Thomas v Farr plc and another: [2007] EWCA Civ 118

CA: Chadwick, Scott Baker and Toulson LJJ: 20 February 2007

The claimant operated a regional brokerage in general insurance before being employed as an account director by the defendant, which specialised in social housing insurance. In December 2003 the claimant became the managing director. His contract of employment contained a restraint clause prohibiting him, for 12 months after leaving the employment, from being concerned with any business in competition with that of the defendant, without its written consent, which could be withheld only as might be reasonably necessary for the protection of its business. In April 2006, when there was a proposal to restructure the defendant's business, the claimant served notice terminating his employment, contending that the proposed restructure would involve a repudiatory breach of his employment contract, and in June he issued proceedings for breach of contract. He also claimed a declaration that the non-competition clause in the contract was an unreasonable restraint of trade and unenforceable. The judge found that the claimant had confidential information, in a highly competitive area of the insurance market, which the defendant had a legitimate interest in continuing to protect; that the clause, while precluding the claimant from operating as an insurance broker in the social housing market, permitted him to operate in all other sectors of the insurance industry; and that the clause was reasonable and enforceable.

The claimant appealed.

The Court of Appeal held:
An employer, seeking to enforce a non-competition clause against a former employee in order to protect its interest in confidential information, had to establish that at the time it was imposed the proposed employment was such as would expose the employee to information of the kind capable of protection beyond the term of the contract. Provided the employer particularised the confidential information sufficiently to enable the court to be satisfied it had a legitimate interest to protect, it did not matter that it might be difficult for the employer or the employee to identify precisely what information remained confidential and what did not. There was ample evidence to support the conclusion that the claimant's appointment as managing director exposed him to information that the defendant was entitled to require to be kept confidential after the termination of his employment, in particular pricing, financial information not in the public domain and knowledge in respect of business development, which it would be detrimental to the defendant to have passed to a competitor. The clause was not unreasonable, as it would not prevent the claimant from acting as an insurance broker in sectors other than social housing or from acting for insurers in that sector so long as he did not do so in a way that was in competition with the defendant.

The appeal was dismissed.

Appearances: Paul Nicholls (Barlow Lyde & Gilbert) for the claimant; Selwyn Bloch QC and Stuart Ritchie (Herbert Smith LLP) for the defendants.