Springboard injunction granted to prevent damaging misuse of company confidential information

In a judgment dated 17 September 2018 (Seatreiver International Holdings Limited (Claimant/Applicant) v Andrew Daly, AMTD Consultants Limited (Defendants) and Sun-Bay ApS, Jupiter Light ApS, and Henrik Bo-Stieler (Respondents) ([2018] EWHC 2424 (Ch)), the High Court has granted a 12 month springboard injunction against the respondents (who were also intended additional defendants) restraining the respondents from soliciting, contracting with or dealing with defined restricted persons in relation to defined restricted products.

Background

A springboard injunction is designed to prevent a person who has obtained confidential information from using it as a ‘springboard‘ for activities detrimental to the person to whom the confidential information belongs.

The claimants (the claimant, together with proposed additional claimants) and the corporate respondents are major competitors in the illuminated party balloon business and the application for interim injunctive relief related to an existing claim against Mr Daly, the claimant’s former global sales director, alleging breach of contractual post termination restraints and misuse of confidential information. As a result of disclosure given by Mr Daly over the period from late March to late May 2018 it was discovered that Mr Daly had been in contact with the respondents in April, May and early June 2017 offering to provide them with confidential information relating to the claimants and to act as their consultant in undertaking business competitive with the claimants.

The respondents consented to being joined into the proceedings and did not object to interim injunctive relief being ordered against them (in relation to not making use of and delivering up any confidential information which the respondents have), but did object to the springboard injunction.

The court’s decision

In reaching its decision, the court took into account the strength of the evidence and the merits of the parties’ cases. The court found that it could not be disputed that various documentation uploaded by Mr Daly to Dropbox, and made available to the respondents, was confidential information belonging to the claimants (which included product, pricing, company financial and customer information). However, the fundamental issue between the parties was whether or not there was credible evidence that the respondents had used, or intended to use, the confidential information to attack the claimants’ business. In that regard, the court stated that:

“…there is no evidence of any approaches to the claimants’ customers, whether direct retailers or distributors, in 2017 let alone any evidence of the claimants having lost business or failed to secure orders from existing customers…If the respondents had intended to use the claimants’ confidential information to mount an aggressive attack on the claimants’ customers by undercutting price one might have expected that this would have come to the attention of the claimants one way or another well before this application was issued, yet there is no evidence to this effect.”

Despite the court’s conclusion that there was very little hard cogent evidence of actual misuse of the claimants’ confidential information, and noting that the court must always be cautious before granting a springboard injunction in the absence of such evidence, the court was satisfied that the claimants had made out the case for the grant of a springboard injunction lasting for 12 months in respect of eight restricted persons (not all of the 36 restricted persons in respect of whom the injunction was sought by the claimants).

In particular, and taking into account the key principles on springboard injunctions set out in QBE Management Services (UK) Ltd v Dymoke [2012] EWHC 80 and Vestergarard Frandsen A/S v Bestnet Europe Ltd [2009] EWHC 1456 (Ch), the court found that any misuse of the claimants’ confidential information by the respondents would give the respondents a clear and unfair competitive advantage, and that lesser injunctive relief would not provide sufficient protection for the claimants against the risk of the respondents using the confidential information to seek and obtain business from the claimants’ existing customers. Further, the court concluded that damages would not be an adequate remedy in the event of the claimants’ loss of business as a result of the respondents’ misuse of the claimants’ confidential information.

Comment

It is interesting, and perhaps surprising, to note that in circumstances where the court granted a springboard injunction, despite finding there was very little hard cogent evidence of actual misuse of the claimants’ confidential information, the claimants failed to obtain an order for disclosure from the respondents – the court did not think it was in the interests of justice for the respondents to be required to carry out a process similar to an electronic disclosure exercise in advance of the electronic disclosure that would take place during the course of the proceedings, and it was therefore neither necessary nor proportionate to order that an independent information technology expert image and search the respondents’ electronic devices, storage facilities or emails accounts for the claimants’ confidential information.