Veitch Penny LLP - Exeter | Crediton, Devon

Case

Fibrenetix Storage Ltd v Davis (1) & Lapis Solutions Ltd (2)
Queens Bench Division (High Court) - (14 June 2004)

Issues

(1) Contract of Employment
(2) Restrictive covenants
(3) Disclosure of confidential information

Facts

The Claimant produced and marketed equipment for use in computer systems. In order to determine the sales price of its goods, it had adopted a specific formula and the salesmen had only a very limited discretion in departing from that structure. The Claimant then developed a new formula.

Mr Davis was a Sales Manager for the Claimant from May 2002 to September 2003. In October 2004 he commenced employment with the Second Defendant who designed and built data storage solutions.

The Claimant applied for an injunction restraining Davis from breaching the implied terms of his Contract. The Claimant argued that in Davis’ Contract of Employment, Davis was prevented from making use of confidential information belonging to the Claimant obtained through his employment and from disclosing customer information, pricing and other confidential information about clients etc in order to interfere with their business relationships with the Claimant.

The Claimant alleged that Davis had used the Claimant’s information for his own purposes or for those of the Second Defendant. The Claimant alleged that Davis had made derogatory comments about the company to third parties and had disclosed confidential pricing information in order to seek business. This information was confidential to the Claimant and was allowing the Second Defendant to compete unfairly with it.

Davis argued that no such implied term existed, save a term preventing Davis from using any information learned from his employment unless it was of sufficient importance to be classed as a trade secret, etc.

Decision

The Court found that on the evidence the First Defendant had not acted in breach of covenant and held that the Claimant had been unable to establish that Davis had done anything about which it could complain. It was found that the information concerning the Claimant’s prices can not be regarded as confidential or sensitive, it was not unusual or of particular value. It was accepted that the information may well be of interest to a competitor but was not confidential enough as to justify a protection particularly as the Claimant had since adopted a new formula. Accordingly the application was dismissed.

It was confirmed that a term could be implied that Davis could not use information which was sufficiently important to be classed as a trade secret, etc. This extended so that Davis could not copy or memorise confidential information for use after his employment ceased.

Comments

This case reiterates the Court’s position that any restraint must be restricted to what was realistically necessary in the circumstances, and would not prohibit or discourage legitimate competition. Employers must take care when dealing with these issues when issuing contracts of employment, to ensure they are appropriate to the situation.