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Insurers get injunction against rival firm set up by employees

Posted: 29th February 2012   In: Business Employment, Individual Employment

An insurance company has been awarded damages and granted an injunction against a group of employees who left to set up a rival business.

The court found that the group had committed numerous breaches of their employment contracts and fiduciary duty. They enticed others to resign and also used confidential company information while still employees.

The insurers claimed that the launch of the rival business was only possible because the employees had breached and abused their employment contracts on several occasions. Those breaches had given the new business an unlawful head start.

The court found that the original group of three employees had unlawfully solicited other employees to become part of the new venture. This had happened while they were still working for the insurers or while they were on garden leave.

During that time they had also solicited the insurers’ clients and brokers. 

They were also in breach of confidentiality clauses in their contracts by secretly using the insurers’ materials to copy and extract information to create documents they needed to launch the new business. 

The judge said that where a person obtained a head start through unlawful acts, the court had the power to grant an injunction which restrained the wrongdoer from taking advantage of such a springboard.

There could not be a clearer case for springboard relief than this one. The insurers were awarded the damages they had sought. The court also granted an injunction ordering the former employees to delay the launch of their new business by two months. 

This was designed to restore both sides to the positions they would have occupied had the abuses not taken place. 

Please contact Sarah Liddiard if you would like more information about the issues raised in this article.