A former employee of DCL Communications left DCL in 2019, and more than 18 months later joined a competitor, Reach Technology Solutions Limited. Both DCL and Reach were in the business of providing services relating to IT infrastructure. Whilst the former employee’s employment contract with DCL contained a confidentiality clause, there was no restraint of trade (non-compete) clause to prevent her from working for a competitor following the end of her employment.

In December 2021, a long-standing DCL client decided not to renew its contract with DCL, which had originally been handled by the former employee. Thereafter, another important client told DCL that they had been approached by the former employee, offering Reach’s products and services. DCL also heard from another client that it had received quotations with significantly lower prices from other companies, but it was not clear whether Reach was among those companies.

DCL grew suspicious and carried out its own investigations. DCL concluded that the former employee was likely helping Reach entice clients away from DCL at the ‘right time’ (i.e. around the time when those clients’ maintenance contracts were due for renewal), with the right price, by using DCL’s confidential information, namely:

• client lists;
• the expiry dates of the clients’ contracts;
• the profit margin for each contract; and
• the time when negotiation with clients for renewal of contracts commences.

The Plaintiff began court proceedings and applied for a springboard injunction to prevent the former employee and Reach from obtaining an unfair advantage by using or disclosing that information.

The court dismissed DCL’s application on the basis that its case was built solely upon suspicion and speculation, without any concrete evidence of any wrongdoing by the Defendants.

In reaching its decision, the Court focused on the following:

• No unlawful behaviour: There was no evidence that the former employee had misused any Confidential Information. In the absence of any non-compete covenants, she was entitled to solicit business from DCL’s customers and use for her own purposes any information she carried in her head, provided that the information was acquired honestly in the ordinary course of her employment and she had not stolen, copied or deliberately memorised such information.

• No unfair competitive advantage: On the contrary, there was evidence that DCL’s clients usually ask for multiple quotations before renewing a contract. In some cases DCL’s clients approached the former employee, not the other way round. There was also evidence that competitors other than Reach managed to provide quotations with a significantly lower price than DCL.

• Competitive advantage no more than ‘ephemeral’ and ‘short term’: There was no evidence that the Confidential Information would still be useful after some 19 months when the former employee started working for Reach (let alone more than three years at the time DCL began court proceedings). The contracts had already been renewed once, if not twice, during that time. Any information about profit margin must have become outdated and any competitive advantage, if it existed at all, must have vanished.

• Monetary award would be adequate: There was no unfair competitive advantage; and even if there was, monetary damages would be adequate. There was also no concern of Reach spreading the Confidential Information around without the injunction, as it was ‘beyond imagination’ that Reach would do so if that information was as valuable as DCL claimed. The balance of convenience would have been against the granting of relief.

The case provides a helpful summary of the law in relation to confidential information and springboard injunctions. It also serves as a reminder that any such applications should be supported by concrete evidence of wrongdoing and not mere suspicion and speculation.

The case also illustrates the importance of non-compete clauses where an employer seeks to protect its legitimate business interests. A confidentiality clause on its own is unlikely to be effective. An employee is free to use any information they honestly obtained and carried away in their head.

Another key takeaway is to take note of any lifespan of confidential information and the timing of bringing a springboard injunction. Employers who are concerned about the misuse or disclosure of their confidential information should act quickly while such information is still in date and capable of providing a competitive advantage.

*Lewis Silkin