In MTP Group Ltd v Peel and others the court dismissed (i) an application for a springboard injunction to prevent the defendants gaining a competitive advantage through dealing or contracting with particular customers; and (ii) a permanent injunction that sought to enforce the defendant’s confidentiality obligations to prevent the alleged misuse of confidential information.
The judgment provides a useful overview of the purposes of a springboard injunction and when they will be granted.
(Co-authored with Glen Brown)
MTP Group Ltd (“MTP”) produces and supplies mattress machinery, equipment and parts to the manufacturer. Shaun Peel and Michael Birtwistle, the first and second defendants, were employed by MTP as the Managing Director and the Technical Sales Manager respectively until 1 September 2016. The first and second defendants were subject to restrictive covenants that prevented them soliciting or dealing with customers that they had personally dealt with at MTP for a period of six months following termination of their employment. Upon expiry of the six months they incorporated MattressTek Limited (“MattressTek”), the third defendant, which traded in direct competition with MTP.
MattressTek developed two machines and a conveyor to transport mattresses. MTP alleged that the designs for MattressTek’s products were based on confidential information of MTP which the first and second defendants misused. MTP also alleged the defendants retained client contact information enabling MattressTek to contact clients in breach of their confidentiality agreements.
The springboard injunction
A springboard injunction aims to prevent the defendant making use of the head start they have gained through misuse of the claimant’s confidential information. The injunctions prevent former employees gaining unfair advantages over their former employer by restoring the parties to the position they would have been in but for the defendant’s misconduct. The injunction lasts until the date when the defendant could have reached the position they are currently in without the springboard advantage.
Springboard injunctions will not be granted when a monetary remedy would be sufficient.
In this case, a springboard injunction would have prevented MattressTek from dealing with any of MTP’s customers or suppliers. It would also have prevented the use of confidential information. MTP alleged that this would include preventing the design of the new machines by MattressTek as those designs were based on MTP’s confidential information.
The burden is on the claimant to show the information was misused which resulted in the defendant gaining an unfair advantage.
Reasoning for dismissing the springboard injunction
MTP argued that MattressTek could not have developed in 6 months the two machines and a conveyor, which normally take 12 months each to develop, without the use of MTP’s confidential information. MTP claimed the springboard advantage would last a further 12 months.
The court dismissed the injunction on the basis that:
- The first and second defendants had combined experience of over 30 years;
- They had dedicated themselves to their tasks without the distractions of the day-to-day running of a company; and
- They had contracted with an associated company that enabled them to get the design work completed more quickly.
- For these reasons the court held it was reasonable for MattressTek to have developed their machines in the unusually quick time. The court further held that:
- The desired injunction, were it to be granted, would last until May 2018. This would be over 20 months after the defendants had left the employment of MTP. Preventing competition for such a long period of time would be excessive; and
- A trial would not be able to be organised until after a springboard advantage, if one ever existed, had ceased to exist.
Retention and use of confidential information
It was not disputed that the defendants took with them large quantities of confidential information. However, a springboard advantage requires the use of that information rather than simply possession of it. MTP alleged that the following factors constituted evidence of the use of confidential information:
- The similarity of the machines;
- The defendants’ untruthful answers;
- The failure to respond to solicitors’ letters;
- The destruction of the devices holding the confidential information by the defendants; and
- The speed at which the machines went to market.
The court nevertheless held that there was insufficient evidence to grant an injunction on the basis that:
- The defendants had shown sufficient evidence to conclude that their machines were suitably different from the claimant’s;
- Although suspicious, the untruthfulness of answers was not evidence that the defendants had used the confidential information;
- Although the first and second defendants did not explain their failure to respond to the solicitors’ letters in their witness statements, their failure to respond was not evidence that they had used the confidential information even though it arose suspicion;
- Destroying the devices which stored the confidential information “as the net was closing in” made the judge “sceptical” of the claims that the information had not been used, but it was, nevertheless, for the claimant to prove; and
- The speed with which the machines went to market could be explained as above.
The Court was prepared to grant limited injunctive relief until trial or further order to prevent the defendants from retaining, copying, using, manufacturing machines in accordance with and divulging to any third party confidential information contained in MPT’s technical drawings, customer lists, supplier lists and bills of materials database.
This judgment provides a useful restatement of the principles upon which a springboard injunction will be granted. In particular, it was important for the court to calculate the head start that was gained together with the chance of success at trial.