Mclarens Hong Kong Ltd v. Poon Chi Fai, Corey and Others

HCA 514/2019

[2019] HKCFI 1550

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 514 OF 2019

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Before: Deputy High Court Judge William Wong SC in Chambers

Date of Hearing: 3 June 2019

Date of Decision: 14 June 2019

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DECISION

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APPLICATION

1.This is the plaintiff’s application, by summons dated 26 March 2019 (the “Summons”) for interlocutory injunctions against the 1^st to 9^th defendants for breach of their contractual duties of confidentiality and in the case of the 1^st defendant, for his breach of fiduciary and director’s duties to the plaintiff.  The plaintiff also claims against the 10^th defendant, the 1^st to 9^th defendants’ new employer, for conspiracy to injure and vicarious liabilities for the 1^st to 9^th defendants’ breach of various pleaded duties vis‑à‑vis the plaintiff.

2.The Summons was taken out on 26 March 2019 and first heard by Deputy High Court Judge Keith Yeung SC on 29 March 2019.  The defendants gave a set of undertakings to the court (the “Undertakings”)and the matter was adjourned for substantive hearing before this Court.

MATERIAL FACTS

3.The plaintiff filed its Statement of Claim on 24 May 2019.  From the Statement of Claim, it can be seen that:

(1) The Plaintiff is and was a company incorporated in Hong Kong carrying on the business of insurance claims management, loss adjusting and pre-risk and damage surveying for companies.  It is part of the McLarens group of companies and a wholly owned subsidiary of McLarens Global Limited, a company registered in England and Wales.

(2) The 1^st to 9^th defendants were part of the 42 full-time employees employed by the plaintiff in its Hong Kong office and other than the 6^th defendant, who was the general office manager of the plaintiff, they made up the majority of the plaintiff’s team for conducting business in its Construction and Engineering Division.

4.There is no dispute that there are no restrictive covenants in all of the 1^st to 9^th defendants’ employment contracts with the plaintiff.

5.The 10^th defendant is part of the group of Charles Taylor PLC which provides insurance loss adjusting services in sectors similar to the plaintiff and its group globally and is a competitor of the plaintiff.

6.In or around February 2019, each of the 1^st to 9^th defendants accepted an offer of employment from the 10^th defendant.

7.On 3 March 2019 (a Sunday), each of the 1^st to 9^th defendants attended the plaintiff’s office.

8.At about 5:02 pm of the same day, Mr Russell Henderson (“Mr Henderson”), the plaintiff’s Regional Managing Director – Asia, received a resignation email entitled “Resignation Letters – Corey Poon Alan McConkey James Grima Francis Ching Ivan Li Remus Chan Connie Tsun May Wong Chie Kuwabara” enclosing the resignation letters of the 1^st to 9^th defendants, all of which:

(1) were addressed to the 1^st defendant except that of the 1^st defendant which was addressed to Mr Henderson;

(2) stated that the letter was a “formal notice of the termination of my employment with immediate effect, with payment in lieu of notice”;

(3) stated that the last day of employment with the plaintiff was 3 March 2019; and

(4) stated that “My desk has been cleared and all Company property returned”.

9.Accordingly, the 1^st to 9^th defendants terminated their employment with the plaintiff on 3 March 2019 by undertaking to make payment in lieu of their notice period to the plaintiff.  The 1^st to 9^th defendants duly paid their respective payment in lieu prior to this hearing.

10.The plaintiff’s case is that not only was there a pre-planned en masse exodus from the plaintiff, the 1^st to 9^th defendants have wrongfully obtained vast amount of confidential information and/or trade secrets from the plaintiff and the 10^th defendant is a party to the conspiracy to injure the plaintiff.

11.The pleaded breach of duties by the 1^st to 10^th defendants are set out in paragraphs 56 to 74 of the Statement of Claim which I should not repeat herein save that it is relevant to note the plaintiff’s pleaded loss and damage claims are as follows:

“ 64. As a result of the matters referred to in paragraphs 60 to 64 above,the Plaintiff has suffered loss and damage.

Particulars

(i) The loss of profit on revenues which have been lost to the Plaintiff in whole or part, by the 2^nd to 9^th Defendants’ breaches of contract and/or duties, in using confidential information constituting and/or including trade secrets of the Plaintiff, and generally for the purpose of assisting in the performance of their duties for a competitor of the Plaintiff and/or in diverting such business to such competitor, including but not limited to loss of profit on revenue lost to the Plaintiff in relation to its business with Wills Towers Watson, JLT, Marsh, AWAC, QBE, Generali and China Taiping Macau.

(ii) Full particulars of loss and damage will be served when the full loss is known to the Plaintiff including and with respect to the loss of clients including Willis Towers Watson, JLT, Marsh, AWAC, QBE, Generali and China Taiping Macau.

73. As a result of the matters pleaded in paragraphs 70 to 72 above the Plaintiff has suffered loss and damage.

Particulars

(i) Costs and expenses incurred in mitigating and/or attempting to mitigate the damage or potential damage so caused, include the following costs and expenses:

(a) time costs and opportunity costs arising from the disruptions to the Plaintiff’s business caused by the Team Move En Masse;

(b) operational costs to hire or transfer employees to C&E Division;

(c) fee of the digital forensic expert; and

(d) legal costs.

(ii) The Plaintiff is continuing to incur costs in mitigating and/or attempting to mitigate the damage caused by the matters referred to in paragraphs 70 to 72 above.  Full particulars of the Plaintiff’s loss and damage will be provided in due course.

(iii) The loss of profit on revenues which have been lost to the Plaintiff in whole or part, as a result of the Conspiracy to Injure, including but not limited to loss of profit on revenue lost to the Plaintiff in relation to its business with client companies including Willis Towers Watson, JLT, Marsh, AWAC, QBE, Generali and China Taiping Macau.

(iv) Full particulars of loss and damage will be served when the full loss is known to the Plaintiff including and with respect to the loss of clients including Willis Towers Watson, JLT, Marsh, AWAC, QBE, Generali and China Taiping Macau.

(v) Basing on the following trend of the Plaintiff’s business since the Team Move En Masse that:

(a) since Team Move En Masse, the Plaintiff has been instructed by its clients to transfer a total of 190 individual claim assignments to the 10^th Defendant;

(b) the business received by the C&E Division also reduced significantly from about 25 to 30 case on average per month before the Team Move En Masse to about an average of 6 cases per month afterwards until recently;

(c) to date, the Plaintiff continues to receive instructions from its clients to transfer its files to the 10^th Defendant;

the Plaintiff estimates that it could lose up to 50% of its business the coming financial year which is about HK$10 to 15 million in a normal year without major catastrophe.

(vi) Further or in the alternative the revenues and profits which have flowed and continue to flow to each of any of the Defendants, do so in whole or part by reason of the 1^st to 9^th Defendants’ wrongful removal of the confidential information constituting and/or including trade secrets of the Plaintiff during their employment with the Plaintiff.  The Defendants are therefore liable to account to the Plaintiff such profits arising out of business opportunities that arose by reason of the 1^st to 9^th Defendants’ conduct.”  (emphasis added)

THE UNDERTAKINGS

12.The Undertakings dealt with three broad issues:

(1) First, not to use confidential information relating to the plaintiff’s business or to any of the plaintiff’s customers, as were copied on or before 3 March 2019 from records maintained by the plaintiff in whatever form;

(2) Secondly, to (i) inform the plaintiff of documents in their possession copied from the plaintiff’s records on or before 3 March 2019; (ii) deliver up hard copies of such documents to the Supervising Solicitor; (iii) clone computers, external hard drives and other equipment in which digital copies of such documents were held; (iv) deliver up digital copies of such clones to the Supervising Solicitor; (iv) delete all such digital copies from those computers, external hard drives and other equipment.

(3) Thirdly, to confirm, by affirmation, compliance with the Undertakings.

13.By consent, the Undertakings were slightly adjusted on 26 April 2019.  Mr Lee for the 1^st to 9^th defendants submitted that:

(1) All nine defendants have filed affirmation to confirm that they have duly complied with the Undertakings as adjusted.

(2) Their compliance with the Undertakings has been aided by a third party expert, FTI, who confirmed that each of the defendants has complied with the Undertakings as adjusted. 

14.Mr Wright for the plaintiff submitted that the compliance is not satisfactory.  On 16 May 2019, the plaintiff’s solicitors wrote to complain that “the Reports or the Appendixes appear to show a complete lack of effort in complying with the undertakings given by your clients and the information contained therein is insufficient or incomplete to allow the Plaintiff to properly identify all the confidential information copied by the Relevant Defendants and to ensure their complete deletion.”

15.I agree with Mr Lee for the 1^st to 9^th defendants that in the plaintiff’s expert report prepared by Deloitte on 24 May 2019, there is no complaint that the FTI’s report is deficient and/or adopted the wrong methodology.  There is indeed no evidence to substantiate the allegation that the methodology adopted by FTI is not in accordance with the best practice in the industry.

16.In any event, during the course of oral submissions, it transpired that the plaintiff’s major complaint is that the Undertakings as adjusted only last until the determination of the Summons at the present hearing and the plaintiff would like to have the Undertakings as adjusted extended until trial or further order of the court.  After the morning adjournment, this Court was informed by Mr Carolan for the 10^th defendant and confirmed by Mr Lee for the 1^st to 9^th defendants that the 1^st to 10^th defendants would give a set of modified undertakings to the plaintiff until trial or further order of the Court (the “Modified Undertakings”).

17.Mr Wright for the plaintiff confirmed that the Modified Undertakings were acceptable to the plaintiff.  As a result, the only issue that this Court has to deal with is whether in addition to the Modified Undertakings, springboard injunctions should be granted against the 1^st to 9^th defendants in the following terms:

“ 5. The 1^st to 9^th Defendants and each of them be restrained for a period of 6 months from the date of termination of the 1^st to 9^th Defendants’ employment with the Plaintiff from:

(1) being engaged or interested in any capacity, whether as director,principal, agent, partner, consultant, employee or otherwise in the Prohibited Area in any other business which then carries on the Relevant Business;

(2) canvassing, soliciting, approaching, dealing with, selling goods,or providing services to any Person who was a customer of the Plaintiff and with whom the 1^st to 9^th Defendants had dealt to a material extent at any time within the 12 months prior to the date of termination of the 1^st to 9^th Defendants’ employment with the Plaintiff;

(3) canvassing, soliciting, approaching, dealing with, selling goods or providing services to any Person who at the date of termination of the 1^st to 9^th Defendants’ employment with the Plaintiff was negotiating with the Plaintiff in connection with the Relevant Business and with whom the 1^st to 9^th Defendants had dealt in the course of negotiations;

(4) seeking to entice away from the Plaintiff or otherwise soliciting or interfering with the relationship between the Plaintiff and any Person who was a supplier of or an introducer of business to the Plaintiff and with whom the 1^st to 9^th Defendants had dealt to a material extent at any time within the 12 months prior to at the date of the termination of the 1^st to 9^th Defendants’ employment with the Plaintiff;

Where

‘Person’ means any business concern, person, individual, partnership, company or any other body whatsoever;

‘Relevant Business’ means (a) insurance claims management, loss adjusting, pre-risk and damage surveying, and auditing services for companies and (b) any other business carried on by the Plaintiff at the date of termination of the 1^st to 9^th Defendants’ employment with the Plaintiff in which the 1^st to 9^th Defendants had a material involvement during the last 12 months of his employment with the Plaintiff;

‘Prohibited Area’ means the United Kingdom, China and Hong Kong.

6. Alternatively, the 1^st to 9^th Defendants be restrained for a period of 6 months from the date of termination of the 1^st to 9^th Defendants’employment with the Plaintiff from canvassing, soliciting, approaching, dealing with, selling goods or providing services in any capacity, whether as an employee or through agent or representative, to any Person whose name appears in the confidential information listed in Schedule 2 attached to this Summons.”

( emphasis added)

18.In other words, in addition to the Modified Undertakings, if this Court grants springboard injunctions against the 1^st to 9^th defendants, they will be restrained, without any enforceable restrictive covenants, from engaging in any meaningful employment for a period of six months.  Further,it will mean that, inevitably, they will have to breach their employment contracts with their existing employer, the 10^th defendant.

SPRINGBOARD INJUNCTION

19.I am of the view that the Court has to consider the following five issues in order to determine whether a springboard injunction should be granted:

(1) Whether there was unlawful use of the plaintiff’s confidential information and/or breach of fiduciary duties by the 1^st to 9^th defendants;

(2) Whether by reason of such breaches of confidence and/or fiduciary duties, the defendants have obtained an unfair competitive edge or “head start” over the plaintiff;

(3) Whether the unfair advantage still exists at the date when the springboard injunction is sought and that it will continue to have such effect unless the relief sought is granted;

(4) Whether damages are an adequate remedy to the plaintiff;

(5) Finally, in deciding whether to grant any interlocutory injunction, including a springboard injunction, the court must take whichever course which appears to carry the lower risk of injustice if it should turn out that it was wrong.  In Music Advance Ltd v Incorporated Owners of Argyle Centre Phase I [2010] 2 HKLRD 1041 at 1046 – 1047, Ma J (as he then was) said:

“ At the interlocutory injunction stage, the principal concern of the court is that it might make a wrong decision in the sense that after trial, the party to whom an interlocutory injunction has been granted may lose or the party who has been refused one, may win. The Court will therefore take whichever course appears to carry the lower risk of injustice if it should turn out that it is wrong. This ‘fundamental’ principle is the source of the guidelines that have evolved for the determination of interlocutory injunctions (included are, of course, the American Cyanamid guidelines) and therefore, in the application of any guidelines, sight must not be lost of this principle. See: Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670, 680D–G, in a passage from the judgment of Hoffmann J which was approved by the House of Lords in R v Secretary of State for Transport, ex p Factortame Ltd (No 2) [1991] 1 AC 603 and recently reiterated in the English Court of Appeal decision of Zockoll Group Ltd v Mercury Communications Ltd [1998] FSR 354 (which Mr Au was kind enough to place before me).” (emphasis added)

Applicable legal principles

20.The leading case in this area of the law is QBE Management Services (UK) Ltd v Dymoke & Others [2012] IRLR 458. At §§240 – 247, Haddon-Cave J set out the relevant legal principles as follows:

“ 240. First, where a person has obtained a ‘head start’ as a result of unlawful acts, the court has the power to grant an injunction which restrains the wrongdoer, so as to deprive him of the fruits of his unlawful acts. This is often known as ‘springboard’ relief.

241. Second, the purpose of a ‘springboard’ order as Nourse LJ explained in Roger Bullivant v Ellis [1987] IRLR 491 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 in the card index’ (at p.496). May LJ added that an injunction could be granted depriving defendants of the springboard ‘which ex hypothesi they had unlawfully acquired for themselves by the use of the plaintiffs’ customers’ names in breach of the duty of fidelity’ (at p.497). The Court of Appeal upheld Falconer J’s decision restraining an employee who had taken away a customer card index from entering into any contracts made with customers.

242. Third, ‘springboard’ relief is not confined to cases of breach of confidence. It can be granted in relation to breaches of contractual and fiduciary duties (see Midas IT Services v Opus Portfolio Ltd, unreported Ch D, Blackburne J 21 December 1999, pp.18–19), and flows from a wider principle that the court may grant an injunction to deprive a wrongdoer of the unlawful advantage derived from his wrongdoing. As Openshaw J explained in UBS v Vestra Wealth (supra) at paragraphs 3 and 4:

‘There is some discussion in the authorities as to whether springboard relief is limited to cases where there is a misuse of confidential information. Such a limitation was expressly rejected in Midas IT Services v Opus Portfolio Ltd, an unreported decision of Blackburne J made on 21 December 1999, although it seems to have been accepted by Scott J in Balston Ltd v Headline Filters Ltd [1987] FSR 330 at 340. In the 20 years which have passed since that case, it seems to me that the law has developed; and I see no reason in principle by which it should be so limited.

In my judgment, 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 (or if they are acting in concert with others, of any breach by any of those others). That unfair advantage must still exist at the time that the injunction is sought,and it must be shown that it would continue unless restrained. I accept that injunctions are to protect against and to prevent future and further losses and must not be used merely to punish breaches of contract.’

243.  Fourth, ‘springboard’ relief must, however, be sought and obtained at a time when any unlawful advantage is still being enjoyed by the wrongdoer: Universal Thermosensors v Hibben [1992] 3 All ER 257, [1992] 1 WLR 840, [1992] FSR 361 Nicholls V-C; see also Sun Valley Foods Ltd v Vincent [2000] FSR 825 esp at 834.

244.  Fifth, ‘springboard’ relief should have the aim ‘simply of restoring the parties to the competitive position they each set out to occupy and would have occupied but for the defendant’s misconduct’ (per Sir David Nicholls V-C Universal Thermosensors v Hibben [1992] 1 WLR 840 at 855A).  It is not fair and just if it has a much more far-reaching effect than this, such as driving the defendant out of business (at 855A).

245.  Sixth, ‘springboard’ relief will not be granted where a monetary award would have provided an adequate remedy to the claimant for the wrong done to it (Universal Thermosensors v Hibben [1992] 1 WLR 840 at 855B).

246.  Seventh, ‘springboard’ relief is not intended to punish the defendant for wrongdoing.  It is merely to provide fair and just protection for unlawful harm on an interim basis.  What is fair and just in any particular circumstances will be measured by (i) the effect of the unlawful acts upon the claimant; and (ii) the extent to which the defendant has gained an illegitimate competitive advantage (see Sectrack NV v (1) Satamatics Ltd (2) Jan Leemans [2007] EWHC 3003 (Comm); [2007] All ER (D) 312 (Dec) Flaux J).  The seriousness or egregiousness of the particular breach has no bearing on the period for which the injunction should be granted.  In this regard, it is worth bearing in mind what Flaux J, said at paragraph 68:

‘I agree with Mr Lowenstein that logically, the seriousness of the breach and the egregiousness of the defendants’ conduct cannot have any bearing on the period for which the injunction should be granted—what matters is the effect of the breach of confidence upon the claimant in the sense of the extent to which the first defendant has gained an illegitimate competitive advantage.  In my judgment, Mr Cohen’s submissions seriously underestimate the unfair competitive advantage gained by the defendants from access to the claimant’s ‘customer list’ and ignore, in any event, the impact (if the injunction were lifted) of actual or potential misuse of other confidential information such as volume of business or pricing information.  It is important in that context to have in mind that the claimant maintains in its evidence that all the information said to be confidential remains confidential.’  (Emphasis added.)

247.  Eighth, the burden is on the claimant to spell out the precise nature and period of the competitive advantage.  An ‘ephemeral’ and ‘short-term’ advantage will not be sufficient (per Jonathan Parker J in Sun Valley Foods Ltd v Vincent [2000] FSR 825 esp at 834).”

21.As to the proper length of a springboard injunction to be granted, Haddon-Cave J at §285 said:

“ The principles to be applied by the court in this assessment exercise are, in my view, as follows:

(1) First, the appropriate measure for the length of a springboard injunction is the length of time that it would have taken the wrongdoer to achieve lawfully what he in fact achieved unlawfully, relative to the victim.

(2) Second, it must be emphasised that the exercise is a relative one and any advantage must be measured as such. Wrongful activities may have both a positive and negative effect, ie benefiting the wrongdoer whilst simultaneously harming the victim. Thus, for instance, the unlawful poaching of key staff is likely to advantage the wrongdoing party whilst disadvantaging the victim who has lost key staff and may have to recover lost market ground.

(3) Third, it is relevant to look at the period of time over which the unlawful activities have in fact taken place. The relationship of this period with the length of any springboard relief is, however, kinetic not linear.

(4) Fourth, there may be many different factors at play during the period of unlawful activity materially affecting the advantage gained which may, or may not, obtain in similar assumed circumstances of purely lawful activity. These factors might include, for instance, (i) the advantage of soliciting junior employees whilst still being employed and in positions of power, compared with the trying to recruit as an ex-employee, (ii) the advantage of stealth and secrecy, so that the management are unaware and do not take defensive measures, and (iii) conversely,the advantage sometimes of being able to work speedily and not having to be covert.

(5) Fifth, the nature and length of the ‘springboard’ relief should be fair and just in all the circumstances.” 

22.Mr Carolan for the 10^th defendant referred to Employment Covenants and Confidential Information: Law, Practice and Technique(3^rd ed) by Kate Brearley and Selwyn Bloch QC and relied on the following legal principles:

“ An ex-employer will sometimes seek a springboard injunction to attempt to protect (mere) confidential information (as opposed to trade secrets) when there are no enforceable express covenants in the contract of employment. A springboard injunction will not,however, be granted merely as a substitute relief to assist an ex‑employer who has not troubled to take an express covenant to protect his confidential information.” (§15.39)

“ The whole purpose of the springboard injunction is to cancel the head start obtained by past breaches of confidence. Plainly, if there is no continuation of conduct whereby the respondent continues to enjoy and build on the head start which he has obtained,the case would be one for damages only and not for an injunction. Accordingly (at least in confidential information cases), the true area of application of this type of injunction is where the respondent has committed an initial breach of confidence and continues activities(not amounting in themselves to breaches of confidence) whereby he builds on and gains further benefit from the initial breaches of confidence.” (§15.39)

“ In Rapid Fixings the respondent employees left that company, secretly removing lists of Rapid Fixings’ customers. Kilner Brown J granted a without notice injunction inter alia to restrain the ex-employees from contacting or attempting to contact or do business with any customers named in the lists which Rapid Fixings had recovered in the course of the execution of a search order. Lawton LJ, with whom Brandon and Templeman LJJ agreed, rejected a springboard argument and refused to continue this injunction on the ground that:

● There was no express restrict covenant;

● The court would not restrain the ex-employees from using their memory of the customers;

● Rapid Fixings could not obtain such a wide injunction at trial.

The Court of Appeal accordingly ordered a specific proviso to the effect that the ex-employees would not be enjoined from calling on customers remembered by them or whose names were acquired from other sources. This was consistent with the decision of Hawkins J in Robb v Green, where the form of the injunction granted (at trial) against a former employee, who had during his employment copied a list of customers and their addresses from the employer’s order book for the purpose of using the information for his own use after termination of his employment, was that he be restrained from making use of the information obtained by him by copying or extracting such names and addresses.

Likewise, in Louis v Smellie (1895) 73 LT 226 (also not cited in Bullivant) the Court of Appeal would go no further than grant a (final) injunction restraining the ex-employee, a process server, who had during his employment secretly copied extracts of the employer’s register of agents, from making use of any copies or extracts made during his employment and would not restrain him from dealing after employment with agents whose names he could remember and whose addresses he could find from public directories (per Lindley LJ at page 228)” (§§15.60 – 15.61)

23.In Universal Thermosensors Ltd v Hibben & Others [1992] 1 WLR 840, Sir Donald Nicholls V-C, after a full trial, at pp 850C – 851D and 853B–C said:

“ The applicable legal principles

Save on one point the underlying applicable legal principles were not in dispute. The contracts of employment between the plaintiff and the three individual defendants did not include any provision restricting their activities after their employment ended. So when they left they were free to set up at once a directly competing business in the immediate locality. Further, they were entitled to approach the plaintiff’s customers, and seek and accept orders from them. Still further, they were entitled to use for their own purposes any information they carried in their heads regarding the identity of the plaintiff’s customers, or customer contacts, or the nature of the customers’ product requirements, or the plaintiff’s pricing policies, provided they had acquired the information honestly in the ordinary course of their employment and had not, for instance, deliberately sought to memorise lists of names for the purposes of their own business. What the defendants were not entitled to do was to steal documents belonging to the plaintiff, or to use for their own purposes information, which can sensibly be regarded as confidential information, contained in such documents regarding the plaintiff’s customers or customer contacts or customer requirements or the prices charged. Nor were they entitled to copy such information onto scraps of paper and take these away and then use the information in their own business.

The one point of disagreement on the law concerned a contention by the plaintiff to the effect that once it is shown that the defendants had stolen documents containing confidential information, and that they had used those documents in soliciting orders, there arises an irrebuttable presumption that any business resulting from the orders derives from the wrongful use of the confidential information and the defendants are liable in damages accordingly.  The court will not inquire at all into whether the defendants knew the name of the particular customer or contact anyway.  I am not able to accept a proposition expressed in such comprehensive and rigid terms.  In assessing and awarding damages here the object of the law is to award fair compensation to a plaintiff, for the wrong done to him by a defendant’s misuse of his confidential information.  Whether particular business obtained by a defendant was obtained as a result of misuse by him of a plaintiff’s confidential information is essentially a question of fact in each case.  In seeking to answer that question, the court will inquire into the facts and surrounding circumstances as much in this case as in any other.  In doing so, of course, a court will not take leave of common sense.  It will view with considerable circumspection, even scepticism, a contention by a defendant who has chosen to use a list, that he already carried some of the information in his own head and that looking at the list for any particular name or names was quite superfluous and unnecessary.  Moreover, any doubts and obscurities arising from the evidence are likely to be resolved against the defendant.  So that, in practice,such a defendant will have a difficult row to hoe.  But such an approach by the court is far removed from saying that in no circumstances will the court look further once user of the list is proved.  That would be altogether too sweeping, and it could easily result in a plaintiff being awarded more than fair compensation for the loss suffered by him from the misuse of his confidential information.  I do not understand Nourse L.J. to have said otherwise in Roger Bullivant Ltd. v. Ellis [1987] I.C.R. 464, 475, when he observed that, having made deliberate and unlawful use of the plaintiff’s property, a defendant cannot complain if he finds that the eye of the law is unable to distinguish between the potential customers whom, had he so chosen, he could have contacted lawfully and those whom he could not.”

“ The plaintiff’s justified anger at the thefts must not be permitted to obscure those facts. The plaintiff was vulnerable to competition from these defendants even had there been no theft. I can understand the plaintiff’s wish that the defendants should go out into the market and find customers of their own and leave the plaintiff’s customers alone. But it is now well established that in the absence of appropriate restraint provisions in their contracts, after leaving their employment employees are at liberty to enter the same field of business as their former employer and to ‘target’their former employer’s customers when they set up their new business.”

24.Relevantly, at p 855D–F, Sir Donald Nicholls VC also said:

“ In these circumstances the substance of the matter is that, by misappropriating and misusing confidential information, the defendants sought to save themselves the trouble and expense of making a tedious trawl through directories and having to spend hours on the telephone. In respect of misuse of confidential information which had occurred by July 1990, the commensurate remedy is that the defendants should pay the plaintiff for that which they wrongly took. They should pay compensation for their use of the plaintiff’s property, for the benefit they received. But as to such past misuse, an injunction aimed at preventing the defendants from deriving any future benefit therefrom after July 1990 would not be an appropriate remedy. Such an injunction would unjustly benefit the plaintiff by putting it into a better position as against T.P.L. than if there had been no breach of confidence, and it would drive T.P.L. out of business, in circumstances where a monetary award would provide an adequate remedy to the plaintiff for the wrong done to it.” (emphasis added)

25.Further, at p 858A–C, Sir Donald Nicholls VC insightfully observed:

“ Undoubtedly the defendants’ conduct was outrageous and dishonest. In particular, Mr. Baldock and Mrs. Lawrence stole documents from the plaintiff while continuing to draw pay; and Mrs. Hibben instigated or encouraged the thefts, and in her evidence to me was not frank. Nevertheless, I must keep in mind that in this action I am concerned, so far as this can now be done, to protect the plaintiff’s property and rights and to assess fair compensation for loss suffered. Punishment of the defendants is not my function. If the defendants have suffered material loss by reason of excessive width in the terms of the injunction sought and obtained by the plaintiff in July 1990, in my view they are entitled to look to the plaintiff for damages pursuant to its undertaking. Plaintiffs, and those who advise them, know or ought to know that there is a risk in obtaining interlocutory injunctive relief: the risk is that the plaintiff may have to pay compensation to the defendant if it turns out at the trial that, having regard to the facts and law as established at the trial, the effect of the injunction was to restrain a defendant from activities it ought to have been at liberty to pursue.”

ANALYSIS

26.Mr Wright for the plaintiff submitted that the confidential information copied by the defendants included client lists as well as list of files and projects being managed and handled for those clients.  There is an irresistible inference that the defendants have used the client lists,  other trade secrets as to ongoing client files, and detailed client claims handling procedures, which they had taken with them when they left the plaintiff’s employment, for the purposes of contacting and offering their services to the plaintiff’s clients in a seamless manner.  The defendants accordingly obtained an unfair advantage by the misuse of the plaintiff’s trade secrets.

27.Mr Wright also submitted that the duty of fidelity owed by the 1^st to 9^th defendants required them to inform the plaintiff about the actions of other employees which were detrimental to the plaintiff’s interests.  The unlawful conduct of the 1^st to 9^th defendants therefore included, in addition to the misuse of confidential information and/or trade secrets, the solicitation of other employees and a complete failure to disclose any of their activities to the plaintiff.  Mr Wright submitted that from the moment that they were each approached and invited to leave the plaintiff en masse to join the 10^th defendant, the 1^st to 9^th defendants were each obliged to inform the plaintiff of the matters which were detrimental to the plaintiff’s interests.  The breach by the 1^st to 9^th defendants of their fiduciary and contractual duties is an additional ground for the grant of springboard injunctions against them .

28.I fully understand the plaintiff’s anger with the sudden en masse exodus of the 1^st to 9^th defendants to its competitor, the 10^th defendant.  In particular, there is a strong prima facie case, that some of the defendants,in particular, the 1^st, 3^rd, 6^th, 8^th and 9^th defendants were guilty of misappropriation of significant amount of information and documents from the plaintiff.

29.Although, Mr Lee for the 1^st to 9^th defendants submitted that the 1^st to 9^th defendants are not subjected to any duty of confidentiality and most of the documents obtained by the 1^st to 9^th defendants were not confidential in nature or trade secrets, for the purpose of this interlocutory hearing, I am satisfied that the plaintiff has established that there are serious issues to be tried as to whether the 1^st to 9^th defendants are subjected to contractual duties of fidelity as well as contractual and equitable duties of confidentiality.

30.From FTI’s findings and the 1^st to 9^th defendants’ own evidence and disclosure, it is shown that the 1^st, 2^nd, 3^rd, 5^th, 6^th, 8^th and 9^th defendants have copied and removed vast quantities of the plaintiff’s information and documents.  In particular, the number of the plaintiff’s documents found to be in the possession, custody or power of the 1^st, 3^rd, 6^th, 8^th and 9^th defendants are as follows:

(1)	1st defendant:	967 documents;
(2)	3rd defendant:	10,540 documents;
(3)	6th defendant:	105,598 documents;
(4)	8th defendant:	85,672 documents;
(5)	9th defendant:	4,019 documents.

31.From the existing evidence, it appears that the 1^st to 9^th defendants have taken away with them when they left the plaintiff’s employment an extraordinarily wide range and volume of documents in electronic form amounting to over 200,000 date files.

32.In the case of the 1^st Defendant, for example, he took away with him a document entitled HK FY20 Budget.xlsx.  Mr Wright submitted that this document contained information which includes highly protected personal data relating to each loss adjuster employee of the plaintiff.  The information relating to each of the loss adjuster employees includes their individual revenue contribution, their individual remuneration and their individual bonus amounts.  This document is highly confidential.  The 1^st defendant specifically sought and requested Mr Stephen Raper of the plaintiff to provide him with this document and information on 2 March 2019, which was the day before his resignation on 3 March 2019.

33.The 3^rd and 6^th defendants have also copied a large number of documents which were unrelated to their duties.  Though, it is fair to say that the documents copied by the 4^th and 7^th defendants are not confidential in nature and Mr Wright did not contend otherwise.  What Mr Wright contended was that in the present case, the only possible inference to be drawn is that at least the 1^st, 3^rd and 6^th defendants acted in an organized and planned manner to copy the plaintiff’s documents which contained the plaintiff’s trade secrets for the purpose of their own gain in anticipation of their employment with the 10^th defendant.

34.In my judgment, the plaintiff has made out a good case to restrain the 1^st to 9^th defendants until trial or further order from making use of, disposing of or dealing with the confidential information of the plaintiff,including those contained in electronic form.  I can see that given the past conduct of the 1^st to 9^th Defendants, the plaintiff has legitimate concerns that there is a real risk of further misuse of its confidential information before trial.  Hence, the interim protection has to be extended.  Mr Lee for the 1^st to 9^th defendants and Mr Carolan for the 10^th defendants have on behalf of all the defendants duly given the Modified Undertakings to the Court.  The Modified Undertakings are as good as an interim injunction.  Indeed, Mr Carolan for the 10^th defendant submitted that all the information and documents have been returned or deleted and there is no intention to use any of the plaintiff’s information or documents.

35.However, a springboard injunction is a different matter.  Having carefully considered the parties’ submissions, in my judgment, no springboard injunction should be granted against the 1^st to 9^th defendants.

36.First, there is 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 burden is on the plaintiff to spell out with precision what and how its confidential information was deployed to build up such a springboard, the precise nature of the springboard and period of competitive advantage.

37.The plaintiff must prove that there is a causal link between the misuse of its confidential information and the building up of a springboard.

38.Further, an ‘ephemeral’ and ‘short-term’ advantage will not be sufficient.

39.Mr Wright for the plaintiff, understandably, submitted that there is an irresistible inference that the defendants used the client lists which they had taken with them when they left the plaintiff’s employment,  other trade secrets as to ongoing client files and detailed client claims handling procedures, for the purposes of contacting and offering their services to the plaintiff’s clients.  As such, the defendants obtained an unfair advantage.  I agree that the 1^st to 9^th defendants obtained the plaintiff’s documents for a purpose and it is very likely that their intention is to use the information for their own benefits.

40.However, it is a different issue as to whether they indeed used the information and/or whether they needed to use the information for the purposes of contacting and offering their services to the plaintiff’s clients.  There is considerable force in Mr Lee and Mr Carolan’s submission that lists of insurers, brokers and indeed the plaintiff’s clients are available from publicly accessible websites.  The 1^st to 9^th defendants could easily go through the lists from public records and identify the plaintiff’s clients which they have previously served in order to contact and offer them services. I agree that it will take time for the 1^st to 9^th defendants to compile such lists from public records.  It may take days or weeks, but in my view, certainly not months.

41.As to ongoing client files and client claims handling procedures, it is not at all clear to this Court how these information help to build a springboard for the defendants.  From the evidence, it appears that what happened was that the 1^st to 9^th defendants contacted the clients whom they have previously served and those clients then directed the plaintiff to transfer their case files to the 10^th defendant for further handling.  This is akin to a solicitor who leaves firm A to work for firm B and with consent of his or her clients, brings along with him or her case files that he or she were handling to the new firm.  In the absence of an enforceable restrictive covenant, there is no legitimate basis to restrain him or her from working as a solicitor for any period of time.

42.It was not explained to this Court, whether by evidence or submissions, how ongoing client files and detailed client claims handling procedures would help to build a springboard.  It will not surprise this Court that some of the defendants are very familiar with client claims handling procedures. As far as ongoing client files are concerned, it is not clear why it would be difficult for the defendants to acquire the same from their ongoing clients. Indeed, many ongoing clients had no difficulties in simply directing the plaintiff to transfer their ongoing files to the 10^th defendant.

43.Mr Carolan for the 10^th defendant submitted that public announcements were made on 4 March 2019 that the 1^st to 9^th defendants joined the 10^th defendant.  The commercial reality is that customers, including the plaintiff’s clients knew and/or ought to have known that the 1^st to 9^th defendants joined the 10^th defendant and it is entirely the plaintiff’s customers’ commercial decision as to whether they would stay with the plaintiff or they would move their files to the 10^th defendant.  The 1^st to 9^th defendants are entitled to persuade the plaintiff’s clients to move their case files to the 10^th defendant in the absence of a restrictive covenant.  I agree.

44.Further, Mr Wright submitted that there is a breach of the duty to inform the plaintiff of the 1^st to 9^th defendants’ en masse exodus from the plaintiff.  By failing to do that, the plaintiff was disadvantaged in not being able to make proper preparation for such en masse exodus, including being deprived of the opportunity to persuade the 2^nd to 9^th defendants to stay with the plaintiff.

45.However, as a matter of practical and commercial reality, there is nothing to prevent the 1^st defendant from exiting the plaintiff on 3 March 2019 and for the 2^nd to 9^th defendants from leaving the plaintiff on 4 March 2019 or a week or a month thereafter.  Given the fact that the 1^st to 9^th defendants were entitled to terminate their employment contracts with the plaintiff by serving a proper notice and, in particular, in the absence of any enforceable restrictive covenants from soliciting, the ease which the plaintiff’s employees could leave the plaintiff to join the 10^th defendant, I am not persuaded that the plaintiff has discharged its burden of proof that the defendants have built a springboard by reason of the failure to inform the plaintiff of the en masse exodus.

46.In any event, even if there was any unfair advantage, such advantage can only be an ‘ephemeral’ and ‘short-term’ one and cannot justify a six-month injunction.  The plaintiff has not shown with cogent evidence why a period of six months is justified.

47.In the circumstances, on balance, in my judgment, the plaintiff has not discharged its burden to spell out the precise nature and period of competitive advantage and hence no springboard injunction should be granted.

48.Secondly, even if I am wrong on the above analysis, there is no evidence that any unlawful advantage is still being enjoyed by the 1^st to 9^th defendants.  Mr Carolan submitted that all of the plaintiff’s information and documents have been returned and/or deleted.  The plaintiff also has the protection and benefit of the Modified Undertakings.

49.Springboard injunctions ought only be granted in cases of continuing misuse of confidential information.  There is no evidence of continuing misuse of confidential information.  Insofar as Mr Wright’s submission that the 1^st to 9^th defendants have memorised some of the confidential information, as a matter of law, the 1^st to 9^th defendants cannot be restrained from using what they have remembered or learnt in the course of their employment with the plaintiff in their new jobs with the 10^th defendant.

50.Thirdly, even if I am wrong on the first two points, I am of the firm view that monetary award would provide an adequate remedy to the plaintiff for the wrongs done to it.  The plaintiff indeed pleaded an estimate of its loss and damage in the region of “HK$10 to 15 million in a normal year without major catastrophe.”  (See paragraph 73(v) of the Statement of Claim.)  

51.It might well be in the best interest of the plaintiff to allow the 1^st to 9^th defendants to continue to work for the 10^th defendants because if the plaintiff’s case were proved to be right at trial, it could well subject the defendants to account for the profits from their wrongs including the profits they made in the six-month period that it asks for at this hearing.

52.Mr Wright submitted that the plaintiff is not confident that the 1^st to 9^th defendants are good for its damages claims.  However, it is clear from the evidence that the 1^st defendant earned substantial income during his employment with the plaintiff.  Further, there is also no concern that the 10^th defendant would not be good for any damages claim.  In paragraph 67 of its Statement of Claim, the plaintiff pleaded that “the 10^th Defendant is liable as the principal for the 1^st to 9^th Defendants’ breach of their duties owed to the Plaintiff whilst being employed by the Plaintiff and prior to their commencement of employment with it” and “the 10^th Defendant is vicariously liable for the above acts of the 1^st to 9^th Defendants as their employer”. 

53.In my judgment, damages are an adequate remedy in the present case and hence it is not appropriate to grant any springboard relief.

54.Fourthly, in my judgment, on the facts of the present case, the course which appears to carry the lower risk of injustice is not to grant springboard injunctions.  The plaintiff’s interests are protected by the Modified Undertakings and the ability to seek an account for profits and/or damages if it succeeds at trial.  However, if springboard injunctions are wrongly granted, the 1^st to 9^th defendants would, in effect, be put out of jobs for a period of six months.  It is a very serious matter to restrain a citizen from deploying his or her skills to make a living.  I also bear in mind that the seriousness or egregiousness of the particular breach has no bearing on the period for which a springboard injunction should be granted.

55.Fifthly, it is of importance that there is no restrictive covenant in the present case and a springboard injunction will not be granted as a substitute to assist an ex-employer who has not troubled to take an express covenant to protect his confidential information.

56.On the facts of the present case, I specifically bear in mind that the plaintiff cannot be given an advantage which it otherwise would not have if the 1^st to 9^th defendants had not committed any wrong.  The 1^st to 9^th defendants are entitled to terminate their employment contracts with the plaintiff and work for the 10^th defendant without using any of the plaintiff’s confidential information.  They are entitled to deploy the skills they have mastered and knowledge learned to make a living.  I am of the view that to grant springboard injunctions against the 1^st to 9^th defendants could well give the plaintiff an advantage which it otherwise would not have.

57.Finally, I agree with Mr Carolan that paragraph 5 of the Summons in its current form is too wide and may not be enforceable. For example, the Prohibited Area includes United Kingdom, China and Hong Kong, but the 1^st to 9^th defendants were employed to work in the plaintiff’s Hong Kong office.

58.For the sake of completeness, I also note Mr Carolan’s submission that as Mr Panes affirmed that the plaintiff is not really in a position to compete in the market, there is no point in granting any springboard injunction against the 1^st to 9^th defendants.  Mr Wright responded by submitting that the plaintiff has recruited new employees and is now in a position to compete.  Mr Carolan is right that Mr Wright cannot give evidence from the Bar table. However, I am happy to accept as a matter of commercial reality, the plaintiff will be able to recruit new employees to compete with the 10^th defendant and other players in the market.  Nevertheless, this does not affect my judgment that in all the circumstances of the present case, no springboard injunction should be granted.  

59.For the reasons stated above, the plaintiff’s application for springboard injunctions against the 1^st to 9^th defendants is dismissed.

DISPOSITION

60.I make an order that upon the defendants’ giving of the Modified Undertakings to the Court until trial or further order of the Court, the Summons is hereby dismissed.

61.As for costs, I make a costs order nisi, that:

(1) The costs of the Summons be costs in the cause.

(2) The defendants are entitled to have 80% of the costs of the hearing to be paid by the plaintiff, on a party to party basis, to be taxed if not agreed.   

62.I make the above costs order because whilst the defendants are successful in resisting the application for springboard injunctions, they have also offered the Modified Undertakings to the Court which is as good as an interim injunction.  Further, most of the affirmation evidence filed could well be deployed for the trial in this action.

63.The above costs order nisi will be made absolute within 14 days from the date hereof unless the parties take out an application to vary the same within the 14-day period.

64.Finally, it remains for me to thank Mr Wright for the plaintiff, Mr Lee for the 1^st to 9^th defendants and Mr Carolan for the 10^th defendant for the helpful assistance they rendered to this Court.

Mr Colin Wright, instructed by Tanner De Witt, for the plaintiff

Mr Thomas Lee, instructed by Gall, for the 1^st to 9^th defendants

Mr Paul Carolan, instructed by Hugill & Ip, for the 10^th defendant