FSS Travel & Leisure Systems Limited v Philip Anthony Johnson and Chauntry Corporation Limited

A restrictive covenant in employment is enforceable only to protect a legitimate employer interest, not simply to prevent competition. Protectable trade secrets must be identifiable objective knowledge that can fairly be regarded as the employer’s property. Skill, experience, know-how and general knowledge acquired by an employee remain available for use after employment, even if they give a competitor an advantage. The court must examine the nature of the employment, the character of the information, restrictions on dissemination, public-domain use and likely competitive harm. General assertions about accumulated knowledge, vague descriptions of solutions, and inadequate pleading or proof do not establish a protectable secret. If no such interest is shown, the covenant is invalid and its duration need not be decided.

FSS Travel sought to enforce a one-year restrictive covenant against Mr Johnson, a computer programmer who intended to join competitor Chauntry. Interim injunctions restrained him from working for Chauntry and from using confidential information.

The deputy judge found that FSS Travel had trade secrets and that the covenant was reasonable in scope and geographical extent, but held the 12-month duration unreasonable. He discharged the injunction and directed an inquiry as to damages. FSS Travel appealed, arguing that duration should not have been considered separately. Mr Johnson’s respondent’s notice challenged the finding that protectable trade secrets existed. The Court of Appeal focused on that issue and did not hear argument on duration.

1. Appeal dismissed unanimously. Lord Justice Mummery delivered the judgment. Lord Justice Millett and Lord Woolf MR agreed. The covenant was invalid because FSS Travel had not established trade secrets legitimately protectable by restraint of trade.
2. An employer cannot enforce a covenant merely to prevent competition. Protection requires an identifiable advantage or asset inherent in the business which can properly be regarded as the employer’s property. Trade secrets may be protected, but an employee’s skill, experience, know-how and general knowledge acquired in employment cannot be restrained merely because they equip the employee to compete. These principles were derived from authorities including Stenhouse Limited v Phillips [1974] AC 391, Littlewoods Organisation Ltd v Harris [1977] 1 WLR 1472, Office Angels Limited v Rainer-Thomas [1991] IRLR 214 and Lansing Linde Limited v Kerr [1991] 1 AER 418.
3. The distinction is fact-sensitive. The court must examine the employment, the character of the information, restrictions on dissemination, use in the public domain and likely damage from competitive use or disclosure. The information must be capable of precise identification, and the employer must provide cogent evidence that dissemination has been limited. Lack of precision in pleading and weak evidence may be fatal to enforcement. The approach in Printers & Finishers Ltd v Holloway [1965] 1 WLR 1 was approved.
4. FSS Travel’s evidence showed knowledge of how its system worked, how problems could be solved and that particular functionality could be developed. It did not identify a separate body of objective knowledge distinct from Mr Johnson’s programming skill, experience, know-how and general knowledge. The pleaded reference to 2,852 programmes and vague references to solutions were insufficient. The court therefore held that no protectable trade secrets had been established. It was unnecessary to decide whether the covenant’s duration was reasonable. FSS Travel was ordered to pay the respondents’ costs of the appeal and respondent’s notice.

• Court of Appeal (Civil Division): The appeal was dismissed. The covenant was held invalid because no protectable trade secrets had been established: [1997] EWCA Civ 2759.
• Queen’s Bench Division: A deputy judge discharged the interim injunction, held the 12-month restraint unreasonable, and directed an inquiry as to damages. No citation for that decision was stated in the judgment.