Need for speed when seeking to injunct an ex-employee

Two recent cases (one in the Court of Appeal and another in the High Court), act as an important reminder to employers that 1) they must not delay if they are considering applying for an injunction to enforce confidentiality provisions or a non-compete clause against an ex-employee and 2) prevention is often better than cure when seeking to protect your business.

Interim injunctions can be granted by a court in a number of scenarios such as pending a full hearing to decide the enforceability of post termination restrictions or to prevent an employee obtaining a head start as a result of their breach of confidence (often referred to as a "springboard" injunction).

The injunction essentially maintains the status quo until the hearing and the applicant (i.e. the ex-employer) must be able to show there is a serious issue to be decided in court. The court will then consider the "balance of convenience" between the parties (of the injunction being granted or not), including whether damages would be an adequate remedy.

Panon v Gilligan (Court of Appeal)

In the first of two recent relevant cases, despite having a 12 month non-compete provision in his employment contact, Mr Gilligan joined a competitor less than two weeks after leaving his employment with Panon. Seven weeks later, Panon applied for an interim injunction to enforce the non-compete clause. This was refused at first instance and again when Panon appealed, although it took seven months for the appeal to be heard and the delay was largely out of Panon's control.

The Court of Appeal refused to grant an injunction in respect of the non-compete restriction and in doing so, found that the longer the delay, the more likely it will be that the employee can persuade the court that the damage to the ex-employer’s interests has already been done (meaning an injunction would be pointless) and they should be allowed to continue in their new job (rather than be prevented from working) until the case can be heard at a full hearing.

The Court held that the 7-month delay was fatal to the application for an interim injunction because most of the damage to Panon’s business would already have been suffered by the time any injunction took effect.

Significantly, the Court decided that the date of the appeal hearing was the appropriate point to assess the position and it did not matter that the delay to that point was largely out of Panon's control.

AMOB Machinery Ltd v Smith-Hughes (High Court)

In the second recent case, the High Court dismissed AMOB Machinery's application for an interim "springboard" injunction against its former employee (a key account manager), its director and a competitor company which the former employee joined as a director.

AMOB Machinery, which sells and markets highly specialist machinery, claimed that prior to leaving the company, its former employee had uploaded large amounts of confidential information onto his personal OneDrive. This confidential information was said to include lists of customers, products, suppliers, quotes, orders and invoices as well as a "key email enquiries" database and notes of conversations with potential customers. AMOB Machinery also claimed that the three defendants all wanted to divert business away from and thereby cause damage to its business and, through the former employee's breach of confidence, they had obtained 'a head start' to doing so. It therefore sought a 12-month injunction against them although the evidence was that it had taken approximately 4 months from being aware of a breach of confidence for AMOB Machinery to instruct a solicitor and a further month to intimate a claim.

The High Court held, among other things, that: (i) the delay in applying for the injunction had been extreme, inordinate and improperly explained; (ii) if any confidential information was currently still in the possession of any defendant, its delivery up would seem to be pointless one year later; (iii) the former employee had not been subject to any express contractual confidentiality obligations; and (iv) the balance fell heavily in favour of not granting injunctive relief.

Conclusion

Each of these cases highlight the potential difficulties faced by employers whose businesses are threatened by apparent wrongdoing by ex-employees. In the unfortunate event that action (whether actual or threatened) is necessary, employers are well advised to act quickly both when assessing risk of damage to their business and taking advice and then in actually taking action. The position of the business will also always be made stronger by well thought out and up to date contractual provisions and highly functioning business protection methods such as the safeguarding of confidential information.