Read the full judgment text of HCA 603/2005 on BabelCite. This High Court CFI judgment was delivered on 18 May 2005 before Stone J.
Employment law – 'springboard' injunctive relief – mass resignation of brokers from inter-dealer money broker to competitor – whether the equitable 'springboard' (or 'head start') doctrine extends beyond misuse of confidential information to cases of alleged conspiracy to induce breach of employment contracts and resulting 'gross reversal' of market positions – employment contracts – post-termination restraints – enforceability of non-solicitation, non-dealing and non-competition clauses – restraint of trade – 'blue pencil' test – Employment Ordinance (Cap 57) s.7(1) – whether unilateral tender of payment in lieu of notice by employee suffices to terminate employment without employer's acceptance – undertakings in lieu of injunction – costs. The plaintiff, ICAP (Hong Kong) Limited, a major inter-dealer money broker in Hong Kong, sought 'springboard' injunctive relief restraining its competitor BGC from employing 32 brokers and 5 back-office staff who had resigned en masse in March and April 2005. The court (Stone J) held that the 'springboard' doctrine is confined to the field of misuse of confidential information and (arguably) maturing business opportunities, and does not extend to a case of alleged conspiracy to induce breach of employment contracts where no confidential information is involved and no proprietary right over employees exists: the modern authorities (Terrapin, Saltman, Roger Bullivant, PSM International, Universal Thermosensors, Balston, CBT Systems) set their face against such expansion, and the only case supporting the extension (Midas IT Services v Opus Portfolio) was treated as an isolated decision properly classified under the 'maturing business opportunity' subset of the doctrine. The plaintiff had expressly accepted over HK$17 million in payment in lieu of notice and released all but one of the departing brokers from their non-compete restraints before issuing these proceedings, which the court treated as a 'flip flop' that weighed decisively against the exercise of discretion in the plaintiff's favour. The court further held that, even if the doctrine could be extended, a 6-month period of restraint was unjustified given that the contractual non-compete period was only 3 months and could not place the plaintiff in a better position than if the alleged breach had not occurred. As to the post-termination restraints in the employment contracts, the court held that subclauses (a), (b), (c) and (e) (non-solicitation, non-dealing, non-interference) were 'absurdly wide' and unenforceable even on a 'blue pencil' approach, and that clause 13(d) as it applied to the 3rd defendant (Kitty Mak) was also unenforceable because the contractual definition of 'Business' was too wide to permit severance. On the third issue, the court held (following the dissent of Huggins J in Yip Wan-Chiu v Magnificent Industrial [1974] HKLR 183) that the word 'agreeing' in section 7(1) of the Employment Ordinance (Cap 57) does not require mutual consensus, so that unilateral tender of payment in lieu of notice by the employee suffices to terminate the contract, with the support of the Explanatory Memorandum to the 1971 Employment (Amendment) Bill considered under Pepper v Hart principles. Undertakings offered by the defendants in lieu of injunctive relief were accepted, and the plaintiff's application for injunctive relief and relief collateral thereto was refused; costs of both this application and the prior interim application to follow the event, with a short appointment for argument on costs if not agreed.
Legal issues: Whether the 'springboard' doctrine extends beyond confidential information to a competitor gaining a 'head start' through mass recruitment of employees and alleged inducement to breach employment contracts · Enforceability of the post-termination restraints (PTRs) in the departing employees' contracts · Whether unilateral tender of payment in lieu of notice suffices to terminate employment under section 7(1) of the Employment Ordinance, Cap 57
Outcome: Plaintiff's application for injunctive relief (springboard relief and relief based on contractual post-termination restraints) refused; undertakings offered by the defendants accepted by the court in lieu of injunctive relief.
Cited by 2 cases