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The Court of Appeal considered the degree of judicial discretion in the application of the ‘balance of convenience’ limb of the American Cyanamid test and held that in this case, the Judge had erred in inferring from the evidence that there was ‘no point’ in granting a springboard injunction.

Judges enjoy a generous ambit of discretion when applying the American Cyanamid principles to the grant of a springboard injunction. Appellate courts will only interfere with their conclusions, based, as they must be, on untested evidence, when they consider that the judge of first instance has erred in law, including where he has exceeded the generous ambit within which reasonable disagreement is possible: see Hadmore v Hamilton [1983] AC 191 220B-E per Lord Diplock. In this case, however, the Court of Appeal held that the Judge had done just that in refusing to grant an interim springboard injunction.  

The facts

The first and second respondents were direct competitors of the Willis Group. The third respondent was the global managing director of one of its divisions. After some 30 employees, including, on the appellants’ evidence, almost all of the senior management team and all the key revenue producers in the UK, had left in the course of four days, Willis anticipated a second wave of recruitment of its remaining staff from both its London and North American office, co-ordinated by the third respondent. The US staff were employed by subsidiary companies, not by the appellants themselves.  

The Judge’s findings (and the power of taking a note)

The Court of Appeal was hampered by the fact that there was no transcript of the Judgment but it relied on notes of the decision, presumably from one of the parties – a reminder of the importance of taking as detailed a note as possible during ex tempore judgments.  

The Judge was satisfied that the third respondent had broken his contractual duties of loyalty and good faith. He was also ‘just about satisfied’ that there was sufficient evidence against the two corporate respondents. Having presumably decided that damages would not be an adequate remedy, the Judge then stated the balance of convenience test but with an added gloss:  

‘The third question is an overriding consideration which Lord Diplock did not expressly consider but which we consider which is whether it is just and convenient to grant an injunction – or, put another way, whether there is any point in an injunction.’

The Judge’s answer to that question was that there was now no obvious attraction to the first and second respondents in any of the employees who remained because ‘the heart had been torn out of the business.’ Although it was not clear from the available notes, the Judge appeared to have rejected the case for protection of the US employees on the grounds that they were not employed by the appellants and that no US staff had yet been recruited.  

The Court of Appeal's intervention

The Court of Appeal did not expressly exclude the Judge’s is there any point?’ gloss as a legitimate way of approaching the balance of convenience test but found that the Judge’s application of it to the facts was not permissible for the following reasons:  

  1. There was evidence before the Court of a second wave of recruitment being aimed at the appellants’ remaining employees. There was also evidence of a second wave of attack against more senior US staff. The fact that those staff were not employees of the appellants was immaterial because the third respondent had an obligation under both his contractual and fiduciary obligations to act in accordance with the interest of his employers. If he was encouraging them to go to a business which he himself was shortly to join, that was plainly in breach of that obligation. 
  2. Consequently, the Judge could not say on the facts that the remaining staff were of no interest to the respondents, even if they were largely more junior staff. It stood to reason that more junior staff might be needed to provide support to the senior staff that had already been recruited.  
  3. The appellants clearly had an interest in retaining the remaining staff in order to build up their business again.  
  4. The balance of convenience clearly came down on the side of the appellants since if the respondents had no intention to recruit the remaining staff, they would not be adversely affected by an injunction, particularly a short one until the return date.  
  5. In terms of springboard relief, the Judge had simply failed to consider whether the effect of past wrongdoing continued to confer a present and future benefit on the wrongdoer which the court should prevent.  

It may be that the Court of Appeal was encouraged in its conclusion by the fact that the injunction it was being asked to make was only to last until the return date. However, its reasoning makes clear that it required a systematic approach to the American Cyanamid principles from the first instance court and a closer inspection of the evidence describing the appellants’ interests in protecting their business despite the considerable damage already allegedly done to it. Your heart may be torn out, but you still have the right to protect what remains of your body (corporate).  

The full judgment can be read here

Paul Goulding QC, instructed by Fasken Martineau LLP acted for the first and second respondents.  

Clerks

Staff