Gary Oliver
Senior Clerk
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Employee Competition Bulletin
Dorma UK Limited v (1) Bateman, (2) Bailey, (3) Power, (4) Morton (5) Arrow Industrial Limited [2015] EWHC 4142 (QB)
11 Apr 2016
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This recent High Court judgment is a useful illustration of the principles relevant to an application for a springboard injunction in a team move case.
Dorma UK Limited (“Dorma”) applied for a springboard injunction against the first four defendants, its former employees, to restrain them from working for or with the fifth defendant (“Arrow”) or anyone else in the business of commercial and industrial doors in the UK market, from soliciting specified customers, from poaching and employing specified employees and from competing with Dorma in relation to specified businesses. Dorma also sought injunctions against all five defendants for the return and protection of its confidential information, including the provision of affidavit evidence in relation to the misuse of such information.
The facts
D1 was Dorma’s branch manager. D1’s contract contained a 6-month non-compete clause and 9-month non-solicit, non-poach and non-deal clauses. D2, was a service surveyor responsible for generating sales through marketing and business development. D3 and D4 were both employed as service coordinators, responsible for handling customer calls to the branch and co-ordinating visits by engineers to customers. D2-D4 did not have any restrictive covenants in their contracts.
All four individuals tendered their resignation from Dorma on the same day, Monday 3 August 2015, giving four weeks’ notice. All four were asked by Dorma about their future intentions. As the judgment records “three of the four defendants lied about their true intentions and the other was evasive. None of the defendants address these conversations in their witness statements”.
On Thursday 6 August 2015 D1 was placed on garden leave. He returned his company mobile phone and laptop. He had wiped all information from both devices. D3-D4 were not placed on garden leave until Friday 14 August 2015. Therefore, they had a two-week period after resignation in which they were still able to access Dorma’s confidential information. During that period, they even made rather audacious requests for hard copies of Dorma’s confidential information, one of which was successful. In addition, D3 and D4 were observed engaging in a lot of photocopying as they served out their notice. D3 and D4 were finally placed on garden leave on Friday 14 August 2015. D1-D4 commenced employment for D5 on the same day, 1 September 2015.
Dorma’s case was that D1, in breach of the restrictive covenants in his contract, and in breach of his duties to Dorma, effectively engineered an unlawful “team move” by which he and D2-D4 all resigned from their employment with Dorma and took up employment instead with Arrow. The defendants denied that this was an unlawful team move.
The judgment of Spencer J
(1) Springboard relief: The Judge held that the individual pieces of evidence “plainly give rise to a strong inference that this was an unlawful team move…They amount to a powerful circumstantial case”. He referred in particular to “coincidence of timing” in relation to the offers of employment by Arrow and tendering of resignations to Dorma as “particularly striking”. He considered the evidence to be “strong” and expressed himself to be “sceptical of the explanations which have been put forward by the defendants”. The Judge held that he was satisfied that the period of the competitive advantage was still up and running and likely to run for a considerable further period beyond the proposed date for a speedy trial. The Judge accepted that it was appropriate to approach the framing of the springboard injunction against D2- D4 in terms which mirrored D1’s post-termination covenants.
(2) Injunction in respect of confidential information: The Judge concluded that there was a serious issue to be tried as to whether, as part of the unlawful team move, D2-D4 were responsible for misappropriation of confidential information, particularly in the form of lists of Dorma’s customers. The Judge held that there was a proper basis to grant an injunction restraining the first four defendants from misuse of Dorma’s confidential information until trial.
(3) Confirmation by affidavit: The Judge considered whether the defendants should be required to confirm by affidavit what use, if any, had been made of Dorma’s confidential information. The Judge accepted that Dorma’s request for such an order was on the right side of the line but considered that such an order was not necessary or appropriate in this case because the information requested had already been provided by the defendants in their witness statements and, if that evidence proved to be false, the remedy of contempt would be available. The Judge also considered that the parties would have enough to do in preparing their cases for speedy trial without the additional burden on the defendants of preparing separate affidavits.
(4) D1’s restrictive covenants: The Judge made an injunction in the terms of the covenants in D1’s contract, including the non-compete clause. He declined to require Dorma to provide a list of the customers who fell within the definition of “restricted
customer” on the basis that (a) D1 knew “perfectly well who the relevant customers are with whom he dealt in the last 12 months”; (b) that if Arrow permitted D1 to solicit such a customer unwittingly, that would not constitute a contempt; (c) there would have to be a cumbersome procedure in place for such a list to be held by the defendants’ solicitors on a confidential basis since it would be quite inappropriate to present any of the defendants with a list of the customers in question.
(5) Restraint against Arrow: The final issue was whether Arrow should be restrained from causing, inducing, encouraging or permitting the other defendants to act in breach of orders made against them in this application. The Judge noted that Arrow
had “very properly” indicated that they were prepared to give an undertaking in this regard and that, subject to any further submissions, he considered that would be an appropriate way of dealing with that particular part of the relief sought.
The full judgment can be read here.
