Springboard Injunctions – the jurisdiction extended?

February 7th, 2012 by Simon Devonshire QC

Haddon-Cave J has just handed down judgment in QBE Management services (UK) Ltd –v- Dymoke & Ors [2012] EWHC 80 (QB), and granted an extended springboard injunction following a fully contested trial.   What does this judgment tell us about the nature and extent of employee’s duties and springboard relief?

Simplifying somewhat, QBE carries on business as a marine insurer.  The first 3 defendants (all senior employees) tendered the resignations in April 2011, with the express intention of joining a new competitive business (D4).   Over the next 3 months, 8 junior employees resigned, also expressing a wish to join D4.   In August, QBE obtained interim injunctions enforcing garden leave obligations and post termination restrictive covenants against Ds 1-3, to expire variously between October 2011 and January 2012, and orders for early disclosure.   That disclosure revealed that Ds 1-3 had been instrumental in setting up D4, had acted as recruiting sergeants for the new business, had solicited QBE’s clients whilst still employed, had abused confidential information, and had concealed their activities from their employer.    In October 2011, QBE obtained a springboard injunction restraining D4’s launch pending a speedy trial.   That trial took place over some 12 days in November 2011.   Judgment was handed down at the end of January 2012.

The disclosure was obviously key in this case.    As the judge observed, Ds 1-3 “did not envisage that many of their candid exchanges would see the light of day.   These contemporaneous documents tell their own story … which accords closely with [QBE’s] case” (para 44).   Their oral testimony simply could not live with the contemporaneous documents (para 46).   They recognised that their new start up would only work if it had “critical mass” – which included “sufficient numbers of experienced and suitably qualified personnel to provide the right standard of service to compete with the two established players ….” (para 55) – and that “it was going to be crucial to recruit impressive underwriting and claims teams in order to have credibility with the right financial backers and vice-versa” (para 56).    Ds 1-3 embarked on a campaign of targeted staff recruitment to this end.   They used only home e mail addresses and pay as you go mobiles (colourfully described as “bat phones”) to keep their activities from the gaze of QBE.   They used head-hunters to disguise their involvement in the recruitment process.

In considering the scope of the employee’s duties, the judge disagreed with the permissive approach taken by Hickinbottom J in Lonmar Global –v- West [2011] IRLR 138, and doubted that any reliance could be placed on the well-worn dictum of Cumming-Bruce LJ in Searle –v- Celltech [1982] FSR 92 (to the effect that there was nothing in the general law to prevent a number of employees deciding to leave in concert) given the way teams moves are generally planned and effected (paras 177-183).   He identified “a tightening in the law” on the obligations of disclosure impose on directors and senior employees to disclose action that if taken will lead to competitive activity and any action of their own as soon as an irrevocable intention to compete is formed (paras 191 & 192).   He did not accept that the non-compete covenants in the contracts of the 8 junior employees could be enforced against them (as they had no access top real confidential information) but this did not matter given the court’s conclusion on springboard relief.

The judge regarded the availability of springboard relief (to grant an injunction to deprive the worng-doer of the fruits of his wrong-doing) as well-established, and available for all breaches (not just breaches of confidence); paras 239-247.   Such an order could only be granted whilst the springboard advantage was still being enjoyed, but he regarded this an as an overwhelming case on the facts, and had enabled D4 to get up and running before the crucial renewals window for some 70% of the marine insurance business in February 2012.   He made a final springboard injunction to prevent D4 from starting up in competition with QBE, expiring 12 months after the resignations of Ds 1-3.

This is a useful judgment for claimants/employers.   It is consistent with the trend of the authorities (‘bucked’ in the Lonmar Global case) tightening the standards of good faith and loyalty expected of an employee.   The judge had no difficulty in concluding that a springboard injunction was available as a final remedy.   Arnold J had expressed some doubts about this in Vestergaard –v- Bestnet [2010] FSR 29, and although this decision was not discussed in the judgment in QBE, Vestergaard is clearly out of step with the flow of authority.   For another recent case adopting the same approach as applied in QBE, see Clear Edge & Anor –v- Elliot & Ors [2011] EWHC 3376 (QB).   In the instant case, the Judge was prepared to make an injunction stopping the operation of the new business at all.   The period of the injunction appears to have been informed by the time it had taken to set up the competitive venture, and by the new business’ need to be up and running before the critical renewals window.

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