Icap (Hong Kong) Ltd v. Bgc Securities (Hong Kong) Llc and Others

HCA 603/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.603 OF 2005

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BETWEEN

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Before : Hon Stone J in Chambers (as from the afternoon of 27 April continued in open court)

Dates of Hearing : 27-29 April 2005

Date of Judgment : 18 May 2005

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J U D G M E N T

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The application

1.This is an application for that which is popularly referred to as ‘springboard’ injunctive relief, alternatively for an injunction based upon breach, or threatened breach, of employees’ contractual post-termination restraints.

2.The inter partes summons before the court, dated 6 April 2005, has been issued by the plaintiff herein, a corporate money-broker of substantial size and reputation in Hong Kong.

3.There are no less than 39 defendants to this action and to this application.

4.The 1^st and 2^nd defendants, BGC Securities and BGC Capital Markets, are part of the BGC Group which I gather has been ‘spun off’ from the Cantor Fitzgerald organization; these companies also conduct what is known as ‘inter-dealer broking’, albeit currently upon a small basis than the plaintiff.

5.It is the efforts of BGC to become a bigger player in the Hong Kong money-broking market, via the recruitment of brokers and associated employees hitherto employed by the plaintiff, which provides the subject-matter of this case.

6.The 3^rd and 4^th defendants, Kitty Mak and Dominica Li, had been relatively senior brokers within the plaintiff’s Hong Kong organization; they were no more than employees, however, and at no stage were directors of the plaintiff.

7.The 5^th to 39^th defendants are all ex-employees of the plaintiff.  They fall into two categories.

8.The 5^th to 34^th defendants are money brokers of differing types, who, prior to their departure from BGC, together made up teams within the various broking desks of the plaintiff.

9.The 35^th to 39^th defendants are not brokers as such.  Within the plaintiff’s organization they formed part of that which, for convenience of reference, may be termed ‘back-room settlement staff’, a phrase employed by way not of dimunition but simply to differentiate them from their colleagues who had participated in the actual money broking transactions with their corporate client counterparts.

10.These, then, are the parties to litigation, which, since the issue of the writ herein on 6 April 2005 has been the source of a significant amount of legal attention, the culmination of which has been a three day hearing of this application, of which this is the reserved judgment.

11.I should at this stage sketch in some of the detail of events giving rise to this dispute.

The background facts

12.There is considerable legal argument in this case, and some salient disputes of fact.  However, much of the broad framework of that which occurred is common ground.

13.On 22 March 2005 33 employees of the plaintiff resigned en masse and tendered payment to the plaintiff in lieu of notice.  All were brokers.

14.The total sum tendered as such payment in lieu was in excess of HK$17 million.  This sum was accepted by the plaintiff.

15.On the same day, the solicitors on behalf of BGC, the 1^st and 2^nd defendants, wrote to the plaintiff, ICAP HK, and indicated that at least “several” of those employees had left “with a view to taking up employment with [BGC] when legally permitted to do so”.  The choice of the term ‘several’ strikes me as mildly disingenuous; there never has been any question in this case but that all the departing employees from ICAP were headed for the perceived greener pastures of employment with BGC.

16.In any event the original 33 soon became 32.  One of the brokers who had walked out a day earlier clearly changed his view that this had represented a good career move, because on 23 March 2005 Mr Louis Chui returned to the ICAP HK fold.

17.Mr Chui is significant in this case, because it is his affidavit evidence of the events leading up to the mass walk-out that has provided a factual cornerstone underpinning the plaintiff’s present application for injunctive relief.

18.On 26 March 2005 the solicitors for the 32 departed brokers indicated to the solicitors for the plaintiff that their clients wished “to commence employment with their new employer as soon as they can validly do so”.

19.Three days later, on 29 March 2005, the solicitors for the plaintiff enquired whether it was the intention of the employees who had departed to commence work immediately, and if so with which employer; on the following day this request received the answer that these employees sought the consent of ICAP HK to be released from the post termination non-compete restraints because they wished to commence employment with the BGC Group as soon as they validly could do so.

20.On 30 March 2005, Messrs Deacons confirmed on behalf of ICAP HK the plaintiff’s agreement to the termination of the employment of each of the 32 employees.

21.This was followed on 31 March 2005 by a further letter from Deacons to the effect that, with one exception, ICAP HK consented to the release of the former employees from the contractual non-competition post-termination restraint to which many of such employees (albeit not all) were subject.  There was no release from other contractual categories of post-termination restraint.

22.On 1 April 2005 a second, far smaller tranche of employees resigned from ICAP HK.  These were the 35^th to 39^th defendants, whom, as earlier noted, were back-office staff mainly concerned with the settlement of transactions.

23.Monies were tendered by this second group as payment in lieu of notice, but, unlike the position in terms of the departing brokers, such sum to-date apparently has not been accepted by the plaintiff, and there thus remains an issue of whether the tender, as opposed to the acceptance of such monies, is sufficient to terminate the employment of these five staff.

24.Thereafter inter-solicitor correspondence continued until 6 April 2005.  However, after business hours on that date ICAP HK sent a writ to the defendants’ solicitors, together with an application for urgent injunctive relief, which application was returnable on 8 April 2005.

25.The relief sought in the writ is extensive, and pleads a variety of remedies arising from that which is alleged to have been a conspiracy between the corporate 1^st and 2^nd defendants and the 3^rd and 4^th defendants to induce the remaining 35 defendants to breach their contracts with ICAP HK.  In this regard damages, equitable compensation, an account of profits and declarations variously are sought.

26.Injunctive relief as pleaded in the writ is confined to the 1^st and 2^nd defendants, paragraph 4 thereof seeking injunctions restraining those defendants from (a) inducing remaining employees of the plaintiff from breaching their contracts of employment, (b) inducing former employees of the plaintiff from breaching post-termination obligations owed to the plaintiff, and (c) from making use of information provided by former employees of the plaintiff in breach of obligations owed to the plaintiff.

27.No reference is made in the writ to the ‘springboard’ injunctive relief with which the present application primarily is concerned.

Prior proceedings

28.This matter first came before Suffiad J, the designated ‘summons judge’, at 10 am on 8 April 2005, at which stage an application was made either for abridgement of time or, more relevantly, for the application for injunctive relief to be heard ex parte on notice.

29.The learned judge took the view that urgency had not been made out, and adjourned the summons for directions to the summons day following, that is, 15 April 2005, for directions, although he acknowledged that if considered appropriate the plaintiff at that stage could renew its application for interim relief.

30.At this stage the plaintiff’s evidence consisted of one affidavit from Mr Clark, the plaintiff’s solicitor, and one affidavit from Mr Louis Chui, whom, it will be recalled, initially had defected to BGC only to return to ICAP HK the following day.  Both such affidavits were dated 6 April 2005.

31.On 12 April 2005 the plaintiff served a second affidavit of Mr Clark, supplementing the earlier evidence and amplifying the more recent departure of the 5 back-office employees.

32.This then was the state of play when this case came before this court, sitting in the capacity of ‘summons judge’, on Friday, 15 April 2005.

33.That which thereafter occurred is a matter of record.  Mr Huggins SC, appearing on behalf of the plaintiff, renewed his client’s application for urgent interim injunctive relief pending the substantive hearing of the inter partes summons.

34.This application was entertained upon that day, judgment on this urgent interim application being delivered on Tuesday, 19 April 2005.

35.This judgment speaks for itself.  Suffice it to say that for the reasons therein advanced the plaintiff’s application for urgent interim relief was refused, and directions were made for the filing of evidence and the hearing of the ‘main event’, that is the inter partes summons, some eight days later.

The issues for decision

36.Essentially this case is subdivided into three parts, although these elements are not of equal significance.

37.There is no doubt that the dominant theme, as now addressed by the plaintiff, is that of ‘springboard’ relief.

38.The second consideration may conveniently be placed under the head of the enforceability, or otherwise, of those post-termination restraints which were not waived and which existed within the contracts of certain of the departing employees.

39.The third main point, which diminished substantially in import as argument in this case wore on, involves a consideration of the effect of section 7(1) of the Employment Ordinance, Cap 57, more particularly whether there can be termination of employment by the mere tender by the employee (as opposed to the acceptance by the employer) of payment in lieu of notice.

The approach of the court

40.Before considering these issues, however, it is worth highlighting the approach to be adopted by the court in a situation wherein, as in the present case, the application for injunctive relief is tantamount to final relief.

41.All parties agree that in terms of broad approach that Cyanamid principles apply, involving consideration of the traditional three questions, namely, whether there is a serious question to be tried, the adequacy of damages (and, if not, the adequacy of the cross undertaking), and the balance of convenience. 

42.However, there is an additional and important gloss in this instance.  Given that the period of interlocutory injunctive relief inevitably will expire prior to trial, as must be the situation in the present instance, wherein the period for which ‘springboard’ relief is sought is but 6 months, the court must also do its best to assess the prospects of ICAP HK of subsequently justifying the grant of such relief at trial.  This, for example, was the approach of the court in Sun Valley Foods v. Vincent [2000] FSR 825, at 832-833.

43.I turn, therefore, to consider the three distinct legal issues raised by the present facts.

(i)  ‘Springboard’ relief

44.The concept of the ‘springboard’, sometimes known as the ‘head start’ doctrine, arose in the area of the misuse of confidential information, the basic idea being “to erase any artificial advantage a confidant might derive from being privy to confidential information which later becomes public”: see Hull, Commercial Secrecy: Law and Practice (1998), at para 3.42, page 63.

45.As Hull points out, the term ‘springboard’ appears first to have been coined by Roxburgh J in Terrapin Ltd v. Builders Supply Co. (Hayes) Ltd, [1967] RPC 375, a 1960 decision upheld by the Court of Appeal later that year (see [1960] RPC 128), but not in itself reported until 1967.  The facts of that case do not greatly matter: the plaintiff was a designer of portable buildings which the defendant was licensed to manufacture, and in the course of that commercial relationship the plaintiff disclosed valuable ‘know how’.  The relationship ended, and the defendant started to manufacture its own buildings, using the information earlier disclosed to it.  Roxburgh J granted an interlocutory injunction to prevent the defendant from using the plaintiff’s confidential information, and in his judgment stated (at 391) :

“As I understand it, the essence of this branch of the law, whatever the origin of it may be, is that a person who has obtained information in confidence is not allowed to use it as a springboard for activities detrimental to the person who made the confidential communication, and springboard it remains even when all the features have been published, or can be ascertained by actual inspection by any member of the public … It is, in my view, inherent in the principle upon which [Saltman v Campbell] rests that the possessor of such information must be placed under a special disability in the field of competition in order to ensure that he does not get an unfair start.”

46.Put thus, this represented an extension of the existing confidential information principle which had served to protect such information which was not in the public domain: see Lord Greene MR in Saltman Engineering Co. Ltd v. Campbell Engineering Co. Ltd, [1948] 65 RPC 203,although, as Hull observes, whether the fact of such extension then was appreciated is moot.

47.In any event, the policy underpinning the concept clearly is an attempt, in appropriate circumstances, to create some form of level playing field.  As Pritchard J expressed it in Aquaculture Corporation v. New Zealand Green Mussel Co. Ltd, [1985] 5 IPR 353, at 383 :

“One can only conclude that there is a principle, founded on a concept of fairness, that once a person has received information in confidence he is not free, if and when the information becomes fully available public knowledge, to exploit any advantage he may have gained over other members of the public by reason of having advance knowledge of the former “secret”; but so long as he takes no advantage, derived solely from having had information in advance of the general public, the confidant is free to use the information in the same way as any other member of the public … Any unfair advantage of this sort is regarded as being of a temporal nature … it gives the confidant a head start.”

48.It is precisely the temporal nature of the advantage that forms the key to this form of relief.  The ‘springboard’ which equity forbids in terms of the use of such information is not, and cannot be, of unlimited duration, and precisely where the line is to be drawn in the competitive sand must be a question of fact in each case.

49.The essential question to be answered is thus : how long in the circumstances of any particular case would it take an uninformed competitor to analyse and to take advantage of the information now in the public domain, but earlier disclosed to a defendant who is seeking to make commercial hay with his ‘head start’?

50.As Hull suggests (op cit, at para 3.44, page 64) to-date the solution to the problem has been twofold: in some cases to estimate the advantage in terms of time, with an injunction tailored to restrain a defendant for a period certain from gaining such ‘head start’, and in others, wherein the difficulty of estimating the erstwhile confidant’s advantage has persuaded the court simply to assess damages in favour of the discloser; see, for example, the observation of Lord Denning MR in Seager v. Copydex [1967] 3 All E R 415, at 417, wherein he noted that in terms of the practical application of the springboard doctrine that the confidant “should not get a start over others by using the information which he received in confidence.  At any rate, he should not get a start without paying for it”.

51.Absent restating the background to, and the basic principle underpinning, the ‘springboard’ doctrine, it is not easy to place into context the plaintiff’s case as it has developed in this case.  The earlier judgment of this court, to which I have earlier referred, and which was delivered consequent upon the plaintiff’s application for urgent interim relief, observed that the current application was being advanced “on the cusp of the existing jurisprudence”.

52.This is because the plaintiff is not in this case asserting the wrongful use of confidential information.  Indeed, demonstrably this is not a confidential information case, and notwithstanding a brief attempt to inject some such element at the conclusion Mr Clark’s second affidavit, Mr Huggins SC, appearing for the plaintiff, specifically has eschewed any reliance upon the doctrines of breach of confidence or confidential information.

53.That which the plaintiff says in this case is that the defendant, its putative competitor in the corporate inter-dealer broking market, should not be permitted to conspire with certain employees of the defendant to induce other erstwhile employees to terminate their contracts in the manner which has occurred, with the result that, consequent upon the departure from the plaintiff of entire ‘desks’ of brokers, the defendant BGC has virtually overnight been able to become a major competitor of ICAP HK in areas in which hitherto it had not been a competitor at all, so that there has been a ‘gross reversal’ of the respective market positions of the plaintiff and the 1^st and 2^nd defendants within the Hong Kong market, which in these areas is said now to have been ‘turned on its head’.

54.In such a situation, submitted Mr Huggins, this court should not hesitate to invoke its equitable jurisdiction to step in to prevent the ‘springboard’ which the 1^st and 2^nd defendants have created by their wrongful activities, and that these defendants should be restrained by this court from enjoying the fruits of their defalcations for a period of 6 months, which period would allow the plaintiff to reconstitute its brokerage desks, and to permit it to regain its former market position.  Damages would not be an adequate remedy, he asserted, and nor would an account of profits.  This, at any rate, was the recurrent thrust of his submission.

55.On the other side of the table, Mr Coleman, for the 1^st and 2^nd defendants, and Mr Burns, for the 3^rd to 39^th defendants, vigorously rejected this argument.  It was not accepted that ‘springboard’ principles, however formulated or adjusted to conform to the circumstances of this case, could thus be utilized for instances other than the misuse of confidential information, and it was maintained that by far the greater balance of modern authority firmly had set its face against such expansion of the existing doctrine.  It was also maintained that damages would be an adequate remedy in this situation, and that in any event, on these facts, the overwhelming balance of convenience was against the grant of such interlocutory injunctive relief.

56.For his part Mr Burns also submitted that on the face of the existing affidavit evidence, when the court now was in the position to take into account the evidence of the disaffected erstwhile employees of the plaintiff, that there could be discerned no cogent case of conspiracy against them, and that on a factual basis alone this case must fall. 

57.I can immediately deal with this latter submission; as was made clear during the hearing, I have no intention, as judge seized with this interlocutory application, of attempting to assess the veracity of the welter of charge and counter-charge as presently appears on the face of the affidavits: whether these employees left by reason of collective ‘disgruntlement’ with ICAP HK, or whether they were tempted by better packages and/or prospects, is nothing to the immediate point.  In factual terms this case cannot be said to be demurrable on its face, and I decline as firmly as I may any attempt to lead me down that primrose path.

58.I return, therefore, to its predominant element within this case, that of the ‘springboard’ argument.  Does it, and should it, apply in these circumstances?

59.Upon a review of the case law in this area, the sole case which lends any real support to Mr Huggins is that of Midas IT Services v. Opus Portfolio Limited, unreported, Chancery Division, 21 December 1999, which was a case in which Blackburne J granted ‘springboard’ relief with a view to neutralizing an unfair competitive advantage which had been gained by the defendant by virtue of the act of a former director of the plaintiff, perpetrated whilst in the employ of the plaintiff, in diverting a maturing business opportunity from the plaintiff to the defendant.

60.In this case, Blackburne J wrestled with the question of whether the so-called ‘springboard’ injunction was limited to misuse of confidential information, or whether the injunction was but an illustration of a wider principle, namely the neutralization of any unfair advantage obtained by a person, or by others through him, as a result of a prior breach of duty of that person.  In this case the judge noted that all the cases cited to him relating to ‘springboard’ relief had been concerned with the misuse of confidential information – see Terrapin Ltd v. Builders Supply Co. (Hayes) Ltd, op cit; Roger Bullivant Ltd v. Ellis [1987] ICR 464; PSM International Plc v. Whitehouse [1992] IRLR 279;and Universal Thermosensors Ltd v. Hibben [1992] 1 WLR 840.

61.In addition, the learned judge in Midas had his attention drawn to two decisions in which ‘springboard’ relief had been canvassed, but specifically refused – see the decision of Scott J (as he then was) in Balston Ltd v. Headline Filters Ltd [1987] FSR 330, a confidential information case, in which the judge declined the invitation by the plaintiff to grant an interlocutory injunction against the second defendant to deprive him of the benefit of what was alleged to be an illegitimate springboard obtained by him during a three month notice period, and where Scott J, without deciding the point, expressed doubt as to “whether an injunction, interlocutory or otherwise, can ever be justified on the ground that the grant is necessary in order to provide a contract breaker of the fruits of his breach of contract” in instances not involving the misuse of confidential information.

62.Also in this context is the decision of Carnwath J in CBT Systems UK Limited v. Campopiano, unreported, Chancery Division, 26 June 1995, in which the judge took the view, on the facts before him, that there was no serious case of misuse of the plaintiff’s confidential information such as to justify a springboard injunction, and declined to grant such merely on the basis of evidence of breach of the duty of fidelity since he regarded that as an extension of the springboard principle, a matter that he was inclined to approach “with caution”.

63.Against this background, Midas is a decision which stands very much on its own, and it should be appreciated that in this case Blackburne J in fact opted to grant that which he regarded as but a “small measure of limited further protection” to the plaintiff, which he viewed as the course carrying the lower risk of injustice, whereby the defendant, Opus, was restrained from marketing the TIA software package in question for no longer than 6 months, even if the trial were not to come on within that period.  That which also is noteworthy, however, is the judge’s rejection of the wider application made by Midas which would have had the effect of limiting Opus from competition altogether for as long as the injunction remained in force, observing that to remove Opus from the race altogether, in order to give Midas an opportunity to re-establish itself, seemed to him to be “an excessive response and an illegitimate restraint on Opus’ freedom to compete”.

64.This latter observation has resonance in this case in terms of the application that BGC be restrained on ‘springboard’ principles for a 6 month period from using the departed ICAP HK staff in order to permit ICAP HK to re-establish itself in the market.  For my part I do not consider that this court has any interest in attempting to regulate positioning within the market.  Be that as it may.  Having reflected on the existing case law, I regard Midas not only as an isolated case but also one that may be characterised on the basis that the concept of the ‘maturing business opportunity’ is but a defined and now relatively established subset of the law relating to the misuse of confidential information, with both situations involving unlawful diversion of proprietary rights.

65.However, this is very different from the present case.  No confidential information is involved, nor indeed any discernible proprietary right of the plaintiff over its employees – in this context I reject the ingenious argument that emerged to the effect that the brokers’ individual relationship with their corporate trader counterparts constituted the ‘goodwill’ of the plaintiff which thus constituted ‘quasi-property’ and which thereby it was entitled to protect by virtue of the ‘springboard’ principle.  To accept this argument would in my view be to stretch the concept of ‘goodwill’ too far, such an approach in effect emasculating the existing ‘springboard’ rationale, which has been to provide a remedy against the unwarranted head start gleaned upon the back of misuse of confidential information.

66.It strikes me that argument in the instant case tended to blur the line of demarcation between two quite different sets of principles, with the ‘springboard’ concept being pressed into forensic service as a somewhat unsteady bridge : on the one hand those principles relating to the protection of misuse of confidence/confidential information and maturing business opportunities, wherein equity attempts to restore for a period certain some semblance of a level playing field relating to the use of such information, and on the other the long-entrenched common law principles relating to master and servant, which have developed upon the basis that it is not the policy of the law to stifle the free movement of labour or the ability of a person to seek gainful employment, with the result that contractual covenants in restraint of trade are prima facie unenforceable unless justified, in spatial or temporal terms, by the employer seeking to enforce the particular restraint.

67.It is clear that mere recruitment of employees (which may, or may not, be in breach of contractual post-termination restraints) does not, at least in pure recruitment terms, necessarily promote or produce a competitive advantage, albeit such ultimately may accrue in terms of access to clients or customers.  Nor, for that matter, is there anything wrong in a group of employees deciding in concert to depart their existing employer for pastures new – see the observations of Cumming-Bruce LJ in G.D. Searle & Co. Ltd v. Celltech Ltd, [1982] FSR 92, at 101-102 :

“The law has always looked with favour upon the efforts of employees to advance themselves, provided that they do not steal or use the secrets of their former employer.  In the absence of restrictive covenants, there is nothing in the general law to prevent a number of employees in concert deciding to leave their employer and set themselves up in competition with him.  And there is now no rule of law or equity which restrains a competitor from seeking out the servants of another and offering him employment provided he does not thereby procure a breach of the servant’s contract of service…”

68.I appreciate that in a present case it is the plaintiff’s contention that the 1^st and 2^nd defendants conspired with the 3^rd and 4^th defendants, the “recruiting sergeants”, to induce the departure of the other employees – the remedy for which generally sounds in damages – but I fail to see how the introduction of this factual matrix necessarily leads to invocation of the ‘springboard’ principle, which has developed within an entirely different context, namely the arena of confidential information over and above the normal intellectual stock in trade that employees are able to take unencumbered whenever they change employment.  Precisely when such employees are free to take up such new employment and upon what terms, involving consideration of notice periods and relevant restrictive covenants, is a separate and distinct issue.

69.At the end of the day, therefore, I resist the proposition that the ‘springboard’ principle is as malleable as Mr Huggins’ argument would have it, or that this principle applies in the circumstances of the present case.  I reject this argument.

70.There is no existing Hong Kong authority on the point, although I note that in a similar case between the Australian counterparts of the parties in this litigation in the Federal Court of New South Wales – see ICAP Australia Pty Ltd v. BGC Partners (Australia) Pty Limited [2005] FCA 130 – an application for injunctive relief in like circumstances and on the like ‘springboard’ basis also was rejected by Jacobson J.  Whilst I appreciate that in that case Midas, op cit., was not cited before him, a point pressed by the plaintiff, nevertheless I respectfully agree with the view adopted by the court in that case.

71.The learned judge in this Australian litigation found on the evidence available to him that the employee walk-outs from ICAP Australia on 17 and 28 January 2005 were the consequence of a “well orchestrated raid on ICAP’s business, in particular on its futures desk”, and, as in the instant case, he was faced with an application from ICAP for injunctive relief which would have had the effect of restraining BGC from employing the ICAP employees until 31 July 2005.  The judge observed that in a practical sense the decision to grant or to refuse interlocutory relief would determine the substance of the claim for the injunctive relief, given the difficulty of fixing early trial dates, and he further concluded that the “short answer” to the springboard argument was that the existing authorities did not establish that the springboard doctrine extended beyond the field of confidential information.

72.The judge further noted that “so far as the gravamen of the case that was put on behalf of ICAP, it was not suggested that the line was crossed between the distinction that exists between information which forms part of the employee’s stock of general knowledge and information which fairly can be regarded as the property of the employer”, citing Faccenda Chicken Ltd v. Fowler [1986] 1 All ER 617.  Interestingly, in this Australian case Jacobson J also commented that he did not see that ICAP had established that damages were not an adequate remedy.

73.Rejection of the contention that the springboard principle is to be extended to the facts of this case encompasses that which was referred to in argument as the ‘jurisdiction’ point, and this conclusion alone is sufficient to dispose of this, the dominant element within this application. 

74.However, on the basis that I am wrong in the view that I have taken – indeed this is a point which greatly would benefit from appellate consideration in Hong Kong – and bearing in mind, further, the mantra that ‘the categories of equity are never closed’, I move to consider whether, as a matter of discretion, I should have been minded to apply the ‘springboard’ principle in the particular circumstances of this case had I been satisfied that it was susceptible to the extension for which the plaintiff is contending.

75.It is in this context that that which has been referred to in argument as the plaintiff’s ‘flip flop’ or ‘u-turn’ assumes significant profile, an argument which in itself provided a basis for the dismissal of the plaintiff’s application for urgent interim relief, as the earlier judgment of this court (at paragraph 35 thereof) makes clear, and which in my view remains at the heart of the discretion argument.

76.To revert to the primary facts.  What is not in dispute between the parties is that on the one hand the plaintiff had chosen to accept, on or shortly after 22 March 2005, a sum in excess of HK$17 million, which were monies tendered in lieu of notice on behalf of the departing brokers – so that there could be no question but that the employment of the 32 individuals concerned had been lawfully terminated – and, in addition, had elected to release these employees from their non-compete post-termination restraints in the full knowledge of the fact that these brokers were moving en masse to BGC – whilst on the other hand, the plaintiff chose to issue proceedings but a week later, on 6 April 2005, together with the instant application for injunctive relief, whereby the 1^st and 2^nd defendants, as the putative new employers, were sought to be restrained upon the ‘springboard’ basis from employment of these same brokers for a period of 6 months.

77.This then is the so-called ‘flip flop’, a term coined at the hearing of the urgent application on 15 April, whereby, if the plaintiff is correct, the application for injunctive relief seeks to side-step the agreement to release the former employees from the non-compete post-termination restraint, at the same time in effect seeking to impose a potentially far more wide-reaching restraint.

78.The commercial consideration driving the plaintiff to act as it did is not hard to divine : the contractual commitment of the plaintiff to all but one of the departing brokers was that in so far as the 3 month non-compete PTR was concerned, the plaintiff was obliged to pay the salaries of these staff during this period; hence, by accepting the monies tendered in lieu of notice and by releasing the staff from the relevant restraint, such financial obligation no longer arose.

79.The exception was the 3^rd defendant, Kitty Mak.  In the terms of her contract there was no obligation to pay her within the 3 month period; she alone of the departing brokers was not released from her non-compete restraint, and thus this restraint remains extant – a separate issue that I consider below.

80.For my own part, despite Mr Huggins’ submission that this is nothing to the point, I am unable to grasp why if, as clearly is here the position, employees specifically are released to work for a competitor, that this fact should not be factored into the discretionary ‘mix’, and also why this should not be accorded a significant degree of importance in terms of considering whether the new employer is to be precluded, via ‘springboard’ relief, from employing the very people whom the plaintiff earlier expressly had released from contractual restraint.

81.I bear in mind the submission pressed upon me that release of the non-compete PTR in the brokers’ contracts conceptually is distinct from the remedy which ICAP HK seeks in order to prevent BGC from obtaining the fruits of that which is regarded as the latter’s illicit conduct, although, with respect, this strikes me as no more than a self-evident proposition which does not materially assist.  That which seems tolerably clear, however, at least in the present circumstances, is that if the plaintiff elects to have its commercial cake and to eat it too, this fact is likely to weigh heavy in the discretionary scales. 

82.I should thus have come to the like conclusion if the decision upon this issue had not encompassed a question of principle but merely had involved the exercise of the court’s discretion.

83.I am fortified in this firm view by an article, to which my attention helpfully has been drawn by Mr Burns, written by Alistair McGregor QC and entitled “Limits to the Springboard Doctrine”, which I understand is to be found on the website of Mr McGregor’s King’s Bench Walk chambers.  The title of the article is self-explanatory.  That which is interesting in the present context is that Mr McGregor posits precisely the type of situation which has occurred in this case, wherein he describes a “very familiar problem” for employers in terms of a competitor acquiring a team of competent and experienced staff by suborning senior staff members to act as ‘recruiting sergeants’.  In this connection Mr McGregor expresses his belief that a court would not impose by way of springboard relief an injunction prohibiting a competitor from using the services of the staff so acquired absent a post-termination restraint on competing or any breach of the notice periods of the staff involved – precisely the two matters which in this case the plaintiff, by its own actions, has removed from the current factual matrix.

84.Mr McGregor comments that this view is founded inter alia on the fact that such an injunction would raise “in stark relief the spectre of the court imposing in effect obligations in restraint of trade upon an individual whose original employer had not seen fit to do so”.  This a sentiment which, in the present circumstances, appears to have much to commend it.  Somewhat ironically I have been told by Mr Huggins, with his usual frankness, that the extensive written submissions in this application relating to the appropriateness of ‘springboard’ relief in fact substantially were framed by Mr McGregor.

85.For my part, and notwithstanding the impressive intellectual facility permitting both sides of the argument to be as persuasively argued, I have no hesitation in preferring the sentiments expressed in Mr Gregor’s article on the subject, wherein the author also presciently notes the two legal principles which tend to operate as a “judicial brake”, and therefore as a limit upon the length of any ‘springboard’ injunction which might be granted: first, the usual judicial dilemma arising in all applications for interim injunctions in the absence of full evidence at trial and the testing of that evidence by cross-examination, and the second being that of restraint of trade, the judicial concern with which is the “thread which runs through the springboard cases”.

86.I agree.  In this latter context I note also that if I be wrong in the view I would have taken in terms of the grant of ‘springboard’ relief, I should in any event have declined to grant such relief for the 6 month period as is sought by the plaintiff.

87.I have difficulty in understanding how this period may be justified given that the length of the non-compete restraints in these employee contracts (now of course waived) is but 3 months, and it seems to me that had I decided that injunctive relief not only could but should have issued (which I have not), that 3 months would have been the maximum period which could in the circumstances have been achieved by the plaintiff.  See, for example, the approach taken by the English Court of Appeal in Roger Bullivant v. Ellis [1987] ICR 464 (a confidential information case) wherein the length of the springboard was fixed by reference to the length of the post termination restraint in the contract of employment, and wherein May LJ (at 481) observed that “the court should be concerned that it does not, in granting such an injunction, give the injured party more protection that he realistically needs and, in particular, discourage or prohibit what in the course of time becomes legitimate competition”.

88.There has, of course, been no misuse of confidential information in the present case – the first basis upon which the remedy has been declined – but even had this been the case the short point is that the 6 month period for which Mr Huggins contended his client should be protected would have had the effect of placing the plaintiff in a far better position than if these events had not taken place and there had been no such alleged breach, given that the contractual PTR’s in all cases were for a period of but 3 months.

89.I can discern no basis for the time-frame contended for by the plaintiff.  The injunction the plaintiff seeks would not, and could not, have the effect of restoring the parties to the competitive position they occupied prior to the matters now complained of – which is the object of ‘springboard’ relief – but would be very considerably more far-reaching, which is something that in principle the courts do not countenance: see, for example, the judgment of Sir Donald Nicholls VC (as he then was) in Universal Thermosensors Ltd v. Hibben [1992] FSR 361 (at 380) and the judgment of Gray J in Moneygram International v. Davar & ors, unrep., QBD, 10 September 2003 (at para 71).  As Nicholls VC observed in Universal Thermosensors : “…to grant an injunction to restrain [the rival company] from dealing after July 1990 with customers it had already approached was to put the plaintiff in a better position for the future than in there had been no misuse of information.  I can see no justification for that…”  At bottom, perhaps, this is to re-emphasise the principle that any springboard relief cannot be open-ended and, if granted, must be strictly limited – as Mr McGregor QC succinctly expresses the position, op cit, (at page 5) : “it is a blinding glimpse of the obvious that it is the essence of springboard relief that it be limited in time”.

90.For the foregoing reasons, therefore, I dismiss the application before me in so far as that application is based upon the ‘springboard’ principle.  I now turn, albeit more briefly, to the two remaining legal issues raised by events in this case.

(ii)  Post-termination restraints

91.Somewhat curiously, the matter of contractual PTR’s was virtually overlooked by the parties to this application until specifically raised by the court.  Doubtless this was a function of the approach to this case being dominated by the ‘springboard’ doctrine, but in any event argument under this head has come in very much as an afterthought.

92.Once again, some primary, and undisputed, facts.

93.This issue does not arise in any form in terms of the 5 ‘back office’ employees, that is, the 35^th to 39^th defendants, given that their contracts contain no PTR’s at all.  The only issue with regard to these individuals is whether they remain employees of ICAP given the latter’s refusal to accept the sum tendered on behalf of these 5 as payment in lieu of notice, a matter to which I shall shortly revert.  So under this head these defendants can be placed to one side.

94.Of the remaining 32 defendants, that is, the 3^rd to 34^th defendants inclusive :

(1)	all were released by the plaintiff from the contractual non-compete PTR, save for the 3rd defendant, Kitty Mak;
(2)	save for the 4th, 15th, 26th and 31st defendants, all are subject to PTR’s (which specifically were not released by the plaintiff) prohibiting in some cases for 3 months and in others for 6 months, the solicitation of and dealing with ICAP HK clients.

95.It is agreed that as a matter of general principle the approach toward such restraints is that they are prima facie unenforceable unless justified in terms of spatial and temporal limitation in the particular circumstances of each case.

96.On behalf of the relevant defendants Mr Burns attacks these restraints, which, depending upon the format of the individual contract, appear either at clause 12 or clause 13, the clause in question being headed by the legend “Post-Termination Obligations”.

97.Clause 13(d) is the non-compete restraint that, in all but one case, has been released by the plaintiff.  Thus the relevant subclauses are (a), (b), (c) and (e), which purport to deal in various ways with the non-solicitation of the plaintiff’s clients, the carrying on of any business in competition with the plaintiff’s ‘Business’ (as defined), and interference with the relationships of the plaintiff and clients, customers, employees and suppliers.

98.The net has thus been cast wide by the contractual draftsman.  It is the submission of Mr Burns that each of the restraints now at issue is far too wide and as a consequence is unenforceable, and that they cannot be saved by recourse to the traditional ‘blue pencil’.

99.For his part Mr Huggins defended the relevant clauses, but in so far as the court may consider that on their face they are too wide, he proffered a semblance of editing by blue pencil in accordance with the usual principles.

100.In the circumstances, not least because of the pressing need for this judgment to issue, I do not intend to descend into great detail on this element of the case.  Suffice it to say that I have considered the arguments put forward by each side on the point, and have concluded that subclauses (a), (b), (c) and (e) remain unenforceable even if ‘blue pencilled’ in the manner that Mr Huggins suggested.

101.In my judgment these restrictions are absurdly wide (“any business”, “any dealings”, “any goods” are phrases which serve to provide a flavour of the restrictions sought to be imposed) in terms of that which they purport to preclude, and cannot be saved simply by the excision of the phrase “or any company of the ICAP Group”.  Indeed, so unreasonable are they that it is entirely possible that there could be an infringement which is totally inadvertent, and of which the ex-employee may be entirely unaware.  Given clauses in restraint of trade of this unacceptable ambit it is perhaps unsurprising that the primary focus of the plaintiff should have lain elsewhere in this case.

102.Lastly, I specifically consider the position of Kitty Mak, the 3^rd defendant herein, and one of the alleged ‘recruiting sergeants’ targeted by the plaintiff.  Like all the others, she was no more than an employee within the plaintiff, albeit she alone has not been in receipt of a waiver of clause 13(d), which is the post-termination non-compete restraint.

103.On its face the temporal restraint, 3 months, is not unreasonable, nor is the spatial limitation to “anywhere within the Central District of Hong Kong”.  The restriction purports to be to “engage or prepare to be engaged in any capacity in any business or activity that is the same or similar to the Business…”, and in this regard Mr Huggins has sought to blue pencil the words “or similar”.

104.The “Business” is contractually defined within the Terms and Conditions accompanying the letter of offer of the contractual engagement, and reads “‘Business’ means any business carried on by the Company and any company of the ICAP Group”, thus potentially encompassing activities far wider than that of the broker that Miss Mak was employed to be.

105.I do not consider that it is open to the plaintiff to ‘blue pencil’ such definition as itself is incorporated into the PTR, although Mr Huggins sought to excise the phrase “and any Company of the ICAP Group”.  The point has not been developed in argument, but it seems to me that either the clause on its face can be satisfactorily ‘blue pencilled’, or it cannot.  In this case, therefore, I hold that it cannot.

106.In the circumstances I find that this PTR is unreasonable in that it is patently too wide in its purported scope, and cannot be permitted to stand.  In this context I note that Miss Mak initially had appeared willing to offer an undertaking in terms of clause (d), but that this was withdrawn by Mr Burns upon the Court declining to accept it in the form in which it had been drawn, which included preliminary expressions of sentiment to the effect that she had felt strongly that “it was unfair for her to be targeted in this application”.  This struck me as nonsense : either an undertaking is given, or it is not, and in principle the court has no interest in the feelings of the profferor one way or another.

107.In the circumstances, therefore, injunctive relief on the basis of clause 13(d) will not issue against Miss Mak either.  In itself this perhaps is not of great significance in circumstances wherein during argument the protection purportedly offered by this particular restraint was characterised within the plaintiff’s own evidence as ‘illusory’ given the practical ease with which this clause could be circumvented – hence reliance upon the ‘springboard’ doctrine, and thus, it was submitted, the more reason why such doctrine should be applicable.  The short answer to this, it seems to me, is to improve the contractual drafting relating to ad hominem post-termination restraints, which represents the long-established manner in which an employer seeks to protect itself from competition.

108.Finally in this context I refer to certain undertakings that have been offered by the defendants to the court.

109.On behalf of the 3^rd and 4^th defendants Mr Burns offered an undertaking “not to induce, procure, facilitate, solicit or encourage … any person who was an employee of the plaintiff as on Monday, 4 April 2005 from terminating (in any manner), seeking to terminate or purporting to terminate their employment with the plaintiff, whether or not for the purposes of that employee entering into employment with the 1^st or 2^nd defendants”.  This undertaking was made to assuage the plaintiff’s concerns about employees who remained in place, but who had, to use Mr Huggins’ terminology, been ‘loosened’ by the defendant preparatory to jumping ship, and is an undertaking which the court is prepared to accept in the terms in which it is drawn.

110.I record also the undertaking offered by Mr Coleman, on behalf of the 1^st and 2^nd defendants, to the effect that they will not use the services of any of the 3^rd to 39^th defendants in breach of the post-termination restrictions contained in their respective employment contracts with ICAP HK for a period of 3 months from 22 March 2005, or to induce any of these persons to act in breach of such post-termination restrictions.

111.The court again accepts this undertaking, which in its amended form – the form originally proffered by Mr Coleman was in terms of “any enforceable post-termination restrictions” – seems to render irrelevant for all practical purposes the views of this court upon the enforceability of the individual contractual post-termination restraints, given that, in contrast to the position of Mr Burns, Mr Coleman confirmed that he was not raising argument as to the validity of these restraints.

112.Additionally, Mr Coleman made it clear that the undertakings that he had offered on behalf of his clients at the hearing on 15 April – to which reference is made (at paragraph 34) in the earlier judgment of this court – were to remain in place, namely the undertaking in terms of paragraph 4(a) of the writ, which deals with a restraint against inducing remaining employees of the plaintiff from breaching their employment contracts, and in terms of paragraph 1.4 of the draft Minute of Order, which dealt with the destruction/alteration of documents in any form relevant to or generated in the context of the recruitment by BGC of the 3^rd to 39^th defendants.

113.In summary, therefore, it follows from the foregoing that no injunctive relief in terms of the individual PTR’s will issue against any of the defendants in this case.

(iii)  The section 7(1) issue

114.This is the third and last of the specific legal arguments that provided the substance of this application.

115.The point for decision is whether the tender of payment in lieu of notice, as opposed to its acceptance by the employer, is sufficient to terminate the employment of the tendering employee.

116.As a matter of fact, the only defendants in this case for whom this is a ‘live’ issue are the 5 back-office employees, namely the 35^th to 39^th defendants.  As was the situation with the brokers, a sum of money was tendered to the plaintiff on behalf of these five employees, but contrary to the procedure earlier adopted by the plaintiff, this money was not accepted, and the plaintiff maintains that during their period of notice the ‘back-room five’ remain employees of the plaintiff.

117.In fact, the importance of this point diminished in practical importance with the revelation on the final day of the hearing that, save for the 35^th defendant, whose notice period was 3 months, and which thus was not due to expire until 2 July, the notice period for the other defendants within this category expired on Monday, 2 May 2005, that is but two days after the conclusion of this hearing.

118.However, since the point remains alive in at least one instance, I allude briefly to it.

119.Section 7(1) of the Employment Ordinance, Cap 57, reads thus :

“Subject to sections 15 and 33, either party to a contract of employment may at any time terminate the contract without notice by agreeing to pay to the other party a sum equal to the amount of wages which would have accrued to the employee during the period of notice required by section 6.”

120.Sections 15 and 33 have no relevance to the current debate.  The focus of the argument here is the word “agreeing”, and whether as a matter of construction this requires consensus on the part of employer and employee, or whether the tender of the requisite sum by the employee, without more, satisfies the section?

121.The parties are polarized, as indeed they have been in every aspect of this application : Mr Huggins says that consensus ad idem is required, whilst Mr Burns and Mr Coleman suggest that the contrary is the case, and all that the employee has to do is to agree to make the payment.

122.In terms of appellate authority on the point, the researches of counsel have uncovered a decision of the Full Court in Yip Wan-Chiu v. Magnificent Industrial [1974] HKLR 183, in which the point was considered and the court, by a majority, expressed the view that mutual agreement was necessary.  In Yeung Chi Wah v. City University, unrep., judgment dated 28 February 2004, an interlocutory appellate court considered Yip, op cit, and expressed the contrary opinion that unilateral tender was sufficient to effect a termination under section 7 : in this the court followed the dissenting judgment of Huggins J in Yip Wan-Chiu, and stated that if one party wished to terminate the contract is willing to make payment in lieu of notice, that party thus is able validly to terminate the employment pursuant to section 7(1), Cap 57.  In Yeung Chi Wah the court appeared to have taken note of the Court of Final Appeal decision in Archer v. Hong Kong Channel Ltd [1998] 4 HKC 637, although it is clear from the report in the latter case that the Court of Final Appeal did not find it necessary to resolve this issue (see the judgment of Litton PJ at 642E).  Nor did the court in Yeung Chi Wah apparently consider whether it was bound, upon Young v. Bristol Aeroplane principles, by the decision in Yip Wan-Chiu.

123.The only other decision cited on the point is that of Chung J in Vite Limited v. Chui Oi Fan, Fanny & ors, unrep., Chambers decision dated 18 August 2000, in which the learned judge expressed, obiter, the view that the natural and ordinary meaning of section 7(1) supported the dissenting opinion in Yip Wan-Chiu, op cit and considered that the view of Huggins J was “more likely”.

124.Against this background, Mr Huggins submits that this court is bound by the Full Court decision in Yip Wan-Chiu.  Mr Coleman asserts that this is not the position, and that this court is free to take its own view as a matter of construction.

125.After some reflection I consider that I am not so bound, and that the observations on the point of the majority (McMullin and Pickering JJ) are obiter.  Indeed, Yip was, if I may respectfully say so, a most curious case, in that, as the report itself makes clear, their Lordships harboured considerable concern over whether they should sound to the point in the particular circumstances before them, wherein a Notice of Appeal had not been served on the respondent company, and wherein it appeared that the court “was being asked to enter upon an academic exercise not so much for the benefit of the legally-aided appellant in this case, nor for the benefit of any litigant, but for the satisfaction of various organs of the Executive and that what was really required of us was an advisory opinion” : see McMullin J at 185. 

126.In the event, counsel in that case, Mr Jackson Lipkin, had persuaded the court to entertain the appeal by changing the emphasis of the argument to the effect that if the damages under section 6(1) are not actually liquidated damages, the subsection involves a pre-quantification of damages not then subject to mitigation on the part of the appellant.  The case proceeded on this point (“counsel warmed to this theme”) and the court thus decided to hear him out : see McMullin J at 186, although the full report then deals not only with that issue but also with whether the option provided by the then section 6(1) could only be exercised by mutual agreement.  In the event the opinion which emerged was that McMullin and Pickering JJ thought that such mutuality was required, whilst in a powerful dissent Huggins J thought that the section “contemplates a unilateral termination by one party or the other, for it is only one party to the contract who has to agree to do something, i.e. pay money, and I understand that to mean ‘indicate his willingness to pay’ or ‘promise to pay’” (op cit, at 194).

127.For my own part I entirely agree with this latter view, and accordingly, if I am correct that I am not so bound, I so hold.  In passing, I should add that the researches of Mr Coleman during the hearing into Hansard revealed the legislative background to the Employment (Amendment) Bill 1971, wherein the Explanatory Memorandum is strongly supportive of the contention that the so-called “agreement to pay” did not require consensus between employer and employee.  Mr Huggins but faintly attempted to persuade me that I should not look at this material upon the basis of what struck me was a strained interpretation of Pepper v. Hart principles, a contention that I rejected.

128.The end result, therefore, in so far as it has any practical relevance, is that I hold that tender of payment in lieu of notice by the five back-room staff (whom, as I have recorded, were not subject to any contractual post-termination restraints) was sufficient to, and did, terminate their employment with the plaintiff, whether or not the plaintiff chose (or now may have chosen) to follow the position adopted in terms of the departing brokers and to accept the sum so tendered on their behalf.

129.It follows, therefore, that no injunctive relief will issue against these former employees either.

Damages as an adequate remedy

130.On the basis of the foregoing analysis, the plaintiff has been unsuccessful in persuading the court to grant immediate injunctive relief, and thus must elect to pursue such remedy as it may be adjudged to have,  whether such sounds in damages or in an account of profits (as to the prospects of which naturally I express no view) at the trial of this action.

131.In this latter context Mr Huggins also asked for an order for an early trial, but in the present circumstances, wherein the injunction remedy now has been fully fought, and decided, I see no reason to expedite proceedings, nor indeed to grant any disclosure order (another interim remedy sought on the face of the summons) pending compliance in normal course with usual pre-trial procedure.

132.However, if I be wrong in the views I have expressed in declining the primary bases for injunctive relief, I should finally indicate the view I would have taken as to whether damages otherwise would have constituted an adequate remedy.

133.I have been addressed at some length by both sides on this issue, and it is tolerably clear that in this area that difficulties exist on both sides of the fence, although for my part, like Jacobson J in the Australian version of this litigation, I am presently inclined to the view that on balance quantification of loss in monetary terms is the more easily open to the plaintiff – in terms, for example, of substantially decreased turnover/revenue arising from depletion of the brokerage desks – than would be the case with the position of the defendant.

134.Be that as it may.  The ‘adequacy of damages’ debate undoubtedly is nicely poised, and in my view the correct approach in a case of this nature is that adumbrated by Hoffmann J (as he then was) in Films Rover Limited v. Cannon Film Sales Ltd [1987] 1 WLR 670, at 680, wherein he stated :

“The principal dilemma about the grant of interlocutory injunctions, whether prohibitory or mandatory, is that there is by definition a risk that the court may make the ‘wrong’ decision in the sense of granting an injunction to a party who fails to establish his right at the trial (or would fail if there was a trial) or alternatively, in failing to grant an injunction to a party who succeeds (or would succeed) at trial.  A fundamental principle is that the court should take whatever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’ in the sense that I have described.”

135.Suffice it to say that had it been necessary to resolve this element of the argument, I should have held that not granting the injunction appeared to me to carry such lower risk of injustice.

Order

136.It follows from the foregoing that, subject to the acceptance by the court of the undertakings hereinbefore described, the plaintiff’s application for injunctive relief, and relief collateral thereto, is refused.  I so order.

137.I should be obliged if counsel would agree an appropriate form of Order for engrossment.

138.As to costs, both of this application and of the preceding interim application, there do not seem to me to be good reasons why costs should not follow the event.  However, in the circumstances I decline to make a costs order nisi, and absent agreement thereon I will entertain argument from counsel at a short appointment to be fixed in consultation with counsels’ diaries.

Mr Adrian Huggins SC and Mr David Stokes, instructed by Messrs Deacons, for the plaintiff

Mr Russell Coleman, instructed by Messrs Linklaters, for the 1^st and 2^nd defendants

Mr Ashley Burns, instructed by Messrs Johnson, Stokes & Master, for the 3^rd to 39^th defendants