Create Financial Management LLP v Lee & Anor

A “springboard” injunction is an injunction restraining a defendant from conduct which would otherwise constitute the benefit of a competitive advantage obtained by the defendant’s unlawful conduct (such as breach of confidence, or breach of contract).

The relevant principles for the grant of a final springboard injunction are summarised in the judgment of Haddon-Cave J (as he then was) in QBE Management Services (UK) Ltd v Dymoke [2012] IRLR 458 (QB) at §§240-247 and 284-285. I take full account of each of 13 identified principles and of his further judgment [2012] EWHC 116 (QB) §8. For present purposes, key points from his judgments are as follows:

As regards the approach to the grant of interim injunctions, the American Cyanamid principles are familiar. In this regards I refer to Gee on Commercial Injunctions (6^th edn) §§2-015 to 2-018. The following four questions fall to be considered:

Two further matters are relevant to the present case. (1)In relation to stage (1), as to the content of the standard of a “serious issue to be tried”, the claimant will succeed, unless he is unable to show, by the evidence, that he has “any real prospect of succeeding in his claim for a permanent injunction at trial”: see American Cyanamid at 408A-B. In my judgment, this is similar to the standard for summary judgment; thus unless the claimant’s prospects of success are no better than “fanciful”, there will be a “serious issue” to be tried. (Somewhat confusingly, the phrase “frivolous or vexatious” is sometimes used (by Lord Diplock at 407G and in other cases)).

This assessment of the merits is part of the balance of convenience at stage (4): see Lansing Linde per Beldam LJ at 266 A-C (citing NWL v Woods) and at 266 F-G; and MPT Group v Peel, below at §104.

The application of these principles in the case of an interim springboard injunction is not straightforward. I have been referred to two particular cases: the decision of Mr Edward Pepperall QC (as he then was) in MPT Group v Peel [2017] EWHC 1222 (Ch) and the recent decision of the Court of Appeal in Forse v Secarma Ltd [2019] EWCA Civ 215. In both cases, the court applied the “Lansing Linde” approach to an application for an interim springboard injunction.

In MPT Group v Peel, Mr Pepperall stated as follows at §22:

“In covenant cases, the length of the potential final injunction is of course certain. Springboard cases are, however, different. It cannot be right that I should take the likely length of any springboard advantage as 12 months simply because such period is asserted by MPT. Miss Pennifer is right to submit that I first need to form some view upon the evidence as to the likelylength of any final springboard injunction and then as to thelikely date when judgment might be handed down after a speedy

trial” (Emphasis added)

The judge then went on to make an assessment, as a preliminary question, and in order to decide whether the Lansing Linde approach was to be applied at all, of the likely length of any springboard injunction (in comparison with likely date of final judgment). He concluded that the final injunction would last, at most, until December 2017 and that judgment would likely be handed down in October 2017. It would not be possible to have a trial until any springboard advantage was likely to have expired or substantially expired: see §§31, 34 and 35. For this reason, he proceeded to a Lansing Linde examination of the merits, and in particular of the alleged unlawful conduct said to give rise to the competitive advantage. He declined relief at the fourth stage, because the claimant was not likely to establish a sufficient breach of confidence to justify a springboard injunction at trial: see §§104-105.

In Forse Sir Terence Etherton MR (§§28-31) first summarised the American Cyanamid principles and then referred to NWL v Woods and Lansing Linde (referring to the passage set out in paragraph 53(2) above). Then, turning to interim springboard relief, he stated at §34 as follows:

“ It follows that an interim springboard injunction effectively delivers to the claimant, in advance of the trial, all or part of the substantive relief which the claimant seeks. At the same time, it operates in restraint of the defendant’s freedom to trade or carry on business or to deploy their skills. Such an injunction may also have consequences for the defendant as regards third parties, whether employees or others, if the defendant is precluded from continuing to honour commitments to such third parties. Forthose reasons, save only where the time gap between theapplication for interim relief and the trial is insignificant, thecourt should adopt the approach in Lansing Linde onapplications for an interim springboard injunction. The judgeshould assess and take into account the strength of each side’scase both as regards liability and also the length of time duringwhich any unfair advantage from the springboard will continue.In carrying out that exercise, the judge cannot conduct a detailedmini trial on disputed evidence. He or she must, however,undertake a fair and reasonable evaluation of the evidencebearing in mind that there will have been no disclosure, and thewitness evidence will be incomplete and untested by crossexamination. I will return to this issue in the context of the assessment of whether the period of unfair advantage would be likely to have expired before the trial has been completed.” (emphasis added)

Subsequently, when considering the scope and duration of the springboard injunction in that case, he added at §59:

“Since a springboard injunction should never last longer than is reasonable to remove the unfair advantage secured by the defendant, a judge granting an interim injunction must always do their best to estimate what is the length of the reasonable period. If it is shorter than the period before the trial will commence (the date of which should always be ascertained), they should specify the period and relief will be limited accordingly. If it is at least as long as the period prior tocommencement of the trial, it will not normally be necessary tosay more than that. In any case, the judge must always state thegrounds for their conclusion. They should avoid being tooprescriptive because the evidence will be incomplete anduntested at the interim stage and, as the present case shows, itmay prove to be incorrect and even knowingly false.” At §63 he said:

“Ms Frost’s evidence was that pen testers are highly skilled and relatively rare in the market, and it is not easy to recruit to replace departing testers. She said that it is even harder to recruit where there is a new competitor in the market seeking to take over Secarma’s business. In view of those difficulties, the time it took the defendants to plan and execute the recruitment of Secarma’s employees would have been a reasonable starting point for assessing how long it would take to remove the unfair competitive advantage obtained by Xcina. Furthermore, the Judge would have been entitled and right to take into account that the defendants’ evidence on this aspect is incomplete and untested and possibly, as indeed it transpired, inaccurate. Thatis why it would have been wrong for the Judge to have been tooprescriptive about the likely time that it would take to removeXcina’s competitive advantage but, on the other hand, perfectlylegitimate to conclude that it was likely to be not less than theperiod of some four to five months prior to the trial.”

(emphasis added)

First, the Lansing Linde approach applies, in principle, to an application for an interim springboard injunction. However, as pointed out by Mr Pepperall QC in MPT there is the difference that, whilst in a post-termination restrictive covenant case, the length of the injunction sought is determined by the terms of the covenant itself, in the case of a springboard injunction that period of time is at large and itself a matter for the court to determine and is not known at the time of the application for interim relief.

Secondly, if the time gap between the application for interim relief and the trial/final judgment is insignificant, the American Cyanamid approach to the merits of the claimant’s case is to be applied. On the other hand, if the time gap is significant, the Lansing Linde approach should be adopted for an interim springboard injunction: Forse at §34. The significance of the time gap is thus a “threshold question”. As to how the court is to assess the significance or otherwise of the time gap, in my judgment this is to be judged by reference to the length of the final springboard injunction (the advantage). So that if the final injunctive relief is a period of, say, 12 months, a gap of 3 months to trial would be insignificant; whereas if the final relief is a period of 6 months, a gap of 5 months to trial would be significant.

Thirdly, it follows that the steps to be taken in the analysis strictly turn on whether the significance or otherwise of the gap between breach and final judgment is to be assessed

In my judgment it is the former (the period sought by the Claimant). The entire rationale for the Lansing Linde approach is that the decision at the interim stage will determine the proceedings once and for all; by the time of trial, there will be nothing practical in dispute, regardless of whether an interim injunction is granted or refused. However, this is not necessarily the case in a springboard injunction case, where at the interim stage the length of the final injunction is not known. In the present case, even if the Court were to take the provisional view that the Claimant would be unlikely to obtain a final injunction for a period substantially longer than the gap to trial, that would not put an end to the litigation. Whether or not an interim injunction up to trial was granted, on the parties’ pleaded case, the Claimant would still be seeking, and the Defendant would still be resisting, the grant of a final injunction of much longer duration. Thus the decision would not put an end to the litigation one way or the other.

However, in my view, whichever approach to “significance” is to be taken, on the facts of the present case, the grant or refusal of the interim springboard injunction will, unusually, depend on whether the Claimant can show a “serious issue to be tried” at stage (1). This arises as follows.

For reasons explained (in paragraphs 69 to 75 below), I have concluded that, at stage (3), damages would be an adequate remedy for the Defendants. Turning then to the alternative analyses:

On any analysis, stage (4) is not reached at all, and thus there is no requirement to assess the likely merits on the Lansing Linde approach. (I add this: if, contrary to paragraph 54 above, the Lansing Linde approach comes at stage (1), in the present case I consider here that the gap is “insignificant” (see paragraph 62). Thus the test remains “serious issue to be tried”.

On its application for interim springboard relief, the Claimant contends as follows:

The Defendants submit:

In the light of my conclusions at paragraphs 63 to 65 above, I will address, first and somewhat out of the usual order, the question of adequacy of damages for the Defendants. I will then turn to deal with the merits of the Claimant’s claim to ascertain whether there is a serious issue to be tried. I will conclude by addressing the Defendant’s “clean hands” argument and considering the position of Old Mutual Wealth.

Damages as an adequate remedy for the Defendants

The Claimant’s evidence is that damages would be an adequate remedy for the Defendants if an interim injunction is “wrongly” granted now. Any loss in the interim period arising from the slow down in their plans will be limited to lost profit and is quantifiable (see Thomas 1st paras 139 and 140). In his second witness statement, Mr

By contrast, Ms Scott gives no evidence to suggest that any loss of the Defendants is not quantifiable. As to the quantum of loss, at paragraph 122 of her witness statement, she asserts that, effectively, the “potential losses to our new business” are £200,000, but provides no further explanation. The Defendants have not contradicted the Claimants’ basis for the sum of £40,000.

On the basis of this evidence, I am satisfied that the Defendants loss is quantifiable. Mr Roseman did identify this as being in issue (as opposed to the issue of fortification of the cross-undertaking). There is no evidence that that it is not quantifiable. The question then is whether the Claimant would be able to compensate the Defendants for such loss.

The Defendants contend that the cross-undertaking offered by the Claimant and its ultimate parent company LTV Group SA is meaningless. Detailed examination of the unaudited accounts of the Claimant and of its ultimate parent LTV Group SA reveals that they are flawed, that Bidco and LTV UK are insolvent and that the Claimant’s net assets, stated to be in excess of £2.6 million, are in fact no more than £104,066. They therefore seek fortification of the cross-undertaking by payment into court of the £400,000, being £200,000 in respect of costs and £200,000 in respect of damages arising from the wrongful grant of the interim injunction.

The relevant principles in relation to fortification of a cross undertaking are set out at paragraph 15.4 Admiralty and Commercial Courts Guide and in Gee, supra, §11.004, where it is emphasised that the enjoined party must show some real evidence which objectively establishes risk of loss in a likely amount.

First, I find that, apart from a passing assertion by Ms Scott, there is no evidence to support the conclusion that the Defendant’s losses will be any greater than in the region of £40,000 (on the basis of an annual loss of £125,000). The evidence supports this latter figure. Secondly, the cross-undertaking is to meet any loss caused by the imposition of the interim injunction, namely the restraint on their business activities. It does not cover the Defendants’ costs of the trial and is not intended to allow for “security for costs” to be provided by a route other than CPR 25.12 Thirdly, even on the detailed critique of the Claimant’s accounts and those of LTV Group, the Claimant’s net assets of £104,066 exceeds by some margin the Defendants’ potential losses. For these reasons I conclude that fortification by payment in is not appropriate in this case and I exercise my discretion not to make such an order.

For those reasons, I find that damages would be an adequate remedy for the Defendants.

The merits of the Claimant’s claim for final injunctive relief: serious issue to be tried

The alleged “unlawful conduct”

Failure to hand over clients

The first issue is the content of the obligation to “hand over” clients imposed, initially, by the Consultancy Agreements, and subsequently by the Settlement Agreement. The Claimant’s case is set out in paragraph 26 above. In particular the Claimant’s pleaded case appears to be that a three-way face-to-face meeting was contractually required with each client. By contrast, the Defendants contend that the obligation to “hand over” comprised (a) informing the client, whether by telephone, email or letter, that they would no longer be there IFA and that another CFM IFA would be taking over; and (b) providing full access to all relevant client information to the new CFM IFA. These are the “core obligations”. It is denied that there was any contractual obligation to conduct a three-way face-to-face meeting with each client and the new IFA.

The Consultancy Agreements refer only to the term “handover”. The Settlement Agreement refers, for the first time to “thorough handover”, at the same time referring to a handover to both a CFM IFA and Mr Thomas. The obligations, in clause 3.4(b) of the Consultancy Agreements, of all due care and skill and best endeavours to promote the interests of CFM import an obligation to carry out handover diligently. To that extent, it is arguable that the “handover” obligation in the Consultancy Agreements imported a duty to carry out handover “thoroughly” or at least to a high standard of diligence.

As regards the central question of whether, as a matter of contractual construction, a three-way face-to-face meeting was required, it does appear that initially some threeway meetings did take place: Thomas 1st para. 63. However as to whether the Claimant will establish at trial that it was a contractual term that there had to be a three-way faceto-face meeting with each client to be handed over, the following matters undermine such a conclusion:

However, whilst the Claimant’s case is weak, I am not satisfied that there is no real prospect of success. First, three-way face-to-face meetings did take place before the Settlement Agreement. Secondly, the change in the Settlement Agreement in the wording of the handover obligation, by the addition of “thorough” and the identification of handover to two specific individuals, were very arguably intended to add to the handover obligation and to make it more stringent. If handover in the Consultancy Agreements meant compliance with the “core obligations”, then handover in the Settlement Agreement required more than that. On this hypothesis, the Defendants have not put forward an alternative explanation of what more was required. It is arguable that that additional element required the face-to-face meetings, some of which had taken place in the intervening period. Thirdly, as regards the Defendants’ contention that the Claimant did not complain of breach of the handover obligation, on the basis of Mr Thomas’ second statement and the documents exhibited, it is likely that Claimant will establish that, in 2018 and 2019, there were concerns raised by the Claimant that handover was not happening quickly enough and that a plan for handover was sought, but not provided. At no point was it alleged that this amounted to a breach of contract, nor was there any reference to a need for a three-way face-to-face meeting in every case or indeed at all. Nevertheless this background of delay and concerns supports the contention that the amended wording was intended to make the obligation more stringent, and that in practice a face-to-face meeting was the only way to achieve that.

As to breach, there are weaknesses in the Claimant’s case. I note, first, that the breach is alleged to have occurred only from some time in September 2019 onwards (and not before) (see Particulars of Claim para 29.2). Secondly, if the content of the “handover” obligation is as contended for by the Defendants, there is no allegation, and no evidence, that they did not comply with those “core obligations” of informing the client of the change of IFA and giving the new IFA full access to relevant information. Thirdly, the Claimant contends that the named clients have not been handed over “thoroughly” or “at all”. That suggests that in some cases clients have been handed over, but not thoroughly and in other cases clients have not been handed over at all. However despite being requested to do so, the Claimant have not identified which clients fall into each of these two categories. They have not identified, in respect of each of the clients in Annex 5 to the Particulars of Claim what the Defendants failed to do, in relation to handover.

Nevertheless it follows that if (as I find above) there is a real prospect of establishing that there was a contractual requirement for three-way face-to-face meetings, then, on the basis that the Defendants have failed to hold such meetings with a number of clients, then there is also a real prospect of establishing breach of the handover obligation.

On the basis of the material before the Court, whilst the Claimant’s case faces substantial difficulty, I am satisfied that there is a real prospect that the Claimant will establish at trial that the Defendants were in breach of the obligations, in the Consultancy Agreements and in the Settlement Agreement, to hand over the clients. There is a serious issue to be tried on this aspect.

Copying across and/or failure to delete contact details

The Claimant’s case here is that: (1)On 6 March 2020 Ms Scott deliberately “synced” her LinkedIn account with her CFM contacts (through Google). This is part of the Defendants’ preparatory acts in breach of clauses 3.4(b) and/or (g) and/or 6(b) and/or 7.2 of the Consultancy Agreements.

The Defendants respond as follows:

As regards the first aspect – syncing - this allegation concerns preparatory acts before 1 May 2020. As such, and as explained below, even if there is breach, it is accepted by Mr Mehrzad that the Defendants have not obtained any material competitive advantage as a result of this breach. Thus, establishing breach does not go to support the claim for a springboard injunction. The factual issue is contested: see Thomas 1^st para 81, and 2^nd para 58 and Scott paras 53 to 58. It is not necessary to make an assessment of the likely outcome of that issue. I observe only that Ms Scott’s stated evidence is that she “never knowingly synced any contacts on LinkedIn, whether my CFM accounts or personal contacts”.

The second aspect is potentially relevant. Ms Scott accepts that she has made “connections” with a number of CFM clients through LinkedIn (both before and after 1 May 2020) and that as at 30 April 2020 she and/or Mr Lee were connected with more than 40 CFM clients through LinkedIn and/or Facebook.

On the material before the Court, I consider that there is a real prospect that the Claimant will establish that the Defendants failed to delete contact details of CFM clients in breach of clause 12(b). First, as regards the second part of clause 12(b), on the argument to date, I am not persuaded that “the contact details of business contacts made during the Engagement” refer, as a matter of construction, to the contact details of CFM clients (see the distinction between “customers” and business contacts” in the definition of Confidential Information in clause 1.1). On the other hand, if the words do refer to CFM clients, the Defendants’ argument that the clause is limited to clients first contacted after 18 December 2017 is weak. It makes no sense for them to be required to delete only those clients, in circumstances where (as demonstrated by the list prepared by Ms Scott) the Defendants’ contacts will have been made whilst they were fully active in the business i.e. before 18 December 2017. Secondly, however, if these client details do not fall within the second part of clause 12(b), there is a strong argument that they fall within the first part, as being “any information relating to the Business” of CFM stored on relevant disk or memory, and/or that they fall within the more widely drawn definition of “Confidential Information” in clause 1.1 (the words “as such” in the second part confirm that clause 12(b) imposed an obligation to delete all Confidential Information). On either basis, the Defendants were bound to delete that information from their Facebook and LinkedIn accounts on 30 April 2020. Whether any competitive advantage has been gained from such breach is considered below.

Preparatory acts during the consultancy before 1 May 2020

The Defendants were subject to a number of obligations of loyalty toward the Claimant during the course of the consultancy – include positive obligations to advance the interests of the Claimant and negative obligations not to be engaged in activity relating to a competing business. There is evidence to support the Claimant’s case that the Defendants were in breach of these obligations in the period from about January 2020 to 30 April 2020; in particular in relation to FCA authorisation through Tenet and Sense. (In a series of emails between the Defendants and Tim Davis of Sense between 28 April and 1 May, there is evidence of the Defendants and Sense being engaged in preparatory discussions and conduct for the grant of FCA approval for up to a week before 1 May 2020, that the Defendants wished to keep this activity confidential; and possibly that the Defendants had been taking steps to invite CFM IFAs to join them before 1 May). There is also evidence to support the further pleaded allegations of acts preparatory for competition: see paragraph 28 above. On the material before me I consider that the Claimant has a real prospect of establishing that that the Defendants were engaged in preparatory acts in breach of relevant clauses of the consultancy Agreements.

However, despite the fact that these allegations form a central part of its pleaded case, it is now accepted by Mr Mehrzad QC that no or no sufficient competitive advantage has been obtained as a result of such breaches. They are therefore not relied upon directly to support the final springboard injunction. Whilst Mr Mehrzad contended that these (non-causative) breaches could be taken into account when considering what is “fair and just” under the QBE principles, there is a strong argument that to do so would run counter to the seventh QBE principle, as amounting to punishing the defendant for wrongful conduct.

The nature and period of the competitive advantage

The Claimants rely upon the cumulative effect of failure to hand over and failure to delete contact details as giving rise to unfair competitive advantage justifying the final springboard relief.

The Claimant’s case on the nature of the competitive advantage has emerged only slowly. It is not pleaded, but is contained in Mr Thomas’ second witness statement: see paragraph 39 above. A further brief explanation was then given in Mr Mehrzad’s skeleton argument (§§40.4 and 47.3). The essential logic, as there explained, is that if the Defendants had thoroughly handed over the clients to the Claimant and its current IFAs properly and at the same time deleted all their contact details of those clients, the clients would have become “embedded” with the Claimant “for years, even a lifetime” and lawful solicitation would have taken a much longer period – at least 18 months, and possibly several years. Inherent in this allegation are two aspects: it would have taken the Defendants longer to solicit the clients in the first place, and once contacted, it would have taken longer to persuade (or “entice”) the client to switch to their business or indeed the client would not have switched.

In my judgment, the Claimant’s case here is very weak. On the material before the Court, I would not be satisfied that it is likely to succeed. The Defendants’ case is supported by the following considerations.

First, the lifelong or long-term relationship between the clients and the Claimant is a relationship between client and IFA, and in the present case, prior to handover, has been a relationship with one of the Defendants. If the lifelong connection had been with the Claimant, there would have been no need for any handover obligation and no need for the restrictive covenants in clause 15.1(b) and (e) of the Transfer Agreement. This is recognised by Mr Thomas in his second witness statement.

Secondly, the underlying logic of the asserted competitive advantage is somewhat difficult to follow. It assumes that handover of a client to a new IFA destroys the client’s long established rapport with his former IFA, Ms Scott or Mr Lee and further that the new relationship is somehow then set in stone. It further assumes that, following thorough handover, the client would necessarily or be likely to remain with the Claimant and that it would take the Defendants 18 months to “entice” the client to their new business.

Thirdly, there is evidence of actual client behaviour which undermines Ms Thomas’ assertion of what would happen where there is thorough handover. Most particularly, Mr Morley’s email of 22 June 2020 shows a CFM client switching his business to ScottLee. It is evidence that, from the client’s point of view, the longstanding connection is with the individual, namely Ms Scott – and not with the Claimant. It also provides evidence that despite having been transferred to the new CFM IFA, Mr Morton, two years earlier, this client had not become “embedded” with the Claimant such as to render it impossible or difficult for him to be “enticed” away by the Defendants. Finally, from consideration of the colour-coded version of Schedule 3 to the draft order, the Claimant does not appear to be alleging that there was a failure to hand over Mr Morley (only that he appears to have remained connected on social media). His case is therefore some evidence of what might have happened “but for” the alleged breach of the handover obligation. Moreover, clients, Mr Harrison and Mr Smith, have both recently indicated that they were transferring their business to ScottLee. Again, the colour-coded Schedule 3 shows that, in neither case, does Claimant appear to be alleging that there was a failure to hand over, nor in fact that they remained connected on social media as at 30 April (i.e. no suggestion that their details had not been deleted). By contrast, the Claimant has produced no evidence of a client who has been handed over resisting an attempt by the Defendants to entice him to their new business. There is further evidence that from the client’s point of view, the lifelong or longstanding attachment was with the Defendants personally. In an earlier email, another client (Mr and Mrs Gillott) informed a CFM IFA that they had decided to move their business to ScottLee due to the longevity of their relationship with Mr Lee.

Fourthly, the existence of the restrictive covenants against solicitation and dealing in clause 15 of the Transfer Agreement, and the fact that the parties agreed that they should fall away on 30 April 2020, undermines the existence of the alleged competitive advantage. The longstanding personal relationship between the individual IFA makes it very likely that when the IFA leaves the Claimant company, the client will also leave and follow the individual IFA. That is the very reason why the restrictive covenants were needed to protect the Claimant. If thorough handover ensured embedding and guarded against competitive advantage, there would have been no need for the restrictive covenant against solicitation, and it would have served no purpose. To the extent that it is suggested that the restrictive covenant had additional purpose, because it was for 5 years and the competitive advantage is only 18 months (albeit not the limit of the Claimant’s case), it might then be said that the 5 year period was an unreasonable restraint of trade by reference to the Claimant’s interests that it sought to protect. In this way, the Claimant is seeking to achieve, by an alternative route, the protection provided by the restrictive covenants, which are no longer in force.

Fifthly, as regards the length of the competitive advantage, the Claimant’s case is that it is either “at least 18 months” or “several years”. (At a later stage it is said to “not less than the period to trial”). No clear reason or evidence is given to support these alternative periods.

Sixthly, as regards the failure to delete contact details (and assuming that the client has been handed over), Ms Scott’s evidence is that all this contact detail information is freely and publicly available and easily found on a simple search on LinkedIn (or Facebook). The information could be obtained within a matter of hours or days. The

Finally, it is very arguable that the Claimant has “not spelled out the precise nature and period of competitive advantage”. At best, its case is one of ephemeral and short term advantage and that is not sufficient.

However, whilst very weak, I am not satisfied that at trial the Claimant has no real prospect of establishing its case on the competitive advantage.

First, in his witness statements, Mr Thomas himself provides some evidence to support its case. The fact that this evidence is an assertion may not be surprising when what is being considered is what would have happened in a “counterfactual” hypothesis. That evidence can be tested in cross-examination at a trial.

Secondly, whilst, following thorough handover, a client may not be embedded with the CFM IFA such that that relationship is “set in stone” with no prospect of the Defendants ever enticing him away, nevertheless in such a situation, there is likely to be an inertia to move back across to the Defendants. Certainly such a move back would be less likely than if there had been no handover to the new CFM IFA at all. Moreover, the very purpose of the Transfer Agreement was to switch the “long-term relationship” from the Defendants to the Claimant; the goodwill of the assets acquired.

Thirdly, the fact that three particular clients indicate that they have transferred, apparently after thorough handover, does not lead to the conclusion that all, or a substantial number of, clients would have transferred to the Defendants readily or without substantial delay to the Defendants.

Fourthly, as to the length of the competitive advantage, whilst the Claimant’s case is for an advantage of 18 months duration, at this stage it is sufficient to show a real prospect of establishing a period of advantage lasting until at least final judgment after a speedy trial: see Forse supra, §§59, 63.

Finally, whilst the Defendants complain that the Claimant has still not pleaded its case for final springboard relief, it has now set out its case sufficiently for interim relief.

I conclude that, whilst its case is very weak, the material before the Court does not disclose that the Claimant has no real prospect of successfully establishing its case on the nature and length of the springboard relief it seeks.

In the light of the foregoing analysis, my conclusions on the application of American Cyanamid stages is as follows:

“Clean Hands”

The Defendants submit that I should exercise my discretion to refuse an interim injunction on the grounds that the Claimant has not come to court “with clean hands”. It relies on two aspects of alleged misconduct by the Claimant: the failure to agree to the amendment of the Signed Order and misrepresenting the effect of the Consent Order to third parties.

In order to decline relief on this ground, I would wish to be satisfied that the Claimant’s conduct was either dishonest or constituted “serious immoral and deliberate misconduct”: see Snell’s Equity (34^th edn) §5-010 citing CF Partners (UK) LLP v Barclays Bank Plc [2014] EWHC 3049 (Ch) at §1133(4).

As regards the Claimant’s conduct in relation to the amendment to Consent Order, I have considered the full chain of correspondence and events between 15 June 2020 when the Defendants received the application for interim relief, through the agreement to the Signed Order and thereafter until receipt of Stewart J’s email on 30 June 2020. The Defendants’ case is that, when the discrepancy between the Signed Order and the Consent Order relating to the hearing date was pointed out both on 19 June 2020 and then raised with the Court on 26 June 2020, the Claimant could and should have accepted that there was an “slip” error in the Consent Order, and should have agreed, there and then, to an amendment on that basis. The Defendants do not go so far as to say that the change made in the Consent Order was the result of the Claimant positively misleading the Court that the parties had agreed that change.

As evidenced by the manner in which this application has proceeded, the conduct of this litigation to date has been, and remains, uncompromising and hard-hitting on both sides. The Claimant’s failure to agree to the correction of the Consent Order to reflect accurately the terms of the Signed Order was, in my judgment, misjudged and unnecessarily obstructive. Nevertheless I am not satisfied that this conduct was either dishonest or that it constituted “serious immoral and deliberate misconduct”.

As regards the Claimant’s conduct in relation to notifying third parties, and in particular Old Mutual Wealth, of the effect of the Consent Orders, the Defendants contend that, in ensuring that the hearing would not come on before 10 July 2020, the Claimant went about misrepresenting the correct position to third parties in order to prevent the Defendants contacting and dealing with clients. First, I do not accept that the Claimant ensured that the hearing did not come on before 10 July. The Defendants were given, but did not take, the opportunity to apply to Stewart J for an earlier date, which was available. Secondly, I not satisfied that the Claimant misled Old Mutual Wealth. The 19 June letter encloses, and draws attention to, the Consent Order itself and summarises accurately its effect upon the Defendants, namely a prohibition on soliciting. As to the suggestion in the letter that Old Mutual Wealth might be facilitating breach of the injunction, it is not clear as a matter of law that the act of authorising or processing the transfer of a client after that client has been solicited is not capable of constituting a contempt by the third party. It might arguably amount to aiding and abetting a breach of the injunction or doing something which disables the court from conducting the casein the intended manner. In any event, I do not consider that the content of the notification to the third parties of the injunction, given the terms of the penal notice, was either dishonest or a serious immoral and deliberate conduct.

The Defendants further contend that the terms in which the Claimant notified the Consent Order to clients were misleading. There is some substance to this contention. I do not agree that the wording of the emails (paragraph 48 and 49 above) suggest that the Consent Order itself gives the Claimant power to refuse to transfer agency to ScottLee without first checking whether the injunction has been breached. On the other hand, I do consider that the words “cannot be … in contact with clients” would cover a communication from client to the Defendants where there is no solicitation by the Defendants or where any solicitation had occurred before 18 June 2020. Such communication very arguably goes beyond solicitation after 18 June 2020 and is not covered by the terms of the injunction. Going forward the Claimant must be very careful to explain the terms of the injunction clearly and precisely. However I am not persuaded that the terms of these notifications were either dishonest or amounted to serious immoral and deliberate conduct to warrant the refusal of relief on this ground.

Old Mutual Wealth

Finally, Quilter, which operates Old Mutual Wealth, has written to the Court seeking guidance as to what it should do as regards authorising or processing the transfer of a CFM client in the face of notice of the injunction. Quilter and the parties are in agreement that the wording of the injunction should be modified, with a view to ensuring that Quilter is not in breach of the injunction by its future conduct. Three alternative wordings are proposed. The first, advocated by the Defendants, is based on its contention that transfer after solicitation cannot possibly amount to a contempt by

As I have indicated above, my present view, on the basis of limited argument, is that it not clear as a matter of law that the act of authorising or processing the transfer of a client after that client has been solicited is not capable of constituting a contempt by the third party. Accordingly the injunction to be granted consequential upon this judgment should contain wording the terms of the third alternative. This still allows the possibility of the Defendants producing evidence that any particular transfer request was not the result of solicitation after 18 June 2020. At the same time, the Claimant

For the reasons set out above, there is a serious issue to be tried and damages are an adequate remedy for the Defendants. Accordingly the Claimant’s application for an interim injunction succeeds and I will make an order for an interim injunction until conclusion of the speedy trial. The terms of the order will require further consideration. In particular the precise wording of the prohibition will need modification and there may be an issue as to the list of clients in Schedule 3, and in particular whether it is appropriate to include those clients who, from the colour-coded Schedule 3, appear to be included on the sole ground that their contact details are alleged to have been “synced” on 6 March 2020

I will hear the parties on other consequential matters, including directions for a speedy trial and other matters

Finally I am most grateful to counsel and solicitors for the efficient and helpful way in which this application has been dealt with, not least in the circumstances of the present Covid-19 situation.