Wallace Bogan & Co v Cove & Ors

A former employee has no implied post-employment restraint against canvassing or soliciting the former employer’s clients merely because those clients form part of the employer’s goodwill. The implied duty of good faith and fidelity ends with employment. A continuing obligation concerning information protects only trade secrets or information of equivalent confidentiality. Wider protection against solicitation requires an express covenant, subject to restraint-of-trade principles. The necessity test for implying contractual terms cannot be used merely because a covenant would be commercially desirable. Solicitors are not a special category for this purpose: professional status, client confidentiality and influence over clients do not create a restraint absent contract, provided conduct does not breach duties to the court, clients or professional rules.

Three solicitors left Wallace Bogan & Co after notice and garden leave, established a competing firm, and wrote to former clients inviting instructions. Their employment contracts contained no post-termination restrictive covenant. Harman J granted an injunction restraining solicitation of clients with ongoing matters.

The Court of Appeal determined the agreed legal issue under RSC Ord.14A, since the facts were agreed and the injunction was likely to expire before trial. The central issue was whether an implied contractual term, or a co-existing fiduciary or agency duty, prohibited post-employment canvassing by solicitors on these facts.

The Court of Appeal, with Lord Justice Leggatt giving the leading judgment and Lord Justice Potter and Lord Justice Judge agreeing, allowed the appeal unanimously.

1. Implied contractual restraint. The implied term preventing an employee from canvassing the employer’s customers during employment forms part of the duty of good faith and fidelity. That duty ends when employment ends. In the absence of an express covenant, there was therefore no contractual restraint against the former employees canvassing or soliciting clients, and equity could not supply the missing term.
2. Confidential information. The continuing post-employment obligation concerning confidential information protects trade secrets, or information of equivalent confidentiality. The confidential solicitor-client relationship and the contents of a client file did not create an implied post-employment non-solicitation obligation. Client confidentiality belongs principally to the client and was not the issue determining the appeal. This reasoning followed the approach in Faccenda Chicken Ltd v Fowler [1987] Ch 117.
3. Necessity. The employer’s commercial desire for a non-solicitation covenant fell short of contractual necessity. The traditional implied-term approaches, including the officious-bystander and business-efficacy tests, could not impose a restraint after termination. The necessity principle discussed in Liverpool City Council v Irwin [1979] AC 239 did not assist.
4. Professional status and agency. Solicitors were not subject to a different rule from other employees or professionals. Their influence over clients, professional status and duties of confidentiality did not alter ordinary contractual principles. The suggested analogy with agency or fiduciary duty could not impose a covenant which was not otherwise implied. The professional rules permitted a solicitor to inform former clients of departure and invite instructions, subject to duties owed to the court and individual clients.
5. Express covenants. Lord Justice Potter explained that an express non-solicitation covenant is prima facie in restraint of trade and must be reasonably necessary to protect a proprietary customer connection or trade-secret information. Its validity depends on its precise terms and the evidence concerning the business. Those principles, supported by Petrofina (Great Britain) Limited v Martin [1966] Ch 146, did not assist the respondent because no express covenant existed.
6. The injunction was discharged, the action was dismissed under RSC Ord.14A, and an inquiry into the appellants’ damages caused by the injunction was ordered. Costs were awarded here and below, and leave to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division): Allowed the appeal, discharged the injunction, dismissed the action under RSC Ord.14A, and ordered an inquiry into damages.
• High Court of Justice: Harman J granted an injunction on 21 January 1997 restraining the defendants from canvassing or soliciting specified clients of the respondent firm.