Faccenda Chicken Ltd v Fowler: CA 1986

Nature of Confidentiality in Information

The appellant plaintiff company had employed the defendant as sales manager. The contract of employment made no provision restricting use of confidential information. He left to set up in competition. The company now sought to prevent him using confidential information for this purpose.
Held: The information and the advantage flowing from it was obtained through dishonesty.
The court set down the obligations of employees after leaving their employment with regard to confidential information acquired by them.
Except in special circumstances, there is no general restriction on an ex-employee canvassing or doing business with the customers of his former employer. The employer can only succeed on the basis of an implied term if he can show improper use of confidential information tantamount to a trade secret. The court must consider: ‘(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 incidently. (b) The nature of the information itself. In our judgment the information will only be protected if it can be 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. . (c) Whether the employer impressed on the employee the confidentiality of the information . . (d) Whether the relevant information can be easily isolated from other information which the employee is free to use or disclose.’ and ‘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.’
Neill LJ restated the classification provided at first instance. ‘(1) Where the parties are linked by a contract of employment, their obligations are governed by the contract between the employee and the employer.
(2) In the absence of an express term, the obligations of the employee in respect of the use and disclosure of information are governed by implied terms.
(3) While the employee remains in the employment of the employer, the implied obligations impose a duty of good faith or fidelity on the employee. The extent of the duty of good faith will vary according to the nature of the contract. The duty of good faith will be broken if the employee makes or copies a list of the customers of the employer for use after his employment ends or deliberately memorises such a list, even though (except in special circumstances) there is no general restriction on an ex-employee canvassing or doing business with customers of his former employer.
(4) After the termination of employment, the implied obligations becomes more limited in scope. A former employee is not allowed to use or disclose information which is of a sufficiently high degree of confidentiality so as to amount to a trade secret. The obligation does not extend to all information obtained during his employment and in particular may not cover information which is only confidential in the sense that unauthorised disclosure of such information to a third party while the employment subsisted would be a breach of the duty of good faith.
(5) In determining whether any item of information is protected by the implied term after termination of employment, all the circumstances would be taken into account and in particular the following factors would be considered :
(a) The nature of the employment-If the employment is in a capacity where confidential material is habitually handled this may impose a high obligation of confidentiality because the employee could be expected to realise the confidential nature of the information.
(b) The nature of the information itself-The information is only protected if it can properly be classified as a trade secret or material which is in all the circumstances of such a highly confidential nature as to require the same protection as a trade secret.
(c) Whether the employer impressed on the employee the confidentiality of the information. 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.
The Court did disagree with Goulding J that an employer can restrain the use of information in his second category (namely confidential information) by means of a restrictive covenant. A restrictive covenant will not be enforced unless it is reasonably necessary to protect a trade secret or to prevent some personal influence over customers being abused in order to entice them away.

Neill LJ
[1987] Ch 117, [1986] 1 All ER 625
England and Wales
Citing:
Appeal fromFaccenda Chicken v Fowler ChD 1984
The court was asked to restrain the plaintiff’s a former sales manager making use of information acquired during his employment which information the employer claimed to be confidential. F had set up a business in a similar field, the marketing of . .
CitedAmber Size and Chemical Co Ltd v Menzel 1913
The implied obligation on a former employee not to use or disclose information may cover secret processes of manufacture such as chemical formulae. . .
CitedReid and Sigrist Ltd v Moss and Mechanism Ltd 1932
An employee can be obliged not to use or disclose information acquired by him during his employment after leaving it in respect of designs or special methods of construction. . .
CitedPrinters and Finishers Limited v Holloway 1965
The court considered the questions arising from the use of information acquired by an employee during his employment after that employment had ended, and noted that information the future use of which will not be restrained is information not . .
CitedHerbert Morris Ltd v Saxelby HL 1916
For a covenant in restraint of trade to be treated as reasonable in the interests of the parties ‘it must afford no more than adequate protection to the benefit of the party in whose favour it is imposed.’ There is a need for the court to consider . .
CitedThomas Marshall (Exports) Ltd v Guinle ChD 1979
The managing director defendant had resigned before the end of the contractual term. There was an express covenant in his contract against using or disclosing the company’s confidential information during or after his employment. It was submitted . .

Cited by:
CitedPoeton Industries Ltd and Another v Michael Ikem Horton CA 26-May-2000
The claimant sought damages and an injunction after their former employee set up in business, using, they said, information about their manufacturing procedures and customers obtained whilst employed by them. The defendant appealed the injunction . .
CitedThomas v Farr Plc and Another CA 20-Feb-2007
The employee, the former chairman of the company, appealed a finding that his contract which restricted his being employed for one year in the same field after termination, was valid and enforceable. The company had provided insurance services to . .
CitedSG and R Valuation Service Co v Boudrais and others QBD 12-May-2008
The claimant sought to require the defendants not to work during their notice period to achieve the equivalent of garden leave despite there being no provision for garden leave in the contracts. It was said that the defendants had conspired together . .
CitedRoger Bullivant Ltd v Ellis CA 1987
The plaintiffs sought various remedies against an ex-employee who had set up a company in competition with the plaintiffs. One was for breach of confidence in respect of a card index of customer contacts, a copy of which the first defendant had . .
CitedLiving Design (Home Improvements) Ltd for Interim Interdict SCS 19-Feb-1999
The petitioner company sought to enforce a post employment restrictive covenant agreed to by the respondent. He had given notice to leave, and the parties had setteled the departure with an additional restriction. The respondent denied that the . .
CitedVickerstaff v Edbro Plc CA 28-Jan-1997
The appellant’s employment had terminated in circumstances where he had threatened to publicise matters about the defendant’s activities, but had failed to co-operate with the company in investigating his allegations by particularising them.
CitedHelmet Integrated Systems Ltd v Tunnard and others CA 15-Dec-2006
Whilst employed by the claimants as a salesman, the defendant came to want to develop his idea for a modular helmet suitable for fire-fighters and others. He took certain steps including showing the proposal confidentially to a competitor, and then . .
CitedCaterpillar Logistics Services (UK) Ltd v Huesca De Crean QBD 2-Dec-2011
The claimant sought an order to prevent the defendant, a former employee, from misusing its confidential information said to be held by her. Her contract contained no post employment restrictions but did seek to control confidential and other . .
CitedPhillips v Mulcaire SC 24-May-2012
The claimant worked as personal assistant to a well known public relations company. She alleged that the defendant had intercepted telephone message given by and left for her. The court was asked first as to whether the information amounted to . .
CitedLancashire Fires Ltd v S A Lyons and Co Ltd CA 1996
It was claimed that a loan to the employee from a customer of the employer coupled with an exclusive supply agreement by the employee as and when the competing business becomes operative was in breach of an non-compete clause.
Held: The . .
CitedRanson v Customer Systems Plc CA 27-Jun-2012
Lewison LJ considered the contractual duty of fidelity within an employment contract:
‘It is not disputed that an employee has an obligation of fidelity towards his employer. If the obligation is not expressed, it will invariably be implied.
CitedWhitmar Publications Ltd v Gamage and Others ChD 4-Jul-2013
Whitmar claimed damages for breach of contract; an account of profits; damages for breach of fiduciary duty and/or for infringement of its Database Rights under the Copyright and Rights in Database Regulations 1997; and for a permanent injunction . .
CitedRanson v Customer Systems Plc CA 27-Jun-2012
Lewison LJ considered the contractual duty of fidelity within an employment contract:
‘It is not disputed that an employee has an obligation of fidelity towards his employer. If the obligation is not expressed, it will invariably be implied.
CitedWhitmar Publications Ltd v Gamage and Others ChD 4-Jul-2013
Whitmar claimed damages for breach of contract; an account of profits; damages for breach of fiduciary duty and/or for infringement of its Database Rights under the Copyright and Rights in Database Regulations 1997; and for a permanent injunction . .

Lists of cited by and citing cases may be incomplete.

Intellectual Property, Employment

Leading Case

Updated: 10 November 2021; Ref: scu.200320