Dyson Technology Ltd v Pellerey

An enforceable post-employment covenant ordinarily attracts an injunction because contracting parties should generally be held to their negative bargain. The remedy remains discretionary. The employee bears the burden of showing why enforcement would be unjust, and the court must consider all the circumstances rather than act mechanistically.

A research and development company’s business may include exploratory work undertaken before board approval or proof of concept. Businesses at different stages of developing the same product may nevertheless be similar and competitive. A contractual duty to notify an employer immediately of a potentially competing job offer is assessed when the approach and offer occur. It does not revive merely because later circumstances make the prospective employment competitive.

DTL employed Dr Pellerey as an electric motor engineer under a contract containing confidentiality obligations, a post-employment non-compete covenant and a duty to report immediately an approach offering actually or potentially competing employment. After accepting an offer from Tesla, Dr Pellerey worked briefly on DTL’s confidential exploratory project for an electric car.

Snowden J, in [2015] EWHC 3000 (Ch), restrained Dr Pellerey from working for Tesla until after 15 June 2016. The judge upheld the non-compete covenant and also accepted DTL’s alternative claim for springboard relief, although he granted no separate springboard injunction.

The appeal concerned whether the exploratory project formed part of DTL’s business, whether Tesla carried on a similar business, whether Dr Pellerey’s proposed role would compete with DTL, whether the injunction should have been granted, and whether the notification obligation had been triggered by a later change of circumstances.

1. Appeal dismissed. The injunction enforcing the post-employment covenant was properly granted. Although the alternative springboard claim should have failed, that conclusion did not affect the operative injunction.

2. DTL’s business included its early research and investigation into an electric car. A research and development company carries on its commercially directed operations as a business. There was no rational basis for limiting that business to projects which had received board approval or reached proof of concept. The meaning of the covenant had to be determined before, and independently of, the separate question whether it was reasonably necessary.

3. Tesla’s business was similar to DTL’s relevant business because both included the design of electric cars. Their different stages of advancement did not prevent similarity or competition. The trial judge was also entitled to find that Dr Pellerey’s work at Tesla would compete with DTL. Electric-car design was an interrelated undertaking, and his specialist work would affect the overall design. That evaluative factual assessment was not open to appellate substitution merely because another view could be advanced.

4. An employer seeking to enforce an enforceable negative covenant is ordinarily entitled to an injunction. The remedy remains discretionary and must not be granted mechanistically. The employee bears the burden of showing why enforcement would be unjust. The categories of circumstances capable of justifying refusal are not closed. Relevant matters may include hardship, the employer’s continuing interest in protection, the risk of inadvertent disclosure and whether damages provide an adequate remedy.

   Here there was commercially sensitive information akin to trade secrets, a real risk of inadvertent disclosure and potentially unquantifiable harm. The trial judge accepted Dr Pellerey’s good faith but was entitled to find that undertakings against deliberate disclosure did not address the relevant risk. His exercise of discretion fell within the permissible ambit.

5. The springboard claim lacked its contractual foundation. Clause 5 required an immediate assessment and notification when an approach and offer were made. Since the Tesla offer was not then actually or potentially competitive, the obligation was spent. It was not revived when Project E later made the prospective employment competitive. Rewriting the clause to impose a continuing obligation was impermissible.

6. The private hearing was justified because publicity would have revealed the very confidential subject matter which the proceedings sought to protect. Open justice remained the norm, but it yielded where a public hearing would prevent justice from being done.

1. Court of Appeal (Civil Division): The appeal in [2016] EWCA Civ 87 was dismissed. The injunction was upheld under the non-compete covenant, although the court held that the alternative springboard claim should have failed.

2. High Court, Chancery Division: Snowden J, in [2015] EWHC 3000 (Ch), restrained Dr Pellerey from working for Tesla until after 15 June 2016. He also accepted the springboard claim but granted no separate injunction on that basis. He refused an injunction restraining the use of confidential information.