Dyson Technology Ltd v Pellerey

The Court of Appeal upheld an injunction restraining the appellant, Dr Pierre Pellerey, from taking employment with Tesla for 12 months from 15 June 2015, enforcing the post-termination restraint in his DTL employment contract. The court applied the multi-stage approach to covenant enforcement: interpretation, assessment of reasonable necessity to protect legitimate interests, whether the proposed employment would infringe the covenant, and the discretionary exercise whether to grant injunctive relief.

The court agreed with the first-instance judge that DTL’s Project E research formed part of the "business being carried on by" DTL; that Tesla’s electric-car activities were similar to that business; and that Dr Pellerey’s proposed role at Tesla would be "so as to compete" with DTL. The court accepted the judge’s assessment that there was a real risk of inadvertent disclosure of confidential, commercially sensitive information and that damages would not be an adequate substitute for injunctive relief.

The court declined to uphold any broader injunction restraining use of confidential information while noting the judge’s finding of the appellant’s good faith and the absence of evidence of deliberate misuse. On the alternative springboard claim, the court held that the judge was wrong to find that clause 5 (the contractual notification obligation) had been triggered by Project E, but that error did not affect the outcome because the contractual restraint injunction remained properly granted.

Background and procedural history: DTL sought expedited relief in the High Court to restrain Dr Pellerey from taking up employment with Tesla and from using DTL confidential information. Snowden J granted an injunction enforcing the contractual 12‑month post‑termination restraint but refused a general injunction restraining use of confidential information. The defendant appealed to the Court of Appeal (appeal expedited because of the limited duration of the injunction). The High Court decision was reported as [2015] EWHC 3000 (Ch).

Nature of claim and relief sought: DTL claimed (i) enforcement of the clause 1(a) post‑employment restraint in the employment contract preventing employment "so as to compete" with DTL or a Group company for 12 months from the Relevant Date; (ii) alternatively springboard relief based on an alleged breach of clause 5 (an obligation to notify any approach concerning potentially competing employment); and (iii) an injunction restraining misuse or disclosure of DTL confidential information.

Issues before the Court of Appeal:

• How to interpret "any business being carried on by [DTL]" in the definition of "Restricted Business".
• Whether Tesla’s activities were "similar to" DTL’s business and whether Dr Pellerey’s proposed role at Tesla would be "so as to compete".
• Whether an injunction should be granted in the exercise of the court’s discretion, having regard to the risk of inadvertent disclosure and the adequacy of damages.
• Whether clause 5 had been breached so as to justify springboard relief.

Court’s reasoning and conclusions: The court endorsed the four‑stage approach used by Snowden J. On interpretation it held that DTL’s research and development operations, including early exploratory projects such as Project E, fell within "business being carried on" by DTL. It accepted that Tesla’s electric‑car design and development business was similar to DTL’s Project E and that work on aspects such as NVH (noise, vibration and harshness) at Tesla would nevertheless be competitive because vehicle design is an integrated process.

On the discretionary stage the court agreed that, although the appellant acted in good faith, there was a real risk of inadvertent disclosure of commercially sensitive matters known only to the Project E team, such that damages would not be an adequate remedy; accordingly injunctive relief enforcing the contractual restraint was appropriate. The court refused to grant a separate injunction restraining use of confidential information while the contractual restraint operated.

On the springboard point the Court of Appeal concluded that clause 5 required "immediate" notification upon an approach/offering that is itself actually or potentially competitive; because Tesla’s approach and offer were made in March 2015 and Project E only arose later, clause 5 was not triggered in March and no notification obligation arose on the facts. That meant the factual basis for the springboard claim was absent, but that finding did not alter the primary outcome upholding the contractual restraint injunction.

Other notable points: The appeal was heard in private and reporting restrictions were made because DTL’s asserted confidentiality extended to the very fact of Project E and the court considered publicity would defeat its commercial secrecy.

Appeal dismissed. The Court of Appeal affirmed the injunction enforcing the 12‑month post‑termination restraint because: (a) Project E formed part of DTL's business; (b) Tesla's activities were similar to DTL's and Dr Pellerey's proposed role would be "so as to compete"; and (c) there was a real risk of inadvertent disclosure of confidential, commercially sensitive information for which damages were an inadequate remedy. The court qualified that the judge was wrong to hold that clause 5 (the notification obligation) had been triggered and so the springboard foundation was absent, but that error did not affect the injunction outcome.

Appeal from Snowden J, Chancery Division, High Court of Justice: Snowden J [2015] EWHC 3000 (Ch). Appeal heard and determined by the Court of Appeal (Civil Division) as reported at [2016] EWCA Civ 87.