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Litigation Success – “Clients are not the property of the law firm”

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Court of Appeal cancelling non solicitation & disclosure injunction – reference made to the so-called Springboard Injunctions

Dr. Marina Himoni

The Plaintiff/Applicant has secured the issuance of non-solicitation and disclosure orders on an ex-parte basis and subsequently the orders were made absolute upon hearing. Our Law Firm has successfully appealed, on behalf of the Defendants/Respondents, the judgment of the Court which has rendered the abovementioned orders absolute. The issued orders that were challenged via the appeal were the following:

  • Order preventing the use or sharing of confidential information of the Plaintiff/Applicant which the Respondents have in their disposal, including contact details of clients and associates and information with regards to the business of the Plaintiff until the final hearing of the action or until further order of the Court;
  • Order preventing the provision of legal services to the Claimant until the final hearing of the action or until further order of the Court;
  • Order ordering the pausing of the illegal use and/or processing of the personal data of the clients of the Plaintiff until the final hearing of the action or until further order of the Court.

According to one of the reasons of appeal, the first instance Court wrongfully and/or contrary to the governing principles relating to the drafting of orders, rendered the above injunctions absolute by leading to the full and disproportionate limitation of civil rights and/or constitutionally protected freedoms. The particular reason of appeal pertains to the fact that no time limit was set for the period that the abovementioned orders would remain in force, contrary to fundamental freedoms of the Appellants such as the freedom to choose an occupation and the right to engage in work, the freedom of contract as well as the freedom of economic development and the freedom to conduct business. The Court at first instance did not examine the possibility to set a time limit or a definable period in which the said orders would remain in force.

The Court of Appeal expressed the view that whether there should be a time limit on the issued orders depends on the cause of action and the nature of the alleged tort and/or breach of contract of employment (if one was in place). Moreover, the Court of Appeal referred with approval to the so-called springboard injunctions. A springboard injunction is a specific type of court order issued under English law which is usually used to prevent a former employee from misusing their former employer’s information. This is the first time that a Cyprus court incorporates this type of orders by reference to the respective English case law. In particular the Court of Appeal sought guidance to QBE Management Services (UK) Ltd v Dymoke [2012] EWHC 80 (QB) which constitutes the leading English case on the “Springboard injunctions” and has set the below principles:

  1. Where a person has obtained a “head start” as a result of unlawful acts, the Court has the power to grant an injunction to restrain the wrongdoer so as to deprive him of the fruits of his unlawful acts, known as “springboard” relief.
  2. The purpose is to prevent the defendants from taking advantage of the springboard which the Judge considered they must have built up by their misuse of the information in the card index.
  3. “Springboard” relief is not confined to cases of breach of confidence. It can be granted in relation to breaches of contractual and fiduciary duties and flows from a wider principle that the Court may grant an injunction to deprive a wrongdoer of the unlawful advantage derived from his wrongdoing.
  4. “Sprinboard” relief must be sought and obtained at a time when any unlawful advantage is still being enjoyed by the wrongdoer.
  5. “Sprinboard” relief should have the aim simply of restoring the parties to the competitive person they each set out to occupy and would have occupied but for the defendant’s misconduct. It is not fair and just if it has a much more far-reaching effect than this, such as driving the defendant out of business.
  6. “Sprinboard” relief will not be granted where a monetary award would have provided an adequate remedy to the Claimant for the wrong done to it.
  7. “Sprinboard” relief is not intended to punish the Defendant for wrongdoing. It is merely to provide fair and just protection for unlawful harm on an interim basis. What is fair and just in any particular circumstances will be measured by the effect of the unlawful acts upon the Claimant and the extent to which the Defendant has gained an illegitimate competitive advantage.
  8. The burden is on the Claimant to spell out the precise nature and period of the competitive advantage.

In a subsequent case, Forse and others v. Secarma Ltd and others [2019] All ER (D) 156 (Mar), the English Court of Appeal has emphasized that a springboard injunction should never last longer than is reasonable to remove the unfair advantage secured by a defendant and a judge granting an interim injunction must always do their best to estimate what is the length of the reasonable period. If it is shorter than the period before the trial will commence (the date of which should always be ascertained), they should specify the period and relief will be limited accordingly. As for the length of the period necessary to remove the unfair advantage, it will all depend on the nature of the advantage and how it can reasonably be expected to be removed, bearing in mind that the object is not to punish the defendant but to correct the wrong to the claimant.

In the present case handled by our Law Firm, the Court of Appeal highlighted that evidently in cases of confidential information, although they may be subject of protection even after the termination of the employment with the issuance of relevant order, there should be a time milestone set by the Court taking into account the specific facts of the case. In the facts of the case, what should be taken into account is the generic occupation of the former employee against any limitations to the exercise of his/her occupation which will accrue with the issuance of the order. In parallel any fiduciary duties seize as of the termination of the employment if there is no contract of employment in place with a non-solicitation clause.

Time limitation does not apply in cases where there is interception or unfair use of trade secrets and the Court of Appeal has in in the present case, by deriving guidance from the English Court of Appeal on what constitutes trade secrets, has reached the conclusion that the personal data and/or contact details of the clients do not constitute trade secrets.

In addition, the Court of Appeal concluded that what should have been taken into account by the Court at first instance is the generic occupation of the Appellants in conjunction with the difficulty and restriction to the free exercise of their occupation that the extended duration of the orders would have for the Appellants. If those parameters were taken into account, the said orders would not have been rendered absolute before a timeframe for their validity was set by the Court. For this reason, the Court of Appeal cancelled the said orders which had no reason to remain in existence three and a half years after their issuance. The reasonable period to remain in place was according to the Court of Appeal twelve (12) months.

The Court of Appeal has highlighted that clients of law firms, even those with whom there is a contract for the provision of services for a fixed term (retainers) shall not be regarded as the property of the law firm as such to prevent the contact between them and former employees in perpetuity. Employers should bear this in mind when drafting employment agreements that contain non-solicitation clauses that aim to last in perpetuity. A reasonable duration for which such restriction may last is twelve (12) months.

For further information on this topic please contact Dr. Marina Himoni at P. N. KOURTELLOS & ASSOCIATES LLC, by telephone: +357 25 745575 or by fax: +357 25 755525 or by e-mail: mh@kourtelaw.com

Disclaimer

This publication has been prepared only as a general guide and for information purposes. It does not constitute or should not be read as a legal advice. One must not rely on it without receiving independent advice based on the particular facts of his/her own case. No responsibility can be accepted by the authors or the publishers for any loss occasioned by acting or refraining from acting on the basis of this publication.