The High Court gave its judgment at the end of January in QBE Management Services (UK) Ltd v Dymoke & others [2012] EWHC 80, where it considered an employer’s application for springboard relief to restrain three former employees and their financial backer from commencing a competing business.
The facts
In April 2011 three key employees resigned from their employment with QBE, a marine insurer, and said that they intended to commence a start up business with Pro Insurance Solutions Ltd (Pro). Their resignations were followed by a spate of eight further resignations by QBE employees in the next three months, all of whom expressed an intention to join Pro.
In August 2011, QBE was granted an interim injunction enforcing garden leave obligations and post-termination restrictions against the three more senior employees. It also obtained an order for early disclosure of documents, pending an expedited trial.
In October 2011, QBE was granted a further springboard injunction restraining Pro’s launch, pending the trial. The early disclosure of documents had revealed evidence of the three employees being instrumental in setting up Pro, the solicitation of a number of other employees from QBE for the new business, the solicitation of a number of QBE clients and significant misuse of confidential information. There was also evidence of concealment of these activities from QBE by the three employees whilst they were employed, including a failure to disclose the setting up of a rival business. As a result, it was contended that the defendants had obtained a major springboard advantage for their new venture by reason of months of concealed unlawful conduct and numerous breaches of contract.
The trial took place during November 2012. QBE sought a final injunction preventing further unlawful conduct until the springboard advantage had expired, which it claimed would be June/July 2012, together with enforcement of the various restrictive covenants and damages.
Decision
The High Court granted springboard relief to QBE until 28 April 2012 (12 months from the date of the three employees’ resignations). It also awarded QBE a total of £314,000 in respect of pay rises and bonuses which it had had to pay to retain existing staff, recruitment expenses in filling posts and the cost of employing a temporary claims adjuster.
The High Court found that the defendants had acted unlawfully, including that they had solicited each other and then other key employees to join Pro; they had misused confidential information in order to get financial backing for their new venture; they had solicited QBE’s clients in order to generate future business for Pro; and they had failed to disclose any of their activities to QBE whilst employed, despite their intention to set up a new venture in direct competition with it. As a result the defendants had achieved classic springboard advantages that could not have been achieved but for their unlawful conduct during their employment.
In the circumstances, it was clear that the enforcement of confidentiality and restrictive covenants alone was insufficient to protect QBE and hence the granting of a springboard injunction was appropriate to try to prevent the defendants from making use of their wrongdoing to gain a head start.
Comment
In a lengthy decision, the High Court provided an extensive and useful review of recent authorities on the provision of springboard relief, including the duty to self report or to report the misconduct of others, and the legal principles which apply in ‘team move’ cases. The decision also provides some helpful guidelines on the length of time for which springboard relief may be granted.
This decision is clearly helpful for employers and confirms that the use of springboard relief is well-established and is available for all breaches, not just breaches of confidence.
This case illustrates the significance of documentary evidence to an employer who believes an employee may be leaving to set up in competition. As The Hon Mr Justice Haddon-Cave commented, it was evident the three employees “did not envisage that many of their candid exchanges would see the light of day. These contemporaneous documents tell their own story. It is a story which accords closely with [QBE]’s case.” It was noted “the defendants’ witnesses had no answer… to the version of events that emerged clearly from the contemporaneous documents.”
This case is also a timely reminder to employers to check their contracts of employment and ensure they include appropriate restrictive covenants and confidentiality clauses.
And finally, the answer to our question about Harry Potter and the Pied Piper: both were mentioned in the judgment, along with fantasy football, fruit machines and bat phones!