Secret injunction - Dyson Technology Ltd v Pellerey

Posted by Heather Welham on
The ever-growing importance of precise use and drafting of terms to protect confidential information, and how this can assist in circumstances where an employee is moving to a competing business, has been emphasised in a Court of Appeal case, Dyson Technology Ltd v Pellerey [2016] EWCA Civ 87.

Although an injunction was granted by the High Court in 2015, the details of the case, which went to the Court of Appeal, were only released earlier this year because at the time of the hearing Dyson's plans to develop an electric car were being kept secret. Dyson persuaded the court to conduct the hearing in private and keep the record out of the public domain until its plan for the electric car was made public.

In this case, the High Court gave detailed consideration to the enforceability of a notification term and the appropriate remedy for its breach.

Facts

Mr Pellerey began working for Dyson as a Motor Drives Engineer in March 2013. Whilst working for Dyson, Mr Pellerey was contacted by a recruitment agent on behalf of Tesla. Following interviews, Tesla made Mr Pellerey a job offer as a Staff Drive Motor Engineer subject to him obtaining a US visa. Mr Pellerey accepted the conditional job offer in March 2015 but did not inform Dyson.

In May 2015, Mr Pellerey was assigned to a new project at Dyson which involved developing an electric car. The project was to be kept confidential and became known as "Project E"; there were only a handful of employees at Dyson who knew about Project E.

In June 2015, after Mr Pellerey had disclosed Dyson's plans to Tesla, Tesla made Mr Pellerey a job offer based in Europe and Mr Pellerey handed in his notice to Dyson.

Mr Pellerey had a rather unusual notification term in his contract of employment with Dyson which provided as follows:-

"You agree that if any person approaches you in connection with offering you employment which is or potentially may be in competition with the Company or any Group Company then you will immediately inform the Company of that approach. In addition, you will disclose to any new potential employer before accepting such an offer of employment the extent of your notice period and the obligations after employment which you owe to the Company and any Group Company and will confirm to the Company that you have provided that notification."

When Dyson learned of Mr Pellerey's intended future employer, it sought to prevent him from commencing employment with Tesla by obtaining an injunction.

Snowden J accepted that Mr Pellerey should have told his managers in March 2015 that he had accepted a conditional job offer with Tesla. Dyson could then have not allowed Mr Pellerey to become involved with Project E. Dyson was therefore successful in obtaining an injunction preventing Mr Pellerey from joining Tesla.

There are three issues which were discussed and are of particular importance:-

Construction of term

The term's commercial purpose was to ensure that Dyson was alerted to any attempt to lure away its employee by an offer of competitive employment.

The clause was triggered when Mr Pellerey learnt of the existence of Project E as the Tesla employment was or "potentially may be" in competition with Dyson.

Enforceability

Restrictive covenants are prima facie void as a restraint of trade, although if drafted precisely can be reasonable and therefore enforceable. However, Snowden J held that the above clause was not a restraint of trade as it did not actually limit Mr Pellerey's ability to take a new job.

The term was limited to a requirement to notify Dyson of an approach from a competitor, rather than being a blanket requirement to notify Dyson of all approaches from potential new employers.

Remedy

The critical point in this case is that Mr Pellerey's breach of the notification term meant that he learnt of the confidential information concerning Project E which he would not have discovered had he told Dyson of his job offer from Tesla in March 2015.

Commentary

In this case the notification term enabled the employer to take control of its confidential information without prejudicing the employee's ability to obtain alternative employment.

Dyson was able to safeguard the legitimate interests of the business through the enforcement of the notification term. If the notification term is observed correctly by the employee, avoiding the need for enforcement action, the employer is able to subtly restrict the employee's access to confidential information. However, the court was clear that this was a fact sensitive decision in which Dyson was successful because Mr Pellerey only learnt of Dyson's plans for electric cars following the non-disclosure of the approach by Tesla.

Dyson limited its claim to the same period as its restrictive covenant which obviated the need for the judge to enter upon further consideration of the issue. In principle, however, it is possible and entirely appropriate for an injunction of this kind to be extended until the information ceases to be confidential.

About the Authors

Heather is an Associate in the Commercial Litigation team specialising in contractual disputes.

Heather Welham
Email Heather
023 8085 7493

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Meg is a Trainee Legal Executive in the Commercial Litigation team primarily assisting with insolvency and professional negligence cases.

Meg Kirkwood
Email Meg
023 80857 7085

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