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The Court of Appeal (whose full judgment only recently entered the public domain) has examined the principles governing the discretionary stage of the test for injunctive relief.

This case concerned a claim to enforce a 12-month non-compete covenant, an alternative claim for a springboard injunction based on breach of a notification clause, and an injunction to restrain misuse of confidential information. The High Court (Snowden J) enforced the non-compete covenant by way of injunction but made no separate order in respect of confidential information: [2015] EWHC 3000 (Ch). This result was upheld by the Court of Appeal (Sir Colin Rimer giving the sole reasoned judgment).

The facts

Dyson Technology Limited (“DTL”, a research and development company of the well-known British technology brand) sought an injunction against Dr Pellerey (“P”, a former engineer at DTL) to restrain him from working for Tesla Motors Inc (“Tesla”, a leading manufacturer of electric cars) for 12 months from the date of his resignation.

P’s contract of employment with DTL contained a non-compete covenant requiring him not to “compete with the Company or any Group Company, carry on or be engaged, concerned or interested in any Restricted Business” ([6]). The definition of “Restricted Business” included “any business which is similar to any business being carried on by [DTL] or any Group Company at the Termination Date” (ibid). The contract also included a notification clause as follows: “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” (ibid).   

In March 2015, Tesla offered P a job as a Staff Drive Motor Engineer conditional upon proof of his right to work in the US. P accepted this offer but then ran into difficulties obtaining a US visa. He did not inform DTL of any of this and continued to work there. On 27 May 2015, P was taken aside by Sir James Dyson and assigned to a highly confidential project which became known as “Project E”. The mission: to develop a Dyson electric car.  On 12 June 2015, Tesla made P an unconditional offer of work in Europe. Three days later P handed in his notice to DTL.

DTL claimed that P ought to have told them that he had accepted a conditional job offer with Tesla when he was first invited to become involved with Project E. Given DTL’s view of the commercial sensitivity of Project E, if he had told them, he would not have been allowed to become involved with Project E.

First instance decision

In short P argued that: (1) his conduct did not engage the non-compete covenant properly construed; (2) in any event that covenant was wider than reasonably necessary for the protection of DTL’s legitimate interests and it would be unjust to enforce it; (3) he had not breached the notification clause; and (4) no injunction in respect of confidential information was required because he was aware of his obligations of confidence and did not intend to breach them ([9]). 

Snowden J rejected all of these arguments save for the last one. He therefore granted a 12-month injunction to enforce the non-compete clause but made no separate order in respect of confidential information. P appealed to the Court of Appeal. The final stage of the injunctive analysis—the discretion to grant or withhold relief—was “the subject of the bulk of the argument on the appeal” ([32]). This bulletin focuses on that issue.  

Principles governing the discretion to grant injunctive relief

The Court of Appeal took as its starting point the helpful summary of the applicable principles in Insurance Co v. Lloyd's Syndicate [1995] 1 Lloyd's Law Reports 272 per Colman J at 277 (emphasis added):

“(1) Express or implied negative covenants will in general be enforced by injunction without proof of damage by the plaintiff.

(2) […] The ready availability of the remedy is not the consequence of equity's regard for the plaintiff's personal feelings, but of equity's perception that it is unconscionable for the defendant to ignore his bargain.

(3) Although absence of damage to the plaintiff is not in general a bar to relief, there may be exceptional cases where the granting of an injunction would be so prejudicial to a defendant and cause him such hardship that it would be unconscionable for the plaintiff to be given injunctive relief if he could not prove damage […]”

The Court of Appeal took issue with the language of ‘exceptionality’ in point (3) of this summary on the basis that “it usually leaves open an unhelpfully wide margin for parties in future cases to find themselves at odds as to whether or not their case is ‘exceptional’“ ([73]). The Court of Appeal recognised that “the starting point in the consideration of a claim by an employer to enforce an employee's negative covenant is that the ordinary remedy is an injunction” ([74]). However, the Court of Appeal cautioned against “attempting to prescribe with any sort of particularity the types of circumstances in which it might be appropriate to refuse an injunction” and emphasised that “the categories of circumstances are never closed and every case will turn on its own facts” ([74]). This is consistent with the flexible guidance given by the Supreme Court in the tort case of Lawrence v Fen Tigers Ltd [2014] AC 822, which the Court of Appeal appeared to treat as instructive although not directly applicable ([67] and [75]-[76]).

All this presents practitioners with something of a paradox: on the one hand, the grant of an injunction remains the “ordinary” course; but on the other, refusal of an injunction is not confined to “exceptional” cases. Evidently the courts wish to give effect to the weighty factor of holding the parties to their bargain while also acknowledging the discretionary nature of injunctive relief. One possible reconciliation is to say that an injunction will be granted absent a ‘strong reason’ for refusing such relief. That is the test applicable to anti-suit injunctions restraining breaches of exclusive jurisdiction clauses, where the same tension arises: see e.g. Donohue v Armco Inc [2001] UKHL 64 per Lord Bingham at [24]. 

The full judgment can be read here.

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