C Wzrd Ltd & Anor v Kortan & Anor

An interim springboard injunction is restorative, not punitive. The applicant must identify the unlawful competitive advantage, the resulting harm, and the period needed to neutralise that advantage and restore the parties’ position. The court must make a broad assessment of both cases without conducting a mini-trial. Relief must be fair, just and proportionate, and must not restrain a former director more widely than justified by continuing statutory duties and proved or credibly alleged wrongdoing. A general restraint on competition will not ordinarily be justified where the director was free to resign and compete, subject to continuing duties concerning company property, information and opportunities.

The claimant companies sought interim injunctions against their former director and a company he had incorporated. The claims included breach of statutory and fiduciary duties, misuse of a database, trade mark infringement and passing off.

By the hearing, undertakings substantially resolved the database, confidential information, passing-off and trade mark issues. The remaining dispute concerned restraints on competition, involvement in the second defendant’s business, solicitation and conduct said to cause continuing commercial harm. The central issue was the proper form and duration of any springboard or other interim injunction.

1. Outcome. The court granted limited additional relief. The first defendant was restrained until 30 June 2020 from assisting the second defendant in a business competing with the claimants’ business as carried on while he was a director. He was also restrained until trial or further order from breaching his continuing statutory obligations, encouraging subscription-refund claims, and commenting online or on social media about that topic, subject to the stated qualification. The wider restraints sought were refused.
2. The American Cyanamid principles applied. There was at least a serious question to be tried, the claimants could provide a worthwhile cross-undertaking in damages, and the balance of convenience favoured limited protection. Since the interim hearing would substantially determine the practical relief, the court assessed each side’s case and the likely duration of any unfair advantage, while recognising that the evidence was incomplete and untested.
3. A springboard injunction exists to neutralise an unfair advantage obtained through wrongdoing. Its purpose is restorative. The court must consider both the effect of the wrongdoing on the claimant and the illegitimate advantage gained by the defendant. The claimant bears the burden of identifying the precise advantage and the period for which protection is required.
4. The first defendant’s admitted conduct gave the claimants a strong prospect of establishing breach of statutory and fiduciary duties. The continuing duty under Companies Act 2006, sections 170(2)(a) and 175, justified protection concerning company property, information and opportunities encountered while he was a director. It did not justify a general prohibition on competition, because he had no contractual restraint and had always been free to resign and compete, subject to his statutory duties.
5. The six-month period was unsupported and excessive. The claimants’ own business vulnerabilities, the absence of evidence of actual database use, and the period for which undertakings had already operated meant that three months was fair, just and proportionate. The proposed boilerplate restraints concerning all prospective customers, suppliers and employees were too wide or uncertain and crossed the line from protection into punishment.