shouldn't start my own business?" He attached no significance to it at the time, and I do not think that any real significance can be attached to it with the benefit of hindsight.

Other indicators show that practical steps to prepare for a commencement of business on Digital's part were taken before the resignations, but not before the beginning of 1999. Office furniture was ordered on 18 and 24 February. A lease of premises in Clydesdale Street, Hamilton, was taken with entry at 24 February 1999. Computer equipment was ordered by the first defender on 19 February for delivery to those premises, and was delivered to Digital there on 2 March (not collected by the first defender, as he originally asserted in evidence). The first defender accepted that he had discussions with the bank about an account in name of Digital in February 1999. The date on which the account was opened is not clear, but was evidently earlier than the date originally asserted by the first defender in evidence (1 March 1999), since cheques were being drawn on the account by 26 February. An account in Digital's name was opened by Starkey Laboratories Ltd on 1 March 1999. Digital's certificate of registration with the Hearing Aid Council is dated 1 March 1999. It may reasonably be inferred that the relative applications were made earlier.

My conclusions thus far are that the possibility of setting up a new business had been under discussion between the first and second defenders from September or October 1998; that their plans had by November 1998 crystalised to the extent that the corporate vehicle for the business had been set up; that by about the turn of the year a firm decision had been made that they would resign from the pursuers and set up business as Digital, although the intended date of commencement of the new business may not then have been finally determined; and that many of the practical details in connection with the commencement of the new business were attended to in February 1999, before either of them had resigned from the pursuers.

Schedule 1 - the laptop

The laptop computer was provided by the pursuers for use by the first defender in the course of his work. His acknowledgement of receipt of it (No. 6/15 of process) refers to conditions of supply or use, but these were not produced or proved. Its original and primary purpose was to enable him to programme digital hearing aids. The first defender used it for other purposes as well. He said that he saw it as a useful management tool. He explained that the only other computer available for use in the Glasgow branch was the PC installed there and that he wished to use the laptop to relieve the pressure of work that would otherwise have had to be done on the PC. There was no funding for an additional PC, although there was work enough to use one (points which Mr Downes confirmed). The first defender obtained the necessary software through Terry Hogan, the pursuers' technical support manager, and got permission to use it for general purposes from Mr Downes. He had members of the staff of the Glasgow branch use it in connection with the compilation of a database of Scottish customers and prospects. In addition, his work included gathering in sales data from the dispensers in the Scottish Region each Friday evening, and the compilation and submission to Mr Downes of a report thereon, and he used the laptop himself in that connection. Mr Downes acknowledged that he was aware that the first defender's laptop was used for these purposes. Mr Williams on the other hand maintained that such use was illegitimate. He expressed himself as "very suspicious" of the use of the laptop to maintain a database of Scottish customers and prospects. I did not understand his reason for taking that view. There was nothing clandestine about the use which the first defender himself made of the laptop, or about the use he instructed his staff to make of it.

I am not persuaded that there was anything intrinsically sinister in the first defender's use of the laptop for purposes other than programming digital hearing aids. It plainly had capacity to do more than that, and if, as I have no reason to doubt, the availability of only one PC (or PC keyboard) in the Glasgow branch operated as a constraint on how much could be done using the PC, it seems only sensible to have used the laptop as an auxiliary keyboard. I do not see why the maintenance of a database of Scottish customers and prospects should be regarded as an illegitimate activity on the part of the Scottish Regional Executive. But whether that is right or wrong, I do not see why maintaining it on the laptop rather than the PC was in any way additionally suspicious, or suggestive of an ulterior motive. Mr Downes appears to have allowed the first defender to use the laptop in the ways he used it. In all the circumstances, I am of opinion that Mr Williams' expressed disapproval and suspicion of the first defender's use of the laptop was driven by hindsight, after he had found other reasons to be suspicious of the first defender's conduct. Had the first defender been minded to misappropriate data from the pursuers (and I have not yet reached a conclusion on that question), he could have done that irrespective of the use to which the laptop had been put during his time as Scottish Regional Executive.

The evidence presents something of a mystery as to what became of the first defender's laptop. The first defender's own evidence was that he handed it over to Mr Downes in the course of his personal audit on 3 March 1999. He said that he handed over the laptop, which he had packed in its bag along with sundry ancillary equipment. That is vouched by the final audit check list (No. 6/150 of process) completed by Mr Downes, which bears that the first defender handed over inter alia a laptop. According to the first defender, Mr Downes carried the laptop in its case to his car when he left after the audit. Mr Downes agreed that he did so, and said that it felt normal, in terms of weight. He did not actually look in the bag. He said that he took everything back to his office in Wilmslow, and left it there that night.

It was subsequently found that the laptop was not in the bag. The evidence as to when that was discovered is not clear. Mr Downes thought that the matter was raised with him the next day (4 March) by the internal auditor. Mr Williams thought it came to light on 11 March when he wished to reissue the laptop. It was on the latter date that an entry on the subject appeared in Mr Cartwright's diary. The bag was with another two beside the desk of Mr Downes' secretary, Nicola Kirk. There was uncertainty as to whether it was found to be completely empty (Nicola Kirk), or to contain only a computer manual (Mr Williams). At any rate, the laptop was not there by the time it was looked for.

The pursuers' claim for delivery of the laptop proceeds on the inference that the first defender in fact retained it, and did not deliver it to Mr Downes. Moreover, that inference is tied up with the proposition that the first defender retained the laptop as a means of misappropriating the database of customers and prospects that it contained. I am unable, on the evidence before me, to conclude either that the first defender retained the laptop or that he did so as a means of misappropriating confidential information belonging to the pursuers. In the first place, while there are no doubt reasons (to which I shall refer as they arise) to hesitate about the acceptability of the first defender's evidence where it stands alone, it is in my view supported on this point by Mr Downes' evidence, which I find acceptable. Secondly, it seems to me that it would make no sense for the first defender to misappropriate the laptop itself. To do so would be likely to be detected in early course, if not by Mr Downes, at least once the equipment was returned to the audit department in Wilmslow, and it was therefore a risky thing to do, and likely to provoke suspicion which might otherwise not arise. Yet it would in my view have been a risk which it was wholly unnecessary to incur. If the purpose was to misappropriate the data from the laptop, that could readily have been done without misappropriating the laptop itself. The data could readily have been downloaded onto floppy disk. The first defender had a computer of his own, to which such data could in due course have been transferred. Although the pursuers at times, to my mind, exaggerated the first defender's expertise in the use of computers, I am sure that he was perfectly capable of realising that there was no need to steal the laptop, in order to misappropriate the data which it contained. Although I have reservations about his honesty, I do not consider that the first defender is by any means unintelligent. In these circumstances I am not prepared to draw from the fact that the laptop was not found in its case in Mr Downes' secretary's office in Wilmslow the inference that the first defender had quite unnecessarily and riskily stolen it in order to obtain the data which it contained.

Schedule 1 - missing documents

The evidence established that it eventually became clear following the first and second defenders' resignations that various categories of business records which ought to have been in the pursuers' Glasgow office were no longer there. It was not really disputed that much of the information contained in the missing records would have been of value to a competitor, although there would have been a considerable overlap in the information about customers and prospects contained in the various categories of records, and it might therefore be thought that the first and second defenders, if minded to misappropriate the pursuers' information, would have been able to do so in a more discriminating way than by taking all that went missing. The evidence was not wholly consistent as to when the absence of the material in question was first noted. There was something of a hiatus in the administration of the Glasgow office following 3 March when Mr Downes conducted the first defender's personal audit. He put Kenneth Wilson in charge of the Glasgow branch (although not of the Scottish Region), and left the office keys in his possession. Following Mr Wilson's dismissal on 5 March, Joyce Black briefly was in de facto charge of the day to day business conducted from the Glasgow office. The locks were changed on 8 March. Jamie Prentice, who had thitherto been a field dispenser and had had little to do with the office, was appointed Regional Executive on 11 March. On 15 March Mr Williams paid a visit to the Glasgow office.

Leaving aside for the present an issue about the 0800 pads, to which I shall return (see paragraph [47] below), Mr Williams' evidence was that he first heard of items being missing in the course of a telephone call from Jamie Prentice on 12 March. Reference was made not only to documents, but also to computer records (in particular, TA5s). That is consistent with Jamie Prentice's evidence. He said that he discovered that material was missing on his first day in the office when he was being shown the office systems by Mrs Black, and at once telephoned Mr Williams. Mrs Black appeared in part of her evidence to deny that anything was found to be missing at that stage, but I did not find her evidence satisfactory. She attempted, indeed, to maintain that she was off work on account of illness, and therefore not present in the office, on the occasion of Mr Williams' visit on 15 March, until time sheets were produced which demonstrated that she was at work on that date. She struck me as a reluctant witness who was attempting to minimise her involvement in the events surrounding the first and second defenders' departure from the pursuers' employment. I am satisfied that the fact that material was missing from the office was discovered by Mr Prentice and Mrs Black on or about 12 March, and immediately reported to Mr Williams, prompting his visit on 15 March. I am prepared to accept Mrs Black's evidence that the fact that material was missing had not come to light in the ordinary course of business between 5 and 11 March.

As a result of Mr Prentice's telephone call, after discussion with Mr Cartwright and Mr Reeves, Mr Williams went to Glasgow himself to investigate the situation. The whole office was searched, and the outcome was recorded in a Memorandum which Mr Williams prepared for Mr Cartwright (No. 6/12 of process). So far as material, the missing items as recorded in that document (and further explained by Mr Williams in evidence) included (i) all regional paperwork, i.e. TA9s, source of sales reports, weekly and monthly sales reports and averages; (ii) dispensers' personal files including clients' correspondence, service requests etc.; (iii) cancelled order record cards; and (iv) the laptop, which was said to contain a database of approximately 4000 names and addresses, including CNPs and dispensings. In addition it was further recorded that (v) all information on the office computer (which I have previously referred to as the PC to distinguish it from the laptop) had been completely wiped clean; and (vi) no record of 0800 numbers could be found.

The questions which therefore arise are whether the first and second defenders were responsible for the disappearance of the missing items, and if so, whether they removed and retained them, or simply destroyed them. It is convenient to address those issues by reference to a number of separate categories of material, but before doing so, I shall deal with a submission made by Mr Clancy for the pursuers to the effect that the first defender had both motive and opportunity to misappropriate the material which went missing. The obvious motive was a desire for the new business to be conducted by Digital to succeed. The misappropriation of the pursuers' information would provide a convenient shortcut to knowledge of the identity and requirements of potential customers for Digital. Mr Clancy also suggested that a further motive actuating the first defender was resentment at the pursuer's dismissal of Kenneth Wilson. There was certainly evidence that the scheme originally was that Mr Wilson would remain in the employment of the pursuers while the new business found its feet, thus maintaining the financial security of his and the first defender's joint household, and that that was thwarted by the dismissal of Mr Wilson. It seems to me, however, that resentment of that sort (provoked as late in the development of events as it was) would be as likely, if not more likely, to lead to malicious destruction of the material than to misappropriation. I therefore take the view that if there was such resentment on the first defender's part, it is not a consideration which assists the pursuers in making the case of misappropriation. So far as opportunity is concerned, it is clear, in my view, that all of the material in question was available for the first defender to misappropriate or destroy if he chose to do so. He had, until 3 March, unrestricted access to the office. From then until 5 March, Mr Wilson had the keys, and therefore, with his co-operation the pursuer could have had continued access. On Mrs Black's evidence the first defender returned to the office thereafter to help Mr Wilson remove his belongings (although her evidence gave no support for an inference that anything was misappropriated at that stage). Recognising the seriousness of the allegations which the pursuers make, Mr Clancy added to his submissions about motive and opportunity a submission that there was ground for concluding that the first defender would have been willing to make dishonest use of the opportunity. He submitted that the first defender had been shown to have been consistently dishonest in his evidence, not only in the course of the proof but also at the commission held under the petition proceedings, and at a commission for recovery of documents. He had lied on a number of occasions. As examples of the first defender's dishonesty, Mr Clancy cited (i) his evidence about his dealings with Mrs Maddox of Business Lists UK; (ii) his use for the purposes of Digital, and in a way that gave the impression that they related to the activities of Digital, of testimonials given by clients in connection with services which he had rendered while in the employment of the pursuers; (iii) his admission that he had destroyed certain of the office records, and deleted computer records; and (iv) his admitted retention and use for the purposes of Digital of SieTech diaries. In my view Mr Clancy was right to submit that the first defender's honesty is open to question, although I would not go so far as to say that he was "consistently" dishonest throughout his evidence. I found the first defender an unsatisfactory witness, and in many places in his evidence I had the distinct impression that his first reaction to an awkward question was to give the convenient answer without much regard to its truth. He gave the impression in parts of his evidence of "making it up as he went along". In my view inter alia the first, second and fourth of Mr Clancy's points reflect adversely on the first defender's honesty. I do not consider that Mr Clancy's third point assists him. It seems to me to be more consistent with sheer malice towards the pursuers, and indeed at various points in his evidence the first defender seemed to me to evince ill-will towards the pursuers. I accept, however, the general thrust of Mr Clancy's submission that the first defender had both a motive and ample opportunity for misappropriation of business information from the pursuers for the benefit of Digital, and that it cannot be said that to take advantage of that opportunity would have been inconsistent with his character, so far as that can be judged from his evidence and his demeanour in the witness box. Mr Beynon submitted that to misappropriate a wide range of documents was hardly an intelligent way to divert business to Digital. Up to a point, there is force in that. With the information technology available to him, the first defender could have misappropriated information about the pursuers' customers and prospects much more unobtrusively by taking electronic copies of information to which he had access than by removing paper records, the absence of which would be noted. But not all of the material allegedly misappropriated was in electronic form. In particular, the raw material in the 0800 records and the coupon responses (both categories of information which would have been particularly valuable to Digital) was only available on paper. Further, the possibility occurs to me that, in so far as the first defender destroyed or claimed to have destroyed branch records on a wholesale basis, that may have been done in order to make it difficult to tell whether any information which was found to be missing had actually been misappropriated. These competing considerations require to be weighed in considering each category of documents or information.

CNP cards

The evidence was that audiogram cards which fell into the CNP category (see item 2 in paragraph [12] above) would be of particular value to a competitor because they each contained the identity and hearing test results of a potential customer who had been found to need a hearing aid but had declined to have one prescribed, and included a note of the customer's reasons for declining a prescription. The procedure for dealing with CNP cards was that when they were returned to the office by the dispenser concerned, a letter was written to the customer, the customer's details were entered on the database, and the card was filed. CNP customers were subsequently followed up with a view to the customer changing his mind. CNP cards were filed separately from audiogram cards for customers who had been prescribed a hearing aid or aids. There was no clear evidence about how many such cards were in the office immediately before the first defender's departure, but there were probably at least several hundred. Mrs Black was the person who normally dealt with such cards. Although Mr Prentice's evidence was that Mrs Black told him that she had noticed their absence during the week before he arrived, her own evidence was that she had no occasion to deal with CNP cards in the interval after the first defender's departure and before Mr Prentice's arrival, so she had not noticed their absence during that period. At any rate, when they were looked for on 12 and 15 March, they could not be found in their normal place, or elsewhere. Mr Prentice's evidence was that he telephoned the first defender to inquire about inter alia the CNP cards, and that the first defender told him that they had been thrown out because he needed the storage space. That answer did not strike Mr Prentice as plausible (indeed he described it as "pretty ludicrous"), but he did not pursue the matter further. According to the first defender's evidence, he last saw the CNP cards in their usual place on the evening of Friday 27 February. He accepted that he had had a subsequent telephone conversation with Mr Prentice, but denied that there was any mention of CNP cards. He said that he was asked only about cancellation forms, and said that he had burned them.

I accept the evidence that the CNP cards were found to be missing shortly after the first defender's departure. As I have indicated, I accept that the first defender had motive and opportunity to remove or destroy them. There was in the evidence no basis for thinking that anyone else was responsible for their disappearance. I prefer the evidence of Mr Prentice to that of the first defender as to the content of their telephone conversation. I can see no reason why Mr Prentice should have inquired about the relatively unimportant cancellation forms yet not about the valuable CNP cards. I accept that the account which Mr Prentice said that he was given of the cards having been destroyed to save space was implausible. That may explain why the first defender did not attempt to maintain it in evidence. At all events, I reject the first defender's evidence that the cards were still in their normal place when he last saw them. I conclude that it is probable that the first defender removed them from the Glasgow office with a view to using the information which they contained for the benefit of Digital.

Sales records

Mr Clancy dealt with items (a), (g) and (h) in paragraph 5 of Schedule 1 to the summons together, and I find it convenient to do likewise. These categories were respectively source of sales data, weekly appointment analyses (TA9s) and weekly and monthly sales figures. The evidence was that on 15 March these were not found in their normal place or elsewhere. These items do not seem to me to be so obviously useful to a trade competitor such as Digital. Mr Clancy laid considerable stress on what he characterised as the first defender's implausible explanation of what he did with them. That was that on 26 February he destroyed them, on the view that the pursuers did not require them. In a sense that was right (in contrast to the position of the CNP cards), because the pursuers would have had most of the information in other forms (for example, TA9s were faxed each week to Mr Downes, and Mr Prentice said that Mr Williams was able to get copies of the missing TA9s from Mr Downes' office), but I do not understand why, if the first defender had maintained these records during his own period as regional executive, he thought they would be of no value or interest to his successor, whoever he might be. Mr Clancy also pointed to the inconsistency of that explanation with the first defender's assertion that when he left the office on 26 February he was still expecting that he would (or at least might) have to work a period of four weeks' notice. I see the inconsistency, but I am inclined to think that it undermines the credibility of the first defender's evidence that he expected to have to serve notice rather than the credibility of his evidence that he destroyed the documents. Although it does the first defender no credit, and shows a petty determination to be as unhelpful as possible to the pursuers and his successor, I am inclined to accept his evidence that he destroyed these categories of documents. At any rate, I do not consider that there is a satisfactory basis for concluding that he probably misappropriated them for the benefit of Digital.

Cancelled order forms

These are the documents mentioned in item (b) of paragraph 5 of Schedule 1 to the summons. A file of cancelled order forms was normally kept in the Glasgow office. It was not found on 15 March. According to Mr Prentice he did not ask the first defender about these forms when they spoke on the telephone. The first defender's position in evidence was that the pursuers' Head Office had the principals. The copies retained in Glasgow were of use only for the purpose of checking commission payments. Thereafter they were destroyed. Mr Downes broadly confirmed that that was so. He added that there was no specific recommendation about keeping them, and that it was a matter for the judgment of the regional executive. One would not, I think, have expected the first defender to have destroyed all the most recent cancelled order forms on his departure, but that he claims to have done so seems to me to be consistent with his deliberately unhelpful attitude. I do not consider that it should be concluded that these documents were misappropriated for the benefit of Digital.

Audiogram cards

These are the documents mentioned in item (d) of paragraph 5 of Schedule 1 to the summons. The CNP cards were also audiogram cards, but I have already dealt with them in paragraphs [28] and [29] above. I shall deal later (in paragraphs [57] and [58] below) with the audiogram cards recovered from the second defender's home in the course of the commission held in the petition proceedings. It was not ultimately contended that the main collection of audiogram cards, relating to customers who neither fell into the CNP category nor cancelled their order, was missing. Under this heading therefore the only SieTech audiogram cards which remain to be considered are those relating to cancellations. I shall deal under the next heading (in paragraphs [34] to [36] below) with the separate category of audiogram cards relating to Amplivox/Ultratone customers.

According to Mr Prentice, Mrs Black told him that the audiogram cards for customers who cancelled orders were kept separately from, but in the same location as, the CNP cards. They were missing on 15 March. Mr Prentice said that his telephone conversation with the first defender covered the cancellation cards as well as the CNP cards, and the same explanation was given, namely that they were thrown out to conserve storage space. The first defender's position was the same as in relation to the CNP cards - the subject was not raised. In these circumstances I see no basis for a different conclusion about the cancelled audiogram cards from that about the CNP cards. I conclude that, like the CNP cards, they were probably misappropriated by the first defender for use for the benefit of Digital.

The Amplivox/Ultratone audiograms

Mrs Black gave evidence to the effect that a quantity of Amplivox/Ultratone audiogram cards was kept in the pursuers' Glasgow office. She spoke to seeing them in bags near to Moira Ramsay's desk some time before the first defender's resignation. She said that there was a substantial quantity of such cards. When asked to estimate the number by reference to the audiogram cards recovered from the second defender in the course of the commission (No. 6/120 of process), she said that there were about three times as many, i.e. over 300. They were missing on 15 March. The first defender acknowledged that he had retained a number of Amplivox/Ultratone audiogram cards when he ceased to be manager of the joint SieTech/Amplivox/Ultratone branch. His estimate of the number was much lower - between 25 and 40 (a number which Mr Downes said would not be surprising). He also disputed that they were kept separately in bags. He said that they were interspersed through the general files of audiogram cards. Moira Ramsay denied any knowledge of the presence of bags of Amplivox/Ultratone audiogram cards near her desk. If such had been the entirety of the evidence on the point, I would not have felt able to make a finding that a discrete quantity of Amplivox/Ultratone audiogram cards was misappropriated by the first defender for the benefit of Digital.

On the other hand there were two strands of evidence which in my view demonstrated that Digital had access to the records of at least two Amplivox/Ultratone customers. One of these customers, Alastair Sutherland, gave evidence. He was seen by the first defender at the Amplivox/Ultratone branch in Glasgow in 1993. He was prescribed and fitted with a hearing aid. In August 1999 he was contacted by a male person speaking on behalf of Digital. He was angry, because his telephone number was ex-directory and jealously guarded. It had been given to Amplivox/Ultratone in confidence, only so that they could communicate with him concerning the hearing aid with which they supplied him. He asked how his number had been obtained by Digital, and was told that it could have come from a broker's list, but the caller would not be more specific. He asked for his name to be taken off the list. The following day he received a further call from Digital, this time from a woman. She was unaware of the earlier call. Again Mr Sutherland asked for his name to be taken off the list. He subsequently wrote a letter of complaint to Amplivox/Ultratone on the basis that they must have released his telephone number to Digital. He excluded the possibility that Digital had obtained his number from a broker's list, because he had never responded to any survey of the sort on which such lists are based. I have no reason to doubt Mr Sutherland's sincerity or his veracity. It seems clear that his telephone number cannot have been obtained from a broker's list. Yet it is equally clear that Digital obtained his number. The only possible source was the record of his dealings with Amplivox/Ultratone. The first defender attempted to explain the approach to Mr Sutherland by reference to his 1999 SieTech diary (see paragraph [43] below), but since Mr Sutherland was not a SieTech customer, that cannot be right. I am therefore satisfied that the defenders did obtain from the pursuers Mr Sutherland's Amplivox/Ultratone records. That they were able to do so seems to me much more easily reconciled with the evidence that the Amplivox/Ultratone audiograms were kept separately from the general body of SieTech audiograms, than with the first defender's evidence that they were interspersed among them. The second strand of incriminating evidence in relation to the Amplivox/Ultratone records relates to the letter sent by Digital to a Mr Paton, who returned it to the Edinburgh Amplivox branch (see paragraph [76] below). In the light of those two stands of evidence (of which that relating to Mr Sutherland is the more important), I take the view that the balance of probability is tilted in favour of the conclusion that the first defender did misappropriate from the pursuers' Glasgow office a number of Amplivox/Ultratone audiogram cards. I do not feel able to make a finding as to the number of such cards so misappropriated.

Mr Beynon for the defenders submitted, however, the pursuers do not have any title or interest to demand delivery of cards belonging to Amplivox/Ultratone. The value of Mr Sutherland's evidence to the pursuers was therefore limited. Even if Mr Beynon is right on that point, I take the view that the evidence does, in a general way, go to support the proposition that the first defender took from the office of the pursuers information which he conceived to be of value to the establishment of Digital in competition with the pursuers. I am not, however, persuaded that Mr Beynon's point is well founded. It seems to me that even if the Amplivox/Ultratone cards belonged to another company in the same group as the pursuers, the pursuers have in the circumstances a better right to those documents than the first defender, and in a question with him and those deriving possession from him, they have title and interest to seek delivery.

Appointment cards

Delivery of these is sought in terms of item (e) of paragraph 5 of Schedule 1 to the summons. Some appointment cards were recovered from the second defender's home in the course of the commission. I shall deal with that aspect of the matter later (see paragraph [59] below). Apart from that, Mr Clancy made no separate submission about appointment cards, and it is therefore unnecessary to discuss them further.

TA5s

These documents were the means by which the field dispensers were informed of the appointments which had been made for them each week. When potential customers responded to advertisements either by calling the freephone telephone number or by returning a coupon, members of the pursuers' staff known as "telepointers" would telephone the potential customer and make an appointment for him or her to be seen by a dispenser. An entry would be made in a diary (one for each dispenser) kept at the telepointing centre in the pursuers' office known as Green Hedges in Wilmslow. On a weekly basis, a list of appointments for each dispenser (a TA5) would be compiled, and faxed to the Glasgow office. It might be updated, if further appointments were made for the dispenser in question. It would be issued to the dispenser from the Glasgow office at or about the end of the week preceding the one to which it related. The dispenser would then visit the customers for whom appointments had been made. At the end of the relevant week, each dispenser would report the outcome of his appointments to the first defender. That was done by telephone each Friday evening. The first defender recorded the substance of the dispenser's report on a copy of the dispenser's TA5, then used that material to compile the analyses he required to make of the work of the Scottish region and to make his own report to Mr Downes. That report was also made each Friday evening, at a fairly late hour. TA5s would contain the customers' names and addresses and a code indicating which advertisement had prompted the customer's inquiry. They therefore contained material which would be of value to a competitor.

Copies of TA5s were normally kept in a folder in the first defender's office. After his resignation they were found to be missing. They would also normally be on the Glasgow office PC, but had been deleted from it. The first defender's evidence in chief was that he had deleted the TA5s from the computer and destroyed the hard copies (save for those for the current week) "to make it as simple as possible for them" (i.e. those who would have to carry on the work of the Glasgow office). Under cross examination (referring to the cumulative computerised versions of TA5s rather than the hard copies) he said that the ones for 1998 had been deleted at about Christmas. The ones for January and February 1999 had been deleted when he left, and were not copied onto the floppy disks which he passed to Mr Downes. Asked why he had dealt with them in that way he said it was because he was no longer going to be dealing with them. He accepted that he realised that they would have been useful to his successor. He explanation was that he was being "slightly nasty and vindictive, and making sure no one was going to get credit for work I had done." He left the most recent TA5s backed up on a floppy disk. That was accepted by Mr Prentice, who said that a floppy disk with a few weeks' TA5s was eventually found in a drawer in the office.

Mr Clancy submitted that it could be inferred that the first defender had appropriated the TA5s as containing material of use to Digital. He suggested that another possibility was that the TA5s were destroyed to mask Mr Eley's appointment history in the week before his resignation, but that cannot in my view stand with Mr Prentice's acceptance that the last few weeks' TA5s were left on floppy disk.. Mr Clancy also recognised that malice or pettiness was a possible explanation. In all the circumstances, I regard that as the probable explanation and am not able to make a positive finding that the TA5s were misappropriated for the benefit of Digital.

Back-up disks

Mr Clancy did not maintain the pursuers' claim for delivery of back-up disks relating to the Glasgow office PC (Schedule 1, paragraph 7). It is therefore unnecessary for me to deal with that subject.

Diaries

The pursuers seek delivery of (a) the first defender's 1999 dispenser's diary and (b) the 1998 Glasgow branch diary (Schedule 1, paragraph 6). I shall deal first with the branch diary. Mr Williams gave evidence that Joyce Black reported to him that she had overheard a conversation between the first defender and Moira Ramsay about the branch diary. The conversation had taken place on the first defender's last day at work with the pursuers. Moira Ramsay was also leaving that day, and subsequently took up employment with Digital. The content of the overheard conversation, according to Mr Williams' second-hand account, was that Moira Ramsay suggested to the first defender that they should take the 1998 office diary, as it contained useful information. Mr Williams did not recall being told what the first defender's response was, but said that Joyce Black has said that she saw the diary being removed from the office. Joyce Black's own evidence was somewhat different. Her account of the overheard conversation was that Moira Ramsay asked the first defender: "Will we take the diary?" He replied: "No. Why would we need it?" Moira Ramsay then said that it might contain information, and therefore took it. Both Moira Ramsay and the first defender denied that any such conversation took place, and denied taking the diary. Joyce Black was cross examined to the effect that she had made up her account of the conversation because she was upset that Moira Ramsay had obtained a job with Digital, whereas she had not. She acknowledged that she was upset at not obtaining employment with Digital, but denied that she had made up the conversation. Mr Clancy also relied on the terms of a letter written by Mrs Eley to Mr Sutherland in September 1999 (No. 6/7 of process) in which she wrote that Digital sourced customers from the "archive diaries of hearing aid audiologists who have visited and looked after clients and wish to maintain contact with them when moving between companies". That does not, however, in my view bear directly on whether the branch diary, as distinct from the diaries of individual dispensers, was appropriated. In the whole circumstances, I am not persuaded that the evidence justifies a finding that the first defender (or Moira Ramsay on his behalf) misappropriated the branch diary.

So far as the first defender's 1999 diary is concerned, it was accepted by the first defender and Mrs Eley, when they were cited as havers to a commission held in this action on 13 June 2001 (of which the report is No. 26 of process), that it (as well as the corresponding diary belonging to the second defender) was retained when the first and second defenders resigned from the pursuers and commenced trading as Digital. Mrs Eley said that they lay about the office in Hamilton for a short time, were of absolutely no use, and were "binned" within weeks. The first defender, while concurring with Mrs Eley that the diaries were eventually binned, said that he had his diary "available to look at" for about six or seven months. At the proof he acknowledged that Digital had written to 15 or 20 people whose names had been in his or the second defender's 1999 SieTech diary. He said that once they got the information out of the diary, they destroyed it. He said that Mrs Eley binned the diary in August 1999. The defender's agents wrote to the pursuers' agents in December 2000 stating that the 1999 diaries were destroyed at the end of 1999. It is not clear where that information (which conflicts both with what was said by the first defender and Mrs Eley at the commission, and with what was said by the first defender in evidence) came from. In light of the admissions made by the first defender in evidence, I find that he did take with him when he left the pursuer's employment his 1999 dispenser's diary. Mr Clancy invited me to regard the first defender's admission as lacking in candour, and therefore not to accept that only 15 or 20 customers whose details were in the diaries had been approached. I have no basis for finding that greater use than that was made of the diaries, but I do not consider that it would be appropriate to make a specific finding as to the number of customers approached on the basis of information obtained from the diaries. Although the evidence is not uniform as to when the 1999 diaries were destroyed, I have no doubt that they were destroyed some considerable time ago. It would, in my view, be wrong to make a finding that they are still in the defenders' possession.

0800 records

There are two principal ways in which persons attracted by the pursuers' advertisements may make contact with them with a view to pursuing an interest in their products and services. One is by returning a coupon contained in an advertisement printed in (or more commonly on a card inserted in) a newspaper. I shall have occasion to return to that topic later (see paragraphs [53] and [54] below). The other is by making contact by telephone. To facilitate telephone contact the pursuers publish in their advertisements a freephone number. Calls to that number are paid for by the pursuers, and are therefore free so far as the customers are concerned. The freephone number begins with the digits 0800. When a potential customer makes a call to the 0800 number, the member of the pursuers' staff who answers the call takes a note of the customer's details. For the purpose of taking such notes the members of staff are provided with pads known within the pursuers' organisation as 0800 pads. There was uncertainty in the evidence as to whether the pads were in duplicate or triplicate, but in my view nothing of significance turns on that. At first there was no separate Scottish 0800 number, and all telephone responses were handled by a call centre in Dudley. The procedure was that the completed 0800 forms (together with a summary document) were sent from there to the pursuers' office in Southampton. There the customer's request for information was "fulfilled", i.e. a package of information was sent to him. The relevant customer information was then passed to the telepointing centre at Green Hedges, and an appointment was made for a dispenser to visit the potential customer.

In November 1998 (according to Mr Williams; Mr Downes thought that it was earlier, although he was uncertain as to the date), at Mr Downes' suggestion, a separate Scottish 0800 number was introduced in advertisements published in Scottish newspapers. According to Mr Williams, he was in charge of implementing the change. The result was that 0800 calls were received by staff in the Glasgow office, and 0800 forms were completed there. As I understood his evidence he expected the same procedure of sending the 0800 forms and the summaries to Southampton to be followed by the staff in Glasgow. The situation was, however, complicated by the fact that with effect from 9 November 1998 diary management (that is the making of appointments for dispensers) was taken over, so far as seven of the eleven Scottish dispensers (Group 2) were concerned, by staff in the Glasgow office, although the physical diaries appear to have continued to be maintained at Green Hedges on the basis of information provided from Glasgow. Diary management for the other four Scottish dispensers (Group 1) continued to be provided from Green Hedges. That situation was not found to work efficiently, and prevailed only until mid-January 1999, when Green Hedges resumed responsibility for the arrangement of appointments for Scottish Group 2 dispensers. A further complication arose from the fact that for a period at least, 0800 inquiries handled by the Glasgow office were being "fulfilled" from Glasgow rather than from Southampton. It is not clear during what period responses were fulfilled from Glasgow, but there was a clear body of evidence that that was done for a time. From mid-January 1999, Scottish 0800 calls were still being handled in Glasgow, but all of the resulting telepointing was to be undertaken at Green Hedges.

Joyce Black was one of those who handled 0800 calls in Glasgow. Her evidence was that the forms were filled out as calls were received, and that the pads were given to the first defender. She understood that the pads were sent on to Southampton, although not in the same envelope as the coupons sent in by customers who chose to note their interest in that way rather than by telephone. Gary Watson also dealt with 0800 calls. His understanding was that one copy of each form was retained, one was sent to headquarters and one was sent to Southampton. He prepared the envelopes of copies to send on a weekly basis to Southampton. His recollection was that the first defender took little to do with the 0800 forms, and had no particular interest in them, although he would occasionally look through them. When it was put to him that the 0800 pads were routinely handed to the first defender (as Joyce Black had said), he said that he could not argue with that. He said that copies of the 0800 forms were sent to Southampton even if an appointment had been made by the Glasgow office. He said that that continued so long as the first defender was the regional executive. A different system was introduced after he departed. The 0800 summaries in the style illustrated in No. 6/73 of process were introduced by Mr Williams after the first defender left. Mr Watson did not deal with the summaries and did not know what form they took while the first defender was the regional executive. Although Susan Hay sometimes answered 0800 calls, and used the 0800 pads, her evidence cast no specific light on how they were processed thereafter. Moira Ramsay had no involvement with 0800 calls.

There was some evidence that difficulty had been encountered with the way in which 0800 calls to the Glasgow office were being handled before the resignation of the first and second defenders. Mr Williams said that in February 1999 (at least two weeks before the resignations, although he was unable to be more precise than that about the date) Terry Hogan, who was the person in the Southampton office responsible for the collation of information about 0800 responses, contacted him to say that he had not been receiving freephone reports from Glasgow. Mr Williams said that he raised the matter twice with Mr Downes, and on each occasion Mr Downes said he would take it up with the first defender. He never, however, reported back to Mr Williams. He appears to have sent a memo to the first defender on 3 February (No. 6/137 of process), but its terms are so inspecific that it is not even clear that it was dealing with Mr Williams' query. Mr Hogan's recollection was not very clear on the point. He at first though it likely that he first became aware of the problem in discussion with Mr Williams after the first defender's resignation, but recognised that the memo of 3 February, if that was what it was about, suggested otherwise. Mr Hogan, however, had no recollection of the arrangement by which Glasgow 0800 responses were fulfilled from Glasgow rather than from Southampton. He recognised that a large part (if not the whole) of the point of Glasgow reporting 0800 responses to Southampton had been to trigger fulfilment from Southampton. A coupon summary for the week ended 12 February 1999 (part of No 6/10 of process), which shows inter alia no 0800 responses to Scottish advertisements, and bears a manuscript note: "Barry, Last week's figures as promised. Terry", appears to be something to do with the point, and to confirm that the discussion was taking place before the resignations, but little beyond that is clear. Mr Downes, on the other hand, said he had no particular recollection of the issue being raised with him; and said that he would have remembered, would have followed the matter up, and would have put his report in writing if it had been raised with him twice, as Mr Williams maintained. The first defender's evidence was that when the Glasgow 0800 number was introduced, the instructions as to the system to be adopted came verbally from Mr Hogan or Mr Downes. Within days, there was discussion which identified that the priority consideration was to turn the response into an appointment. If that was done, there was no need to do more with the 0800 form. His practice therefore was to look through the 0800 pads, check if appointments had been made, and, in so far as they had been, discard the duplicate form. He said that he did not know if any were sent to Southampton. He recognised that Southampton ought still to have been receiving the 0800 forms for the Group 1 dispensers who were telepointed by Green Hedges. He said that some 0800 forms were sent to Green Hedges for telepointing. If no appointment was made a fulfilment pack would be sent from Glasgow. If an appointment was made in Glasgow, the fulfilment pack would accompany the letter confirming the appointment.

In my view the evidence discloses a situation of some confusion about how 0800 responses to the Glasgow office were to be processed. Three aspects of the operation were intertwined: the processing of the records of the 0800 responses, the making of resultant appointments for dispensers, and the issue of fulfilment packs. The arrangements for each of these three aspects varied over time. There were occasions when one aspect changed but another did not. Not all those involved were fully informed about all three aspects, e.g. Mr Hogan was unaware of the practice of fulfilling from Glasgow. The procedures were not reduced to writing. In that situation, it seems to me that there was considerable scope for differences of understanding. At one extreme, it was a possible view that there was a need for reporting to Southampton, even where telepointing and fulfilment were both being done from Glasgow, so that the response to different advertisements could be analysed. At the other extreme, it was possible to take the view that if both telepointing and fulfilment were being undertaken from Glasgow there was no practical need for reporting to Southampton. That is the view which the first defender expressed in evidence, although I note that he attributed the adoption of that practice to discussion with Mr Downes, a view which Mr Downes did not support. Whichever view is taken, however, it is difficult to understand why there should be no 0800 forms going from Glasgow to Southampton (i) since the Group 1 dispensers were never telepointed from Glasgow, and (ii) Glasgow telepointing for Group 2 dispensers ceased in mid-January 1999.

A series of documents produced by the Southampton office, headed "Summary of SieTech Coupons", forms No. 6/10 of process. Each document covers a period of one week and shows on a daily basis the number of coupon responses, and on a weekly basis the number of 0800 responses, reported to Southampton in respect of each of a series of advertisements. Each advertisement is denoted by a code. The advertisements published in Scotland are denoted by a code beginning with the letter X. The documents produced cover the period beginning with the week ended 23 October 1998 and ending with the week ended 5 March 1999. In October to December 1998 there were occasional single 0800 responses to Scottish advertisements recorded. In January and February 1999 there were none. That is so even in the weeks ended 15 January, 19 February, 26 February and 5 March, when Scottish coupon responses totalled 159, 256, 105 and 54 respectively. With the possible exception of the week ended 15 January, these documents relate to a period when there was no longer any Glasgow telepointing being undertaken, and in respect of which the first defender's evidence therefore does not afford an explanation for the absence of reporting to Southampton. It appears from records obtained from British Telecom (No. 6/14 of process) that a substantial number of calls was being made to the SieTech Scottish 0800 number during that period. In the months of January and February the total was 498. The peak number was 53 on 9 February, and in the two weeks ended 19 and 26 February, the total was 102. No doubt there were some hoax calls or incomplete calls, but making allowance for such cases, there was nevertheless a substantial traffic of 0800 responses.

The pursuers placed an advertisement in the Daily Record newspaper of 9 February 1999. That date corresponds with the date of the peak number of 0800 calls recorded by BT. That advertisement also accounts for 254 of the coupon responses recorded by Southampton in the week ended 19 February. Yet no 0800 responses are recorded by Southampton in respect of it.

The diaries of Mr and Mrs Eley and Mr Wilson show a few appointments attributed to 0800 responses in the early part of January. Those entries would appear to be consistent with the first defender's explanation about not reporting to Southampton 0800 responses which resulted in appointments telepointed from Glasgow. An even smaller number of appointments, later in the period, appear to be attributable to responses to advertisements in English newspapers (e.g. the Daily Telegraph), presumably made to the English 0800 number.

The absence of 0800 responses recorded by Southampton in January and February 1999, and in particular in relation to the advertisement in the Daily Record on 9 February, calls for explanation. The figures for coupon responses show that the explanation cannot be that the advertisement was ineffective. The BT records rule out the theoretical possibility that for some undiscovered reason there simply were no 0800 responses. The first defender's explanation, namely that there was a change in practice when Glasgow took over telepointing whereby 0800 responses were not sent to Southampton if the response was telepointed and fulfilled from Glasgow, (a) is unsupported by any other evidence, (b) is an incomplete explanation, since Group 1 telepointing was still done from Green Hedges, and (c) most decisively, cannot apply to the advertisement of 9 February, because by then all telepointing had been resumed by Green Hedges. The possibility that a batch of 0800 forms might have been lost at, or en route to, Southampton might have explained a single week's lack of records, but cannot, in my view explain the period of two months on which I have concentrated. It is also, in my view, necessary to take account of the evidence that no 0800 records were found in the Glasgow office after the first defender's departure. In all the circumstances, I conclude that it has been proved on the balance of probabilities that the first defender was, during the greater part of January and February withholding from the pursuers some or all of the records of 0800 responses received in Glasgow, and that he did so in order to misappropriate the information about prospects contained therein for the benefit of Digital.

Coupon responses

The procedure for handling coupon responses was similar to the original procedure for handling 0800 responses, but was not complicated by the changes that affected the 0800 procedure. The coupons were sent on a daily basis to Southampton, where they were fulfilled, and telepointing was thereafter undertaken at Green Hedges. The pursuers' case for maintaining that the defenders had misappropriated advertisement coupons returned by prospects was based on an examination of the results of the advertisement placed in the Daily Record of 9 February 1999. Mr Cartwright took a particular interest in the level of response to advertisements, and took the view that the response received to that particular advertisement was unusually low. No. 6/131 of process is a schedule showing the details of each advertisement placed by the group between October 1998 and 7 March 1999. The entry relating to the advertisement in the Daily Record of 9 February appears on the third page of the schedule, denoted by the code XD090299. The information conveyed by the entry (once various codes are understood) was that the advertisement was for SieTech; that it was in coupon format; that it related to Prisma hearing aids; that the advertisement was one of a series called "Know your rights"; that 460,000 leaflets were distributed; that the cost was £14,668 net and £17,235 gross; that the number of responses was 379; and that the gross cost per response was therefore £45. Mr Cartwright's evidence was that he would have expected in excess of one thousand responses to the advertisement in question. An advertisement in the Daily Record of 5 October 1998 for Ultratone, from the same number of leaflets at broadly the same cost, generated 1302 responses. In the interval between 9 February and the date of the next Scottish advertisement (1 March) the BT records show just over 200 0800 responses, which Mr Cartwright put at the upper end of the normal range of 0800 responses to such an advertisement. If Mr Downes was right that 0800 responses amounted to only 10% of the total, that figure would lead one to expect about 1800 coupon responses to the advertisement of 9 February. It is difficult to account for the coincidence of a normal or better than normal level of 0800 responses with an abnormally low level of coupon responses. None of these means of cross checking the figures can be precise, but they seem to me to lend considerable support to Mr Cartwright's view that the recorded level of coupon response to the 9 February advertisement was unusually low.

Various possible explanations for the low level of coupon response were canvassed in evidence and in submission. It was suggested that the Prisma was a particularly expensive hearing aid, but it appears that the advertisement did not mention the price, so there cannot in my view be force in that point. Mr Beynon questioned the suitability of the Daily Record as a vehicle for such advertisements, but Mr Cartwright's evidence was that it had been used for a number of years, and his expected level of response related to advertisements in that newspaper (c.f the Ultratone advertisement of 5 October 1998). It was suggested that there was no evidence that the leaflets had been properly inserted in the newspaper. There was evidence of other occasions on which a difficulty of that sort had been encountered, but that as I understood it was an episode of complete failure. There is no question of such complete failure on 9 February, since there were some responses. Moreover, in my view, the BT evidence of a peak of 0800 responses on and immediately after the day of publication in numbers consistent with the expected level of response shows persuasively that there was no failure to include the leaflets in the newspapers. Mr Beynon submitted that there was no basis for generalisation from the experience with the 9 February advertisement. That is no doubt so, but there is no call for generalisation - the 9 February advertisement was the only Scottish SieTech advertisement in the relevant period. It is in my view legitimate in all the circumstances to infer that the first defender abstracted a proportion of the coupon responses to that advertisement, and misappropriated them for the benefit of Digital.

Documents recovered from the second defender

In the course of the commission held in pursuance of the order pronounced in the petition procedure, various documents were recovered from the second defender's home. Three categories of these were made the subject of submissions by Mr Clancy, and I shall therefore concentrate my attention on these categories. They were: (i) audiogram cards, of which there were 110 (No. 6/120 of process); (ii) appointment cards (otherwise known as TAP forms), of which there were 391 (No. 6/119 of process); and (iii) branch appointment analysis forms (No. 6/118 of process).

The audiogram cards recovered from the second defender covered dates from March 1998 onwards. They were not all fully completed. Of the total of 110, only 35 had the medical details of the customer fully completed. The evidence of practice was that the field dispenser returned a customer's audiogram card to the Glasgow office once he had dealt with the customer. The audiograms were not necessarily so returned after each appointment, but might be retained until the prescribed hearing aid had been fitted and any rehabilitation appointment that might be necessary as a follow-up to the fitting appointment had been carried out. On any view, however, the audiogram cards were to be returned to the office in due course. They were not to be retained by the dispenser on a long term basis. The first defender said that he might expect a dispenser to have up to about 40 audiograms in his hand at any time. Mr Prentice confirmed that a dispenser would get into trouble with the first defender if he did not return audiogram cards to the office when he was finished with them. They tended to be returned in batches. It is, in my view, clear that the second defender had in his possession at the time of the commission many more audiogram cards than he ought to have had at the time of his resignation.

The explanation offered for the number of audiogram cards recovered from the second defender was, broadly, that the recovered cards were duplicates. There was undisputed evidence that the second defender suffers from a form of dyslexia (see the psychological report, No. 7/49 of process). As a result, special arrangements to accommodate his disability were made when he was sitting the examinations for qualification as a hearing aid audiologist. Both the second defender and the first defender offered explanations for the accumulation of audiograms retained in the second defender's possession which related to his dyslexia. The explanations were, however, different from each other. The first defender said that, although the second defender was a very good salesman, had good "people skills", and was able to deal with difficult customers, his paperwork was of a "diabolical" standard. He was worse than the other dispensers in "getting things down on paper". The first defender said that he was aware that the second defender made duplicates of audiogram cards. He understood that to make the audiogram cards legible, the second defender made fair copies in the evening. He had assumed that he "binned" the rough draft after the fair copy was made, although he had never asked or instructed him to do so. It was only at the commission that he became aware that there was a substantial number of such cards in the second defender's possession. The second defender's explanation was that the audiograms which he retained were not undiscarded rough drafts, but rather copies (not necessarily complete) which he made for his own use. Because of his dyslexia, he felt more comfortable if he had records to refer to if the first defender raised any query. It was simply his personal system, which enabled him to provide a better service to his customers. It did not occur to him that they might be useful to the new business. It was said, however, that that had occurred to Mrs Eley, and that she was on the point of returning them to the pursuers when the commission took place. I did not find that last point convincing.

I do not consider that the fact that the second defender's explanation differs from the first defender's compels me to reject both. The second defender impressed me as in general a straightforward, if somewhat naïve, witness. His explanation, more complex and more closely related to the nature and effect of his disability than the first defender's, rang true. I am not sure whether the first defender did seek an explanation from the second defender, but failed to understand it properly, or whether on the other hand his evidence on this point was an example of his willingness to give the convenient answer without very much attention to accuracy, but I do not find in his evidence a reason to reject the second defender's explanation. In the result, I accept that the audiogram cards recovered from the second defender were duplicates, and that he did not intend to misappropriate the information contained therein for the benefit of Digital.

The fact that the second defender had in his possession at the time of the commission a volume of TAP forms is, in my view, put in context by the evidence which Mr Prentice gave about how a dispenser would deal with such forms. His evidence was that these forms were obsolete once the appointment to which they related had taken place. There were no rules laid down by the pursuers about what a dispenser should do with the TAP form once the appointment had taken place. Mr Prentice's own practice was to throw them away. He understood that to be a practice common among dispensers. In the light of that evidence, it does not seem to me that the pursuers attached any long term significance to TAP forms. That being so, I do not consider that it would be right to draw any sinister inference from the fact that, instead of throwing them away as the appointments took place, the second defender simply allowed them to accumulate. That was in tune with his desire, in light of his disability, to have records of the work he had undertaken available to him as an aide memoire. I am not persuaded that the TAP forms which the second defender retained were retained improperly, or that his motive in doing so was to misappropriate from the pursuers the information about customers and prospects which they contained.

So far as the branch appointment analysis forms were concerned, Mr Clancy submitted that no explanation for their retention was offered by the second defender. By my recollection, that is so, but the point was not raised with him. Mr Clancy submitted that the explanations offered in relation to the other categories of recovered documents did not apply to these, and that too is in my view correct. But in the absence of any real exploration of the matter in evidence it would not in my view be appropriate for me to draw any adverse inference against the second defender on the basis of his retention of these documents.

Schedule 2 - copies and compilations

Whereas Schedule 1 is concerned with property and documents belonging to the pursuers and allegedly misappropriated by the defenders, Schedule 2 is concerned with electronic or paper records allegedly created by the defenders by copying, or making a compilation of, information derived from the pursuers' records. I propose to consider at this stage what evidence there is to support the inference that such copies or compilations have been made by the defenders, reserving until later the question of the appropriate remedy if such copying or compilation is held to have been undertaken.

Mr Clancy recognised that there was only very limited evidence to support paragraph 1 of Schedule 2, namely the paragraph concerned with copies derived from the laptop and other Schedule 1 items. He founded first on what had been said at the commission held in the petition process, which took place on 25 March 1999, when the first defender referred to using a computer for mail merging, in connection with Digital sending out standard form letters. That implied that there was by that date, in electronic form, a list of names and addresses of persons to whom the standard form letters were to be sent. He founded, secondly, on evidence given by Moira Ramsay to the effect that when she started in the employment of Digital she was given lists of prospects to telephone. These pieces of evidence do not seem to me to afford a very secure basis for an inference that the defenders had compiled lists of customers and prospects on the basis of the material misappropriated from the pursuers. In general, however, Mr Clancy's submission was that if I concluded that there had been misappropriation of documents from the pursuers by the defenders, it was legitimate to draw the further inference that there had been copying of the misappropriated material in order to facilitate its use by Digital. He submitted that that inference could be drawn without any direct evidence of copying.

Paragraph 2 of Schedule 2 is concerned with documents compiled by the defenders and containing inter alia lists of names and addresses of persons who were, as at the resignation date, customers and prospects of the pursuers. Mr Clancy acknowledged that it was possible that the names and addresses of persons who were at that date customers or prospects of the pursuers might appear on lists compiled or maintained by the defenders as a result of their having been obtained legitimately through responses to flyers or through acquired mailing lists (AMLs) purchased by the defenders. He submitted, however, that if I had concluded that there had been misappropriation of information from the pursuers, the risk of innocent duplication ought not to stand in his way.

In connection with Schedule 2, Mr Clancy relied on the evidence which he submitted showed that a database of Scottish customers and prospects had been compiled on the first defender's instructions while he was SieTech's regional executive for Scotland; that that exercise had been an unauthorised one; and that the first defender had not ensured that that database had been handed over to the pursuers at the time of his resignation. Some of these matters have already been touched on in relation to whether the first defender misappropriated the laptop, but they bear somewhat differently on the question of whether the first defender copied and retained the regional database for the use of Digital when he left SieTech.

The evidence that the staff of the Glasgow office were instructed by the first defender to compile a database of customers and prospects by drawing on the information contained in audiogram cards was clear and undisputed. Indeed on the first defender's own account, the process was virtually carried out twice, because the original version was inadvertently wiped from the computer. It is therefore clear that there was in existence at the time of the first defender's resignation a substantial database of the names, addresses and other relevant details of the pursuers' Scottish customers and prospects.

While, as I have already said in discussing what became of the laptop, I see nothing intrinsically inappropriate in the Scottish regional executive causing his staff to compile such a database, the explanation offered by the first defender for doing so was not wholly satisfactory. If he had simply said that he decided to create the database because he considered that it would be a useful tool for the more efficient conduct of the pursuers' business in Scotland, it would, in the absence of any positive instructions to the contrary from the pursuers' senior management, have been difficult to fault the first defender's action. In his evidence, however, he offered a more specific explanation, which was only partially supported by the other evidence that was led. The first defender's position was that Terry Hogan had told him that the main database maintained in Southampton was "a mess", and that he wanted to send people round the branches collecting information to enable it to be brought up to a satisfactory standard. He said that he had offered to make a start on that work for the Glasgow branch. He issued instructions to the staff and the work began in about August 1998. The information for the whole of Scotland was available in the Glasgow branch, and was therefore included in the database which was compiled. Terry Hogan's evidence did not expressly confirm the conversation to which the first defender referred. He was unable to confirm from his own knowledge that a customer and prospect database for Scotland was maintained at the Glasgow branch. He did confirm that his department were "capturing" branch databases by sending members of staff round with laptops for that purpose. As I understood his evidence on that point, however, the purpose was to capture data about customers dealt with at branches as distinct from those dealt with by field dispensers, since information about that particular category of customer might otherwise not find its way onto the central database. That exercise, therefore, did not require a Scottish regional database to be compiled. Mr Hogan also said, however, that the collection of data at regional level was happening around SieTech. In effect Mr Hogan gave no specific support to the explanation offered by the first defender. It seems to me likely that, if he had had the conversation with the first defender that the first defender spoke to, he would have remembered it, or would at least have been aware that a regional database was being compiled in Glasgow. Mr Hogan, however, did not give evidence suggesting that the first defender was acting improperly in having a regional database compiled.

In the course of the commission held in the petition process, the first defender indicated to the commissioner that the database of customers and prospects had been on his own computer at home (No. 6/19 of process, at page 25). In evidence at the proof, he first sought to deny that that was correct, but quickly withdrew that denial. His ultimate position was that the database had at one time been on his own computer, but that it had been deleted after he resigned and before the audit conducted by Mr Downes. He maintained that the database had also been deleted from the laptop, but only after it had been saved on two floppy disks, along with certain other data. Those floppy disks, he said, had been labelled and handed to Mr Downes at the audit. There is no record of them on the audit checklist (No. 6/150 of process). He acknowledged that by then the disks contained the only remaining copy of data that had been laboriously compiled over a period of time, was important and valuable to the pursuers, and would be of value to a competitor. Yet he said that he "never gave it a thought" that they should be recorded on the audit checklist. He stated that he would have made clear to Mr Downes what was on the disks. He then immediately restated more firmly that he had told Mr Downes that the disks contained the database. Mr Downes' evidence was that at the first defender's audit some floppy disks (two or three) were handed over to him, which he understood to contain TA9s and documents of that sort. To the best of his recollection, they were sent to Southampton. He did not say that he had been told that they contained the sole surviving copy of the regional database. Mr Clancy submitted that it was inconceivable that Mr Downes would not have passed on to Southampton the specific information that the disks contained a regional database if that was the information which the first defender had given him. Mr Hogan's evidence was that he was clear that floppy disks containing the Scottish database were never received in Southampton. On that evidence I conclude that the first defender latterly had the database in a form in which it could readily be misappropriated by him, to the extent even that it was on his own computer. I do not recall any explanation being proffered for its being on that computer. I conclude, further, that although (as I have already held) the laptop was returned to Mr Downes, the first defender first deleted the database from its hard drive. In so far as the first defender sought to explain that deletion by reference to some difficulty to do with the licensing conditions applicable to the software, I do not find his evidence convincing. He derived no support on that point from Mr Hogan. No acceptable explanation for the deletion was offered. I accept that the first defender handed two or three floppy disks to Mr Downes in the course of his audit. I do not accept, however, that the first defender told Mr Downes that those disks contained the database, or that they in fact did so. I accept that, although Mr Downes was not able to be categorical on the point, the floppy disks which he retrieved were sent to Southampton. I also accept Mr Hogan's evidence that no disks containing the database were received in Southampton. I conclude that, although he deleted the database from the hard drive of the laptop, the first defender did not provide it to the pursuers on floppy disks. In all these circumstances, the evidence in my opinion supports the conclusion that the first defender retained the database, probably on floppy disks, and misappropriated it for the benefit of Digital.

Sales performance before resignation

There is clear evidence that the first and second defenders' productivity in the last six months of their employment with the pursuers fell off dramatically. The figures which I am about to summarise come from documents (No. 6/32 of process) compiled by Terry Hogan on the basis of returns made to Southampton. I do not understand the accuracy of the figures to be disputed. In the period between 7 March and 29 August 1998 (26 weeks) the first defender achieved sales totalling £60,870 (£2341 per week), which can be contrasted with the average figure for Scottish dispensers, which was £89,118 (£3427 per week). There were 5 weeks in the period when no sales were achieved by the first defender, but these (or at least some of them) were presumably periods when he was on holiday. The fact that the first defender achieved sales lower than average is no doubt at least partly explained by the fact that he operated at the Glasgow branch rather than in the field, and by the fact that he had to spend a material part of his time on administrative rather than dispensing duties. In the period between 5 September 1998 and 27 February 1999 (24 weeks), however, the first defender achieved sales totalling only £21,040 (£877 per week). The average figure achieved by Scottish dispensers in the same period was £81,495 (£3395 per week). In that period, there were 15 weeks in which the first defender made no sales at all, although only two of these are noted as a holiday period. Sales of only £3660 were achieved in the first two months of 1999, all concentrated in the first two weeks of February.

In the earlier of the two periods (7 March to 29 August 1998) the second defender's sales figures were impressive. He reported total sales of £128,895 (£4957.50 per week), considerably in excess of the Scottish average of £3427 per week. In the period from 5 September 1998 to 27 February 1999 (23 weeks), however, his total was only £56,290 (£2447 per week), well below average. In January and February 1999 his reported sales totalled £8725. He reported no sales after 6 February.

The actual sales reported by the first and second defenders in January and February 1999 may be contrasted with their target figures, as set out in No. 6/133 of process. The first defender's target was £10,000 in January and £12,000 in February, a total of £22,000. He achieved £3660. The second defender's target was £27,000 (£12,500 plus £14,500). He achieved £8725. The first defender suggested in evidence that the targets were unreasonably high. He said that Mr Downes fixed the overall target for Scotland, and that his responsibility was merely to allocate the total among the dispensers. Mr Downes' evidence, however, was to the opposite effect, that the total target was proposed to him for his agreement by the first defender. I am inclined to prefer Mr Downes' evidence on the point. While no doubt the target figures erred on the high side to give the dispensers something to strive to achieve, and while the comparisons which I have made are no doubt crude, it seems to me to be clear that in the first two months of 1999, the last two months of their employment with the pursuers, the first and second defenders both made far fewer sales than their historical performance would have suggested they were likely to make, and far fewer than had been proposed or at least agreed by the first defender as their targets. The comparison with the average achieved by other Scottish dispensers tends to suggest that the explanation lay in the activities (or lack of activity) of the first and second defenders rather than in general market conditions.

A number of explanations for their poor performance were put forward by the defenders, but it does not seem to me that they, singly or in combination, are satisfactory. One point made was that the quality of the telepointing undertaken by the staff at the Glasgow office was poor. That, however, cannot account for the situation that prevailed in the last few weeks, when telepointing had been resumed by the staff at Green Hedges. There was a time when the second defender had had his monthly earnings guaranteed at a certain level, but that came to an end in October 1998, and does not seem to me to have any bearing on his performance in the first two months of 1999. The second defender suggested that his taking over responsibility for the Ayrshire area had an adverse effect on his sales, because the National Health Service hearing aid provision was of a high quality there, and during his last few weeks with SieTech Ayrshire appeared to account for a substantial proportion of his appointments. I do not consider, however, that that alone is likely to have accounted for his latterly achieving hardly any sales when, the previous year, his performance had been much above average. The first defender said that, so far as he was concerned, in 1999 he was "not motivated to sell"; he "coasted" from the beginning of February. I have no doubt that there is truth in that.

Mr Williams carried out, or had carried out, some examination of the available records relating to the second defender's activities in February. The material upon which he proceeded included (i) the second defender's TA5s for the weeks ended 13, 20 and 27 February, showing 13, 12 and 13 appointments respectively; (ii) the failed appointment report for the week ended 20 February, showing two failed appointments reported by the second defender; and (iii) sales reports for the week ended 20 February, showing no sales by the second defender. Mr Williams suggested that it was most unusual for a salesman of the second defender's ability to make no sales out of a week of twelve or thirteen appointments. Mr Clancy invited me to draw the inference that appointments had gone unreported, and that the second defender was holding customers over to be visited, after his resignation from SieTech, on behalf of Digital. While the records do not seem to me to afford a satisfactory explanation of the second defender's activities, I am conscious that the material is incomplete, and on that account I hesitate to draw any clear conclusion from it alone.

In their pleadings (article 20 of the condescendence) the pursuers aver that before their departure from the employment of the pursuers, the second defender and Mrs Eley sold hearing aids on behalf of Digital to four named customers or prospects of the pursuers. In the end, only one of those allegations was maintained. It was that the second defender sold on behalf of Digital to a Mrs McLaughlin, whom he had initially seen on behalf of the pursuers. The appointment appears in his Green Hedges diary (Nos. 53 and 53A of process) on 23 February 1999. When telephoned by Mr Williams' personal assistant, Mrs Drew, Mrs McLaughlin indicated that she had purchased from Mr Eley. The pursuers had no record of any such sale. It then transpired, as the second defender admitted in evidence, that he had gone back to Mrs McLaughlin on Digital's behalf after his resignation. The second defender's evidence was that Mrs McLaughlin had asked if he would be dealing with her throughout the fitting of a hearing aid. He said that he would not, because he would be leaving. Mrs McLaughlin then said that she would not deal with anyone else. He went back to her after he had resigned. He said he could not remember whether she had contacted him, or he had contacted her. He "might" have kept a note of her address in his diary. In any event, he sold her a hearing aid on behalf of Digital.

Before leaving the subject of the first and second defenders' activities in the period preceding their resignations it is necessary to consider a conflicting body of evidence as to whether or not the second defender admitted selling hearing aids for Digital prior to the date of his resignation from SieTech. The allegation that he had done so is said to have reached the pursuers through Mr Terry Biddle, a director of Ultratone Ltd. Mr Biddle gave evidence that he heard the allegation from Gordon Wallace, an area manager with Hidden Hearing Ltd. Mr Biddle's evidence was that he became aware in March 1999 that the first and second defenders had left SieTech. He had, however, heard before that from Gordon Wallace that the second defender had been selling hearing aids for a new company. His evidence was confused as to date. When first asked to date the telephone call from Mr Wallace in which he received that information, he put it as the last Friday of April. He then acknowledged that it might have been earlier, and said that it was on the Friday before the second defender resigned from SieTech. His account of the conversation was that Mr Wallace said something to the following effect: "I thought I'd ring to tell you that Jim Eley has sold his first hearing aid for the new company". Mr Biddle said that he thought Mr Wallace was gloating; and that he was surprised, both at the allegation against the second defender and at the fact that Mr Wallace had telephoned him. He passed the information on to Mr Cartwright, as Mr Cartwright confirmed. Mr Wallace's evidence, however, was to a very different effect. He gave evidence of having had a conversation with the second defender, with whom he was on friendly social terms, in which he was told that the second defender was leaving SieTech to start up Digital with Russell Borland. He did not date the conversation more precisely than to place it in March 1999. He agreed that he spoke to Mr Biddle about what the second defender had told him. He said, however, that the second defender had said nothing about having sold his first hearing aid for the new company. He said the second defender spoke of advertising and using AMLs. The second defender placed his conversation with Mr Wallace after Digital began trading. He did not recall speaking of advertising and AMLs. There was clearly some communication between the second defender and Mr Wallace, and thereafter between Mr Wallace and Mr Biddle. It seems to me that it is likely that the second defender spoke to Mr Wallace as a friend, sharing his excitement at the setting up of the new business, but that Mr Wallace's motive in speaking to Mr Biddle may well have been mischievous, designed to discomfit a trade rival. I do not consider that it would be appropriate to base on that body of evidence a conclusion that the second defender had indeed been selling hearing aids in Digital's name before resigning from SieTech (as opposed to paving the way for future Digital sales).

Post-resignation contact with SieTech customers

In March 1999 there came into the possession of the pursuers a letter sent by Digital to a Mrs Alstad. The letter was undated, but it is a matter of agreement that it was sent by Digital to Mrs Alstad prior to 19 March. The letter (Nos. 6/17 and 6/17A of process) was unsigned but bore a printed "signature" of Digital. It bore to announce "a monumental change in the hearing aid industry ... a change in attitude ... to you the client" and went on to mention the "vast knowledge, experience, and superior customer service of two of the most respected Hearing Aid Audiologists in the United Kingdom", namely the first and second defenders. It bore to enclose "an introductory £100 voucher". It invited telephone contact. Mrs Alstad passed the letter to the pursuers' Glasgow branch, and Mr Prentice faxed it on to Mr Williams. It was Mr Williams' understanding that Mrs Alstad was annoyed or concerned that the pursuers had passed her name to Digital. The first defender's explanation of the letter to Mrs Alstad was that he saw her in the Glasgow branch on 26 February 1999, as is borne out by the 1999 branch diary (No. 6/138 of process). On that occasion, her hearing aid was not working, and he sent it for repair. He told her he was leaving SieTech, and she asked for a note of his new business details, which he gave her. He made a note of her address to write to her after his resignation. He acknowledged that to write to her in that way was a breach of the undertaking in paragraph 3 of the document (No. 6/146 of process) which he signed on 3 March 1999. Mr Clancy invited me to reject the first defender's evidence that Mrs Alstad had asked for his details in his new business. He pointed out that she would not have sent the letter to the pursuers if she had asked for and been expecting communication from the first defender on behalf of Digital. There is, in my view, force in that point. Moreover, although it is clear that the first defender had indeed had recent dealings with Mrs Alstad, I find it odd that, if the situation was that he was making contact with a recent customer who had asked or encouraged him to do so, he should have sent such an impersonal, standard form letter bearing only a printed "signature" of Digital rather than his own signature.

On 23 March 1999 the pursuers received from the Edinburgh branch of Amplivox a letter (Nos. 6/18 and 6/18A of process) which Digital had sent to a Mr J. P. Paton. The letter was in identical terms to the one sent to Mrs Alstad. Again Mr Williams' evidence was that he understood that the customer had sent the letter to Amplivox to express his concern that they had passed his name and address to Digital. The significance of its being sent to Amplivox, Mr Clancy submitted, was that it suggested that Digital had access to records relating to Amplivox customers as well as SieTech customers. The first defender in evidence suggested that Mr Paton's name had come from an AML, but it is a matter of agreement (No. 48 of process, paragraphs 5 and 9) that Business Lists UK, from whom Digital first acquired an AML, did not supply one in any format before 31 March. No other explanation of the source of the information on which the letter was based was offered.

Mr Prentice in the course of his work after taking over as regional executive for the pursuers came in contact with a customer who appeared to have been solicited on behalf of Digital. She was a Mrs Stirling, who, it appeared, had placed an order with SieTech through Mr Wilson, before his dismissal (see his audit check list, No. 6/151 of process, on which her name appears in a list of outstanding orders). Mr Prentice telephoned her to arrange a fitting. She at first thought that he was Mr Wilson, and said that "the other mob" (meaning SieTech) had not contacted her yet. Mr Prentice explained who he was, and it emerged that she had agreed with Mr Wilson to purchase from Digital. Ultimately she cancelled the order placed with SieTech, on the ground that the hearing aid offered by Digital was cheaper. The first defender's account was that he had himself dealt with Mrs Stirling on 8 and 22 February, but decided to process the order as if it were Mr Wilson's, so that Mr Wilson would receive the commission. He told Mrs Stirling that he was leaving the pursuers and that Mr Wilson would deal with the fitting of the aid, but she was not willing to deal with anyone other than the first defender, and cancelled the order. The first defender contacted her on 8 March on behalf of Digital, on the basis of information contained in his diary and in her audiogram, which Mr Wilson had retained. She subsequently on 13 March placed an order with Digital. That explanation is not properly supported by SieTech records, does not accord with what Mrs Stirling is said to have said to Mr Prentice, and in any event does not absolve the defenders of impropriety. Another example given by Mr Prentice related to his dealings with a customer, Dr Erskine, who had ordered a hearing aid through Mr Wilson and had been fitted, after his dismissal, by another SieTech dispenser, Mr Prentice noticed on the audiogram card annotations by Mr Wilson which he interpreted as a calculation of the discount on the SieTech price which Digital could offer if the customer would cancel the SieTech order.

In the light of these matters, Mr Williams caused investigations to be made to see if letters were being sent by Digital to customers and prospects of the pursuers on a more widespread basis. Over a period of time Mr Prentice compiled a number of lists of SieTech customers who had indicated that they had been approached by Digital. The earliest lists were dated 16 April (No. 6/20 of process) and 27 April 1999 (No. 6/21 of process) and contained between them a total of ten names, including Mrs Alstad, Mrs Stirling and Dr Erskine. Mr Clancy submitted that they were of particular significance because they antedated the earliest mail shot issued by Digital on the basis of the AML acquired from Business Lists UK, and therefore were not explicable in terms of the names appearing coincidentally on that list. Later lists included Nos. 6/22, 6/23, 6/24, 6/25 and 6/62 of process. They threw up further examples of the same standard form letter as had been sent to Mrs Alstad and Mr Paton (Nos. 6/26, 6/63 and 6/65 of process), and also a further standard form letter sent to a number of SieTech customers after another dispenser, Alan Purdie, left SieTech and joined Digital in August 1999. The latter standard form bore to follow an earlier communication, and introduced Mr Purdie as a new recruit to Digital. Examples of that letter are Nos. 6/27, 6/28, 6/29, 6/64, 6/66 and 6/67 of process.

Ross Duguid, one of the pursuers' field dispensers, also gave evidence of a number of customers mentioning that they had been approached by Digital. A number of these customers showed him letters from Digital. He reported the phenomenon to Mr Prentice, who asked him to gather in the letters. Of the customers included in the lists compiled by or for Mr Prentice, Mr Duguid spoke to dealing with Mrs McPherson, Mrs Poli, Dr Gallen, Mr Dunlop and Mrs Whitson.

Another aspect of the inquiries conducted by the pursuers was undertaken by Mr Williams' personal assistant, Yvonne Drew. She was instructed to contact customers whose names appeared in the diaries kept for the second defender, Mrs Eley and Mr Wilson at Green Hedges, and to seek to ascertain whether they had been contacted on behalf of Digital. She compiled a memorandum (No. 6/52 of process) setting out the results of that exercise. She was instructed to carry out a similar exercise in respect of the first defender, but his Green Hedges diary could not be found. Later, after Alan Purdie joined Digital, she carried out a similar exercise in respect of him, the results of which are set out in No. 6/47 of process. In addition to compiling the memoranda, Mrs Drew made annotations in the diaries, recording the responses that she got from the customers. There was one major methodological flaw in Mrs Drew's work. At the time she carried it out, she was unaware that another company in the hearing aid industry, Hidden Hearing Ltd, used "Digital Hearing" as a trade name. She therefore had no reason to be aware that a customer's reference to "Digital Hearing" might not be a reference to the third defenders. She maintained adamantly in evidence that she wrote down in the diary precisely the words used by the customer. For example, the annotation to the entry in the second defender's diary on 15 February 1999 relating to Mr W Clark is "approached by Digital UK", and Mrs Drew maintained that she was certain that that was the precise form of the name which Mr Clark used. She said that if the letters "UK" appeared in the diary annotation, they were used by the customer. I did not find Mrs Drew's purported certainty on this point convincing. It is common experience that people use various more or less accurate versions of company names. That was borne out by the language used by those customers who did give evidence (Mrs Henshaw and Mr Sutherland). Mrs Drew was not at the time herself aware of the potential for confusion between the third defenders and the trading name used by Hidden Hearing Ltd. In that situation, the results of Mrs Drew's research cannot in my view to accepted as necessarily wholly accurate. On the other hand, it would, in my view, be highly improbable that the potential confusion accounted for all of the references to communications from Digital. Moreover, the memorandum contains a number of examples of clients who referred by name to former SieTech personnel who were by then with Digital. I am therefore persuaded that, despite the methodological weakness of the work undertaken by Mrs Drew, and despite her refusal to recognise that weakness, the inquiries undertaken by her do evidence that Digital approached a considerable number of SieTech customers by the end of April 1999. So far as the Memorandum relating to Alan Purdie (No. 6/47 of process) is concerned, there is another difficulty, namely that the entries, in various forms of words, attribute correspondence or telephone calls to Mr Purdie personally. He denied in evidence that he had made such contact, and I am inclined to believe him. I am inclined to think that references in the memo such as "received a letter from Mr Purdie at Digital Hearing UK Ltd" are references to the standard form letter (e.g. No. 6/27 of process) which makes reference to Mr Purdie, rather than a letter from him personally. Mr Purdie also denied passing information about his SieTech customers to Digital. If that is so, and I am again inclined to believe him, it tends to support the inference that Digital had information about SieTech customers and prospects from sources other than dispensers' diaries.

One name which appears first on the list compiled by Mr Prentice dated 8 August 1999 (No. 6/22 of process) is that of Mrs Naylor (misprinted as Maylor). The first defender's post-resignation contact with her was explained in evidence not only by him, but also by Mr Purdie and Mrs Henshaw. Mrs Henshaw was a neighbour of Mrs Naylor and was a Digital customer of the first defender's. Mrs Henshaw asked the first defender to see Mrs Naylor (who had been a customer of Mr Purdie's at SieTech), because she was having trouble with her hearing aid. There is an apparently acceptable body of evidence that he did so as a favour, and that his visit to her did not arise in a way that involved his making illegitimate use of confidential information belonging to the pursuers. However, the evidence of Mr Purdie and Mrs Henshaw tends to place that contact in the spring of 2000. If that is correct, the letter (No. 6/67 of process) cannot have been sent as a follow-up to the visit, as the first defender suggested, since it led to the entry of Mrs Naylor's name on a list compiled on or before 8 August 1999. I am inclined to conclude that the evidence of contact between Mr Borland and Mrs Naylor brought about by Mrs Henshaw does not undermine the inference that the letter to Mrs Naylor was sent on the basis of information misappropriated from the pursuers.

Another strand of evidence relied upon by Mr Clancy as support for the proposition that Digital had been contacting SieTech customers was given by Mr Prentice. He said that the cancellation rate applicable to orders placed with the pursuers, which had been 12% in Scotland (as compared to 10% nationally) before the resignations, shot up to 30% after the first and second defenders resigned, and did not return to normal for about a year. There was a further peak in the cancellation rate following Mr Purdie's departure in August 1999. Mr Prentice expressed the opinion that these fluctuations in the cancellation rate were greater than were to be expected to occur simply because of the departure of a number of dispensers. Moreover, Mr Prentice identified what he regarded as a significant feature of the cancellations. He said that normally a customer who cancelled was prepared to discuss the matter and explain the reasons for the cancellation. In the period in question, however, there was a pattern of categorical cancellations which the customer was not prepared to discuss.

Mailing lists

In their pleadings the defenders adopt the position that in writing to customers of the pursuers they did so, not on the basis of records relating to the pursuers' customers, but because the names of those persons appeared on AMLs which they purchased. They aver that some of the names on those lists were recognised by the first and second defenders, and when that occurred they checked their diaries to see if they had previous dealings with the persons in question. Although that position was not fully maintained at the proof, it is nevertheless necessary to examine the evidence about the AMLs which the third defenders bought, in order to see whether that evidence bears out the suggestion that contact with customers of the pursuers was based on the coincidental occurrence of the names of those customers on AMLs rather than on the misuse of information misappropriated from the pursuers.

At the commission held under the petition proceedings reference was made to AMLs. It is to be recalled that the date of that commission was 25 March 1999. The commissioner asked about the material used as the source for inserting names and addresses into standard form letters by the use of mail merge software. Mrs Eley replied: "It comes from a company called Claritus. You are allowed to [use] it once and return the disc" (No. 6/6 of process, page 24A). Later she added that Digital no longer had the list: "Not any more, because you actually run it and send it back to the companies" (page 25A). In answer to the commissioner's question: "And all these names were on the list you got from Claritus?" the first defender said "Yes" (page 26E). In evidence at the proof the first defender accepted that Digital had not acquired an AML from Claritus before the date of the commission. It is impossible to escape the conclusion that Mrs Eley and the first defender lied to the commissioner on that point. It is not difficult to infer that they did so because of the difficulty of explaining otherwise how Digital had come by the names and addresses of persons to whom to write. If some legitimate source had been used for the mailshot which the first defender accepted in evidence had been sent to several hundred persons by 25 March 1999, it is difficult to understand why the first defender and Mrs Eley would not have mentioned it to the commissioner instead of giving false information about an AML acquired from Claritus. The absence of any such explanation to the commissioner in my view points powerfully to the absence of any legitimate source of names and addresses at that date. Mrs Eley's statement to the commissioner that the list had to be returned after use was also false - see paragraph 4 of the Joint Minute (No. 48 of process). It may be inferred that that statement was made in an attempt to explain why no AML from Claritus could be exhibited to the commissioner.

At the documents commission held in the present action on 13 June 2001, both the first defender and Mrs Eley sought to maintain the position that an AML had been acquired from Business Lists UK in March 1999 (No. 26 of process, pages 102C and 112A (first defender), and page 74B (Mrs Eley)). At the outset of his evidence on the point at the proof, the first defender maintained that the AML from Business Lists UK was obtained on 1 April 1999. Eventually, however, the defenders' dealings with Business Lists UK were largely the subject of agreement (No. 48 of process). The first defender first approached Business Lists UK on 15 March (paragraph 1); they faxed a quotation to him on 24 March (paragraph 5); no list was provided before the date of the commission (paragraph 5); Digital ordered an AML on 25 March (paragraph 6); Business Lists UK invoiced Digital on 26 March and Digital sent a cheque in payment on the same date (paragraph 7); the AML was dispatched to Digital on 31 March (paragraph 9); the first defender complained that the list sent did not include telephone numbers, and cancelled the cheque (paragraph 9); a new list including telephone numbers was sent to Digital on 16 April (paragraph 10). The delay in sending the second list arose because Business Lists UK, in light of the fact that the defenders' earlier cheque had been cancelled, awaited payment before dispatching it. Had the defenders truly been dependent on the AML acquired from Business Lists UK as the only substantial source of information about potential customers, it would not have been difficult for the first defender to have accelerated the delivery of the second list by handling the question of payment with more delicacy. He chose not to do so, and that adds to the impression that the AML was not of crucial importance to Digital, because they had other sources of names and addresses. The first defender maintained that he had the permission of Business Lists UK to use the first list (without telephone numbers) pending the arrival of the second list (including telephone numbers). Mrs Linda Maddox of Business Lists UK, however, strongly disputed that that was so, and her reason for doing so (that there were fewer addresses available with telephone numbers, so the lists did not refer to the same people) seemed to me to be cogent. On that point I prefer her evidence and reject that of the first defender which was, in my view, an attempt to advance, if only by a few days, the date by which Digital had a legitimate source of names of possible customers.

Flyers

In evidence in chief the first defender said that on 28 February Digital started issuing flyers (i.e. leaflets advertising their business) which they had obtained from Garthland Print Ltd. That cannot be correct, because an examination of the relative documents shows that the flyers, although ordered on 18 February, were not uplifted until 7 March (see No. 7/50 of process, page 2). There was evidence that prior to that the defenders had made and distributed "home-made" flyers. That was first offered when the first defender, in cross examination, accepted that his earlier evidence about distributing Garthland flyers on 28 February could not be right. I would have been disinclined to accept the first defender's evidence about home-made fliers, if it had stood alone, but it was corroborated by the second defender, and I therefore accept that the defenders may for a few days have used home-made flyers. There was no very convincing evidence about the conversion rate from flyers (i.e. the number of orders obtained from the distribution of a given quantity of flyers). There was evidence that the conversion rate for AMLs was 1% (i.e. 5 appointments per 100 names contacted, and one sale per 5 appointments). I reject the first defender's assertion that there would be one appointment from every three letters, if that was intended, as the context in which it was said suggests, to apply to letters written on the basis of AMLs. The conversion rate from coupon or 0800 responses would, of course, be higher, since in those cases the customer takes the initiative in indicating interest. Mr Clancy submitted that it was inconceivable that flyers could achieve anything like the conversion rate achieved from AMLs, and that seems to me to be common sense. Moira Ramsay said that customers were asked what the source of their information about Digital was, and some referred to flyers. She said, however, that there were not even ten customers who referred to flyers in that way. It therefore seems to me that it has not been shown that the flyers issued by Digital made any material contribution to their business in the early stages. It would be extraordinary if flyers happened to attract a material number of approaches from persons who had been customers of SieTech. Moreover, the geographical distribution of the customers listed in Nos. 6/20 and 6/21 of process is such that flyers cannot have played any part in attracting them to Digital. It seems to me to be clear that Digital's use of flyers plays no part in affording an innocent explanation for approaches to SieTech customers.

Overview

Before considering the legal basis of the pursuers' claims and the remedies to which they are entitled, it is necessary to attempt to draw together my conclusions on the various aspects of the evidence. My conclusions, in the broadest terms, are that it has been proved that the first defender, in particular, misappropriated a number of categories of documents belonging to the pursuers with a view to using the information which they contained for the benefit of Digital; that he also probably copied in some electronic form the database of SieTech's Scottish customers and prospects which had been compiled in the Glasgow office on his instructions, and misappropriated that copy for the same general purpose; that Digital did during its first year of trading approach in the course of its business a material number of persons who were customers or prospects of SieTech; and that at least the majority of those approaches were probably made on the basis of information contained in records misappropriated from the pursuers.

Before elaborating on those findings against the defenders, it is convenient to record a summary of those allegations maintained by the pursuers against the defenders at proof that I have not found proved. For the reasons which I have set out in paragraph [23] above, I do not find it proved that the first defender misappropriated the laptop. In relation to several categories of documents, my conclusion is the same, namely that it has not been proved that the first defender misappropriated them. The categories to which that conclusion applies are those discussed in paragraphs [30] (sales records), [31] (cancelled order forms), [40] (TA5s), and [42] (the 1998 Glasgow branch diary). It therefore follows that on that account the pursuers must fail to obtain decree of delivery in terms of the first conclusion in respect of the following paragraphs of Schedule 1 to the summons, namely paragraphs 1, 5(a), (b), (f), (g) and (h), and 6 (so far as relating to the branch diary). Moreover, as I have recorded in paragraph [41], Mr Clancy did not maintain the claim for delivery of back-up disks, and on that account decree of delivery in terms of the first conclusion also falls to be refused in respect of paragraph 7 of Schedule 1. In addition, for the reasons discussed in paragraphs [55] to [60] above, I do not find that the documents which were recovered from the second defender in the course of the commission were retained by him with the intention that they should be used for the benefit of Digital.

I turn, therefore, to those aspects of the pursuers' case in respect of which I have made findings that the defenders have misappropriated documents belonging to the pursuers. First, for the reasons discussed in paragraph [29] above, I find it proved on the balance of probabilities that the first defender removed the CNP cards from the pursuers' Glasgow branch office. Secondly, for the reasons discussed in paragraph [33] above, I reach the same conclusion in relation to one other limited category of SieTech audiogram cards, namely those relating to cancelled orders. Thirdly, for the reasons set out in paragraph [35] above, I find that the first defender removed from the Glasgow office an indeterminate number of audiogram cards relating to Amplivox/Ultratone customers, which he had retained in his possession when he ceased to be manager of the Glasgow Amplivox/Ultratone branch. Fourthly, I find that the first defender, after he left the pursuers' employment, retained possession of the 1999 diary containing details of his appointments with SieTech customers and prospects (see paragraph [43] above). Fifthly, I find that the first defender took with him when he left the employment of the pursuers the records of the 0800 responses received in the Glasgow office during January and February 1999 (see paragraph [52] above). Sixthly, I find that the first defender abstracted and retained a proportion of the coupon responses to the advertisement published in the Daily Record of 9 February 1999 (see paragraph [54] above).

So far as the second conclusion of, and Schedule 2 to, the summons are concerned, I have, for the reasons set out in paragraph [67] above, made the finding that the first defender probably copied the database of SieTech's customers and prospects in Scotland from the laptop onto floppy disks which he retained. That finding is made in the context that the database existed only in electronic form, and that it follows that electronic copies are the most likely form in which it could be appropriated. Beyond that, however, the evidence does not in my view justify the conclusion that the defenders made paper or electronic copies of any of the appropriated material. It would, for example, have been relatively laborious to create paper or electronic copies of the information contained in appropriated CNP or cancelled audiograms, or on 0800 pads, or in coupon responses.

Although it is clear that the first and second defenders' sales performance slumped markedly in the last few months of their employment with the pursuers, it would, in my view, be going too far to conclude, solely on that basis, that they were holding back prospects to be re-approached later on Digital's behalf. In the absence of any very satisfactory explanation of the sales figures, that is at least a possibility, but I do not consider that, even taken with the evidence of contact with SieTech customers on behalf of Digital once it began trading, it can be said to have been shown to be probable. Although the second defender admitted one occasion on which he went back to a customer of SieTech (Mrs McLaughlin) and sold to her on behalf of Digital, the circumstances, if the second defender's account is accepted, were somewhat equivocal, and I do not consider that it would be right to generalise from that instance. As I have set out in paragraph [74] above, I do not consider that it has been proved that the second defender was actually selling hearing aids on behalf of Digital before he left the pursuers' employment. I am, however, satisfied that, after the first and second defenders left the pursuers' employment, Digital made approaches to a material number of SieTech's customers and prospects. In the few cases where the defenders tendered a specific explanation (e.g. Mrs Alstad (paragraph [75]), Mrs Stirling (paragraph [77]), and Mrs Naylor (paragraph [81])), the explanations offered were more or less unsatisfactory, as was also the case in relation to Mr Sutherland, the Amplivox customer (paragraph [35]). Although Mrs Drew's research was flawed in its failure to take account of the possibility that a customer's reference to an approach from Digital was actually a reference to Hidden Hearing Ltd trading as Digital Hearing, it would in my view be an overreaction to that flaw to reject on that account the whole of Mrs Drew's evidence of approaches to SieTech customers and prospects by Digital. Mr Prentice's evidence of the sudden rise in the cancellation rate also supports the inference that Digital were targeting SieTech customers. Even if the evidence about the defenders' early reliance on AMLs and flyers had been satisfactory, it would have been an extraordinary coincidence if accidental duplication through those sources had been the explanation for the approaches to SieTech customers and prospects. The plausibility of such an explanation was further reduced by the unsatisfactory nature of the evidence about AMLs, the dealings with Business Lists UK, and the alleged dealings with Claritus.

Mr Beynon made the point that in the context of the numbers of Scottish customers (2500) and prospects (25,000) claimed by the pursuers, the number in respect of which there was evidence of contact by Digital was insignificant. It is no doubt true that in absolute terms Digital have been proved to have approached only relatively few of SieTech's established customers and prospects. The point is not, however, a strong one. Unless the approaches can be explained away as innocent, based on the coincidental appearance of the names in an AML or other legitimate source, a few examples are enough to show that the defenders were following an illegitimate course. Moreover, if I am right in holding it proved that the first defender misappropriated a batch of recent 0800 responses, and a proportion of recent coupon responses, approaches to those prospects would not have been detected by the means adopted by the pursuers, because they had no independent information as to the identities of the authors of those responses. The approaches which have been identified in evidence, small though they may be in number, are in my view a sufficient basis, when taken along with my findings as to the extent to which and form in which information was misappropriated, for a conclusion that for an period after it started trading (the length of which is not clearly determinable, but was at least a matter of months) Digital used information misappropriated from the pursuers as a means of identifying prospects, and contacted a significant number of those so identified.

The legal basis of the pursuers' claims - Conclusion 1

The pursuers' first conclusion proceeds primarily on a simple proprietary basis, but is also based on the proposition that the defenders were in breach of a duty not to misuse trade secrets belonging to the defenders.

Proprietary claim

The pursuers say that the items set out in Schedule 1 are their property, and are in the possession of the defenders. That, to the extent that it has been established in evidence, is, they maintain, sufficient to entitle them to decree of delivery as concluded for. That contention, so far as it goes, was not disputed by the defenders. The defenders, however, contended that it was not enough, to justify decree of delivery, for the pursuers to establish that the defenders had at the time of their resignation taken or retained possession of the property in question. Mr Beynon submitted that it was incumbent on the pursuers to prove that the property in question still remained in the possession of the defenders. Otherwise decree of delivery should not be granted. In support of that proposition he referred to Liverpool Victoria Legal Friendly Society v Houston (1900) 3 F 42 in which the pursuers sought inter alia decree of delivery for return to them of lists of members in the hands of their former agent. Reference was made in particular to a passage in the opinion of the Lord Pearson (Ordinary) at 49, where his Lordship said:

"I am not at all satisfied that the defender has not in his possession copy collecting-books and lists of members, although his assertions on the subject may quite well have been empty boasts. But in the absence of definite information, I am of opinion that decree of delivery in terms of the first conclusion would be inappropriate, as it would be impossible to say when the decree was implemented."

Mr Beynon also referred to Walker on Civil Remedies 264, but the passage does not seem to me to focus on whether actual proof of possession at the time of decision, as distinct from possession at some time in the past, is necessary to justify decree of delivery. Mr Clancy submitted that where it was proved that the defenders had taken possession of the pursuers' property, the onus was on the defenders, if they wished to avoid decree of delivery by reference to impossibility of performance, as where the property was no longer in their possession, to make and prove averments to that effect (Macphail on Sheriff Court Practice, second edition, paragraph 21.80; Salaried Staff London Loan Co Ltd v Swears and Wells Ltd 1985 SLT 326). There was no onus on the pursuers, once the defenders' possession was established, to prove that it continued at the date of decision.

In my opinion, Mr Clancy was right in his submission that it is in general for a party who seeks to argue that a decree ad factum praestandum which is otherwise justified should not be granted to aver and prove the circumstances that make it inappropriate for the court to grant the decree (Salaried Staff v Swears and Wells). Other things being equal, if pursuers show that defenders have misappropriated their property, and the defenders lead no evidence to show that they are no longer in possession of the property, the pursuers will be entitled to decree of delivery. In the present case, the defenders have, in my view, discharged the burden of proving that the property is no longer in their possession only in respect of the first defender's 1999 diary (see paragraph [43] above). Beyond that, since their position was that there had been no misappropriation, they led no evidence to the effect that documents formerly in their possession no longer are in their possession. The granting of any decree ad factum praestandum is, however, a matter in respect of which the court retains a discretion. After proof has been led, the matter should in my view be judged by reference to the circumstances as they appear to be in light of the whole evidence led, rather by reference to where the onus of proof lay in respect of different assertions. Here I have held that the defenders did misappropriate some, but not all, of the property said by the pursuers to have been misappropriated. But that finding relates to the situation which existed in and shortly after March 1999. There is also evidence that procedure undertaken in March 1999 to recover the property in question did not lead to recovery. There is evidence that eventually the defenders obtained other legitimate sources of information about potential customers. It seems to me to be improbable that the defenders still have the property that was misappropriated in the form in which it was misappropriated. The first conclusion is simply for decree ordering delivery. Although Mr Clancy made some reference to possible ancillary procedure, none is concluded for. It seems to me that, if decree were granted in terms of the first conclusion, and the defenders failed to deliver material within one or more of the categories mentioned in Schedule 1, it would be impossible to tell whether the defenders were wilfully refusing to comply with the court's order, or were no longer in a position in which they could comply. There is the further difficulty that, although I have been able to make findings about categories of property (e.g. CNP cards, 0800 records, coupon responses), I have not been able to quantify how many documents in each category were misappropriated. It seems to me that in these circumstances there is a difficulty akin to the one which led Lord Pearson to refuse decree of delivery in Liverpool Victoria.

In the result, therefore, although I am satisfied that the defenders did misappropriate documents belonging to the pursuers which fell within the categories specified in the following paragraphs of Schedule 1, namely paragraphs 2, 3 (and 4), 5(c) and (d), and 6 (so far as relates to the first defender's 1999 diary), I am not satisfied that it would be appropriate to grant decree in terms of the first conclusion for delivery of those items.

Trade secrets

The pursuers also base their claim for delivery in terms of the first conclusion on the proposition that the defenders, in taking the items in question, were in breach of a duty not to misuse trade secrets (see plea-in-law 3). I shall discuss that ground of action in the context of the claim for damages. I find it unnecessary to address the issue, raised in submissions, as to whether decree of delivery as sought is an appropriate remedy for breach of such a duty. For present purposes, it is sufficient to record that I do not consider that the claim for delivery based on that breach of duty affords the basis for a different view on the appropriateness of granting decree in terms of delivery from the one set out in paragraphs [95] and [96].

The legal basis of the pursuers' claims - Conclusion 2

The pursuers' second conclusion proceeds on the basis that the defenders are in possession of material, in documentary or electronic form, which has been derived by copying from information which belonged to the pursuers, and that possession is in breach of the pursuers' copyright and database rights.

Copyright

The claim based on copyright is set out in article 26 of the condescendence. It is averred that the pursuers own the copyright in the documents itemised in paragraphs 2 to 6 of Schedule 1 to the summons. Although the defenders admit only that the pursuers owned the copyright in those documents "at the time that the documents were created", I do not understand it to be disputed that that copyright subsists. The pursuers aver that the first defender infringed their copyright by storing the information from those documents on "his" laptop, by which I understand them to mean the laptop provided to him by them. They refer to section 17(2) of the Copyright, Designs and Patents Act 1988 ("the 1988 Act"), which extends copying to include storing the work in question in any medium by electronic means. They further aver that they apprehend that the defenders have made copies of the documents. The defenders deny having made copies of the documents. In my opinion, the compilation of the database on the laptop did not constitute infringement of the pursuers' copyright in the audiogram cards and other material on which it was based. That is because, on the view I have taken of the evidence (see paragraph [66] above), the compilation of the database was carried out by the first defender and the staff under his direction in the course of his employment as the pursuers' Scottish regional executive. I am not persuaded that he was acting contrary to instructions or outwith the proper scope of his authority in doing so. In so far, therefore, as copyright material was copied in the compilation of the database, that copying was undertaken by or on behalf of the copyright owner, the pursuers. In my opinion, infringement of the pursuers' copyright in the material contained in the database arose only when, as I have held he probably did, the first defender copied the database onto floppy disks for his own benefit and the benefit of Digital. That copying was, in my opinion, an infringement of the pursuers' copyright. For the reasons which I have already discussed (see paragraph [90] above), while the defenders may well in one way or another have made further copies of parts of the copyright documentary material which they misappropriated, I take the view that the evidence is insufficient to justify a specific finding to that effect.

Although I have held that the defenders have, by copying the Scottish customers and prospects database onto floppy disks for their own purposes, infringed the pursuers' copyright, it does not follow that the pursuers are to that extent entitled to decree of delivery in terms of the second conclusion. The remedy of an order for delivery up of infringing copies depends on the infringing copies being in the copier's possession (section 99(1) of the 1988 Act). The considerations which I have discussed in paragraph [95] above in relation to the first conclusion seem to me to be broadly applicable to the second conclusion as well. In addition, the problem of regulating enforcement of an order under the second conclusion is exacerbated by the fact that there is not extant in the hands of the pursuers or the court any copy of the database by reference to which compliance with the order might be monitored. In these circumstances, I do not consider that it would be appropriate to grant decree in terms of the second conclusion.

Database rights

The claim based on database right is set out in article 27 of the condescendence. In terms of regulation 13(1) of the Copyright and Rights in Databases Regulations 1997 (S.I. 1997 No. 3032) ("the Regulations"), which came into force on 1 January 1998, a property right called a database right subsists, in accordance with Part III of the Regulations, in a database if there has been a substantial investment in obtaining, verifying or presenting the contents of the database. That right is independent of copyright, and can subsist whether of not the database is a copyright work (regulation 13(2)). In terms of regulation 15, the maker of a database is the first owner of database right in it. In terms of regulation 16(1), infringement is constituted if a person, without the consent of the owner of the database right, extracts or re-utilises all or a substantial part of the contents of the database. As restricted in the course of Mr Clancy's submissions, the pursuers' contention is that the items described in paragraphs 2 and 5(b), (d) and (f) of Schedule 1 to the summons are or form part of a database. They also aver that the information copied onto the laptop is a database. They aver that they own the database rights in those databases, and that the defenders have infringed those rights by extracting and re-utilising substantial parts of their contents. The defenders admit that the pursuers owned the database rights in the items mentioned by the pursuers, but deny infringement.

Since I have held that the defenders did not misappropriate cancelled order forms (Schedule 1, paragraph 5(b) - see paragraph [31] above) or TA5s (Schedule 1, paragraph 5(f) - see paragraph [40] above), I hold that there was no infringement of the pursuers' database rights in those items. So far as the CNP cards (Schedule 1, paragraph 2) and the cancelled and Amplivox/Ultratone audiogram cards (Schedule 1, paragraph 5(d)) are concerned, I have held that these were abstracted by the defenders from the pursuers' Glasgow office. That can in my view be regarded as the extraction of a substantial part of a database. I therefore hold that in respect of these items the defenders did infringe the pursuer's database rights. There was evidence, which I accept, of re-utilisation of the Amplivox/Ultratone cards (Mr Sutherland, and the letter to Mr Paton), but I do not consider that it was sufficient to justify the conclusion that there was re-utilisation of "a substantial part" of the contents of the database. I therefore do not find infringement by re-utilisation established in respect of that item. I do not consider that there is sufficiently evidence to justify a specific finding of infringement by re-utilisation in respect of the CNP cards or the cancelled audiograms. The making of the Scottish customer and prospect database on the laptop was not, in my view, an infringement of the pursuers' database rights since, as I have held, that was done in the course of the first defenders' employment with the pursuers. The extraction of that database by downloading it onto floppy disks which the first defender retained did, however, in my opinion constitute infringement. Since the defenders had a variety of sources of information about the pursuers' customers and prospects, I do not consider that there is a sufficient basis in the evidence about approaches to such customers and prospects by Digital for an inference that the defenders infringed by re-utilisation the pursuers' database rights in the laptop database.

Mr Clancy acknowledged that, by virtue of the fact that regulation 23 of the Regulations does not apply section 99 of the 1988 Act in relation to database rights, there is no right to an order for delivery up of a copy of a database or a substantial part of a database made as a result of infringement of a database right. In so far as the infringer of database rights has the primary extracted material in his possession, however, Mr Clancy submitted that decree of delivery was a competent remedy. I accept that that is so, by virtue of regulation 23 of the Regulations and section 96(2) of the 1988 Act. For the reasons discussed above in the context of copyright (see paragraph [100] above), however, I am not persuaded that such a decree should be pronounced in respect of the items extracted in infringement of the pursuers' database rights.

Trade Secrets

Although there are no relative averments, the pursuers' third plea-in-law also seeks to base the claim for delivery made in the second conclusion on breach of a duty not to misuse trade secrets. In that connection, I refer to what I said in paragraph [97] above.

The legal basis of the pursuers' claims - Conclusion 3

The pursuers base their conclusion for damages on three grounds. In their fourth plea-in-law they advance the proposition that they have suffered loss and damage as a result of breach of duty on the part of the first and second defenders, for which they seek to hold the third defenders vicariously liable. In their fifth plea-in-law the pursuers advance the proposition that they have suffered loss and damage as a result of infringement of copyright and database rights on the part of the first and third defenders, and are therefore entitled to damages from them. That plea contains the alternative contention that the pursuers are entitled to an account of the defenders' profits from the infringement. In relation to that alternative contention, I would point out that there is no conclusion for an account of profits.

I can deal briefly with the claim for damages, so far as based on infringement of copyright and database rights. The only infringement of copyright which I have upheld on the evidence is the copying of the Scottish customer and prospect database from the laptop onto floppy disks retained by the first defender. I consider that I am entitled to infer that that was done on behalf of Digital. I therefore hold that the first defender and the third defenders are jointly and severally liable to the pursuers in damages in respect of any loss and damage which the pursuers may prove that they suffered as a result of that infringement.

I have upheld on the evidence the allegation of infringement of database rights in relation to the CNP cards, the cancelled audiogram cards, the Amplivox/Ultratone audiogram cards, and the database downloaded from the laptop onto floppy disks retained by the first defender. I hold that there was infringement by extraction in respect of all of these categories. I hold that infringement by re-utilisation has not been proved in respect of any of the items. The infringement was carried out primarily by the first defender, but again I hold that he did so on Digital's behalf. I therefore hold that the first and third defenders are jointly and severally liable to the pursuers in respect of any loss and damage proved to have been suffered by the pursuers as a result of that infringement of database right.

The pursuers' case of breach of duty is set out in articles 22 to 25 of the condescendence. In article 22 the pursuers aver:

"It was an implied term of the first defender's contract of employment with the pursuers that the first defender would act in good faith. The duties of good faith owed by him included the duty not to misappropriate or misuse trade secrets and other confidential information obtained by him in the course of his employment with the pursuers. The first defender is in breach of that duty in respect that he took and retained possession of the confidential information itemised in Schedules 1 and 2 to this summons."

The defenders admit the implied term contended for, but deny breach of it. In Article 23 the pursuers aver:

"The implied term of the first defender's contract of employment referred to in the preceding Article subsists beyond the termination of his employment with the pursuers in respect of the pursuers' trade secrets. The first defender is in breach of that duty in respect that he has misused those trade secrets by using them to make contact with the pursuer's customers and prospects and by making them available to the second and third defenders for use in the third defenders' business. Those trade secrets have been used by and on behalf of the third defenders as hereinbefore condescended upon."

The defenders admit the subsistence of the implied term contended for beyond the termination of employment, but deny breach of it.

In Article 24 the pursuers make a slightly narrower case against the second defender, in that they do not aver that he misappropriated trade secrets and confidential information. The case against him is set out in the following terms:

"The second defender has a duty not to make use of trade secrets of the pursuers which he knows or ought to know were acquired by the first defender in breach of his contract of employment with the pursuers and in breach of the duties arising therefrom. The first and second defenders have been the shareholders and Directors of the third defenders since its incorporation. They are the persons responsible for the management and operation of the third defenders' business. They work closely together in that regard. The second defender knows or ought to be aware of the use to which the pursuers' trade secrets are being put by and on behalf of the third defenders. Separatim, the second defender has a duty not to misuse the pursuers' trade secrets howsoever they came into his possession. The second defender is in breach of the duties owed by him to the pursuers in respect that he has misused those trade secrets by using them to contact the pursuers' customers and prospects."

Once again the defenders admit the implied term contended for and its subsistence after the termination of employment, but deny that the second defender has breached it.

In Article 25 the pursuers aver:

"The affairs of the third defenders are controlled by the first and second defenders as hereinbefore condescended upon. The knowledge of the first and second defenders anent the pursuers' trade secrets and their knowledge of how those trade secrets were acquired is accordingly shared by the third defenders. In these circumstances the third defenders owed a duty to the pursuers not to make use of the pursuers' trade secrets. The third defenders are in breach of that duty in the circumstances hereinbefore condescended upon. Separatim, the third defenders are vicariously liable for the breaches of duty committed by the first and second defenders as hereinbefore condescended upon."

The defenders admit that the affairs of the third defenders are controlled by the first and second defenders, but deny that the third defenders have made use of the pursuers' trade secrets.

It is also important to note that in answer 15 the defenders make the following admission:

"Admitted that the pursuers' customer lists (including details of customers who had cancelled) together with lists of prospective customers, being persons who had responded to the pursuers' advertisements, comprised trade secrets of the pursuers at the time of the first defender's resignation."

In connection with this aspect of the case, Mr Beynon made reference to Roger Bullivant Ltd v Ellis [1987] ICR 464 and McBryde, The Law of Contract in Scotland, second edition, paragraph 19.130.

In view of the admissions made, the question whether the first defender acted in breach of the duties relied upon seems to me to be a question of fact. In the light of the findings in fact which I have made, I hold that the first defender acted in breach of those duties (a) by misappropriating (i) the CNP cards, (ii) the cancelled audiogram cards, (iii) the Amplivox/Ultratone audiogram cards, (iv) his 1999 diary, (v) the 0800 records for the months of January and February 1999, (vi) a proportion of the coupon responses to the Daily Record advertisement of 9 February 1999 and (vii) the database of Scottish customers and prospects downloaded from the laptop onto floppy disks; (b) by disclosing those trade secrets to Digital, a company set up to operate in competition with the pursuers; and (c) by being party to the use of those trade secrets by Digital for the purpose of soliciting customers and prospects of the pursuers. He is accordingly liable to the pursuers in damages in respect of any loss and damage which they prove that they suffered as a result of those breaches of duty.

The position of the second defender is somewhat different. I have not found that he personally misappropriated any material containing trade secrets. I am satisfied, however, that he was in breach of the duties which he owed to the pursuers in two ways. First, as one of the two directors of Digital, he must in my view be taken to have been aware of the basis on which it was conducting its business, and in particular of the fact that in doing so it was using trade secrets of the pursuers in the form of customer and prospect details misappropriated by the first defender. He thus in my view became a party to that misuse of the pursuers' trade secrets. Secondly, there is evidence in the research carried out by Mrs Drew which shows that the second defender was himself involved in approaches made to customers and prospects of the pursuers. I am therefore of opinion that the second defender is jointly and severally liable, along with the first defender, for any loss and damage that the pursuers prove they have suffered as a result of the misuse by the third defenders of the trade secrets misappropriated by the first defender.

In my view the third defenders must be taken, because they are controlled by the first and second defenders, to be fixed with knowledge of the fact that the pursuers' trade secrets (to the extent indicated in paragraph [112] above) had been misappropriated by the first defender in breach of the duties which he owed to the pursuers during and after his employment with them. In these circumstances, I am of opinion that the third defenders came under a duty owed to the pursuers not to make use of those trade secrets. They have acted in breach of that duty. They are therefore, in my opinion, liable to the pursuers, jointly and severally with the first and second defenders, for any loss and damage that the pursuers may prove that they have suffered as a result of the third defenders' misuse of those trade secrets. I prefer to reserve my opinion on the alternative case against the third defenders based on vicarious liability.

Interlocutor

In order to give effect to the foregoing findings, I shall pronounce an interlocutor to the following effect:

In order to deal with the conclusions for delivery, I shall repel the pursuers' first, second and third pleas-in-law, and assoilzie the defenders in respect of the first and second conclusions.
So far as the damages claim is concerned, I cannot give effect to my findings by sustaining the pursuers' fourth and fifth pleas-in-law at this stage, because I have not heard evidence as to whether the pursuers have suffered loss as a result of the wrongful acts which I have held were committed by the defenders. Under reference to the findings which I have made in paragraphs [106], [107], [112]. [113] and [114] above, I shall allow a proof before answer of the parties' respective averments in relation to the loss allegedly suffered by the pursuers as a result of these wrongful actings on the part of the defenders.
In order to facilitate management of the remaining stage of the case, I shall transfer the action to one of the present commercial judges, and the case will be put out before him By Order in due course.

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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Sietech Hearing v. Borland & Ors [2003] ScotCS 37 (19 February 2003) URL: http://www.bailii.org/scot/cases/ScotCS/2003/37.html Cite as: [2003] ScotCS 37