Appeal court won't cater for very hungry Caterpillar's appetite
To remind readers of the facts and the trial judge's ruling, the IPKat relates as follows. Accountant Paula Huesca had a middle management post with Caterpillar Logistics till she left in August 2010 to take up a senior management position with Quinton Hazell Automotive Limited (QH). Her contract of employment with Caterpillar didn't contain a restrictive covenant, though she did sign a separate confidentiality agreement, unlimited in time, in which she undertook not to use or divulge Caterpillar's trade secrets or confidential information during or after her employment.
A year later, Caterpillar told Huesca that it intended to sue her for breach of a fiduciary duty which she owed the company by accepting the QH position . Huesco denied the allegation, maintaining that she had no intention of disclosing confidential information to QH and even undertaking not to do so. Not daunted by this display of confident denial, Caterpillar issued proceedings: the order which it sought contained a generic definition of confidential information which did neither specified any particular information which was stated to be confidential not listed any documents by which it could be ascertained precisely what was included. According to Caterpillar,despite the requirement laid down by the Court of Appeal in Faccenda Chicken Ltd v Fowler [1987] Ch 117 and Roger Bullivant Ltd v Ellis (1987) ICR 464 that the confidential information be identified, the court could still apply the principle established by the House of Lords in Bolkiah v KPMG [1998] UKHL 52 that an ex-employee can be barred from carrying out specified work for a new employer unless that employee is able to satisfy the court that all reasonable measures have been taken to ensure that no disclosure would occur.
Mr Justice Tugendhat dismissed Caterpillar's applications for a broad interim "barring order" or at least an injunction to prevent Huesca using its confidential information:
- The learned judge wasn't persuaded of the utility of the Bolkiah principle. Apart from the fact that no order had ever been made on behalf of an employer against an employee in reliance on it, Bolkiah wasn't an employment case and contained no reference to any employment case law. All it established was that a solicitor remained under a continuing duty, after a retainer had ended, to preserve the confidentiality of information imparted by a client during the fiduciary relationship which had previously existed. If Bolkiah was relevant to the relationship of an employee to an employer, it was odd that its relevance had been overlooked in all the major employment cases since it was decided.
- The judge agreed that an employee might indeed be a fiduciary in respect of specific property or confidential information entrusted to his or her care -- and that such an employee might even have a relationship with the employer which was analogous to that of a trustee to a beneficiary or solicitor to client. However, that was not the usual case. In general, in a normal employment relationship, the balance of power was with the employer -- not the employee.
- If Bolkiah didn't apply, what did? The judge explained that Faccenda Chickens still ruled the roost: this meant that the extent to which an employer was free by agreement to restrain the use or disclosure by a former employee of confidential information depended on the nature of the information and the period and territory in which the restraint was to apply.
- In any event, Caterpillar's application was doomed for several reasons, but mainly because (i) the confidentiality agreement was too wide to be enforceable since it sought to include both information and other matter that employees would normally carry around in their heads and would be entitled to use for their own benefit after the employment relationship ended, and (ii) the form of the injunction which Caterpillar was too wide because it was not clear what information it was seeking to protect and also because it specified no time limit;
On 21 February the Court of Appeal, in [2012] EWCA Civ 156, dismissed Caterpillar's appeal, as the IPKat thought would be the case. The judges (Lords Justices Maurice Kay, Stanley Brunton -- who gave the leading judgment -- and Lewison) were not persuaded that the Bolkiah rule was of broad application beyond solicitors. As to the application for injunctive relief to restrain a breach of confidence has this to day (at [66] to [68]):
"I would not uphold the judge's decision on this part of the claim on the ground that the confidentiality agreement was of indeterminate duration. ... Agreements restricting the misuse of an employer's trade secrets are commonly of indeterminate length, and are enforced: see, for an example, SBJ Stephenson v Mandy [2000] IRLR 233.
I would uphold the judge's decision to refuse to grant an interim injunction restraining the respondent from misusing CLS's confidential information on the simple ground that CLS has not established any arguable case that she has broken or intends to break or even that there is a real risk that she will break the terms of the confidentiality agreement. ... [S]he was willing to give an appropriate consensual undertaking. An employer is not entitled to injunctive relief simply because he seeks it.
I add that the form of interim relief sought by CLS is hopelessly wide and vague. It does not specify the confidential information to be the subject of restriction with any certainty, but simply describes it as "all or any confidential information acquired by the respondent during her employment with [CLS] in whatever form". Paragraph 10 of CLS's Particulars of Claim does attempt to identify some of the confidential information it seeks to protect. I say some, because the allegation is that the respondent had access to the identified information "in particular, but not limited to" the listed information. It is I think significant that there is no evidence that the respondent has a copy of any of the documents referred to in that paragraph".Says the IPKat, it seems the moral of the story seems clear. If you want to protect the confidentiality of information which is made available to employees in positions of responsibility, have a policy and implement it, keep records, draft a contract with reasonable restraints and don't ask for the moon if you're going to court to enforce your rights. Merpel notes that the Court of Appeal was not as uncomfortable with the "if Bolkiah supported Caterpillar's argument, it would have been cited to that effect by now" argument as the IPKat is.
Interesting things about caterpillars here
Caterpillar tracks here
