EMPLOYMENT — Contract of — Confidential information — Non-competition clause — High-ranking employee exposed to confidential information in course of employment — Non-competition clause restricting use of confidential information after termination of employment — Whether clause unreasonable restraint of trade

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

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

The fact that it might be very difficult for the parties to a contract of employment to know where the line lay between information which remained confidential after the end of the employment and information which did not might support the reasonableness of a non-competition clause that was intended to protect the employer’s interest in confidential information.

The Court of Appeal so stated dismissing the appeal of the claimant, Huw John Phillip Thomas, the former managing director of the first defendant, Farr plc, whose business was subsequently transferred to the second defendant, Hanover Park Commercial Ltd, from the decision of Ramsey J dated 12 October 2006 who had held as a preliminary issue that a non-competition clause in the claimant’s contract of employment with the first defendant was not an unreasonable restraint of trade and was therefore enforceable.

TOULSON LJ said that in order to establish that the inclusion of a non-competition clause in an employment contract was reasonably necessary for the protection of the employer’s interest in confidential information, the first matter which the employer obviously needed to establish was that at the time of the contract the nature of the proposed employment was such as would expose the employee to information of the kind capable of protection beyond the term of the contract (ie trade secrets or other information of equivalent confidentiality). The degree of the particularity of the evidence required to establish that matter must inevitably depend on the facts of the case. Provided that the employer overcame that hurdle, it was no argument against a restrictive covenant that it might be very difficult for either the employer or the employee to know where exactly the line might lie between information which remained confidential after the end of the employment and the information which did not. The fact that the distinction could be very hard to draw might support the reasonableness of a non-competition clause. Applying the correct test, there was ample evidence to support the conclusion that in the nature of things the claimant’s appointment as Farr’s managing director exposed him to information which Farr was entitled to require to be kept confidential after the termination of his employment.

Scott Baker and Chadwick LJJ agreed.

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

Reported by: Ken Mydeen, barrister