England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
HIGH COURT OF JUSTICE (QUEEN'S BENCH DIVISON)
(HIS HONOUR JUDGE SEYMOUR QC)

		Royal Courts of Justice Strand London, WC2A 2LL
		22 April 2015

LORD JUSTICE ELIAS:

1. This is an appeal against the refusal by His Honour Judge Seymour to grant an interim injunction pending the return date. The application was made before him on short informal notice to the respondents. The judge accepted that there was a serious issue to be tried, but refused relief on the grounds that there was no purpose in granting an injunction in the circumstances of the case; that makes it a highly unusual case.
2. The background to the application was set out in the witness statement of David Thomas. Until October 14, he was the Chief Executive Officer of the Market Services and Solutions Division of the first applicant and its subsidiary companies. He has, since that date, been responsible for negotiating a sale of part of the business and in fact it involves the sale of the part which is the subject of these proceedings.
3. Willis is a global insurance and reinsurance broker which provides, apart from insurance and reinsurance, risk management and financial services to clients. The application relates to one part of its business, namely the Fine Art, Jewellery and Specie Risks Division (FAJS). According to Mr Thomas, it makes tens of millions of US Dollars annually and he says it is the worldwide market leader involved in this type of insurance. The third respondent is the global managing director of that division, Mr Gordon. He is a longstanding Willis employee. The first and second respondents (whom I will call JLT) are direct competitors of the Willis Group; the second respondent being a subsidiary of the first.
4. The witness statement was made on 13 April. It stated that in the preceding ten days some thirty employees of Willis had resigned the FAJS division in order to join JLT. Twenty two resigned on Maundy Thursday, these included Mr Gordon; he left first and then the others followed during the course of the day. He, in fact, was subsequently placed on garden leave in April. Four then left on 9 April; three on the tenth and two more on the thirteenth. The staff, according to the statement, included almost all the senior management team and all the key revenue producers in the UK. Many of them had had long service with Willis in the FAJS division and were extremely experienced. There were, however, around thirty staff left in more junior ranks, but still individuals who would have an important role to play in the business.
5. Mr Thomas said that it was Willis' belief, based in fact upon statements from Mr Gordon and other evidence, that there would be a second wave or phase of recruitment, part of what he describes as a coordinated attack which would be directed at further employees in the London office and also employees from the North American offices. There are 35 employees in the US. They are employed by subsidiary companies, not by the claimants themselves. The evidence is that the New York operations provide to London much of the business which is placed by Willis with Lloyds and other London brokers. The three senior US team members report to Mr Gordon. Mr Goulding QC, counsel for the respondents before us today, submitted that there was very little evidence that the US operation was of any great significance to the UK operation. However, that is not the tenor of the evidence which has been produced at court.
6. Willis had been investigating the circumstances of these resignations. The sequence seemed to be as follows. On Wednesday 1 April, JLT's CEO, Mr Dominique Burke, told Willis' Deputy Chief Executive Office that JLT had taken over twenty employees from the division and he said he wished to offer Willis the opportunity to sell the division at what Willis believed to be a substantially discounted price. The respondents have, at all times, denied that they have done anything unlawful, as alleged by the claimants. They say that the employers were recruited individually by a head hunter using information from Willis' own website. Mr Burke sent a text message on 2 April saying that he needed a response to the offer to buy the business. It was indicated that the claimants would not sell and that, it is believed, led to the resignation of the employees on that date.
7. Willis considered that, at least for the purposes of an interim injunction, it was legitimate to infer that the resignations had been choreographed by Mr Gordon acting, essentially, in cahoots with the respondents who had been coordinating the departure of the staff. Willis alleged that he was acting in breach of both his contractual and fiduciary duties and that JLT were the coordinating arm. This was supported, they claimed, by the fact that some of the staff were contacted on telephone numbers which were not to be found on the website and must have been obtained by some other means. The injunction was sought in the usual way only until the inter parties return date.
8. The case for the appellants essentially is that this sudden drain of staff created an urgent situation. There was a serious risk that further staff would leave and that would be very damaging to the claimants. They sought relief in two main parts. The first was to prevent the respondents from approaching employees in order to persuade them to leave or to encourage others to leave. That would have been unlawful (as Mr Goulding accepts). The second, in relation to the first two respondents in particular, was designed to prevent them from seeking to recruit employees from Willis or to negotiate with them or accept them into employment in any way. This would not of itself involve any illegal activity by the respondents in the normal way, but the relief was sought on the basis of the well-known Springboard Principle i.e. it was alleged that the respondents had benefitted from their unlawful activities and that it was necessary, in order to prevent them from taking advantage of those activities, to prevent any employees, either from the US or the UK operations, from being able to join them. The appellants undertook to give cross undertakings in damages in the usual way.
9. We do not have an official transcript of the judge's decision, but there are notes of what he said before the court. The judge considered that the appropriate test was the well-known American Cyanamid test laid down by Diplock LJ; on the assumption that damages are not an adequate remedy, the judge has to ask whether there was a serious issue to be tried, and if so, where does the balance of convenience lie? That, essentially, is asking which is the lesser evil; will it do less harm to grant an injunction which is subsequently shown to have been unjustified, or to refuse one which subsequently turns out to have been justified? The judge accepted that there was a serious issue to be tried against Mr Gordon in particular. He was satisfied that there was evidence that Mr Gordon had broken his contractual duties of loyalty and good faith. That, of course, was only on prima facie evidence and I emphasise that Mr Gordon denies this and has not as yet adduced any evidence to explain what he did or did not do. The judge was also "just about satisfied" that there was the case against the two corporate respondents while describing the evidence as "thin". He then went on to consider whether it was just and convenient to grant the injunction. He does not seem to have addressed, in terms, the balance of convenience test, but according to the notes, he said this:

"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."

10. We assume that the judge must have come to the view that damages would not be an adequate remedy (no doubt realistically). But the basis of his conclusion was that there was no point in the injunction and the reason that he came to that conclusion was essentially on two grounds: first, he said that as far as the UK staff were concerned, the evidence was that the heart had been torn out from the business and so there was now no obvious attraction to the first and second respondents in any of those employees who remained in the operation. So far as the US operation was concerned, it is a little more ambiguous as to precisely what his reasoning was. He pointed out that no US staff had actually been recruited by JLT, but he went on to say that these employees were in any event not employed by the claimants who were before the court and that it was a matter for the employer of those individuals to seek relief. It was not relief which these appellants could properly seek. So he refused the injunction.
11. Before us there is a second witness statement which suggests that a further employee, Mr Brady, a divisional director, has resigned since the judgment on 14 April, but nothing much has been made of that in the hearing today. The appeal to this court is by permission of Moore-Bick LJ. The appellants say that the approach of the judge was wrong. Specifically, he could not properly say, on the evidence, that the remaining staff would be of no interest to the respondents and that everything was simply in the past. It was important for the appellants that they should be protected from further poaching of their staff. Even if these were largely more junior staff, they were still essential to the nature of the operation. The fact that they would be of some interest to the respondents was demonstrated by the fact that some categories of these staff had in fact been recruited and, in any event, it stands to reason that the respondents will need junior staff in order to provide the necessary back-up to the senior staff whom they had already recruited.
12. It was also submitted that there is a serious risk that more senior US staff would be poached; there was evidence of the phase 2. The judge was wrong to say that relief could not be granted because the US staff were not employed by the claimants before the court. The third respondent was in breach of his obligations in seeking to deal with these US employees for whom he was responsible by potentially persuading them to take action which would be inconsistent with his duty to the company. If the first two respondents were part of this (putting it in loose terms) conspiracy with the third respondent then there is every reason why they should be prevented from dealing with the staff also. That would be a necessary safeguard to prevent them from benefiting from the springboard advantage which they had obtained by acting unlawfully, as the claimants contend.
13. Moreover, it is submitted that if one looks at the balance of convenience (which the judge did not do) there is very little harm to the respondents if the injunction is granted. On the assumption that the judge is right and that there is no interest which the respondents have in the remaining staff in future, there is no reason to suppose that they will seek to recruit any of them. On the other hand, it is very important from the point of view of the claimants that such staff as they have are retained in the business. It has been badly destabilised as a result of these activities; it is important that they keep as many staff as they can and recruit, as quickly as they can, more senior employees so that they can seek to stabalise the business before it is too late.
14. I have not focused on the third respondent because we were told today that an agreement has been reached in his case and undertakings have been given pending trial, but no such agreement was made in respect of the first two respondents. Mr Goulding has focused particularly upon the conclusions of the judge. He has reminded us of the well-established principle laid down in such cases of Hadmore v Hamilton [1983] AC 191 220 B to E by Lord Diplock that in cases of interim injunctive relief, the appellate court should only interfere where they consider that the judge of first instance has exceeded the generous ambit within which reasonable disagreement is possible. He submits that if one looks at the decision in this case, the argument was advanced before the judge on the grounds that there was a legitimate concern that further employees would be recruited and that it would be appropriate, in accordance with the principle to protect against the springboard effect, that the injunction should be granted pending the hearing. The judge was well aware this was the argument. He reached a clear conclusion that there was no real risk of further staff being recruited and he gave his reasons. It is not for this court to seek to upset that conclusion unless the court considers that it is wrong in the sense that it falls out with the band of what a reasonable judge could have considered on the evidence before him.
15. In my judgment, the judge did err. I do not think it was a proper inference to be drawn from the evidence that even in relation to the UK staff there was no real risk that further attempts may not be made to recruit those who were left. Essentially, I say this for the reasons advanced by the appellants. It is likely that the respondents would need staff off this category of employees and, as I have said, they have recruited some of them already, and there was a pattern of staff leaving, albeit only in small numbers following the first initial significant departure of 22 members of staff on 2 April.
16. It is important, from the claimants' point of view, that they can retain the staff, if possible, so as to build up their business again. In relation to the US staff, it seems to me that a better reading of the judge's decision (and, as I have said, we only have this note) is that he did not think that they were properly to be considered by the court because they were not employed by the appellants. I do not accept that that is relevant. The third respondent clearly had an obligation both under his contractual and his fiduciary obligations to act in accordance with the interest of his employers. If and to the extent that he was seeking to encourage them to leave and go elsewhere to a business that he was shortly going to join himself, that was plainly in breach of that obligation. If the first and second respondents were parties to that wrongdoing then they too would be acting unlawfully.
17. There must be a realistic prospect, if indeed the evidence that there was intended to be a phase 2 can be sustained, that there was some plan to seek to recruit from the American staff also. Accordingly, in my view, the judge erred in law in concluding that these employees would be of no interest to the claimants. It seems to me that the appellants needed to be protected from possible recruitment of both categories of staff and, in addition, it seems to me that the balance of convenience came down decisively in favour of the claimants. If the respondents do not wish to recruit these staff, they are not adversely affected by an injunction, particularly a short one.
18. Mr Goulding emphasised that springboard injunctions are very exceptional and that there must be compelling evidence of serious wrong doing and he cites cases such as UBS Investoral Wealth [2008] IRL 654 and Tullett Prebon Plc v BGC Brokers [2009] EWHC 819. I would see more force in this if we were granting a long injunction, but at this stage, we are only concerned with granting the injunction pending the return date, which should be between one and two weeks, one would hope.
19. I should emphasise that the first two respondents strongly dispute the allegations. When they file evidence the picture may look very different to the judge than they do today when we have seen only one side of the case. But for the moment, we are simply holding the ring. Mr Goulding also suggested that even if it was appropriate to prevent the respondents from recruiting or actively seeking to recruit staff it would be wrong to prevent them from employing staff who had approached them. He says that would be a serious incursion into the right to work for these particular employees. I see the force of that, but it seems to me that it is not a justification for excluding them from the scope of the injunction. The reason is that the business will have been destabilised and some of the staff will naturally be seeking to find more secure employment elsewhere. The claimants are, I think, entitled to prevent the respondents from recruiting such staff in the short term, at least until the return date. Moreover, it is extremely difficult to monitor a situation of that kind and to determine whether the approach came from the employee or whether it came, in reality, from the employer.
20. For these various reasons, therefore, I would uphold the appeal and grant injunctions broadly in line with the relief sought by the appellants, save that it is agreed that paragraph 1.8(ii) should go. There may be other detailed points of drafting which need to be resolved between the parties, but in substance, I would approve the order in the terms sought by the appellants until the return date.

LORD JUSTICE LEWISON:

21. I agree and have only this to add: As Lord Justice Elias has explained, the main reason why the judge refused the injunction was that he thought that there was no point in granting it. As he said in his judgment:

"The evidence suggests strongly to me that if and insofar as Mr Gordon had wrongly constructed a team move, and the First and Second Defendants were involved unlawfully in encouraging Mr Gordon to breach his contract, all that has happened. It is the past."

22. The wrongdoing may have been in the past, but the question of springboard relief is whether the effect of past wrongdoing continues to confer a present and future benefit on the wrongdoer which the court should prevent. The judge simply failed to deal with that question and that, in my judgment, was an error of principle which entitles this court to intervene. For the reasons given by Elias LJ, I agree that the appeal should be allowed in the terms that he proposes.

SIR COLIN RIMER:

23. I agree with both judgments. I too would allow the appeal.

LORD JUSTICE ELIAS:

24. A somewhat old-fashioned order, but we will say claimants' costs in the case.

Order: Application granted.