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Hong Kong’s Court of First Instance (CFI) dismissed a plaintiff company’s application for a springboard injunction in DCL Communication Limited v Lam Yim Chi Julia and Reach Technology Solutions Limited [2023] HKCFI 98.

A springboard injunction removes any advantage or head start a former employee, or his/her subsequent employer, may have obtained through misusing a former employer's confidential information.

Facts

The first defendant was formerly employed by the plaintiff as an account executive responsible for dealing with the plaintiff's clients. She left the company in September 2019 and joined the second defendant some 19 months later, in April 2021.

Around December 2021, the plaintiff lost its maintenance contract with a long-standing client.

The plaintiff realised that the original sale contract with that client had been handled by the first defendant. A different client informed the plaintiff that the first defendant – on behalf of her new employer – had attempted to sell similar services and products that the plaintiff offered.

The plaintiff suspected that the first defendant had contacted its clients "at the right time" (i.e. when the maintenance contracts were due for renewal) to entice those clients away.

The plaintiff applied for a springboard injunction to enjoin the second defendant company from using or disclosing any of the plaintiff’s confidential information – including client list, expiry dates of the plaintiff’s contracts with its clients and the plaintiff's profit margins for each contract (Confidential Information).

CFI's Decision In Refusing to Grant Springboard Injunction

The CFI refused to grant the springboard injunction, considering the plaintiff's case was only built upon suspicion and speculation, without concrete evidence of any unlawful behaviour by the two defendants.

The first defendant's contract of employment with the plaintiff did not contain a restraint of trade clause. So when she left the employ of the plaintiff, she was entitled to approach the plaintiff’s customers, and seek and accept orders from them.

The first defendant was entitled to use for her own purposes any information carried in her head regarding identity of the plaintiff’s customers, customer contacts, the nature of the customers’ product requirements, or the plaintiff’s pricing policies – provided she had acquired the information honestly in the ordinary course of employment and had not, for instance, deliberately sought to memorise lists of names for the purposes of her own business.

Although the CFI considered there was a serious question to be tried in whether she had access to the Confidential Information, the plaintiff failed to convince the Court that the first defendant had misused any Confidential Information to contact the plaintiff’s clients.

To the contrary, evidence showed that one of the clients initiated contact with her to provide a quotation, rather than the other way round. There was no evidence to show she had breached her employment contract with the plaintiff.

Additionally, the Court found, among other things, that in the 1½ years since she left the plaintiff’s employ, all the maintenance contracts had been renewed once, if not twice, by the time she joined the second defendant. On this basis, the plaintiff did not make out any case that the Confidential Information could still be useful to the second defendant to poach their clients.

Therefore, the CFI found there was no serious question to be tried in order to grant an injunction. However, even if there was, the Court went on to say that the balance of convenience would have been against granting any injunction, since damages would be an adequate remedy for the purpose of compensating the plaintiff's loss of profit.

Lessons for Hong Kong Employers Seeking an Injunction

There are high evidential and legal hurdles to overcome to obtain an injunction. Employers should naturally gather appropriate evidence before launching legal action.

An employer is unable to impose any contractual restraint on an employee to protect against mere competition. However, it can impose post-termination restrictive covenants on an employee to protect a legitimate interest, so long as the restraint is reasonable in all the circumstances to protect that interest.

That said, in the present case, a post-termination restrictive covenant would unlikely to have helped, given the substantial period of time that had elapsed since her departure from the plaintiff’s employ.

For an example of a case where the Court did grant an interim injunction, see our earlier legal update.

The judgement is available here.