Caterpillar Logistics Services (UK) Ltd v de Crean

A former employer cannot ordinarily obtain an injunction barring a former employee from work for a customer or competitor merely because the employee possesses relevant confidential information. The special protective jurisdiction applicable to solicitors and comparable advisers does not extend to an ordinary employment relationship. Without an enforceable restrictive covenant, the employer may restrain actual or threatened misuse of confidential information, but cannot prohibit innocent activities surrounding that right.

A confidentiality obligation protecting trade secrets may continue indefinitely. Quia timet relief nevertheless requires an arguable breach, threatened breach or real risk of breach. Any injunction must identify the protected information with sufficient certainty.

Caterpillar Logistics Services (UK) Ltd sought injunctions and damages against a former middle manager who had joined an important customer during a contentious contractual relationship. No restrictive covenant prevented the move. The employee remained subject to a confidentiality agreement and accepted a continuing duty not to misuse confidential information.

The employer sought both a conventional confidentiality injunction and wider “barring-out” relief preventing the employee from dealing with the parties’ logistics agreement. Tugendhat J refused interim relief and struck out the claim under the Civil Procedure Rules 1998, holding that it had no real prospect of success: [2011] EWHC 3154 (QB).

The appeal concerned whether the special jurisdiction protecting former clients of solicitors and comparable advisers could extend to a former employee, and whether the evidence established a sufficient risk of misuse to justify narrower quia timet relief.

1. Appeal dismissed by a majority. Stanley Burnton LJ, with whom Lewison LJ agreed, held that neither the requested barring-out injunction nor the narrower confidentiality injunction should be granted. The strike-out was upheld. Maurice Kay LJ agreed on barring-out relief but would have allowed limited confidentiality relief and reinstated that part of the claim.

2. The protective jurisdiction exemplified by Prince Jefri Bolkiah v KPMG [1999] 2 AC 222 is a special remedy for solicitors and persons in an equivalent position. An ordinary employer–employee relationship is contractual and is not a fiduciary relationship of that character. Although an employee may owe particular fiduciary duties, describing the employee as a fiduciary does not attract every duty or disability applicable to trustees or solicitors. Barring-out relief against a former employee could therefore arise, if at all, only in the most exceptional circumstances. None existed here: paras [46]–[60].

3. Where an employer wishes to prevent a former employee from working for a customer or competitor, it should obtain an express restrictive covenant. Such a covenant must be reasonable between the parties and in the public interest. In its absence, the law protects the employee’s freedom to use her skills and knowledge, while prohibiting disclosure or misuse of the former employer’s secrets. The employer cannot surround its enforceable rights with a penumbra of prohibited but innocent conduct: paras [61]–[65].

4. The judge was wrong to treat the confidentiality agreement’s indefinite duration as precluding enforcement. Obligations protecting trade secrets commonly continue for an indeterminate period and may be enforced: para [66].

5. The majority nevertheless refused narrower quia timet relief because the employer had shown no arguable breach, threatened breach or real risk that the employee would misuse confidential information. The employee had offered an appropriate undertaking, voluntarily delivered up an external drive unknown to the employer, and was not shown to have copied or retained protected documents elsewhere. An injunction is not available merely because an employer requests one: paras [35]–[40], [67]. The proposed order was also impermissibly vague and failed to identify the protected information with sufficient certainty: para [68].

6. The claim had been brought without reasonable grounds. The later forensic report did not improve it, so the judge properly struck it out under the Civil Procedure Rules 1998: para [70]. Claims alleging misuse of confidential information, particularly where misconduct is alleged, should be defined and pleaded promptly rather than awaiting the interim-injunction hearing: paras [71]–[73].

1. Court of Appeal (Civil Division): By [2012] EWCA Civ 156, dismissed the employer’s appeal. The court unanimously rejected barring-out relief; by a majority it also upheld the refusal of narrower interim relief and the strike-out.
2. High Court, Queen’s Bench Division: Tugendhat J refused interim injunctions and struck out the claim under the Civil Procedure Rules 1998 because it had no real prospect of success: [2011] EWHC 3154 (QB).