21 February 2007

Confidential Information and Restraint of Trade: Thomas v Farr Plc - Ocular Sciences to join Series 5?

Nearly 10 years ago I wrote a case note on Ocular Sciences v Aspect Vision Care [1997] RPC 289 entitled "Have Faccenda's Chickens had their Chips?" I chose that title because the CA had appeared to draw a distinction in Faccenda Chickens v Fowler [1984] ICR 589 between "trade secrets" the disclosure or use of which could be restrained without a restrictive covenant and other confidential information that could not. Drawing the line between the two was never very satisfactory and in Ocular Sciences Sir Hugh seemed to offer a better test.

He started from the premises that an employee is entitled to deploy his skill and expertise for any employer though an employer may restrain unauthorized use or disclosure of his confidential information like anyone else. He acknowledged that it is public policy that an employee should use and put at the disposal of new employers all his acquired skill and knowledge no matter where he acquired it or whether it was secret at the time. Where the employer's right to restrain misuse of his confidential information collides with the public policy it is the latter that prevails.

Mr Justice Laddie also rejected the notion that there exists any class of information that is so trivial or commonplace that an employee is free to disclose to anyone including a competitor. Such disclosure would breach an employee's implied duty of fidelity as postulated in Hivac Ltd. v Park Royal Scientific Instruments Ltd. [1949] Ch 169. The judge stressed that this duty of fidelity was quite distinct and separate from the duty of confidence. He warned of the danger of confusing the two concepts:
"….. there is a risk of slipping into thinking that what an employee can be restrained from using while in employment is likely to be secret when, in truth, that restraint has little to do with secrecy but a lot to do with the employee's obligation to act in the interests of his employer. Once one slips into thinking that because a piece of information cannot be disclosed to a competitor, therefore it is secret, it is but a little step to assuming that it is secret for the purposes of the law of confidence."

This judgment was so clear and elegant that it appeared inconceivable that courts would continue to apply the Faccenda analysis. Yet that is precisely what seems to have happened in Thomas v Farr Plc and another [2007] EWCA Civ 118 yesterday.

This case was about the enforceability of a restrictive covenant of a managing director of a firm of insurance brokers, prohibiting him from competing with his employer for 12 months after the termination of his employment. At first instance the judge reviewed the authorities, including Faccenda, and considered whether the information to which the claimant had access could be regarded as inherently confidential. He concluded that it was and that conclusion was one of the grounds of appeal.

The judge's approach was approved by the Court of Appeal. Lord Justice Toulson remarked that he had set out the relevant law with clarity and accuracy.

No comments: