QBE Management Services (UK) Ltd v Dymoke & Ors

Senior employees breach duties of fidelity when they covertly organise a competing venture during employment, solicit colleagues or clients, misuse confidential information, or conceal a material competitive threat. The legality of preparatory competition depends on the employee’s duties and the nature and scale of the conduct. A fiduciary’s disclosure obligation is ordinarily an aspect of the duty to act in the company’s best interests.

Springboard relief is available for serious breaches of contract, fiduciary duty or confidence where an unlawful competitive advantage remains. The injunction must remove that advantage, rather than punish the wrongdoer, and must be proportionate to the time lawfully required to achieve the same position.

The claimant’s senior employees resigned and sought to establish a competing marine insurance venture with the fourth defendant. Before and during their employment and garden leave, they planned a mass departure of colleagues, approached employees and brokers, used the claimant’s confidential material, and negotiated financial and security backing.

The claimant sought final injunctive relief, damages and enforcement of post-termination covenants. Interim injunctions had been granted by Parker J and by Nigel Wilkinson QC, sitting as a Deputy High Court Judge; the Court of Appeal rejected an appeal against the latter order. The central issues were whether the defendants had breached duties of fidelity, fiduciary duties and confidentiality, whether the fourth defendant had induced breaches of contract, whether the non-competition covenants were enforceable, and whether springboard relief was justified.

1. Liability. The first, second and third defendants had engaged in a concerted and covert campaign to establish a competing business using the claimant’s employees, brokers, confidential information and business opportunities. Their conduct was far beyond legitimate preparation for competition. It breached contractual duties of fidelity, confidentiality and, in the case of the first defendant, fiduciary duties. The fourth defendant knowingly induced numerous breaches of contract. Blind-eye knowledge was sufficient.
2. Fidelity and disclosure. The duty of fidelity is fact-sensitive and increases with seniority. It was a breach to solicit or entice employees, assist a team move, misuse confidential information, and fail to disclose a serious competitive threat. The first defendant’s fiduciary duty required him to inform the claimant when the proposed venture and concerted recruitment became a material threat. A fiduciary’s disclosure obligation was not a separate free-standing duty, but flowed from the duty to act in the company’s best interests.
3. Confidentiality and covenants. The claimant had not established sufficient trade secrets or highly confidential information, client connections, or contractual protection for workforce stability to justify the non-competition covenants. The covenants were therefore not enforced. This did not affect the separate operation of other post-termination obligations.
4. Springboard relief. The court could restrain an unfair advantage obtained through breaches of contract, fiduciary duty or confidence. Relief had to be sought while the advantage remained, had to be directed to restoring the lawful competitive position, and could not be punitive. Damages were inadequate because the threatened loss of business was difficult to quantify and potentially irreversible. The appropriate period was assessed by reference to the time needed to achieve lawfully what had been achieved unlawfully, measured comparatively and in the circumstances as a whole.
5. Orders. Final springboard relief was granted against all defendants until 28 April 2012. The claimant was also awarded £314,030.81 for staff retention, recruitment and temporary claims-adjuster costs.

The judgment records earlier interim proceedings. Parker J granted an interim injunction on 25 August 2011. Nigel Wilkinson QC, sitting as a Deputy High Court Judge, granted further interim relief on 18 October 2011. The Court of Appeal rejected the defendants’ application to appeal that order on 28 October 2011. The present court then determined the expedited trial and granted final relief.