McLarens Hong Kong Ltd v Poon Chi Fai Corey
Court of First Instance
High Court Action No 514 of 2019
Deputy Judge William Wong SC in Chambers
14 June 2019

Springboard Injunctions

In this case, the High Court considered the scope of a springboard injunction application brought by McLarens Hong Kong Limited (“McLarens”).

Material Facts

McLarens was an insurance claims management, loss adjusting and pre-risk and damage surveying services provider and had about 42 full-time employees in its Hong Kong office.

In February 2019, nine of McLarens’ employees (“Employees”) accepted an offer of employment from Charles Taylor PLC (“Charles Taylor”), a competitor of McLarens. On 3 March 2019, the Employees formally resigned by undertaking to make a payment in lieu of notice to effect immediate termination.

McLarens claimed that the Employees had pre-planned their an masse exodus and had wrongfully obtained and used extensive confidential information from McLarens, including client list and files and/or trade secrets, which would have been a breach of their fiduciary and contractual duties; and that Charles Taylor was a party to the conspiracy to injure and was vicariously liable for the Employees’ breach.

Vast quantities of McLarens’ information and documents have been copied and removed amounting to over 200,000 data files.

It was undisputed that the Employees were not bound by any restrictive covenants.

The Hearing

McLarens sought a springboard injunction in respect of these claimed breaches. The injunction was to seek to restrain the Employees for six months from their last date of employment (“Termination Date”). Specifically, the injunction was to restrain them from;

a. being engaged or interested in any capacity in the UK, PRC and Hong Kong in any other “relevant” business;
b. canvassing, soliciting, approaching, dealing with, selling goods, or providing services to;

i) any customer of McLarens and with whom they had dealt to a material extent within 12 months prior to the Termination Date;
ii) any person who was negotiating with McLarens in connection with the “relevant” business and with whom the Employees had dealt in negotiations; and

c. seeking to entice away from the McLarens or otherwise soliciting or interfering with the relationship between McLarens and any person who was a supplier of or an introducer of business to McLarens and with whom they had dealt to a material extent within 12 months prior to the Termination Date

At the hearing, the Employees agreed to give McLarens a modified undertaking, to last until trial or further order of the court. The undertaking was not to use confidential information relating to McLarens’s business or customers which was copied from McLarens’s records; and Charles Taylor submitted that all information and documents had been returned to McLarens or deleted and would not be used.

Applicable legal principles

The Court referred to the case of QBE Management Services (UK) Limited v Dymoke [2012] IRLR 458 in distilling the relevant legal principles. The Court noted that the purpose of a springboard is “to prevent the defendants from taking unfair advantage of the springboard which [the Judge] considered they must have built up by their misuse of the information…[a] springboard relief is not confined to cases where former employees threaten to abuse confidential information acquired during the currency of their employment. It is available to prevent any future or further economic loss to a previous employer caused by former staff members taking an unfair advantage and “unfair start”, of any serious breaches of their contract of employment.

In summary, the aim of a springboard relief should be to restore the parties to the competitive position they would be in but for the defendant’s misconduct, and the length of a springboard should be the length of time it would have taken the wrongdoer to achieve lawfully what he in fact achieved unlawfully.

Ruling

The Court held that the modified undertakings to the Court were sufficient. The Court said that there was an important distinction between breach of the duties of confidentiality and/or fiduciary duties and the use of such confidential information to build a springboard or to gain an unfair advantage.

The Court dismissed the springboard injunction because McLarens had not established the precise nature and period of unfair competitive advantage, nor had they shown that the Employees had in fact used the information to contact and offer their services to McLarens’s clients.

The Court also said that even if there was any unfair advantage, it could only be short term and, given the absence of cogent evidence, could not justify a six month injunction. The Court noted that the list of insurers, brokers and McLarens’ clients are available from publicly accessible websites, and that the Employees could easily go through the public records and identify McLarens’ clients which they have previously served in order to contact and offer them services. The Court said it would take days or possibly weeks to go through this exercise, but not months. The Court went further stating that even if the findings were wrong, a monetary award would be an adequate remedy.

Costs Order

The Employees were awarded 80 percent of the costs of the hearing to be paid by McLarens, on a party to party basis, to be taxed if not agreed.

Takeaway Points

An employer seeking springboard relief must meet the high standard of demonstrating the precise nature and period of unfair competitive advantage, and to be able to swiftly gather evidence of the wrongdoing by the employee and demonstrate the detrimental impact it has caused or may cause to its business.

It is important to note that an employer cannot simply rely on a springboard relief in circumstances where the former employees were not subject to enforceable restrictive covenants. Employers should review their employees’ employment contracts to ensure it contains robust and tightly drafted restrictive covenants for their senior employees or employees who have access to confidential / proprietary information.

An employer should not rely on the courts granting a springboard injunction, as they are not suitable in all cases. Where a former employee is willing to give a reasonable undertaking, it is important to consider whether an injunction is still necessary.

Jurisdictions: 

Legal Director, Lewis Silkin Hong Kong