Dealing With Team Moves And The Scope Of Springboard Injunctions: The McLarens Hong Kong Case

• Published date: 20 May 2020
• Author: Ms Andrea Randall and Felda Yeung
• Subject Matter: Employment and HR, Litigation, Mediation & Arbitration, Contract of Employment, Employment Litigation/ Tribunals, Trials & Appeals & Compensation
• Law Firm: Gall

Setting the Scene

This practice note considers the applicable legal principles in respect of an application for a springboard injunction as well as key takeaways for employers seeking to protect their businesses when key employees depart.

What is a springboard injunction?

A springboard injunction is a type of prohibitive injunction. In general terms, if granted, it prohibits competitive activity by cancelling out any unlawful head start gained as a result of unlawful conduct.

Most commonly, it is applied for where a former employee has gained a head start by misusing confidential information belonging to its former employer.

Springboard injunctions are usually granted for until a specified date, or until trial after a final judgment by the Court.

McLarens case

In McLarens Hong Kong Ltd v Poon Chi Fai Corey [2019] 3 HKLRD 403, the Court considered the scope of an application for a springboard injunction sought by the plaintiff, McLarens ("McLarens") against its nine former employees ("Employees") and their new employer Charles Taylor ("New Employer").

Facts

McLarens and New Employer are both loss adjustor firms.

On 3 March 2019, the Employees terminated their employment contracts by promising to make payment in lieu of notice. The next day, the Employees joined the New Employer.

There is no dispute that there were no post termination restrictive covenants ("PTRs") in the Employees' employment contracts with McLarens. It followed that there was nothing preventing the Employees from working for a new employer, or even a competitor, if they chose to do so.

However, in response, McLarens sought a springboard injunction on the grounds that it alleged that the Employees planned an en masse exodus from McLarens, that the Employees wrongfully obtained vast amount of confidential information and/or trade secrets from McLarens and the New Employer is a party to the conspiracy to injure McLarens.

At the first hearing on 29 March 2019, the Court declined to make injunctive orders against the Employees or the New Employer. The Court determined that the formal Undertakings in relation to the alleged confidential information and/or trade secrets, which were readily offered by the Employees, would be sufficient to ring fence the parties' interests.

By consent, the Undertakings were slightly adjusted on 26 April 2019 which were to last until the substantive hearing on 3 June 2019. Given the expiry of the Undertakings, the Employees and the New Employer offered to give a...