So I have to be upfront here. The legal industry is definitely a
fluid one—the collective movement of lawyers from firm to
firm, otherwise known as "the group move" has become
increasingly familiar over the last couple of years. And the legal
industry is obviously not alone. But it's fair to say that
firms both lose and benefit from the group move. While good people
might be lost with any transition, the enthusiasm and instant lift
that can come with an incoming group can be of great benefit.
This market trend gets me thinking about restraints, and
particularly, just why you don't often see law firms stealing
headlines with disputes over restraints, or disputes about clients
or confidential information. I'm not saying there are no
headlines (although if you're excited by the types of headlines
that sensationalise the comings and goings of partners in law
firms, you probably need to expand your literary horizons! And yes,
reading this update is a good start!). However, industry headlines
are rarely about some salacious dispute over clients.
It's basically because law firms, and the lawyers who work
there, are pretty good at figuring it out quietly and amicably
among themselves, without recourse to a messy public courtroom.
This is a good thing. It means law firms are capable of practising
what they preach—dispute resolution to the mutual advantage
of both parties. It also means that lawyers realise there's no
ownership of a client, and arguing about it is rarely going to be
in the client's best interest.
My tip for this update is to ask yourself when faced with a
group move—either on the giving or the receiving
end—"can we sort this out ourselves?" By all means,
seek legal advice. But at the same time try to step back from the
initial shock and consider what's in the best interests of your
clients. We all operate in fiercely competitive markets and each
client win or loss is really important. But we also know that doing
well in whatever industry we're in is not so much about winning
or losing the clients, it's about doing a good job for them.
That's what's going to pay dividends and that's
what'll keep them coming back (or not leaving in the first
Besides which, litigation is really expensive and while it's
a cliché, it's true—there's no guarantee of
the outcome. Even the winner may not necessarily walk away happy if
there are cost orders that don't cover all or even some of
In January 2005 around 20 ICAP staff resigned en masse in what
the court described as a well-orchestrated raid by the Respondent
on the business of the Applicant. ICAP and BGC were banking brokers
who traded in futures, swaps and bonds. Actually, BGC didn't
have an operation in Australia, until they brought over the entire
team from ICAP. BGC essentially created a business by bringing over
the ICAP team, leaving ICAP decimated in the process.
ICAP argued that BGC had induced the staff to walk out from
their jobs, without providing notice, in breach of their contracts
which required them to provide one month's notice.
There was also evidence that a couple of employees had emailed
themselves confidential documents they intended on using to their
advantage in their new employment.
The problem was there was no restraint in the contracts
preventing staff from working for BGC. Once the notice period had
expired, there was no interlocutory injunction BGC could obtain
because there was no real prospect of an injunction on a final
BGC did try to get a springboard injunction by arguing there
were special circumstances that enabled the court to
"mould" injunctive relief to prevent BGC from obtaining
an unjustifiable head start, which it would otherwise receive by
inducing breaches of contract. But the court found that springboard
injunctions do not apply outside the field of confidential
information. In other words, an injunction in the absence of a
restraint provision in a contract is only available where there is
risk confidential information will be used to the benefit of the
person who has it, or is taking it. The discreet pieces of
confidential information emailed by the two employees weren't
enough for a springboard injunction.
When reading the judgment, you can see Justice Jacobson had a
lot of sympathy for ICAP. However, there was no legal basis to
really do anything about what had happened.
While ICAP did obtain some orders against BGC (such as an order
that BGC be restrained from inducing any breach of a contract
between ICAP and any remaining employees—of which there were
few), it largely failed in its application for interlocutory
relief. As a result, cost orders were made against ICAP.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
We discuss whether certain clauses commonly found in ordinary commercial contracts could be considered to be penalties.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).