Dyson Technology Ltd v Pellerey

This is the expedited trial of a claim by the Claimant, Dyson Technologies Limited (“DTL” or “the Company”) for an injunction to prevent the Defendant (“Mr. Pellerey”) from taking up employment with Tesla Motors Inc (“Tesla”) for a period of 12 months from the termination of his employment with DTL; and for an injunction restraining him from making use of DTL’s confidential information.

I heard the majority of the trial in private pursuant to CPR 39.2(3)(c) to protect what DTL contended was its confidential information. I did so on the basis that the proceedings were to be transcribed and I would reconsider that ruling in light of my judgment. I will now also give my judgment in private, but on the same basis. I will hear submissions as to whether, and if so, when, this judgment can be made public.

Although the inferences and legal conclusions to be drawn from the facts were hotly disputed, much of the essential factual background was not in dispute. I shall therefore set out the basic facts that I find to be established on the evidence. For convenience and to aid the narrative, I shall also include (and indicate) some areas of evidence that were challenged.

DTL is a research and development company. It is a member of the group of companies ultimately owned by Sir James Dyson (“the Dyson Group”). The Dyson Group is well-known for its innovative vacuum cleaners and “air-blade” hand driers.

DTL called two witnesses at the trial: Mr. Andrew Clothier, DTL’s director of Technical Research, and Mr. Martin Bowen, who is the Dyson Group’s General Counsel. Both were truthful and careful witnesses. I should, however, record that I formed the impression that, as was perhaps inevitable given their long service with the Dyson Group, they tended to view the world through Dyson spectacles and were instinctively disinclined to accept propositions that they thought might be adverse to DTL’s case. In addition, it became apparent some way into Mr. Clothier’s cross-examination that parts of his evidence were not given from his own knowledge, but were an amalgam of hearsay evidence obtained from discussions with other persons within the research department at DTL who had not been identified in his witness statement. That should not have occurred, but in the end I do not think that it affected any factual issue that I have to resolve, and to his credit, when the problem was pointed out to Mr. Clothier he took steps to clarify his evidence thereafter.

Mr. Pellerey is a French national who is now aged 30. He graduated in France with first-class honours in Electrical and Mechanical Engineering and conducted research for his PhD in Acoustic Noise and Vibration in electric motors for electric vehicles between 2009 and 2012.

Mr. Pellerey gave evidence at the trial. He was a truthful witness, who gave his evidence with disarming candour. Although Mr. Nicholls QC, who appeared for DTL, legitimately sought to question the motives behind some of Mr. Pellerey’s conduct, in the end he (in my view correctly) did not seek to suggest that Mr. Pellerey had acted other than honestly throughout the events in question (albeit that, for reasons that I will explain, Mr. Nicholls submitted that Mr. Pellerey had been misguided and had acted in breach of his employment contract with DTL).

Whilst working for his PhD between 2009 and 2012, Mr. Pellerey assisted Renault on the design of the electromagnetic parts of the motors and powertrain to reduce the acoustic noise and vibration in Renault’s electric cars such as the Zoe, Kangoo and Fluence. However, when Mr. Pellerey completed his PhD research, Renault told him that their economic situation was such that they were unable to offer him a permanent position. Accordingly, in the Autumn of 2012 Mr. Pellerey applied for a number of jobs, including an advertised post as a motor design engineer at DTL. He also uploaded his cv to the website of Tesla, which is a leading manufacturer of electric cars based in the United States.

Mr. Pellerey did not then hear from Tesla, but he was offered the post at DTL, working within the Motor Research and Development Department, designing the electromagnetic parts and electronic control systems for the next generation of the Dyson Group’s digital motors for its vacuum cleaners. Mr. Pellerey accepted the position at DTL and on 4 March 2013 he started work as a Motor Drives Engineer based at the Dyson Group’s headquarters at Malmesbury, Wiltshire.

Mr. Pellerey was employed pursuant to a contract dated 5 February 2013 (the “Employment Contract”). That agreement identified DTL as his employer (“the Company”) and referred to him in the second person. It contained the following clauses:

“Confidentiality

The contractual relationship between Dyson and yourself is founded in trust. At any time during or after the termination of your employment you agree not to disclose to any person or use for your own purposes other than those of the Company, any private, confidential or secret information specific to the business of the Company. Any breach of this trust by you, such as the unauthorised disclosure to a third party of confidential material relating to the business of the Company will result in disciplinary actions and/or civil proceedings to restrain you from disclosing or making use of the information without authority, or for damages if loss to the Company results from the unauthorised disclosure.

Loyalty and other employment

During the term of this agreement you shall use your reasonable endeavours to promote the interests of, and shall act in good faith in relation to, the Company. In addition you shall not (unless otherwise agreed by the Company) undertake any other business or profession or become an employee or agent of any other firm, company or other person.

Obligations after employment

Definitions used in this clause are set out in the Schedule to this Agreement.

1.

You will not for the Restricted Period:

(a)

so as to compete with the Company or any Group Company, carry on or be engaged, concerned or interested in any Restricted Business;

….

4.

Each of the restrictions above shall apply whether you act as principal or agent and whether alone or jointly, with or as a director, manager, partner, shareholder, employee or consultant of any other person, and whether you act directly or indirectly.

5.

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.”

The Schedule to the Employment Contract defined the “Relevant Period” as twelve months from the “Relevant Date” which was the date on which Mr. Pellerey’s employment with the Company ended (the “Termination Date”) or, if earlier, the date from which he was required not to attend work during a period of notice.

“Restricted Business” was defined as meaning,

“… any business which is similar to any business being carried on by the Company or any Group Company at the Termination Date and with which you were either:

(i)

involved at any time during the Relevant Period; or

(ii)

materially informed about or had responsibility for during the Relevant Period; or

(iii)

in circumstances where a new product is planned to be launched, involved in the planning, research, development or manufacture of that product in the 24 months prior to the Relevant Date and as a result of that involvement still have Confidential Product Information.”

“Confidential Product Information” was defined to mean,

“any confidential information relating to:

(i)

any product or plans for a product not yet launched by the Relevant Date;

(ii)

current or future product strategy; or

(iii)

product design; or

(iv)

the marketing or sales strategy of any product,

in each case excluding information in the public domain other than as a result of a breach by you of your obligations under this Agreement.”

Mr. Pellerey and one other engineer were initially the most junior members of his research team. In addition to work on the design of electric motors for vacuum cleaners, Mr. Pellerey also devised and worked on a new idea for an electric motor, and, between January and May 2015 he was involved in an “incubator” project comparing different electric motor technologies that might work in an electric bicycle (code-named “Project B”). He was not asked to work on the acoustic noise or vibration aspects of any electric motor.

In October 2014 Mr. Pellerey was approached with a job offer from a CCTV company in London. He notified the approach to his line manager at DTL and was offered a salary increase and promotion as an inducement to stay, which he accepted. Implementation of this appears to have been delayed, but Mr. Pellerey was eventually promoted to the role of Senior Motor Drives Engineer on 5 March 2015, when he received a salary increase to £51,000 per annum, and became subject to an extended notice period of 12 weeks.

In the meantime, on 20 November 2014 Mr. Pellerey was contacted by a recruiter from Tesla. Tesla indicated that it was interested in Mr. Pellerey because of his previous expertise concerning the reduction of acoustic noise and vibration in electric drivetrains from his PhD and from his time at Renault. Mr. Pellerey had an initial interview with Tesla by Skype on 3 December 2014 and a further telephone interview on 29 January 2015. Mr. Pellerey also went to Palo Alto, California for a series of interviews in person on 19 February 2015. During the course of that day he made a presentation entitled “Electrical Machine Noise and Vibrations – Application to the Automotive Domain”.

Following his interview at Tesla in February, Mr. Pellerey was also asked to provide written answers to some questions which he understood were to be seen by the founder of Tesla, Mr. Elon Musk. The questions commenced with a request, “Please highlight your resumé and explain why you made certain decisions in your career and moved from one job (or project) to another”. In response, Mr. Pellerey’s answer outlined his academic background and his time working with Renault, and then continued,

“At Dyson, I expanded my EMAG design expertise such that I am now a confident and competent EMAG designer. I was immediately given technical trust and took advantage of that opportunity. From a blank sheet I designed the latest Dyson Digital Motor. This motor rotates at 130,000 rpm and has over …90% efficiency and soon it will be the motor with the highest power density on the market. I produced the concept and design and through collaboration with a talented team of engineers (5 people) we proved it: from mathematical concept and simulations through to lab measurements on prototypes…”

Mr. Pellerey’s disclosure to Tesla of the speed and efficiency values for the latest Dyson Digital Motor (which is not yet in production and is code-named the V10) was the subject of complaint by DTL. In his witness statements and in cross-examination, Mr. Pellerey said that he had given those values to try to promote himself during the recruitment process with Tesla by showing that he was involved in the development of a high technology motor. He said that he did not give any thought at the time as to whether this was information that was already in the public domain, but now accepted that it was not. However, he maintained that the stated values of speed and efficiency of the V10 motor were merely rough values without definition of other relevant variables, and would not have been of any use or value to any engineer from Tesla working with the entirely different type of motors that are used in electric vehicles that operate at low speeds of an order of magnitude difference (e.g. at about 15,000 rpm rather than 130,000 rpm).

On 18 March 2015 Tesla made a job offer to Mr. Pellerey of appointment as a Staff Drive Motor Engineer. The role which he was to perform was described in the accompanying documents:

“The Staff Drive Motor Engineer reports into the Propulsion Team and will interact heavily with the Electromagnetic Design and Motor Control teams. He will be heavily involved in all design aspects of the electric motor mechanical design and participate in defining the optimal parameters for the electromagnetic design of the drive motor.

Working with the manufacturing teams he will assist with vendor, material and assembly selection for creation of early and pre-production prototypes.

The Drive Motor Engineer will be responsible for dynamic mechanical simulation of new and existing motor concepts, and perform combination of Electro-Magnetic and structural acoustic analysis to predict and optimize motor designs for [noise, vibration and harshness] and durability and assist the [Electromagnetic] design team to achieve the best overall design for [noise, vibration and harshness].”

The offer letter stated, however, that Mr. Pellerey’s, “duties, responsibilities, job title, and work location may be changed at any time by Tesla.” It also contained the following request:

“We ask that, if you have not already done so, you disclose to Tesla any and all agreements relating to your prior employment that may affect your eligibility to be employed by Tesla or limit the manner in which you may be employed. It is Tesla’s understanding that any such agreements will not prevent you from performing the duties of your position and you represent that such is the case. We want to emphasize that we do not wish you to bring any confidential or proprietary materials of any former employer which would violate any obligations you may have to your former employer. You agree not to make any unauthorized disclosure to Tesla or use on behalf of Tesla any confidential information belonging to any of your former employers…You also warrant that you do not possess any property containing a third party’s confidential and proprietary information. Of course, during your employment with Tesla, you may make use of information generally known and used by persons with training and experience comparable to your own, and information which is common knowledge in the industry or is otherwise legally available in the public domain.”

A slightly revised offer was sent to Mr. Pellerey on 23 March 2015 which envisaged a start date of 24 August 2015 and which was conditional upon his obtaining proof of a right to work in the United States. Mr. Pellerey accepted the offer by email on 24 March 2015 and Tesla started the process of applying for a H1B visa for him. On 12 May 2015 Tesla told Mr. Pellerey that this visa application was unlikely to be successful and they were looking at “other methods we can use to get you a visa”. Whilst efforts to obtain a visa continued, Mr. Pellerey did not inform DTL of Tesla’s conditional offer or of his acceptance of it.

On the morning of Wednesday 27 May 2015, events at DTL took an unexpected turn for Mr. Pellerey. Mr. Tuncay Celik, the head of Motors and Power Systems Research, took Mr. Pellerey and two of his colleagues aside and told them confidentially that Sir James Dyson intended that the Dyson Group should develop an electric car. He told Mr. Pellerey and his colleagues that they were to be assigned to this new project which was to be kept confidential and which became known as “Project E”.

Mr. Pellerey and his colleagues were instructed immediately to take their laptops and move into a separate secure area within the research department. There they and a limited number of other employees from the Technical Research and Product Design teams were given a high level briefing on the project by Mr. Celik and his superior, Mr. Clothier.

That briefing explained that the basic idea was to use a solid-state battery and to couple that with Dyson’s expertise in electric motor technologies. It was well-known that the Dyson group had been investing and working with a battery technology company in the United States called Sakti-3 which had been developing solid-state batteries which would have an obvious application in its vacuum cleaner and domestic product business. The plan was to use that solid-state battery technology in an electric car rather than the lithium ion batteries that are used in the majority of electric cars in current production. The full-time leader of the project was to be Mr. Peter Gammack (then Director of New Product Innovation). Mr. Pellerey was told that the aim was that by Christmas this year the Project E team should provide “proof of concept”, so that the DTL board could approve the next stage of research and development with a view to a Dyson electric car eventually going into production in about 4 years’ time.

Mr. Pellerey’s initial task for Project E was to look at torque/speed curves and to do some basic calculations of the motor size required for various acceleration targets given different assumptions for a number of variables such as the mass of the vehicle and the current density and cooling methods for the motor. The work was entirely hypothetical and produced a wide range of outcomes depending upon the different values used for the different variables. In addition, in the first week or so, he and the other engineers on the project conducted a review and comparison of publicly available information in relation to the specification of a number of the electric cars that are already available from leading manufacturers such as the Nissan Leaf, Renault Zoe, Tesla Model S and BMW i3.

Within the first few days of work on Project E, Sir James Dyson paid a visit to the engineering and design team in the secure area. He gave a talk to the team and explained the overall strategy for development of a Dyson electric car, including in particular his intentions for the basic nature, size and price of the car and various targets for different aspects of its performance. A number of those target specifications were written onto a whiteboard on the wall of the secure area for all in the Project E team to see: these included the target range, top speed, acceleration, weight, wheelbase, turning circle, external dimensions, motor power and drive-type.

From about 1 June 2015 Mr. Pellerey’s work on Project E expanded to the development of software programmes to produce drive cycle simulations. These built on the work that he had done on Project B (the electric bicycle) and predicted the energy required and hence the range of a hypothetical electric car with different specifications (e.g. mass, aerodynamic resistance, gearbox ratio, mass and size of wheel and rolling resistance of tyres, powertrain efficiency, ancillary power consumption for heating, ventilation and air conditioning (HVAC), and regeneration under braking) under different drive cycles (e.g. city, motorway, mountain etc). As before, these projections were entirely theoretical and resulted in spreadsheets and graphs illustrating the effects of the different variables on range and performance.

During his time working on Project E, Mr. Pellerey made a number of presentations to the team of his work product, illustrating his predictions for the range of a vehicle for a number of drive cycles and assumptions. He also provided data for inclusion in a table prepared by Mr. Clothier on 12 June which contained predictions for the runtime of a number of potential specifications of vehicle depending on the operating temperature and discharge power.

In addition to his own work, Mr. Pellerey also took part in informal discussions between the various members of the Project E team as well as more formal discussions in the secure area every few days at which results, information and ideas were exchanged. Sir James Dyson also attended these formal discussions on a number of occasions. Some of the issues discussed are apparent from Mr. Pellerey’s own notes in his notebook, and the topics were also the subject of emails circulated by Mr. Clothier after the meetings.

The items discussed by the Project E group and included in the emails sent to Mr. Pellerey ranged over the whole of Project E and went beyond the drive cycle simulations that he was working on. So, for example, there were emails circulated to Mr. Pellerey dealing with proposals for the use of airflow to cool the electric motor and transfer that heat to the solid state battery to improve its performance (rather than the liquid cooling conventionally required for both motor and lithium-ion batteries in other cars). The discussions and emails also referred to the possibility that Dyson might seek to use new gallium nitride (GaN) transistors to control power flow, and to the potential application of new gearbox coating technologies using lasers that were being developed in conjunction with researchers at Cambridge University.

By the end of the first two weeks of work on Project E (11 and 12 June 2015) the core market propositions and target technical specifications for an electric car had been discussed by the members of the Project E team and a rough degree of consensus reached. Such matters included the market sector, type of vehicle, price, weight and dimensions, the target range in realistic driving conditions, the top speed and acceleration. Although the evidence of Mr. Clothier for DTL sought to stress the importance of these early weeks in setting the direction for future work, in my judgment the reality was that the project was still very much in its infancy. Though obviously important, the work done in developing a target specification was at a fairly high level and was aimed at providing the basis for the development by December 2015 of a credible business case for submission to the Dyson board. That was the thrust of Mr. Clothier’s evidence in cross-examination:

“Q ….a very large part of the work during this period was that, wasn't it, it was gathering in information about competitors which was already in the public domain?

A. Yes, so the job in those first couple of weeks was to let us take the technology that we have got and know about, put it together, let us assimilate it, predict it and compare it to competitors, and that is what we confirmed, that we predict a very big advance on what anybody else can do that we know of.

Q. But this was all very much exploratory, wasn't it?

A. In what sense?

Q. In the sense of the stage of the project, it was very much exploratory. You were exploring all sorts of different options, weren't you?

A. We were certainly exploring a number of options, yes.

Q. Yes. And the actual specification itself wasn't fixed either, was it, those options in terms of the different spec was all very high level? This is, roughly speaking, the sort of thing that we would like to look at, let us examine the different parameters to get there?

A. I think we started out with a top level spec, which did change to a certain extent, as you might expect, after we get the first round of simulation results through and after we have done more thinking on what would make a competitive product. So we were essentially thinking -- we had, I think, a good idea from – James Dyson and Pete Gammack had thought through in the months beforehand and once the team were on it, we could then do more work and get that first round of pretty good predictions, and therefore refine how we were going to pitch the product.

…

I think the most fundamental thing is we need to know that we have a business case and we can do something differently to competitors, and we have the technology that can do that. That is why we are going through this exercise of showing what we can do and therefore pitching it in a certain way in terms of that will be that vehicle type with a certain specification in terms of acceleration, range, that sort of thing with, you know, other ideas beyond motor and power systems, for example the heating and ventilation system. You know, we just need to show we have a strong enough concept, a strong enough idea that will justify us going forward and massively scaling the project.”

Likewise, in re-examination, Mr. Clothier described what had been done in the first two and a half weeks as a “first cut” in designing an electric vehicle,

“Q. What were you going to do? You have the knowledge. You are confident you have the technology, so what are you going to do in those first couple of weeks?

A. It is really just the first cut at designing the whole vehicle. Because we have all of this knowledge and capability, we can work with the product design people led by Pete Gammack and ultimately James Dyson as well to design that vehicle as we want.”

At this stage I should say something about the approach of DTL to confidentiality generally and to the confidentiality of Project E specifically. It was a theme of DTL’s evidence - and not disputed - that the Dyson Group has made its name and business reputation by emphasising the “high-tech” and innovative nature of its products. Moreover, a very considerable amount of the evidence given by the two Dyson witnesses at the trial concerned what I think might fairly be described as the Dyson Group’s obsession with keeping its research and development activities secret. Typical was the following evidence from Mr. Bowen:

“Confidential information is one of Dyson’s most critical business assets. Innovation is the raison d’etre of the Dyson business; our overall strategy is to find new ways of looking at existing products and to develop new and novel products. Accordingly, confidentiality is central to what Dyson does. We rely upon confidential information for our research and development work, in particular and for the design and manufacture of our products, to keep ahead of our competitors and ensure the long-term success of the Dyson business. Moreover, much of Dyson’s research and development work is conducted over an extremely long time-frame. In extreme cases, a particular product might take more than a decade from initial idea to launch, and it is essential that we maintain commercial confidentiality at every stage of that process … we need to ensure that competitors do not discover our plans or products before we are ready to launch them in public….

Further, our approach involves an element of surprise. We enter markets that may be unconnected with previous markets we have developed. We arrive with an innovative product and capture consumers’ imagination before the competition can react. For this reason, knowledge of our intention to enter a new market is a key aspect of our confidential information.”

Mr. Clothier also elaborated on the importance, as the Dyson Group sees it, of confidentiality in order to maintain a commercial advantage:

“Dyson takes the protection of confidential information exceptionally seriously. At a certain stage in the research and development process, parts of our design plans will be protected by patents. This will not be until research is well advanced, however, and often not until the product is close to launch – not least because patent applications will become public documents. For several years before that stage, and afterwards in relation to information which is not directly covered in a patent application, we are reliant on the contractual obligations to which our employees, contractors, suppliers and any third party collaborators are subject – and in the case of employees, we use and rely heavily upon both contractual non-disclosure obligations and non-competition restrictions which apply for a limited period following the termination of their employment.

…

If our confidential information was disclosed to competing businesses, particularly information in relation to a product at its most vulnerable stage, before launch and before any patent is granted, we might lose the value of many prior years of investment and work. The fact that such information is public might hinder or preclude Dyson’s application for a patent. A competitor which learned of our plans would have an opportunity to react to the product before Dyson’s launch, whether by creating a similar design or creating an alternative design that countered Dyson’s product.”

For his part, Mr. Pellerey accepted that part of his induction process at DTL involved a presentation and on-line training on a Code of Conduct relating to information security and the protection of confidential information. He also acknowledged that DTL continued to stress the need for confidentiality,

“Q. Do you agree with me that from the start of your employment Dyson impressed upon you the need to preserve confidentiality?

A. Yes.

Q. They constantly, don't they, remind people of the need to keep matters confidential; do you agree?

A. Constantly I wouldn't say so, but I agree that, yes, they put effort on that.”

In addition to the training and information provided to employees, DTL also takes practical precautions to keep its research and development activities confidential. Access to the research and development department is controlled by thumb-print recognition and security passes with chip cards, and a variety of additional security procedures operate within the building to preserve the confidentiality and integrity of DTL’s data.

From the outset, additional steps were taken to keep the nature of Project E secret, even from the remainder of DTL’s employees. A limited number of staff were assigned to work on Project E, and, as I have already indicated, their work was confined within the research and development building to a secure area divided into two rooms, access to which was restricted by a security pass.

It is a central complaint of DTL that when Mr. Pellerey was first invited to become involved with Project E on 27 May 2015, he did not tell DTL that he had accepted a conditional job offer with Tesla. Mr. Clothier’s evidence, which was not challenged and which I accept, is that given DTL’s view of the commercial sensitivity of Project E, if Mr. Pellerey had told his managers at DTL at the outset that he had accepted a conditional job offer with Tesla and was waiting for visa clearance, he would not have been allowed to become involved with Project E.

For his part, although Mr. Pellerey disputed that DTL had succeeded in its objective of keeping Project E secret, he accepted that DTL took steps designed to keep the existence and nature of Project E highly confidential from the remainder of its workforce and the outside world. He also accepted in his witness statement that he felt “a little uncomfortable” working on it from the start,

“…Although this project was in its very early stages, and Dyson was a long way off having an electric vehicle, I felt a little uncomfortable about being involved in that project, as I knew I would be involved with electric vehicles at Tesla, although at Tesla I would be focusing on the acoustic noise of electric powertrain, which is not something I had been involved with or exposed to during my time at Dyson. However, I could see there was a potential risk that some form of conflict could arise further down the line, and at this time I did not know what my role would be in Project E….

….

There was not much time to reflect on the announcement and consider my position. As I mentioned … above, I felt a little uncomfortable about getting involved in Project E, especially as I did not know at the outset exactly what it would involve and I was concerned that, should the matter continue for a long time, a conflict might arise in the future (in the sense of being exposed to information which might make things difficult in the future). I, therefore, consciously monitored and limited my exposure and involvement to what was specifically required of me. I was interested in being involved in Project E, however, and I believe if I had told Dyson at the time of my conditional job offer from Tesla (as it is now suggested I should have done) it would have compromised my future prospects at Dyson should Tesla have not confirmed an unconditional job offer with me.”

On 3 June 2015, about one week into Project E, the issues of confidentiality and conflicts of interest were expressly brought to Mr. Pellerey’s attention. On that day, Mr. Bowen attended to give a briefing to the Project E team to stress the importance of maintaining the confidentiality of the work that they were doing. Mr. Pellerey accepted that Mr. Bowen reminded those present that Project E was confidential and that it was important to maintain that confidentiality. He also did not dispute Mr. Bowen’s evidence that Mr. Bowen had also spoken about conflicts of interest, how they might arise, and the need to avoid them.

The next day, 4 June 2015, Mr. Pellerey sent an email to Tesla chasing an up-date on his visa application, and stating,

"It becomes difficult for me to continue with my current employer without risking some kind of conflict of interest so I would like to hand in my notice in quickly."

Mr. Pellerey was cross-examined about this email,

“Q. So on 4 June you realise that you were in a position of conflict of interest; do you agree?

A. I don't say I was in a position of interest; I am explicitly saying I could risk some kind of conflict of interest.

Q. Are you suggesting that on 4 June you did not think that there was a conflict of interest? You were working on the electric car for Dyson … in circumstances where you had a job offer from Tesla?

A. I was thinking that … in the future … a conflict-of-interest like situation could arise, and I didn't consider at the time that there was a conflict of interest.

Q. What would have had to change in order for a conflict of interest to come around in circumstances where you are working on an electric car that you have been told is confidential, for your employer, and sitting on a job offer from another electric car manufacturer?

A. I think there are several points that could translate that potential … that risk of conflict of interest into a real conflict of interest, if, let us say, the job I had to do at Dyson was similar to what I had to do at Tesla, as well as if … I wasn't working on pure speculative, and benchmarking, blue-thinking options about what the car could be, but if I had strong information about which direction Dyson would take at some point. And I believe at that point that wasn't the case. So yes, I didn't consider that Dyson was a competitor, and that my job at Tesla would have any kind of similarities with what I was doing in that project.”

As well as criticising Mr. Pellerey for his failure to disclose his offer from Tesla even after Mr. Bowen’s, DTL also objected that far from limiting his exposure to Project E after the first week, Mr. Pellerey carried on playing a full, and indeed expanded role in the project. The point was addressed in cross-examination:

“Q. Yes, and in circumstances where you had identified at least a potential conflict of interest you decided yourself, to expand your role in the Project E work by not just doing torque speed work, but by doing the drive simulation work as well, correct?

A. I think there are like two explanations to that. The first one is that there wasn't a lot more do about the torque peak curves that had probably reached, like, all of the results you could get from that, so it is like the really simple calculation sheet made for an electric bike, so I was like finished on that. The second thing is that it was very natural to move to something a bit more elaborative, like a constant acceleration, okay, a speed profile of the drive-cycle. I took the initiative to go further, but I wasn't seeking to go in the domain of, like, a calculation where I would have all of the information around me. That wasn't the purpose, that was a natural direction….

Q. You certainly didn't go to your manager and say that, "I have come to an end with the torque speed work, what would you like me to do?"

A. I think I did actually mention it to Yu Chen, my line manager, as to which direction I should go to for, and I think initially I developed that as well to help Matte finish his things so I could develop his simulations.

Q. It would be fair to say, wouldn't it, as a result as a result of taking on the drive simulation work as well, you got deeper into the project?

A. Yes, I think, like, as time goes, you get deeper into the project, yes.”

Mr. Pellerey continued to press Tesla for a firm job offer, and on the evening of Friday 12 June 2015 he received an offer of a job based in Europe, which avoided the problems with his US visa application. Mr. Pellerey then handed in his notice to DTL at 9 a.m. on Monday 15 June 2015. As might be expected, this news was not well received by DTL, and various difficult meetings followed at which DTL insisted that Mr. Pellerey could not go to work for Tesla. Mr. Pellerey notified Tesla on 15 June that there might be some legal issues arising from his employment contract and a project that he had been working on for DTL.

Over the next few days, DTL indicated that unless it received satisfactory undertakings from Mr, Pellerey not to go to work for Tesla and not to disclose the reason to Tesla, it intended to take legal proceedings. In response, Mr. Pellerey asked Tesla to help him defend any legal proceedings, and Tesla agreed that it would enter into an indemnification agreement in relation to costs with Mr. Pellerey. Mr. Pellerey told DTL of this on 24 June 2015, and that same day received a letter from DTL’s solicitors, Slaughter and May indicating that they had been instructed to commence legal proceedings. That letter was headed “Confidential, not for publication” and, after setting out DTL’s contentions as to Mr. Pellerey’s duties, contained the following paragraph,

“Our client has raised concerns with you, following your resignation on 15 June 2015, regarding your proposed move to a new employer and your failure to inform our client of the job offer you received from that new employer prior to your placement on a highly sensitive and confidential project at Dyson (“Project E”). Your proposed new employer is engaged in the same type of business as the business comprised in Project E and is therefore a direct competitor of that business and so a Restricted Business within the meaning of your contract of employment. Our client has been concerned to ensure that you abide by the provisions in your contract of employment, in particular the restrictive covenant, which restricts you from taking up employment with a competitor for a period of 12 months.”

(my emphasis)

The highlighted passage in the letter from Slaughter and May made it quite clear that the subject matter of Project E and the business of Tesla are the same. It therefore made it clear to the reader that Project E concerns the development of an electric car.

Later that day Mr. Pellerey told Mr. Yusuf Mohamed, Tesla’s Associate General Counsel in California, about the letter from Slaughter and May in the course of an email exchange about the signing of his indemnification agreement by Tesla. Mr. Mohamed then asked to be sent a copy of the letter as soon as possible. In response, Mr. Pellerey emailed to say,

“I received the letter by email. I could forward it to you but it says “confidential, not for publication” so I’m not sure I can send it to Tesla directly. What do you think?”

In response, Mr. Mohamed replied,

“Yes, just don’t put it on twitter. ☺ We’ll need to see it to carry out our indemnity obligations.”

Mr. Pellerey then sent a copy of the letter to Mr. Mohamed.

When challenged in cross-examination on why he had sent the letter to Tesla, Mr. Pellerey said that by this stage he had run out of legal advice because his previous solicitor had ceased to act. Mr. Pellerey said that, as a lay person, he was under the impression that because Mr. Mohamed was a lawyer, he would have to deal with information given to him confidentially, and not disclose it to the rest of the company. Although that explanation seems obviously inaccurate to a lawyer, I accept Mr. Pellerey’s evidence as to his thought process, which is consistent with his uncertainty and request for Mr. Mohamed’s assistance as to whether he could “send [the letter] to Tesla directly”.

As regards the view that Tesla now has of events, I was shown a letter from Mr. Mohamed to Mr. Pellerey’s solicitors dated 6 September 2015, in which Mr. Mohamed stated that he has not shared the Slaughter and May letter with anyone else at Tesla. Mr. Mohamed went on to state, “I did not at the time and still do not understand how we might be a competitor to Dyson”. Given what is obvious from the contents of the Slaughter and May letter as regards the subject matter of Project E, I can only assume that this observation reflects Mr. Mohamed’s view of the meaning of “competitor”.

I also received evidence in the form of a witness statement from a Mr. Verzeni, a Propulsions Systems Manager for Tesla, who was not cross-examined, and who therefore gave unchallenged evidence that he does not know why DTL has commenced the proceedings against Mr. Pellerey. Mr. Verzeni said that he “can only speculate that it must be something to do with confidential business information [Mr. Pellerey] has acquired during his employment by [DTL]”. I note, however, that Mr. Verzeni does not indicate the outcome of such speculation.

In my judgment, irrespective of whether or not anyone at Tesla apart from Mr. Mohamed has positively been informed of the nature of Project E by sight of the contents of the letter of 24 June 2015, I think that the reality is that Tesla must by now have deduced that Dyson is working on an electric car project. Tesla knows that DTL is taking these proceedings against Mr. Pellerey to stop him working for them. It does not require a great deal of imagination to come to the conclusion that DTL would not be going to such trouble if the only confidential information he possessed related to vacuum cleaners and hand dryers, which are businesses in which Tesla is not involved. Tesla must by now also be well aware of the Dyson Group’s investment in Satki-3 and press speculation that the Dyson Group is planning to develop an electric car using such batteries. When the point was put to Mr. Bowen in cross-examination, he eventually accepted that Tesla must by now have deduced that DTL intends to develop its own electric car.

It is, however, far less obvious that those in the wider world (including other electric car manufacturers) who are not aware of these proceedings will necessarily have reached the same conclusion. Although there have, as I have indicated, been a number of recent online press articles speculating directly that the Dyson Group were working on an electric car (see e.g. articles in early September in The Daily Mail, The Telegraph and The Independent), there has been no public confirmation of that from the Dyson Group. The stance of the Chief Executive, when questioned on the subject at a press conference on 3 September 2015 was to say “We are ruling nothing out”. It was on this basis, together with concern to preserve confidentiality in the more specific technical details in relation to Project E that were likely to be canvassed in the evidence, that I took the decision to hear most of the trial (including all of the evidence) in private.

DTL puts its case for an injunction to restrain Mr. Pellerey from working for Tesla for 12 months from 15 June 2015 in two ways. First, it contends that it is entitled to enforce the post-termination restraint in Mr. Pellerey’s Employment Contract. Secondly, it says that it is entitled to a “springboard injunction” to prevent Mr. Pellerey from enjoying the benefit in his new employment of the “illegitimate head-start” that he allegedly gained by acting in breach of the terms of his Employment Contract that required him to act in good faith towards DTL and specifically to notify it of any approach from a potential new employer which might be in competition with DTL or any Dyson Group company.

DTL also seeks an injunction to restrain Mr. Pellerey from using or making use of DTL’s confidential information, in accordance with the express or implied terms of his Employment Contract.

Mr. Pellerey denies that DTL is entitled to any of the relief that it seeks. He contends that the post-termination clause in the Employment Contract is void and unenforceable as a matter of policy, that it does not apply on the facts, and that it would in any event be unjust for it to be enforced against him. He further denies any breach of contract or duty that would give rise to the basis for a “springboard injunction” or that an injunction preventing him from working for Tesla would in any event be an appropriate response to any alleged breach, because neither he nor Tesla he stand to gain any advantage as a result of any such breach.

In relation to the claim for an injunction to prevent a breach of confidence, Mr. Pellerey’s position is that he is well aware of his obligations of confidence to DTL and does not intend and has not threatened to breach them. He therefore says that there is no basis for the grant of an injunction (with the potential for penal sanctions for contempt).

I therefore turn to consider the claims seriatim.

Both parties were agreed that the general approach of the court to the question of enforcement of post-termination restrictions is conveniently summarised in the judgment of Cox J in TFS Derivatives Ltd v Morgan [2005] IRLR 246 at [36]-[40]:

“36.

Thus, [the clause in issue] will be unlawful unless it is justified by [the employer] as being reasonable, in the interests both of the parties and of the public. In assessing reasonableness, there is essentially a three-stage process to be undertaken.

37.

Firstly, the court must decide what the covenant means when properly construed. Secondly, the court will consider whether the former employers have shown on the evidence that they have legitimate business interests requiring protection in relation to the employee's employment….

38.

Thirdly, once the existence of legitimate protectable interests has been established, the covenant must be shown to be no wider than is reasonably necessary for the protection of those interests. Reasonable necessity is to be assessed from the perspective of reasonable persons in the position of the parties as at the date of the contract, having regard to the contractual provisions as a whole and to the factual matrix to which the contract would then realistically have been expected to apply.

39.

Even if the covenant is held to be reasonable, the court will then finally decide whether, as a matter of discretion, the injunctive relief sought should in all the circumstances be granted, having regard, amongst other things, to its reasonableness as at the time of trial.

40.

If a restrictive covenant applying after employment has terminated is held to be unreasonable, then it is void and unenforceable. The court cannot read down such a clause in an effort to render it reasonable and enforceable. In certain circumstances, however, if only a discrete phrase within a particular covenant is held to be unreasonable, individual words or phrases may be “blue-pencilled” or severed, provided that what is left makes independent sense without the need to modify the wording and that the sense of the contract is not changed….”

There are, accordingly, the following stages to my inquiry:

In TFS at [41], Cox J indicated that at the first stage, when interpreting a restrictive covenant, the normal principles of construction of written contracts should apply. Those principles have been examined in a number of cases in recent years, including in particular Investors Compensation Scheme v West Bromwich BS [1998] 1 WLR 896, Chartbrook Limited v Persimmon Homes [2009] 1 AC 1101, Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, and most recently Arnold v Britton [2015] 2 WLR 1593. In Arnold v Britton at para [15], Lord Neuberger summarised the approach of the courts,

“When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to "what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean", to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101, para 14. And it does so by focussing on the meaning of the relevant words … in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions.”

Lord Neuberger also went on to emphasise seven factors. The first (at para [17]) was as follows,

“… the reliance placed in some cases on commercial common sense and surrounding circumstances … should not be invoked to undervalue the importance of the language of the provision which is to be construed. The exercise of interpreting a provision involves identifying what the parties meant through the eyes of a reasonable reader, and, save perhaps in a very unusual case, that meaning is most obviously to be gleaned from the language of the provision. Unlike commercial common sense and the surrounding circumstances, the parties have control over the language they use in a contract. And, again save perhaps in a very unusual case, the parties must have been specifically focussing on the issue covered by the provision when agreeing the wording of that provision.”

In applying that approach in relation to restraint of trade clauses such as the one in issue in this case, it is not the function of the court to strive to give the clause a meaning which, as a matter of construction, it cannot reasonably bear in order to improve it to make it a restraint that would be of some use in practice: see Prophet v Huggett [2014] EWCA Civ 1013 at para [35]. Nor will the court “read down” the natural meaning of a clause to save a restraint that would otherwise be unreasonably wide: see Ashcourt Rowan Financial Planning v Hall [2013] EWHC 1185 (QB) at para [47].

Finally, in determining whether a contractual clause is genuinely ambiguous, the court is entitled to test the rival interpretations against the commercial consequences: see Napier Park v Harbourmaster [2014] EWCA Civ 984 at paras [33]-[36]. If the clause really is ambiguous, the court is entitled to adopt the meaning that best accords with business commonsense and which renders the restraint of trade lawful on the basis that the parties are to be presumed to have intended their bargain to be lawful and not to offend against the public interest: see Rainy Sky at paras [21]-[30] and TFS at para [43].

The two main issues of interpretation in this case are (i) the meaning of the words “so as to compete with the Company or any Group Company” which appear at the start of clause 1(a) in the Employment Contract, and in particular whether they serve to qualify the entirety of what follows in that clause, or are merely descriptive of what follows; and (ii) what activities are comprehended by the expression “similar to any business being carried on by the Company or any Group Company at the Termination Date” in the definition of “Restricted Business”.

As to the first issue, Mr. Nicholls contends that the opening words are of substantive effect and qualify the remainder of clause 1(a). For Mr. Pellerey, Mr. Sims QC submits that the words are merely descriptive of the object of the clause, and that the only operative part of the clause is that which follows. On the second point, Mr. Nicholls contends that the research and development activities of DTL amounted to the carrying on of a business by DTL: in contrast, Mr. Sims contends that the clause was only meant to apply if there was research and development activity for an external trade in a type of product which DTL or another Dyson Group company were actually selling at the Termination Date.

I therefore turn to the first point, and start with the language and structure of the Employment Contract itself. There is nothing in the structure of clause 1(a) that suggests that the opening words “so as to compete with the Company or any Group Company” are intended as a mere description of the object of the clause and are not intended to have some meaning in themselves. They are not, for example, underlined or italicised or in any other way distinguished from the remainder of the clause. Moreover, none of the other sub-clauses of clause 1 - or indeed any of the other clauses of the Employment Contract - contain any words in the body of the clause that could be interpreted as being merely descriptive. The agreement is carefully constructed, and there are descriptive headings in the agreement, but they are underlined, in bold and precede the text of each relevant clause. In the context of the Employment Contract, it would therefore be a unique drafting technique if the opening words of clause 1(a) were meant to be merely descriptive of what follows. It would, moreover, be an unusual drafting technique, because it would involve the insertion of words not intended to have some substantive meaning between the operative words “You will not for the Restricted Period…” and the remainder of the prohibition, namely “…carry on or be engaged, concerned or interested in any Restricted Business”.

I also observe that, in context, the opening words (“so as to…”) are natural words of qualification. Indeed, if the order of the phrases had been reversed so that clause 1(a) read, “You will not … carry on or be engaged, concerned or interested in any Restricted Business so as to compete with the Company or any Group Company”, I apprehend that there could be no room for argument that the words “so as to…” qualified the remainder of the clause. Mr. Sims’ argument thus places a very great deal of weight on the order of the words in the clause.

It is also apparent that if the first half of the clause were merely descriptive, the second half of the clause would not accord with that description. Neither party suggested that the word “compete” should have anything other than its natural and ordinary meaning of rivalry in business or trying to gain superiority over others. But applying that meaning, if Mr. Sims’ argument was correct, the second half of the clause would not be limited to competitive conduct by Mr. Pellerey. It could apply, for example, if he were simply “interested” as a passive minority shareholder in a business that was similar to the business being carried on by DTL, or if he was otherwise “engaged or concerned” in a similar business but in an entirely administrative capacity. Reading the clause in that expansive way was the foundation for some of Mr. Sims’ submissions that the clause was invalid as being an unreasonably wide restraint, but I disagree with his premise. I think that the focus of the clause is on Mr. Pellerey’s activities and position, and the disconnect that I have identified supports the argument that the first part of the clause was not intended to be merely descriptive of the second part.

In my view the natural reading of clause 1(a) is that the first half is meant to qualify the second half. It is only conduct of Mr. Pellerey which falls within the second half of the clause and which competes with DTL or any Group Company that is intended to be caught by the clause. Taken in conjunction with clause 4 and the definition of Restricted Business, the restraint is intended to prohibit Mr. Pellerey from competing with DTL or another Dyson Group company as a result of his own involvement (whether by virtue of his activities as a director or employee etc of another company) in a business similar to that carried on by DTL or another Dyson Group company at the Termination Date, and in which Mr. Pellerey had been relevantly involved during his time at DTL.

The second issue of interpretation is whether the reference to “any business being carried on by DTL or any Group Company at the Termination Date” in the definition of “Restricted Business” was intended to be confined to an external trading activity, and hence the restraint could only apply if, at the Termination Date, DTL or another Dyson Group company was actually selling relevant products in the marketplace.

I do not think that is what is intended, having regard to the language and structure of the Employment Contract and the background context against which it was entered into.

Mr. Pellerey was to be employed by DTL. The purpose of that company is to conduct research and development for products to be sold by other companies in the Dyson Group. DTL does not itself sell products to the public or any other external market. It would thus not have been the obvious starting point for the parties to have chosen to define the scope of the restraint by referring to an activity that DTL, as Mr. Pellerey’s employer, was known not to be carrying on itself.

It was also known, again as confirmed by the unchallenged evidence of Mr. Clothier for DTL, that the activities of DTL would not be limited to the improvement of existing product lines, but would be very likely to involve research and development of new products. It would also have been apparent, as Mr. Pellerey accepted in his evidence, that all such projects for the development of new products would be confidential, and would remain so, at least until the new product was marketed to the public or a patent application made. Accordingly, as the restraint clause was intended to assist in the protection of confidential information (a point to which I shall return below) it could readily be foreseen that protection would not only be required for confidential information relating to existing products, but also for confidential information relating to new products in research and development.

Against that background, I do not think that the words “business being carried on” were intended to be read narrowly so as to be restricted to the sale of products in the marketplace. As a matter of language, the concept of “carrying on a business” can be a very wide one. It is not necessarily synonymous with the carrying on of a trade selling goods or services for profit, and it can connote activities done otherwise than with a view to profit: see e.g. Rolls v Miller (1884) 27 Ch D 71 at 88, and Re Sarflax Limited [1979] Ch 592 at 598-599. Given the scale of DTL’s research and development activities, I have no doubt that the contracting parties would have understood that DTL was “carrying on a business” in its own right by engaging on those activities.

I also do not think that the restraint was intended to be restricted by reference to products already being sold by other Dyson Group companies. Quite apart from the acknowledged need for protection of the confidential information in research and development projects, the definition of Restricted Business itself refers, in sub-clause (iii), to “circumstances where a new product is planned to be launched”. The inclusion of that sub-clause would make little or no sense if the restraint could only apply if products were actually being sold at the Termination Date.

Nor do I accept that sub-clause (iii) was only intended to apply if “proof of concept” approval had been given, or specific plans had been laid for the launch of a finished product onto the market by the Termination Date. The clause makes no mention of “proof of concept” or any particular marketing stage at all. Instead, I read it as designed to apply at any time from the point in time at which a potential product was conceived (by DTL) until it was actually made available to the market (by another Dyson Group company), provided that Mr. Pellerey had been involved with some stage of that development process in the 24 months prior to the Relevant Date, and provided also that he still had Confidential Product Information (as defined) relating to it.

The basic principle of law was set out in Nordenfelt v Maxim Nordenfelt [1894] AC 535 by Lord NcNaughten and was further explained by Lord Parker in Herbert Morris v Saxelby [1916] AC 688 at pages 706-7. The public interest is that individuals should be able to carry on their trade freely, and so contractual covenants in restraint of trade will be contrary to public policy and void unless they can be justified as reasonable in the interests of the parties and not injurious to the public interest. As regards the former, Lord Parker made it clear in Herbert Morris at page 707 that the interests of the parties requires that any restraint affords no more than adequate protection to the party in whose favour it is imposed.

The cases demonstrate that there are a number of legitimate interests of an employer that may justify the imposition of a covenant in restraint of trade. Of these, the only one in issue in this case is the protection of trade secrets or confidential information akin to a trade secret. The rationale for permitting a restraint on trade as a means of protecting such secrets or confidential information was explained by Lord Denning MR in Littlewoods Organisation v Harris [1977] 1 WLR 1472 at 1479,

“It is thus established that an employer can stipulate for protection against having his confidential information passed on to a rival in trade. But experience has shown that it is not satisfactory to have simply a covenant against disclosing confidential information. The reason is because it is so difficult to draw the line between information which is confidential and information which is not: and it is very difficult to prove a breach when the information is of such a character that a servant can carry it away in his head. The difficulties are such that the only practicable solution is to take a covenant from the servant by which he is not to go to work for a rival in trade. Such a covenant may well be held to be reasonable if limited to a short period.”

It is therefore clear that the fact that (as in the instant case) a contract of employment may contain a separate clause restricting the disclosure of confidential information does not prevent a non-competition clause from being regarded as reasonable: see also Dyson Technology Limited v Strutt [2005] EWHC 2814 at paras [59]-[62].

The distinction between trade secrets and confidential information akin to a trade secret (which can be protected by a suitable non-compete covenant) and other knowledge and information that cannot was addressed in Herbert Morris. Lord Parker stated, at page 709,

“I cannot find any case in which a covenant against competition by a servant or apprentice has, as such, ever been upheld by the Court. Wherever such covenants have been upheld it has been on the ground, not that the servant or apprentice would, by reason of his employment or training, obtain the skill and knowledge necessary to equip him as a possible competitor in the trade, but that he might obtain such personal knowledge of and influence over the customers of his employer, or such an acquaintance with his employer's trade secrets as would enable him, if competition were allowed, to take advantage of his employers' trade connection or utilise information confidentially obtained.”

Lord Shaw also stated, at page 714,

“Trade secrets, the names of customers, all such things which in sound philosophical language are denominated objective knowledge—these may not be given away by a servant; they are his master's property, and there is no rule of public interest which prevents a transfer of them against the master's will being restrained. On the other hand, a man's aptitudes, his skill, his dexterity, his manual or mental ability—all those things which in sound philosophical language are not objective, but subjective—they may and they ought not to be relinquished by a servant; they are not his master's property; they are his own property; they are himself. There is no public interest which compels the rendering of those things dormant or sterile or unavailing; on the contrary, the right to use and to expand his powers is advantageous to every citizen, and may be highly so for the country at large.”

A non-exhaustive list of the factors that might be considered in determining whether information is of sufficient status to be capable of protection after employment has ceased were set out in Faccenda Chicken v Fowler [1987] 1 Ch 117 at pages 137B-138H,

“(a)

The nature of the employment. Thus employment in a capacity where "confidential" material is habitually handled may impose a high obligation of confidentiality because the employee can be expected to realise its sensitive nature to a greater extent than if he were employed in a capacity where such material reaches him only occasionally or incidentally.

(b)

The nature of the information itself. In our judgment the information will only be protected if it can properly be classed as a trade secret or as material which, while not properly to be described as a trade secret, is in all the circumstances of such a highly confidential nature as to require the same protection as a trade secret eo nomine. The restrictive covenant cases demonstrate that a covenant will not be upheld on the basis of the status of the information which might be disclosed by the former employee if he is not restrained, unless it can be regarded as a trade secret or the equivalent of a trade secret…

It is clearly impossible to provide a list of matters which will qualify as trade secrets or their equivalent. Secret processes of manufacture provide obvious examples, but innumerable other pieces of information are capable of being trade secrets, though the secrecy of some information may be only short-lived. In addition, the fact that the circulation of certain information is restricted to a limited number of individuals may throw light on the status of the information and its degree of confidentiality.

(c)

Whether the employer impressed on the employee the confidentiality of the information. Thus, though an employer cannot prevent the use or disclosure merely by telling the employee that certain information is confidential, the attitude of the employer towards the information provides evidence which may assist in determining whether or not the information can properly be regarded as a trade secret….

(d)

Whether the relevant information can be easily isolated from other information which the employee is free to use or disclose….

For our part we would not regard the separability of the information in question as being conclusive, but the fact that the alleged "confidential" information is part of a package and that the remainder of the package is not confidential is likely to throw light on whether the information in question is really a trade secret.”

In this regard I was also referred to the dictum of Staughton LJ in Lansing Linde v Kerr [1991] ICR 428 at page 437E-G,

“It appears to me that the problem is one of definition: what are trade secrets, and how do they differ (if at all) from confidential information? Mr. Poulton suggested that a trade secret is information which, if disclosed to a competitor, would be liable to cause real (or significant) harm to the owner of the secret. I would add first, that it must be information used in a trade or business, and secondly that the owner must limit the dissemination of it or at least not encourage or permit widespread publication.

That is my preferred view of the meaning of trade secret in this context. It can thus include not only secret formulae for the manufacture of products but also, in an appropriate case, the names of customers and the goods which they buy. But some may say that not all such information is a trade secret in ordinary parlance. If that view be adopted, the class of information which can justify a restriction is wider, and extends to some confidential information which would not ordinarily be called a trade secret.”

The manner in which these principles are to be applied when considering the question of the reasonableness of a restrictive covenant was addressed by Toulson LJ in Thomas v Farr [2007] ICR 932 at para [41],

“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 needs to establish is 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 (i.e. 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….”

The need to assess the reasonableness and hence validity of the covenant by reference to the information which the parties could reasonably have envisaged at the time of contracting that the employee might have access to during his employment flows from the fact that one cannot have a situation in which the validity of the clause might vary, depending upon what had occurred from time to time during the employment. As I see it, the precise nature of the information to which an employee is actually exposed during his employment and which remains confidential will be relevant to the exercise of the court’s discretion as to whether to enforce the covenant by an injunction after the employee has left the employment. I shall return to consider that issue later in this judgment.

Applying these principles, I have no doubt whatever that at the time of entering into the Employment Contract the parties must have envisaged that Mr. Pellerey’s employment would involve him being exposed on a daily basis to highly confidential information regarding the research and development of existing and potential products by DTL that could properly be described as trade secrets or information of equivalent confidentiality. I have set out in paragraphs 33 and 34 above the evidence of Mr. Bowen and Mr. Clothier as to the nature of DTL’s business and the Dyson Group’s strict approach to confidentiality and the practical steps taken to preserve it. That evidence was not materially challenged, and I accept it. Given the manifest importance to DTL of the confidential information concerning the research and development being undertaken by its staff, and the steps taken to protect that information, there can be no doubt that DTL had a legitimate business interest in such information that it was entitled to protect by a suitable covenant restraining Mr. Pellerey from engaging in a competitive activity after termination of his employment.

Mr. Sims did not dispute those propositions, but contended that the terms of the restraint clause in this case went further than was reasonably necessary. On the assumption that the clause was to be construed as I have outlined above, he submitted that the following features of the clause were unreasonable:

In support of the proposition that a covenant that seeks to protect the interests of companies other than the employer will be invalid, Mr. Sims relied upon the decisions in Henry Leetham & Sons Limited v Johnstone–Mills [1907] 1 Ch 322 and Business Seating (Renovations) Limited v Broad [1989] ICR 729.

In Henry Leetham, a contract between the parent company of a group and the defendant contained a covenant by which the defendant agreed to serve the parent company or any of its subsidiary companies as the claimant might direct, and not to engage in a business similar to that carried on by any of the companies anywhere in the United Kingdom for 5 years after termination of his employment. Each of the subsidiary companies had their own separate business in a discrete geographical area of operation (see pages 323-324) and the contract contained a provision which stated that,

“all restrictions and conditions contained in the agreement should be construed as if they were made in separate agreements entered into by the [defendant] with the [claimant] and each of the subsidiary companies, and might be put in force by any one of them in whose actual service the [defendant] had been at any time during the continuance of the agreement.”

The Court of Appeal held that the defendant had, pursuant to that agreement, been employed by only one of the subsidiary companies (“the Cleveland Company”) that carried on business in the “comparatively small portions of England” of Northumberland, Durham and Yorkshire, and that the restraint of trade was void, as it purported to prevent the defendant from working in a far wider area than was required for the protection of the business of that one company. Crucial to the decision was the Court of Appeal’s view that the businesses of the subsidiaries were separate, and of the subsidiaries, the only contract was with the Cleveland Company: see e.g. per Buckley LJ at pages 328-329.

That point was relied upon by the Privy Council in Stenhouse v Phillips [1974] AC 391 in upholding a restraint of trade clause in a contract between the defendant and the parent company of a group of companies which prohibited the defendant from carrying on business in any town in Australia in which any of the group companies carried on business, and from soliciting the custom of any person who had been a customer of any group company during the continuance of the agreement. Lord Wilberforce said, at page 404,

“It was submitted that whereas the agreement of March 23, 1972, was made with the appellant company, the interests to be protected were the interests of its subsidiaries - independent legal entities - and reference was made to Henry Leetham & Sons Limited v Johnstone-White [1907] 1 Ch 189; [1907] 1 Ch 322. That was a case where the agreement, as interpreted by the Court of Appeal, was with one company of a group, that one company having a limited business, whereas the restraint was expressed in far wider terms, extending to the area covered by the operations of the group as a whole. The facts of this case are different and do not support the respondent's argument, technically attractive though it may appear. The evidence is clear that the business of the Stenhouse Group was controlled and co-ordinated by the appellant company, and all funds generated by each of the companies were received by the appellant. The subsidiary companies were merely agencies or instrumentalities through which the appellant company directed its integrated business. Not only did the appellant company have a real interest in protecting the businesses of the subsidiaries, but the real interest of so doing was that of the appellant company. It is not necessary to resort to a conception of 'group enterprise' to support these proceedings. The case is, more simply, that of the appellant's business being to some extent handled for it by subsidiary companies. Their Lordships therefore agree with the judge in rejecting this argument.”

Business Seating was a case of a non-solicitation covenant which purported to restrict the defendant from canvassing or soliciting the custom of existing customers of the plaintiff employer or of an associated company. The business of the plaintiff employer was repairing or renovating office furniture and commercial seating: the business of the associated company was manufacturing and selling new office furniture and commercial seating. Millett J described the two companies as,

“each with its own separate and distinct business, and each with its own customers, though many of the customers are customers of both..” (pages 734H-735A)

and found that,

“So far as the plaintiff company was concerned, its only interest in customers of [the manufacturing company] was as potential customers of its own” (page 734C-D).

Millett J also found that the defendant had no connection at all with the manufacturing company itself or with its customers (page 734C-D). On these bases, Millett J held that the restraint was too wide and the covenant void in so far as it extended to the customers of the associated manufacturing company.

I note that none of these authorities were cases involving the enforcement of non-competition covenants in order to protect the misuse of trade secrets or confidential information: see in particular the observation of Lord Wilberforce in Stenhouse at page 400E. That said, the authorities show that the law on restraint of trade generally respects the concept of separate corporate personalities, and that a restraint of trade clause by which an employer seeks to protect the business of another company which is separate and distinct from the employer’s own business, and in which the ex-employee in question has not been involved, will be invalid.

However, I consider that the position is very likely to be different where the business of the employer is not commercially separate and distinct from the business of an associated company, and where it is envisaged that, during the employment, the employer will make its trade secrets or confidential information (or the services of an employee possessed of such trade secrets or confidential information), available to that associated company for use in its business. In such a case, I do not see why the legitimate interests of the employer might not extend to protecting the business of that other company against misuse of the trade secrets or confidential information by the employee after termination of his employment. For example, the employer company charged with conducting research and development is likely to have a direct financial interest in the use to which its trade secrets or confidential information are put by the associated company. It may, for example, stand to benefit by way of payments of a licence fee or royalties from other group companies who exploit such information. It may also be in the commercial interests of the employer to ensure that the businesses of such group companies are not undermined by unfair competition based upon misuse of such information. In that way revenues will be maximised and additional resources will be available within the group for further research and development work by the employer.

Although the evidence did not set out the precise terms upon which DTL deals with the other companies in the Dyson Group, it is clear that DTL makes available the right to exploit its inventions to other companies in the Dyson group that in turn manufacture and sell Dyson products. It is also clear that DTL (which does not sell products itself) is dependant upon such other Dyson group companies to generate the sales revenues to provide a large part of the very substantial financial funding that is provided annually for the research and development business conducted by DTL. It is, therefore, quite clear that the research and development business of DTL is intimately linked to the success of the manufacturing and retailing businesses of the other Dyson Group companies.

I also note that the terms of the definition of “Restricted Business” are such that, in relation to the business of another Dyson Group company, Mr. Pellerey’s post-employment activities in respect of another business are only to be restricted if the business is similar to the business carried on at the Termination Date by that other Dyson Group company and Mr. Pellerey was either (i) involved in that company’s business, (ii) materially informed about or had responsibility for that company’s business, or (iii) where that business did not relate to a product which was already on the market, involved in the evolution of that product and as a result still had Confidential Product Information (as defined) relating to the product. Coupled with the requirement that there be competition, those limitations mean that the restriction would only apply to Mr. Pellerey if he was involved in rivalry with a similar Dyson business with which he had previously also had a personal involvement.

For these reasons I think that the authorities to which Mr. Sims referred are readily distinguishable on the facts. The research and development business of DTL and the manufacturing, sale and marketing of the finished products by the other Dyson Group companies have at all times been intrinsically linked, and to the extent that restrictions were to be imposed on Mr. Pellerey’s post-employment activities by reference to the businesses of other Dyson Group companies, they were limited so that they would only apply where Mr. Pellerey had had a relevant personal involvement. It therefore seems to me that the covenant was appropriately drawn and went no further than reasonably necessary to protect DTL’s legitimate commercial interests in its confidential information.

I next turn to the objection that the clause is too wide because it would apply to prevent Mr. Pellerey from going to work for a new employer which is established in the marketplace, in circumstances in which no Dyson Group company is actually yet producing relevant products and hence is not in a position to compete. I think that this argument is misplaced.

As indicated above, the authorities indicate that it is a legitimate purpose for an employer to impose a restraint to bolster a restriction on misuse of confidential information and to minimise the risk that an ex-employee might cause harm to the employer by the disclosure of the employer’s trade secrets or equivalent confidential information for the benefit of a commercial competitor. The potential for harm is most obvious where the two companies are both already established as rivals in trade, but I do not think that this is a necessary requirement for a legitimate restraint. For example, if the employer was already established, it would doubtless be legitimate to seek to prevent an employee who had had access to relevant confidential information from being engaged by another company which was intending to develop a rival product: see e.g. Scully UK v Lee [1998] IRLR 259 at para [26]. Likewise, if the employer and another company were both racing to be first in the market with a new type of product, it must be legitimate for the employer to seek to prevent an employee possessed of trade secrets or equivalent confidential information from going to work for the other company, even though neither might at the relevant time have succeeded in manufacturing and selling a finished product.

I therefore see no obvious reason in principle why it should be any less legitimate for an employer planning an entry to a particular marketplace to seek to protect its trade secrets or equivalent confidential information relating to its proposed products from disclosure to an established manufacturer. If the employer’s confidential information relating to its planned new product were to be disclosed, the established manufacturer might then seek to capitalise upon its existing position to launch new “spoiler” products of its own or employ targeted marketing strategies aimed at the new product in an effort to diminish the impact of its arrival and stifle competition when the new product is most vulnerable.

Those considerations apply in the instant case. As I have indicated above, Mr. Pellerey was employed by DTL, the corporate purpose of which was research and development in a group that has established a reputation for innovation. When Mr. Pellerey entered into the Employment Contract, both parties could reasonably have foreseen (as in fact occurred) that Mr. Pellerey might be asked to work on research and development into new products that DTL would make available to other Dyson Group companies. It would be entirely reasonable for the parties to have foreseen that DTL and those other Dyson Group companies might suffer harm if their secret plans and confidential information relating to a new product was leaked in advance. In those circumstances, I think that it was entirely reasonable for DTL to insist upon a post-employment restraint that might operate as a result of Mr. Pellerey’s involvement in the research and development of a proposed new product prior to the Dyson Group entering the market in question.

Although Mr. Sims objected that DTL had introduced no specific evidence to support its case that the disclosure of its plans concerning the development of an electric car might provoke a reaction from any of the established manufacturers, and indeed speculated that the established manufacturers might not be remotely concerned to learn that the Dyson Group was planning to enter the marketplace in several years’ time, I do not think that this was a matter upon which such evidence would have been relevant. As Mr. Sims pointed out on several occasions, the reasonableness of the covenant in the Employment Contract is to be assessed objectively at the time of entry into the contract, and is not an inquiry to be undertaken by reference to the particular facts of Project E, which was not in contemplation at the time.

That conclusion does not, of course, answer the question of whether, on the facts that have occurred, Mr. Pellerey’s new role at Tesla can be said to compete with DTL or another Dyson Group company within the meaning of the restraint clause. Nor does it answer the question of whether, as a matter of discretion, the clause should be enforced in circumstances in which the information to which Mr. Pellerey had access originated in the very early days of Project E, and Dyson Group’s entry into the electric car market is still some years off. Those are matters to which I shall return at stages three and four of the analysis.

The next issue raised by Mr. Sims is whether a restraint for twelve months is longer than is reasonably necessary. As indicated above, Mr. Sims’ argument is essentially that the period of restraint is arbitrary, because (as indicated by DTL’s own evidence) it was known that DTL’s research and development projects often took a long time to come to fruition, and hence that the agreed period of restraint bore no correlation to the period during which it might have been anticipated that information that would come into Mr. Pellerey’s possession would remain confidential.

I do not accept this argument. As Maurice Kay LJ observed in Beckett Investment Management Limited v Hall [2007] IRLR 793 at para [29], any fixed period of restraint will always bear an element of arbitrariness. But arbitrariness is not the test. The correct approach to temporal limits was explained by Lord Wilberforce in Stenhouse (Australia) v Phillips [1974] AC 391 at 402C-E,

“The question is not how long the employee could be expected to enjoy, by virtue of his employment, a competitive edge over others seeking the clients' business. It is, rather, what is a reasonable time during which the employer is entitled to protection against solicitation of clients with whom the employee had contact and influence during employment and who were not bound to the employer by contract or by stability of association. This question, secondly, their Lordships do not consider can advantageously form the subject of direct evidence. It is for the judge, after informing himself as fully as he can of the facts and circumstances relating to the employer's business, the nature of the employer's interest to be protected, and the likely effect on this of solicitation, to decide whether the contractual period is reasonable or not. An opinion as to the reasonableness of elements of it, particularly of the time during which it is to run, can seldom be precise, and can only be formed on a broad and common sense view.”

Although that was a solicitation case, the comments of Lord Wilberforce are of more general application. So, if it were the case that the contracting parties could foresee that information would only remain confidential for a limited period, commonsense suggests that a restraint on competition for longer would be likely to be held to be unreasonable. But where the parties to an employment contract can foresee that the employee is likely to be exposed to information about a new product that will remain confidential for a lengthy period, commonsense and logic suggests that it would be reasonable for the employer to seek protection for that information for a longer, rather than a shorter, period of restraint. Even though the information will still be confidential when the restraint expires, the restraint will give the employer the added assurance that its commercial rivals will not have had access to its information for a period, and hence will have been delayed in being able to take steps to modify their own products or change marketing tactics to pre-empt the arrival of the employer’s product onto the market. It would certainly be illogical for an employer to be unable validly to impose any restraint at all simply because its information was likely to remain confidential for a longer, rather than a shorter, period.

At the end of the day, therefore, the issue is one where the court is required to form a view as to the reasonableness of the period of restraint having regard to the public interest that an individual should be free to trade and to all of the circumstances. I was shown a number of cases in which various lengths of restraint were considered by the court and either upheld or struck down, which provided some (limited) guidance as to the periods that have been considered reasonable or unreasonable in different situations. Of these, the most relevant (though obviously not in any way binding upon me) was the decision of Sir Donald Rattee in Dyson Technologies v Strutt [2005] EWHC 2814 (Ch) especially at paras [65]-[67], upholding a twelve month restraint on what was described in the judgment as “a very able young engineer” who worked in research and development for DTL pursuant to a contract in similar form to that in issue in this case.

Having regard to those authorities, to the timescales over which DTL conducts its research and development projects, to Mr. Pellerey’s role and the highly confidential nature of the information concerning the research and development of products for the Dyson Group to which it was foreseeable that he would have access, I do not think that the period of twelve months’ restraint in this case was any longer than reasonably necessary.

The final objection to the reasonableness of the covenant was that it is worldwide and not limited to any particular geographical areas. The attitude of the courts to restrictive covenants as regards spatial limits varies according to the nature of the business of the employer and the restraint, and has varied over the years. So, for example, in Commercial Plastics v Vincent [1965] 1 QB 623 at 644, the Court of Appeal observed that, “The fact that the restriction is potentially worldwide in its operation is a remarkable feature prima facie needing justification”, and struck down a non-compete covenant on the basis that the employer company, which operated only in the United Kingdom, had adduced no evidence of a need for protection world-wide.

By contrast, in Scully UK Limited v Lee [1998] IRLR 259 at para 26, Aldous LJ said, when considering a non-compete clause,

“The fact that the clause is not limited to the United Kingdom does not, in my view, make it unreasonable. Business is becoming increasingly international and the covenant is to protect dissemination of confidential information. That is not constrained by national boundaries.”

Likewise, in Dyson Technologies v Strutt [2005] EWHC 2814 (Ch) at para [65], Sir Donald Rattee held that having regard to the international business of the Dyson Group as a whole, it was “entirely reasonable” for there to be a worldwide restraint on an employee being employed in a competing business.

Mr. Sims relied on Commercial Plastics and reiterated that I should not have regard to the business of Dyson Group as a whole, but should confine my consideration to the business of DTL, which he said was conducted entirely in England. He also pointed out that the clause was not even limited to the countries in which the Dyson Group might sell products at any time. He did, however, also accept that if the clause in Mr. Pellerey’s Employment Contract was limited to competing activities of the employee (as I have held that it is) his spatial objection might be “less of a concern”.

In my judgment it is appropriate, for similar reasons to those set out in paragraphs 92 and 93 above, to have regard to DTL’s role and commercial interests in the operations of the Dyson Group as a whole when considering whether a worldwide restriction was reasonable. Mr. Bowen’s unchallenged evidence was to the effect that products designed and developed by DTL are sold, either directly by other Dyson Group companies, or indirectly through distributors, in 65 countries across Europe, the Americas, Asia and Africa; and that the Dyson Group is constantly seeking to expand into new markets around the world. I also agree with the point made in Scully that confidential information is not constrained by national boundaries, so that (as Mr. Bowen pointed out in his evidence) it would not matter where Mr. Pellerey might work, because wherever he was based, his new employer could use any confidential information disclosed to it in the production elsewhere of rival products for sale in the same markets as targeted by the Dyson Group from time to time. Accordingly, I think that it was entirely reasonable for the restrictive covenant in the Employment Contract to be geographically unrestricted.

In conclusion on this part of the case, I consider that DTL has established that the restraint sought to be imposed on Mr. Pellerey in the Employment Contract was no wider than was, at the date of the contract, reasonably necessary to protect DTL’s legitimate commercial interests in the trade secrets and equivalent confidential information relating to its business that both parties might reasonably have anticipated Mr. Pellerey would acquire in the course of his employment. The covenant was therefore in the interests of both parties and not contrary to the public interest, and hence is enforceable against Mr. Pellerey.

DTL contends that the covenant in the Employment Contract applies squarely to Mr. Pellerey’s proposed employment with Tesla. DTL says that the research and development of electric cars by Tesla is a Restricted Business because it is the same as the business of Project E which was being carried on by DTL when Mr. Pellerey resigned, and with which he had been involved within the meaning of each of the three sub-clauses of the definition of that term within the Relevant Period. DTL also says that Mr. Pellerey will be acting so as to compete with its business, because his role for Tesla will be to assist Tesla to produce an electric car that will be better than the Dyson electric car when the latter is launched.

Mr. Pellerey disputes these contentions, first because he says that, on the facts, it is impossible to regard anything that might be done by him at Tesla as competing with DTL, because the Dyson Group is years away from bringing any finished electric car to market. Secondly, he says that his role at Tesla will be limited to work on minimising the acoustic impact (noise, vibration and harshness or “NVH”) of the Tesla cars, which is not something that he was doing for DTL, or indeed anything that DTL will be addressing within Project E for some time.

There can, I think, be no real doubt that the research and development activities of Tesla are a Restricted Business within the meaning of the Employment Contract. At the time at which Mr. Pellerey resigned, both DTL and Tesla were engaged in the business of designing electric cars, and Mr. Pellerey had been involved to the requisite degree in Project E at DTL.

I also consider that the fact that Project E is less advanced than Tesla’s established car business is not relevant to the question of whether Mr. Pellerey would be competing with DTL in his new job at Tesla. I accept Mr. Nicholls’ argument that since DTL commenced work on Project E, DTL and Tesla have been business rivals, irrespective of the respective stages which their research and development have reached. Ultimately, each company is striving to design a superior electric car that will sell better than the other’s product.

That said, I of course acknowledge that circumstances might change, so that Mr. Pellerey might cease to be competing with DTL. That might be the case, for example, if Project E did not obtain approval at proof of concept stage later this year and was then discontinued: see e.g. Pheonix Partners Group LLP v Asoyag [2010] IRLR 594. But that is not the current position.

I also accept (and Mr. Nicholls did not dispute) that if Mr. Pellerey had been engaged to work for Tesla in a role in which he was not involved in the design and development of an electric car at all (e.g. if he was employed in an administrative role in Tesla’s human resources department) it could not be said that he was engaged or concerned in a Restricted Business “so as to compete with DTL”. In such a situation, his contribution to Tesla’s corporate operations, though doubtless beneficial to Tesla in general terms, would not be directed to trying to establish superiority in any way over DTL.

But I do not accept Mr. Sims’ argument that Mr. Pellerey’s intended job at Tesla would not result in him competing with DTL because it would involve acoustic noise work rather than work on torque/speed curves and drive-cycle simulations. The technical evidence that I heard from both Mr. Clothier and Mr. Pellerey made it very clear that the development of an electric car is a complex undertaking, in which many aspects of the design and specification of the car are inter-related and choices in one area have an implication for other aspects of the design. Any person contributing to one aspect of the project does not work in isolation from other contributors and his work is very likely to have an effect upon the overall design. Mr. Pellerey’s evidence on this issue was typified by the following exchange,

“Q. Is it right that there is a relationship between acoustics and other issues affecting motors, such as, for example, a trade off as between noise and power?

A.

Yes, sure. Maybe I can explain. I won't go into details technically, … When you work on acoustics you are going to work on the forces within that motor. You work on basically the thin details; how the metallic part of the magnet is shaped to make sure the forces are not too sharp, let us say. You need to understand how the motor works. Let us say if you want to reduce the noise by reducing the forces that is going to make everything vibrate, you want to make sure you understand you don't destroy the efficiency by making the changes. So of course you have a trade off, yes.”

and further,

“Of course, like, if you, as an engineer, you take decisions to improve the motor it is going to impact everything, as well. Probably if I make a choice, on like, making a big casing to reduce the vibration I am going to change the shape of the bonnet, which is basically going to impact on the design of the car, which is not my domain. It is all like everything is correlated.”

Accordingly, even accepting Mr. Verzeni’s unchallenged evidence that it is “anticipated” that “the focus” of Mr. Pellerey’s work for Tesla for several years would be on the NVH of electric motors, I accept Mr. Nicholls’ submission that the overwhelming likelihood is that Mr. Pellerey will be involved in work and discussions at Tesla which will involve other aspects of the design of a car. That work at Tesla will inevitably be aimed at the design of a better car that will be able to overcome a challenge from anything that the Dyson Group or other manufacturers might produce. Accordingly, I think that Mr. Pellerey would be competing with DTL or other Dyson Group companies in his new job.

Although I have found that Mr. Pellerey’s employment at Tesla would be contrary to the terms of an enforceable covenant in the Employment Contract, I still have a discretion as to whether or not to grant an injunction. As Cox J held in TFS at para [39],

“Even if the covenant is held to be reasonable, the court will then finally decide whether, as a matter of discretion, the injunctive relief sought should in all the circumstances be granted, having regard, amongst other things, to its reasonableness as at the time of trial.”

In Dyson v Strutt, Sir Donald Rattee concluded, at paras [71]-[73] that in a case of a restrictive covenant, this discretion falls to be exercised in accordance with a number of well-established principles that were summarised by Colman J in Insurance Company v Lloyd’s Syndicate [1995] 1 Lloyd’s Rep 272 at page 277,

“The effect of the authorities can be summarised as follows:

“1.

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

“2.

The principle does not depend on whether the plaintiff is a person or a corporation. 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. In such cases an injunction will be refused and the plaintiff will be awarded nominal damages.”

Mr. Sims contended that this approach had now to be modified as a result of the decision of the Supreme Court in Lawrence v Fen Tigers [2014] AC 822. In that case, the Supreme Court considered the correct approach to the question of whether to award of damages instead of an injunction in the context of proceedings in nuisance relating to the noise generated by motor sports, including speedway and stockcar racing, at a stadium and motocross track located about 560-860 metres from a bungalow owned by the claimants. Lord Neuberger, who gave the leading judgment, considered the authorities, including in particular the approach of AL Smith LJ in Shelfer v City of London Electric Lighting Co [1895] 1 Ch 287 to the effect that it requires an exceptional case before damages are awarded in lieu of an injunction, and concluded, at paras [119]-[120],

“119

…the approach to be adopted by a judge when being asked to award damages instead of an injunction should, in my view, be much more flexible than that suggested in the recent cases of Regan v Paul Properties [2007] Ch 135 and Watson v Croft Promosport [2009] 3 All ER 249. It seems to me that (i) an almost mechanical application of A L Smith LJ's four tests, and (ii) an approach which involves damages being awarded only in “very exceptional circumstances”, are each simply wrong in principle, and give rise to a serious risk of going wrong in practice…

120

The court's power to award damages in lieu of an injunction involves a classic exercise of discretion, which should not, as a matter of principle, be fettered, particularly in the very constrained way in which the Court of Appeal has suggested in Regan and Watson.”

Lord Neuberger then went on to observe that each case would be likely to be fact-sensitive. He cautioned against laying down any firm rules, but recognised that some guidance was required in order to make the exercise of discretion as predictable as possible. He then observed, at para 121, that,

“I would accept that the prima facie position is that an injunction should be granted, so the legal burden is on the defendant to show why it should not.”

Finally, Lord Neuberger “cautiously approved” the observations of Lord Macnaghten in Colls v Home and Colonial Stores [1904] AC 179, 193,

“In some cases, of course, an injunction is necessary—if, for instance, the injury cannot fairly be compensated by money—if the defendant has acted in a high-handed manner—if he has endeavoured to steal a march upon the plaintiff or to evade the jurisdiction of the court. In all these cases an injunction is necessary, in order to do justice to the plaintiff and as a warning to others. But if there is really a question as to whether the obstruction is legal or not, and if the defendant has acted fairly and not in an unneighbourly spirit, I am disposed to think that the court ought to incline to damages rather than to an injunction.”

In light of the decision in Lawrence, I accept the submissions made by Mr. Sims that the exercise of discretion to grant or refuse an injunction to restrain a breach of a negative covenant is not a mechanistic exercise, that it requires a consideration of all of the facts, and that it does not require “exceptional” circumstances for an injunction to be refused. I note, however, that it is still for Mr. Pellerey to show why an injunction should not be granted.

In that regard, the main points relied upon by Mr. Sims were,

Those points were well-made and I have given them anxious consideration. In the end, however, they have not persuaded me that it would be right to decline to grant an injunction to enforce the restrictive covenant. Taking the points in order: first, for reasons that I have already explained, I agree that the fact that DTL is working on the development of an electric car is no longer likely to be a secret as between DTL and Tesla. I also accept that if that were the only piece of confidential information that DTL wished to keep secret, an injunction would serve no purpose. But this case is not simply about that fact. Whilst working on Project E, Mr. Pellerey was privy to more detailed confidential information, in particular about the intended specifications and design targets for the new Dyson car, which Tesla does not know and which DTL has a genuine commercial interest in keeping secret.

Secondly, whilst I accept Mr. Pellerey’s own good faith and have no reason to doubt the corporate good faith of Tesla as indicated in Mr. Verzeni’s evidence and its contractual terms, the purpose of a restraint of trade is not limited to preventing the deliberate disclosure of confidential information. The authorities, and in particular Littlewoods Organisation v Harris and Thomas v Farr show that the reasons for enforcing a non-compete covenant include the fact that it may be very difficult to differentiate between precisely what is confidential and what is not, and it is impossible for an employer to monitor what the ex-employee is doing in his new job so as to detect whether an innocent breach of a non-disclosure covenant has occurred.

Those considerations are well illustrated on the facts of this case concerning the disclosure to Tesla of the confidential information concerning the V10 motor in response to “Elon Musk” questions, and the forwarding of Slaughter and May’s letter of 24 June 2015 to Mr. Mohamed. Though I accept Mr. Pellerey’s explanation that he did not think that the former would be of any use to Tesla, and he thought that Mr. Mohamed would keep the Slaughter and May letter confidential, in both circumstances confidential information was nonetheless passed to representatives of Tesla. In my view these events illustrate that inadvertent disclosure of confidential information is a real risk.

That risk would be vastly increased in circumstances in which Mr. Pellerey would be working day-to-day with other engineers on the design of a car at Tesla. Mr. Pellerey fairly accepted in cross-examination that if he was having discussions with other engineers at Tesla, that would jog his memory and bring back the details of his work at DTL. Although Mr. Pellerey went on to say,

“Yes, [such details] could pop into my mind but I wouldn’t agree that they would pop out of my mouth.”

in my judgment (and without in any way doubting Mr. Pellerey’s good intentions), the reality is that there can be no assurance that this will not occur.

Thirdly, whilst I think that a good deal of the confidential information to which Mr. Pellerey had access during his limited time on Project E tended to be of a preliminary nature, and I formed the impression that Mr. Clothier and Mr. Bowen were apt to over-state the importance of some of the peripheral matters, there was, nevertheless, a core of information generated in the period of time that Mr. Pellerey was engaged on Project E that must on any view qualify as confidential information akin to a trade secret. Although many of the projections and calculations of the performance of various motors and hypothetical vehicles which Mr. Pellerey performed or contributed to could be replicated by use of a similar computer programme, the particular targets set by the DTL team and Sir James Dyson for the range and performance of the car, the body shape and size, the proposals for the air cooling of the motor and heating of the battery, and an unusual idea for design of the car’s wheels are commercially sensitive matters known only to DTL.

Even allowing for the Dyson Group’s preoccupation with secrecy, the very fact that DTL went to considerable efforts to keep these matters confidential to the Project E personnel must lend weight to the argument that disclosure of these matters could cause significant harm to DTL and the Dyson group. Whilst (for obvious reasons) I can have no direct evidence of what would happen if those details were revealed to Tesla, I also have no real basis upon which to discount the views of Mr. Clothier and Mr. Bowen as to the damage that might be done to the business of DTL and the Dyson Group if that were to occur. In this respect, as Lord Neuberger accepted in Lawrence, the onus must be on Mr. Pellerey to persuade me that I can reach a reliable conclusion that such information would be of no use to Tesla and that DTL would suffer no real harm were the information to be disclosed. I am not so persuaded.

Moreover, and picking up the main point made by Mr. Nicholls in response on this issue, it would simply be impossible to quantify the harm that would be caused to DTL were any such disclosure to take place. In those circumstances I do not think that the prospect of recovering damages for breach of confidence provides a fair or adequate substitute for the grant of an injunction to prevent – for a limited period - the situation existing in which inadvertent disclosure and consequent harm is most likely to take place.

Finally, I of course have in mind that the grant of an injunction will deprive Mr. Pellerey of the opportunity, at least until next June 2016, to deploy his particular expertise in the very line of business to which it is most suited and in which he would be most eager to work. That is a powerful factor. But against that I am not convinced that Mr. Pellerey will be unable to put his undoubted talents to gainful employment during the period of the restraint. He previously obtained a job offer whilst at Dyson in a field that would not have been restricted by his Employment Contract, and it was not suggested that there are no other industries in which highly skilled electrical/motor design engineers are required.

Finally, although I have considerable sympathy for the predicament that Mr. Pellerey finds himself in, I cannot disregard the fact that Mr. Pellerey is largely the author of his own misfortune. As I shall indicate below, I do think that Mr. Pellerey acted unwisely and breached his contractual duties to DTL when failing to inform it on 27 May 2015 when he was asked to work on Project E (or even after the security briefing on 4 June 2015), that he had received and had accepted a conditional job offer from Tesla. Whatever Mr. Pellerey’s concerns at the time, I do not accept the suggestion that DTL would have held that fact against him, and more importantly, had Mr. Pellerey told DTL of the job offer (which he did when it suited him to do so in relation to the offer from the CCTV company in October 2014) he would not have become involved with Project E, and DTL would have been unable to prevent him leaving to work for Tesla when his job offer was confirmed.

I therefore propose to grant DTL an injunction to restrain Mr. Pellerey from working for Tesla until after 15 June 2016. Picking up Mr. Sims’ point that there is no assurance that the electric car project at DTL will obtain approval at the “proof of concept” stage, that injunction should be subject to the condition that it should cease to operate if DTL were to discontinue work on an electric car at any earlier date (and DTL will be required to notify Mr. Pellerey forthwith should that be the case).

Mr. Nicholls submitted that as an alternative to the grant of an injunction to enforce the restrictive covenant in the Employment Contract, DTL should be granted what he described as a “springboard” injunction to prevent Mr. Pellerey from taking unfair advantage of the fact that, in breach of the terms of the Employment Contract, he failed to tell DTL of his job offer from Tesla, and thereby obtained access to confidential information relating to Project E that he would not otherwise have obtained.

I approach this alternative claim on the footing that I would not have been prepared to grant an injunction to enforce the restrictive covenant. I am also mindful of Mr. Sims’ warning that I should be wary of granting any injunction to restrain Mr. Pellerey from taking up employment with Tesla in circumstances in which (on that hypothesis) I would not enforce an express non-compete covenant.

The origin of the so-called “springboard” injunction is a dictum of Roxburgh J in Terrapin Ltd v Builders’ Supply Co (Hayes) Ltd [1967] RPC 349 at 375 to the effect that,

“…a person who has obtained information in confidence is not allowed to use it as a spring-board for activities detrimental to the person who made the confidential communication, and springboard it remains even when all the features have been published or can be ascertained by actual inspection by any member of the public.”

Although at one time controversial, this principle has since been applied to cases not involving misuse of confidential information. So, in Midas IT Services v Opus Portfolio (21 December 1999) Blackburne J held that it could apply where the defendant had simply acted in breach of an obligation to the claimant; and in UBS Wealth Management (UK) v Vestra Wealth LLP [2008] IRLR 965, giving judgment on an interim application, Openshaw J observed, at para 4,

“In my judgment, springboard relief is not confined to cases where former employees threaten to abuse confidential information acquired during the currency of their employment. It is available to prevent any future or further serious economic loss to a previous employer caused by former staff members taking an unfair advantage, an “unfair start”, of any serious breaches of their contract of employment (or if they are acting in concert with others, of any breach by any of those others). That unfair advantage must still exist at the time that the injunction is sought, and it must be shown that it would continue unless restrained. I accept that injunctions are to protect against and to prevent future and further losses and must not be used merely to punish past breaches of contract.”

In support of his allegation that Mr. Pellerey had breached his contract with DTL so as to bring this line of reasoning into play, Mr. Nicholls relied upon the express term requiring Mr. Pellerey to act in good faith in relation to DTL, together with sub-clause 5 under the heading “Obligations after employment” (“Sub-Clause 5”). In spite of the heading, that sub-clause plainly imposed obligations upon Mr. Pellerey in relation to events occurring during his employment, viz,

“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.”

(my emphasis)

Mr. Nicholls accepted that Sub-Clause 5 was not triggered at the outset of Mr. Pellerey’s communications with Tesla, because at that time Mr. Pellerey had no idea that DTL might be contemplating becoming involved in the development of an electric car. However, he submitted that it was implicit that the obligation to inform DTL continued after the first approach and for so long as a job offer was open, and was therefore triggered when Mr. Pellerey was informed of Project E at a time when there was in existence (and he had accepted) a conditional offer of employment from Tesla, which was then identifiable as a competitor or potential competitor.

As I have indicated, Mr. Sims did not accept that Mr. Pellerey’s proposed employment with Tesla could, at any time, properly be described as competing with DTL. Nor did he accept that Sub-Clause 5 should be interpreted so as to impose a continuing obligation of notification upon Mr. Pellerey. Mr. Sims submitted that the natural reading of Sub-Clause 5 was that it only applied to a first approach when received, and that it was unnecessary to imply any extension of that obligation in circumstances in which the employee would thereafter be subject to duties of good faith.

I prefer Mr. Nicholls’ argument on this point. The parties chose to include the notification term in the Employment Contract, and the question is simply what it should be interpreted to mean. Mr. Sims’ argument would involve the adoption of a very narrow meaning of “approach” which was confined to a singular event or the first step only in a series of events. The commercial purpose of the notification term was to ensure that DTL was alerted to any attempt to lure away its employee by an offer of competitive employment, and for the prospective new employer to be informed of the relevant restrictions on employing the employee. That purpose would not be properly served and could easily be frustrated if the requirement for notification was only tested once and for all at the start of what might be a lengthy period over which the job specification on offer might change and what could fairly be described as a continuing approach or a series of approaches might be made to the employee.

I therefore accept Mr. Nicholls’ argument on the interpretation of Sub-Clause 5, and I find that the clause was triggered when Mr. Pellerey learnt of the existence of Project E. For reasons that I have already explained, I think that at that stage it would be right to characterise Tesla as offering employment which was, or at very least “potentially may be” in competition with DTL. Indeed, if and to the extent that Mr. Pellerey’s own contemporaneous views are relevant in this regard, his notes in his notebook between 27 May and 1 June 2015 listed Tesla as first among the “competitors” whose products he was to obtain information on as part of Project E.

Mr. Sims further submitted that Sub-Clause 5 was invalid as an unreasonable restraint of trade. He suggested that the very fact that the clause was included in the section of the Employment Contract dealing with post-employment restraints was a tacit admission that it operated as a restraint, and he characterised it as having a stifling effect upon what he contended was the inherent freedom of an employee to prepare for future activities: see Helmet Integrated Systems v Tunnard [2007] IRLR 126 at paras [26]-[27].

I do not accept that characterisation of Sub-Clause 5, and even were it to be right, I consider that it would be a reasonable restraint.

In Tullett Prebon v BGC Brokers [2010] IRLR 648, Jack J considered the effect of a similar clause in a case involving a recruitment approach made to a “desk head” at a inter-dealer broker. Jack J said, at para 67,

“I start with the obvious – that there is nothing wrong in a desk head responding to an approach to recruit himself. If his contract obliges him to report that approach to his employer, in my judgment he is obliged to do so. I do not consider that such a provision operates in restraint of trade. This case has examples of where such reports were made without difficulty. Mr Bowditch told Tullett that he had been approached. Some brokers are very happy to inform their employer, because if the employer values the broker, he is likely to make a counter-offer. So the system works, and brokers may move or not move according to their advantage. There are a number of cases dealing with what employees may or may not do while still employed in preparation for their future activities. But I do not consider that they support the suggestion that an obligation to report an approach is a restraint of trade. I refer to Balston Headline Filters Ltd [1990] FSR 385, British Midland Tool v Midland International Tooling Ltd [2003] 2 BCLC 523, Helmet Integrated Systems Ltd v Tunnard [2007] IRLR 126, Foster Bryant Surveying Limited v Bryant [2007] IRLR 425, and Shepherds Investments Ltd v Walters [2007] IRLR 1.”

To similar effect is the commentary in Employee Competition (ed. Paul Goulding QC) (2^nd ed) at paras 5.283-5.285, pointing out that such clauses do not actually limit an employee’s ability to take a new job. They just require employees to be open about their plans and to inform new employers of obligations to which they may be subject, thereby assisting the existing employer in knowing when it might need to enforce covenants and deterring new employers from inducing a breach of contract.

I agree, for the reasons given, with Jack J’s analysis in Tullett Prebon and with the commentary in Employee Competition that such clauses are not to be regarded as covenants in restraint of trade.

In any event, as the commentary in Employee Competition suggests, even if such a clause were to be regarded as in restraint of trade, it is difficult to see why it should be other than reasonable if it operates as an adjunct to a restrictive covenant and/or a confidential information clause. That point is particularly significant in the instant case, because Sub-Clause 5 is limited to a requirement to notify DTL of an approach from a competitor, rather than being a blanket requirement to notify DTL of all approaches from potential new employers. That limitation emphasises the link between the notification clause and the non-compete and confidentiality clauses in the Employment Contract, all of which serve the legitimate interests of DTL in protecting its confidential information.

Moreover, the particular facts of the instant case graphically illustrate a further reason why such clauses might be thought reasonable as between the parties. Notification that an employee has been approached and is considering an offer from a competitor will enable the existing employer to take steps whilst the offer is pending to ensure that the employee does not become privy to any further confidential information so as to worsen the potential problem. As I have indicated, if Mr. Pellerey had notified DTL on 27 May 2015 that he had accepted a conditional offer from Tesla, DTL would have been able to avoid the problems that have now arisen by the simple step of not assigning Mr. Pellerey to work on Project E unless and until it was clear that he would not in fact be leaving to work for Tesla.

I also agree with the point made by Jack J in Tullett Prebon that such notification clauses can be operated without difficulty and may often turn out to be to the benefit of the employee. Most large employers in the financial or high-tech industries are not so naïve as to believe that their best employees will not be approached by others. They are unlikely to hold it against the employee if he is approached by another and reports the approach, and notification may prompt an employer to seek to improve the pay and conditions of a valued employee in an effort to retain him. That indeed was the evidence of Mr. Bowen as to DTL’s general approach, and was supported by the manner in which DTL dealt with Mr. Pellerey when he voluntarily reported his offer from the CCTV company in late 2014.

Accordingly, I conclude that Sub-Clause 5 of the Employment Contract was valid and enforceable and that Mr. Pellerey acted in breach it when failing at any time after 27 May 2015 until 15 June 2015 to notify DTL that he had been approached and had accepted a conditional job offer from Tesla.

The issue of remedy thus arises. Is it appropriate to grant an injunction to restrain Mr. Pellerey from going to work for Tesla as a response to his breach of this notification clause? I readily accept that in most cases of breach of a notification clause simpliciter, it will be very difficult to see why it would be an appropriate response to restrain the employee from taking up his new employment. As Openshaw J stated in UBS Wealth Management, an injunction in this context can only be granted to protect against and to prevent future and further losses, and must not be used merely to punish past breaches of contract. In many cases, little, if anything is likely to have changed factually as a result of the non-notification of the job offer. But this case is different: Mr. Pellerey’s breach of the notification clause meant that he learnt of the confidential information concerning Project E that he would not have discovered had he told DTL of his job offer from Tesla.

If Mr. Pellerey’s failure to notify DTL had been part of a deliberate plan to equip himself with confidential information that he could take to Tesla, there could, I think, be no real doubt that an injunction to prevent him from going to work for Tesla would be an appropriate response. It would avoid future loss to DTL caused by Mr. Pellerey utilising the information that he had (on this hypothesis) deliberately obtained by that breach of contract. But I do not think that the absence of any such nefarious intent on the part of Mr. Pellerey means that an injunction would be inappropriate. As I see it, once it is established that an employee has obtained access to confidential information by reason of a breach of an obligation that he owed his employer, if there is a continuing risk of future injury to the employer from unauthorised disclosure of that information, then as between the innocent employer and the wrongdoing employee, it might well be just and appropriate to grant an injunction designed to eliminate that risk, especially if the payment of damages could not fairly compensate the employer for any losses.

In this case, Mr. Pellerey obtained access to confidential information as a result of a breach of contract in not notifying DTL of his job offer from Tesla. That is information which he would not otherwise have obtained and which DTL is entitled to insist remains confidential even after Mr. Pellerey has left DTL’s employment. Although I accept that Mr. Pellerey does not intend deliberately to disclose it to Tesla, and Tesla has indicated that it does not wish to receive it, there will inevitably be a continuing risk of inadvertent disclosure if Mr. Pellerey is permitted to take up employment with Tesla working on the development of the same product as he was working on whilst with DTL. It is obvious that DTL cannot police Mr. Pellerey’s activities at Tesla, and, as I have also accepted above, it would be impossible to quantify the loss that DTL would suffer if such disclosure was inadvertently made, so that damages would not be an appropriate remedy.

It therefore seems to me that the grant of an injunction to restrain Mr. Pellerey from taking up employment with Tesla would be a just and appropriate response to the situation that has arisen.

In principle, such an injunction could extend until the information had ceased to be confidential: see Vestergaard Frandsen A/S v Bestnet Europe Limited [2009] EWHC 1456 (Ch). However, DTL does not seek such a restraint, but limits its claim to the same period as its restrictive covenant. There is no obvious logical justification for that concession in circumstances in which this line of argument is put forward as an alternative and separate claim, but since the concession operates in favour of Mr. Pellerey, and since I intend to grant an injunction to enforce the restrictive covenant in any event, I will not enter upon further consideration of this issue.

DTL seeks an injunction to restrain Mr. Pellerey from using or making use of its confidential information.

I can deal with this aspect of the case very shortly. The only basis for the grant of such an injunction would be if I thought that there was a real threat or risk that Mr. Pellerey would disclose or make improper use of the confidential information concerning Project E to which he is now privy.

I have already indicated that I accept Mr. Pellerey’s bona fides and his evidence that he understands that he has obligations of confidence to DTL, and that he does not intend deliberately to disclose details of Project E to any third party. My concern, as I have made clear, is the risk of inadvertent disclosure if Mr. Pellerey is permitted to take up employment with Tesla in an environment in which he will be working on the development of electric cars on a daily basis. But if, as a result of the injunction to restrain Mr. Pellerey from working for Tesla, Mr. Pellerey is not placed in such an environment, then I see no basis upon which to grant an injunction against him.

I accept, of course, that the position might change were Mr. Pellerey to take up employment with Tesla or another electric car manufacturer after 15 June 2016, but if that were to occur, a court would have to look at the circumstances afresh at that stage.

I propose to grant an injunction restraining Mr. Pellerey from taking up employment with Tesla until 15 June 2016. I shall hear argument as to the precise form of order and as to the restrictions to impose upon publication of this judgment and the transcripts of the trial when I hand down this judgment in approved form.

I should record my thanks to the parties, solicitors and counsel for their efforts to bring this case on expeditiously, and for the high quality and efficiency of their written and oral submissions.