Dyson Technology Ltd v Strutt

A post-employment restraint is enforceable where it protects a legitimate business interest and is no wider than reasonably necessary, assessed from the parties’ perspective when the contract was made. An express confidentiality covenant does not necessarily provide adequate protection, particularly where confidential information is carried in the employee’s knowledge and may be difficult to identify or prove. A reasonable restraint may be worldwide and last 12 months where justified by the business and information concerned. An injunction will normally enforce an enforceable negative covenant without proof of damage, subject to exceptional hardship making enforcement unconscionable.

Dyson Technology Ltd sought a declaration that a 12-month post-employment restraint in Ben Strutt’s employment contract was valid and enforceable, together with an injunction restraining him from working on the design of vacuum cleaners for Black & Decker. The claimant accepted that Mr Strutt had acquired confidential information concerning its vacuum-cleaner designs. The issues were the construction and enforceability of the covenant and whether an injunction should be granted despite the absence of proved loss or an actual breach.

1. Construction. The covenant referred to business activities, not whole business entities. In context, “any business” meant activities such as the design of vacuum cleaners. A business was “similar to and competed with” the claimant’s business where it competed by reason of similarity in nature. “Involved” meant involved in the relevant business activity during the course of employment. Black & Decker’s vacuum-cleaner design business could realistically compete with the claimant’s design and development business.
2. Validity. The court adopted the three-stage approach in TFS Derivatives Limited v Morgan [2005] IRLR 246: construe the covenant; identify legitimate business interests requiring protection; and determine whether the restraint was no wider than reasonably necessary, assessed at the contract date in its factual and contractual context. The claimant’s confidential information was a legitimate interest.
3. An express confidentiality covenant did not make the restraint unreasonable. The authorities recognised the practical difficulty of distinguishing confidential from non-confidential information and proving misuse, especially where information was carried in an employee’s memory. A restraint could therefore be the more satisfactory protection. It also protected the employee from being placed in the position of refusing work because it might require misuse of confidential information.
4. The covenant was reasonable in duration and scope. Twelve months was justified by the nature of the information, and the absence of territorial limits was reasonable given the international nature of the Dyson group. The covenant was accordingly enforceable.
5. Injunction. The court adopted the principles summarised in Insurance Company v Lloyd’s Syndicate [1995] 1 Lloyd’s Reports 272. An enforceable express or implied negative covenant will generally be enforced without proof of damage. Relief may exceptionally be refused where enforcement would cause extreme hardship to the defendant and make the order unconscionable. This was not such a case. The defendant’s refusal to undertake compliance and the possibility that Black & Decker might require him to work on vacuum cleaners made an injunction appropriate.
6. An injunction was granted to enforce clause 19.1, in terms to be settled with counsel.