GILMAN ENGINEERING LTD v. HO SHEK ON SIMON

1986 No. A5233

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The plaintiff is a wholly-owned member of the Inchape Group of Companies. It is also a wholly-owned subsidiary of Gilman & Company Limited. On all hands it is accepted that through these associations the plaintiff is part of an old establishment serving this part of the world. The plaintiff has taken under its charge all the Gilman specialised engineering operations. Its activities involve the supply and installation of electrical and air-conditioning systems, water and sewage treatment plants as well as general trading in electrical and engineering products.

2. After 14 years' service with the plaintiff, the defendant tendered his resignation at the end of July 1986 and left on the 13th August. At one time he was a Departmental Manager before he became a director in January 1983. He was in the Contracting Division as opposed to the Trading Division of the plaintiff company, heading three of the plaintiff's departments, namely, Electrical Installation, Air-Conditioning & Fire & Security and Projects and Building Equipment (Gondolas). For the last few years of his employment, he had been concerned in the overall supervision and administration but was not directly engaged on a job to job basis with any of the companies' customers or suppliers. His division was autonomous. A quarter of his time was spent in visiting the plaintiff's overseas customers and suppliers.

3. Prior to the defendant's resignation, so it is alleged, the performance of his division deteriorated, he spent more time visiting overseas, he had personally been exploring trade opportunities affiliated with the activities of his present employer beyond the general scope of the plaintiff's operations, he was making dishonourable overtures to the plaintiff's overseas suppliers with the view to enticing them from their contractual relationship or association with the plaintiff, and he was spreading rumours of an exodus of a number of plaintiff's responsible staff for joining his new master. All these allegations are denied.

4. The defendant admits that he told a Mr. Ward, the Managing Director of Atlas Air Australia Pty. Ltd. of his soon departure and his belief that other responsible staff of the plaintiff would also be leaving. He denies having ever suggested that they would join him or his present employer. According to the defendant, it was Mr. Ward who offered to transfer the plaintiff's agency to his new employer. The defendant's response was that if that could be effected without any breach of Atlas' agency agreement with the plaintiff, he "would be happy to take up its agency." The defendant further admits that at a pre-arranged meeting with a Mr. Blaxall of the Dewplan Group in the United Kingdom, he informed him of his resignation and that he "would like to maintain contact". 'The defendant refutes all charges of impropriety and disclaims any intention to induce or procure breaches of agency agreements. The plaintiff had acquired a technology transfer from the Dewplan Group for £30,000. It is to be expected that the defendant was aware of this fact. The defendant has had knowledge of an exclusive 5-years' Dewplan licence with the plaintiff.

5. As the man then in charge of his autonomous division, the defendant has deposed to the fact that he had no personal list of suppliers or customers. Names of customers and suppliers could conveniently be obtainable from the plaintiff's junior staff, or its computer. Before 1975, the plaintiff's computer would supply a mailing list of customers for the company's Quarterly Circular Newsletter, but the defendant has no knowledge if such information is still being stored. He did not remove or take away any list of suppliers or customers. The defendant maintains that the making of trip reports had never been the practice. For his last Australian visit, a report was recently requested by Mr. Barnicot.

6. The plaintiff seeks various injunctions against the defendant. The prayers were imprecise and, even after an amendment, are now couched in wide terms. As it then stood, the relevant part of the summons read as follows:

 

"an application by the Plaintiff for an order that the Defendant be restrained, whether by himself or by his servant or agents or otherwise (howsoever), from:-

 

7. As for prayer l of the summons, by a letter to the plaintiff's solicitors dated 8th October, 1986, the defendant through his solicitors offered to undertake:

"until trial or further order not to procure a breach or breaches by principals of the Plaintiff of agency agreements made between the Plaitiff and such principals upon the condition that you will provide a list of the names of such principals for our agreement and to be incorporated in the undertaking. "

8. This undertaking was refined and offered at the hearing in these terms:

 

"Undertakes not to procure a breach or breaches by the principal or principals of any of the Plaintiff's Agency Agreements made respectively with Atlas Air Australia Pty. Ltd., Anpress Pty. Ltd., a company or companies in the Dewplan Group, Enquip (Full name to be furnished jointly by the parties hereto), Jones & Attwood Ltd. and Weir Pumps Ltd."

9. The defendant further offered through counsel "to undertake for 12 months or until trial or further order (whichever shall occur earlier) not to, on his own behalf or on behalf of any other, enter into or maintain any agency agreement with Atlas Air Australia Pty. Ltd. for the supply of air-conditioned plant to the People's Republic of China. "

10. The plaintiff is concerned with 18 companies. The defendant has offered to give the above undertakings in respect to 6 without reservation. As for the other 12, the defendant seeks particulars as to the names of the suppliers whose agents the plaintiff claims to be, the territories in which each alleged agency operates, the nature of goods allegedly included in every one of these agencies and their respective duration. The defendant requires the information so as to enable it to observe and comply with the terms of any undertaking so given in respect to these other 12 companies.

11. The plaintiff initially claimed that all the 18 companies were its principals. It is now clear that 6 out of the 18 have agency agreements with the plaintiff. The defendant complains that at least up to 1985, 3 of the 12 companies, "Dormarg", "Edwards and Jones" and "Capco Pty. Ltd." (possibly a misnomer for "EPCO") were represented by companies other than the plaintiff as agents. Another company, "Planmarine" has had only a brief encounter with the plaintiff in the form of a letter of enquiry. The defendant also exhibits a copy letter to Messrs. Southa by "Olympic Hunt & Baird" disclosing their intention to consider whatever approaches from the commercial sector. The defendant further maintains that he has no personal knowledge of "Aero Environmental Ltd.". The defendant therefore presses for the supply of the requested information so as to delineate the parameter of any undertaking which he may have to give in respect to these 12 other companies.

12. If I understand counsel correctly, the plaintiff now asserts that there has been "a period of engagement" with all these 18 companies, and that the relationship in this "formative period" or the "course of dealings" is expected to bear fruit. It is therefore said that the plaintiff is very close to securing exclusive or further exclusive agency agreements.

13. Counsel for the plaintiff informs the court that information sought is being prepared but that it would supply the same on a confidential basis and only in exchange of the offered undertaking given by the defendant but not before. It is claimed that any advance notice to the defendant of such information would only serve to remind him of more trade secrets or confidential information that the defendant had acquired in his former capacity of a director of the plaintiff. I do not follow this line of argument and I cannot appreciate the contended anxiety. The defendant would be so reminded in any case. The real fear of the plaintiff is, I believe, that the defendant would be fed more data if the relationship or course of dealings disclosed does not command protection. Therefore, the offered undertaking has been resolved only in respect to the known agency agreements of 6 companies. It is not clear whether the plaintiff would accept the further undertaking for Atlas Air Australia Pty. Ltd. As I understand it, the plaintiff continues to seek an injunction in terms of paragraph 1 of the summons in respect to these other 12 companies and presumably also the "formative period" relationship of the 6.

14. The other prayers in the summons, i.e. paragraphs 2, 3 and 4 were superseded by an "Amended Prayer" in the following terms:-

15. The schedule referred to is as follows:-

"                     SCHEDULE TO SUMMONS

 

16. The list marked "DWB-1" contains the 18 companies.

17. The plaintiff has set out the alleged trade secrets, but it is pointed out that the list is by no means comprehensive. "These trade secrets consist of (but not exclusively) the following:-"

18. Before I deal with the specific allegations in these proceedings, it would be convenient to set out the law as I understand it.

19. Broadly speaking, the main obligations of an employee during his employment are three:

20. The juridical basis for the employee's obligations towards his employer and his interests has been much debated. It is now reasonably settled that his obligations in a contractual relationship are the subject of implied terms. See Faccenda Chicken Limited v. Fowler & Others⁽²⁾. Whichever juridical basis is selected, an employee's obligations do not significantly differ in any particular setting. The Vice-Chancellor, as he then was Megarmy, J. commented in CoCo v. A.N. Clark (Engineers) Ltd.⁽³⁾.

 

"In the case before me, I would imply a term if there were a contract, and so, a fortiori, I imply the equitable obligation. "

 

21. When all employee's obligations fall within an implied contract term, one looks no further than the very implied term itself. But it would be instructive, however, to note Mr. Justice Megarry's approach to "breach of confidence" in equity. The learned judge had this to say:-

 

"In my judgment, three elements are normally required if, apart from contract, a case of breach of confidence is to succeed. First, the information itself, in the words of Lord Greene, M. R. in Saltman case on page 215, must 'have the necessary quality of confidence about it'. Secondly, that information must have been imparted in circumstances importing an obligation of confidence. Thirdly, there must be an unauthorised use of that information to the detriment of the party communicating it."^(3a) (The underlining is mine)

22. For his stated second element, the learned judge formulated the following tests for general guidance:-

 

"If the circumstances are such that any reasonable man standing in the shoes of the recipient of the information would have realised that upon reasonable grounds the information was being given to him in confidence, then this should suffice to impose upon him the equitable obligation of confidence. "(3b)

23. If a similar equitable obligation should also be implied where there is enough to imply a term in a contract, the above formulated test may well serve as a good guideline for determining what obligations should fall within the implied term.

24. Top or senior executives like the defendant, become confidants of information more often by way of self acquisition of trade secrets or confidential information than when they are actually given it. Instances of these opportunities are many, such as the director in Baker v. Gibbons⁽⁴⁾ acquiring knowledge of the company's affairs and business including names and addresses of its sales agents and the respective terms of their employment; the divisional director of Ladies' Fashion in The Littlewoods Organisation Ltd. v. Harris⁽⁵⁾ gaining knowledge of the trend of mail order sales, the percentage and identity of their return, the source of manufacture, and his former employer's future plans; the office manager in Coral Index Ltd. v. Regent Index Ltd. and Another⁽⁶⁾ carrying away in his mind a considerable number of names and addresses of customers; the sales manager in Faccenda Chicken Ltd. v. Fowler and Others⁽²⁾ familiarising himself with the sales information; the managing director in Cranleigh Precision Engineering Ltd. v. Bryant⁽⁷⁾ receiving particulars of a Swiss pattern from his employer's pattern agents.

25. When it came to identifying trade secrets or confidontial information which enjoy the Courts' protection, Megarry V.C. in Thomas Marshall (Exports) Ltd. v. Guinle⁽⁸⁾ suggested, I think, tentatively four ingredients:-

 

"First, I think that the information must be information, the release of which the owner believes would be injurious to him or of advantage to his rivals or others. Secondly, I think the owner must believe that the information is confidential or secret, i.e. that this is not already in the public domain. It may be that some or all of his rivals already have the information. But as long as the owner believes it to be confidential, I think he is entitled to try and (sic) protect it. Thirdly, I think that the owner's belief under the two previous heads must be reasonable. Fourthly, but I think that the information must be judged in the light of the usage and practices of the particular industry or trade concerned. It may be that information which does not satisfy all these requirements, may be entitled to protection as confidential information or trade secrets but I think that any information which does satisfy them must be of a type which is entitled to protection. "

26. In a recent decision, the Faccenda Chicken^(2a) case, the English Court of Appeal held that in the context of an implied term, a former employee would only be bound not to use or disclose trade secrets and information of a highly confidential nature equivalent to trade secrets. In another words, his implied obligation after his contract of employment would not extend "to cover information which is only 'confidential' in the sense that an unauthorised disclosure of such information .......... while the employment subsisted would be a clear breach of the duty of good faith." ^(2a) The English Court of Appeal adopted a more comprehensive test than the one suggested by the Vice Chancellor for judging confidentiality. It was considered necessary to survey all the relevant circumstances of the case including the nature of the employment, the nature of the information itself, the employer's emphasis on confidentiality and the separability of such information from other information which the ex-employee is free to use.

27. The class of matters capable of forming part of the information protected by such an implied term is endless. The question of costs and prices including pricing data and production costs may be accorded, in the particular circumstances of a given case, the status of either trade secrets or confidential information that should be regarded as trade secrets. See Curry "Breach of Confidence" ^(1a); Thomas Marshall^(8a); the two decisions referred to in Faccenda Chicken Ltd. v. Fowler anothers ^(2b). A list of customers has always been jealously guarded by the courts. Any surreptitious copying, physically or even by making a conscious mental note, for unauthorised personal use has invariably been disapproved by the courts. That is because a list of customers is often, and can readily be shown to have been, compiled with much effort in the strictest confidence. See Robb v. Green⁽⁹⁾; Coral Index Ltd. v. Relent Index Ltd.⁽⁶⁾; United Sterling Corporation Ltd. v. Felton & Mannion⁽¹⁰⁾; an Australian case Metrans Pty. Ltd. v. Cortney - Smith⁽¹¹⁾. Unless such a list is taken, copied or deliberately committed to memory for improper use during or after the employment, Kekewich J. observed in as long ago as 1895 that no criticism could be levelled at an ex-employee approaching and engaging the tried services of his ex-employer's agents whom he merely happened to remember:-

"There would be nothing dishonest in that; and, if these were allowable in one case, it is difficult to see why it should (be allowable in a dozen or more." See Louis v. Smellie⁽¹²⁾.

28. Baker and Gibbons ⁽⁴⁾ also dealt with a list of agents which is essentially no different from a list of customers. That decision resolved a number of practical points:- The courts have always reacted favourably in the case of a written list, but there seems to be no valid reason as to why an oral list should not be similarly respected, though there can be enforcement difficulties. In the absence of a written list, it "would normally be an impractical exercise" to try to establish independently by evidence the alleged nature of any name. See Baker v. Gibbons^(4a). Lord Justice Denning was also apprehensive of the immense difficulties in isolating what an ex-employee has properly carried away in his head. See The Littlewoods Organisation Ltd. v. Harris^(5a). What was also sought to be argued in Baker and Gibbons is that the names of the 16 agents should be regarded, information-wise, collectively and "that, so regarded, the information is equivalent to a list of the names and addresses of the agents". That argument was rejected by Pennicuick, V.C. who stated tersely:-

"No case has been cited to me covering information obtained otherwise than that contained in some written document. "^(4b)

 

29. Without any theft of a list or a copy of it, ex-employees have been enjoined to desist from disclosing or using information which they had deliberately memorized from it. This development was acknowledged by Pennycuick V.C. in Baker v. Gibbons as an "illogical" exception "based on sound practical sense". ^(4c) See also Coral Index Ltd. v. Regent Index Ltd. and Another^(6a).

30. A list of suppliers, or manufacturers would rank pari passu with a list of customers and agents. Such a list has been considered on the same footing. See Curry on "Breach of Confidence"^(1b); The Littlewoods Organisation Ltd. v. Harris^(5b); Thomas Marshall (Exports) Limited v. Guinle^(8b); Faccenda Chicken Ltd. v. Fowler and Ors. ^(2a), where reference was made to the paper suppliers in E. Worsley & CO. Ltd. v. Cooper⁽¹³⁾.

31. The courts have been astute to preserve a former employee's full right of choice of employment and his full freedom of competition. The use of ordinary stock of knowledge and experience will not be disturbed. This comprises skill and information acquired in his work or generalised bodies of information learned as a part of his business and experience in the course of earning his living with the ex-employer. See Stephenson Jordan and Harrison Ltd. v. MacDonald & Evans⁽¹⁴⁾ as approved in Amway Corporation v. Eurway International Ltd.⁽¹⁵⁾ Attempt restriction against rival use of an employee's ordinary stock of knowledge and experience would have the dreaded effect of bringing about "a monopoly of a branch of human knowledge, which the law does not permit except so far as Parliament has authorised it". See Stephenson Jorden & Harrison Ltd. v. MacDonald & Evans^(14a).

32. Other examples may be found in a chemical formula and a design feature which have been treated as prohibited material for an ex-employee. See United Sterlin Corporation Ltd. v. Felton and Mannion^(10a). Another is a mathematical formula. See Stephenson Jordan & Harrison Ltd. v. MacDonald & Evans^(14b).

33. There are matters and information which a top or senior executive must inevitably get to know, e.g. the former employer's customers' names and addresses as in the case of an Office Manager for five years in Coral Index Ltd. v. Recent Index Ltd. and Another^(6b). Knowing the manner in which the former employer ran his business is another obvious example. See Littlewood Organisation Ltd. v. Harris^(5c). There are many others.

34. I should pass then to consider the length to which the courts would go in interfering with a former employee's use or disclosure of highly confidential information equivalent to trade secrets. If such highly confidential information cannot be easily isolated from the ordinary stock of knowledge and experience of an ex-employee, the courts would be reluctant to come to the ex-employer's aid with an injunction. See Printers & Finishers Ltd. v. Holloway (Confidential Information)⁽¹⁶⁾; United Sterling Corporation Ltd. v. Felton and Mannion^(10b); Metrans Pty. Ltd. v. Courtney-Smith and others^(11a) at p.187, line 45. There is, therefore, a need for the employer to stipulate for protection by an enforceable restrictive covenant against misuse of sensitive information, confidential in the general sense as well as in the sense of almost a trade secret. See The Littlewoods Organistation Ltd. v. Harris^(5d). Indeed, as Mr. Justice Cross observed in Printers & Finishers Ltd. v. Holloway (Confidential Information)^(16a) :

"The proper way for the plaintiffs to protect themselves would be by exacting covenants from their employees restricting their field of activity after they have left their employment, not by asking the court to extend the general equitable principle to prevent breaking confidence beyond all reasonable bounds. "

35. Even with a restrictive covenant, it is highly desirable to explicitly preclude, without being unduly oppressive, the ex-employee from certain fields or spheres of activities. Denning, M.R. sounded a warning note in The Littlewoods Organisation Ltd. v. Harris:

 

"It is not satisfactory to have simply a covenant against disclosing confidential information. The reason is because it is so difficult to draw line between information which is confidential and information which is not; and it is very difficult to prove a breach when the information is of such a   character that a servant can carry it away in his head."^(5a)

36. There seems to be all the more reason, therefore, for an injunction order to be couched in specific and precise terms as to what must not be disclosed or used. In paragraph 2 as amended, the plaintiff merely refers to "confidential information". Unless theses matters are sufficiently identified and particularised, an ex-employee would be placed in a most embarrassing if not altogether a hopeless situation, particularly in the narrower meaning of confidentiality as given in the Faccenda Chicken case ⁽²⁾. Any injunction order granted in broad general terms would be impracticable in the extreme. See Amway Corporation v. Eurway International Ltd. ^(15a) ; Potters-Ballotini Ltd. v. Weston-Baker & Ors.⁽¹⁷⁾; Sarotsa Automation Ltd. v. Clark⁽¹⁸⁾. Of course, an injunction granted should be only for a reasonable period commensurate with the desired fair protection. See Roger Bullivant Ltd. & Ors. v. Ellis & Ors.⁽¹⁹⁾.

37. I have tried to outline all the principles. Occasionally an injunction in the widest possible terms is granted, like in the case of Printers & Finishers, Ltd. v. Holloway^(16b). But as it was pointed out by Scarman, L.J. in Potters-Ballotini Ltd. v. Weston-Banker & Ors. ^(12a), a prayer in broad terms, though a likely cause for enforcement difficulties, cannot "itself be decisive but it is a factor to be brought into account when striking the balance." Holloway is an old case, and little was said in the judge's reference to the terms of the interlocutory injunction. As a matter of interest, in Thomas Marshall (Exorts) Ltd. v. Guinle^(8b) particulars were given for 11 categories which included the ex-employer's suppliers.

38. Next I turn to the allegations. The defendant has been with the plaintiff for 14 years. Before he left, not only was he a high ranking responsible officer, but he was also running an autonomous division or department. There can be little doubt that in his capacity as a director he had come to grips with virtually all the sensitive information including trade secrets and highly confidential information equivalent to trade secrets, if any, ever possessed or kept by the plaintiff. In his long years of service, he could not have failed to retain a considerable part of it.

39. Counsel for the plaintiff referred, time and again, to these 18 companies as the Gilman's suppliers. It is not seriously suggested that any list did exist. The names of 18 companies cannot be regarded collectively as if there had. been some list. A similar suggestion was rejected in Baker v. Gibbons⁽⁴⁾. The plaintiff is therefore left with its alleged trade secrets or highly confidential information equivalent to trade secrets.

40. What then are these alleged trade secrets or highly confidential information equivalent to trade secrets now under complaint? These alleged material is in A to H set out earlier in my judgment. They are all empty headings. In appropriate circumstances, they are capable of being the kind of highly confidential information which the law protects. It would seem that little can be said to be incapable of becoming such confidential material. Each case must be judged on its own. A claimant must adequately describe his alleged interest and disclose such relevant background and surrounding circumstances as would assist the court to identify the claim and preliminarily assess its validity. Hard pressed for a number of days, counsel for the plaintiff declined to furnish particulars. The defendant claims all of A to H as part of his business and experience learned in the course of earning his living as an executive with the plaintiff. What can hardly be disputed is the fact that the defendant is a man of vast experience in possession of the most covetous know-how in the trade. It seems an impossible task to isolate A to H from what under those general headings the defendant must also be at liberty to disclose and use. From such generalised broad headings, I do not know what the plaintiff's alleged trade secrets and confidential information are. Thus, it is impossible to tell whether any of these is readily separable from other information which the defendant is free to use as his ordinary stock of knowledge and information or his un-committed range of expertise and experience. It is of interest to note that failure to furnish details of a process in the diamond trade led to a denial of an interlocutory injunction. See Diamond Stylus Co. Ltd. v. Bauden Precision Diamonds Ltd. & Others⁽²⁰⁾. The defendant is adamant that none of A to H is trade secrets or highly confidential information equivalent to trade secrets.

41. The defendant has offered to undertake not to induce breach or breaches of contracts with the six companies which maintain agency agreements with the plaintiff and will give a similar undertaking for the other 12 provided certain particulars are furnished. In the absence of any written agreement with the other 12 companies, all alleged relationship must at least be specified as requested by the defendant so as to reasonably clarify the ambit of his undertaking for observance or compliance. The plaintiff's submitted schedule sets out some classes of goods, but it has not allotted any particular items to each of the other 12 companies. The same criticism maybe directed at the territories which were given as Hong Kong, Macau and China on the 3rd day of the hearing. However, at the commencement of these proceedings, the plaintiff was quite prepared to be confined to a period of 12 months from the defendant's departure. It would seem that the plaintiff is also willing to limit "contracts" in paragraph 1 of its prayer to contracts entered into also before the defendant's departure.

42. As for paragraph 1 of the summons, the defendant's request for the particulars in respect to the 12 companies is, in my view, necessary and reasonable. Even without the defendant's offer, I would not grant the plaintiff's application for an injunction in terms of paragraph 1 unless the alleged contracts are prima facie established and their extent and scope defined. The plaintiff has failed to file any evidence on the alleged contracts for the other 12 companies. The alleged "period of engagement" is certainly not sufficient. In my view, the plaintiff is not entitled to any relief under paragraph 1 against these other companies save for the undertaking offered subject to the requested particulars.

43. In reality, the plaintiff's application on the amended paragraph 2 of its summons is sought to be supported by the defendant's knowledge of most if not all of the plaintiff's sensitive trade information. Much time and money has been invested in kindling and engaging the interest of these other 12 companies as well as the six in matters outside their already concluded agency agreements. The plaintiff's assertion is that its business opportunities are generally so cultivated and sustained before relationship is finally sealed or deal struck. Counsel for the plaintiff maintains that the plaintiff is close to securing exclusive agency agreements. It is quite possible that the plaintiff only speaks of these other 12 companies. With the defendant well briefed on the plaintiff's strength and weakness, it is feared that the plaintiff would be at a likely disadvantage as a rival of the defendant through his present employer. Allegedly the defendant simply stands on too good a vantage-ground to appraise the value of potential agencies for all the 18 companies in respect of the areas uncommitted. But that is the anxiety of every former employer. The real question is whether the defendant as an ex-employee could be legitimately suppressed in the scope of his future operations. In essence, if permissible, it is the plaintiff's wish to have the defendant barred from approaching or dealing with its potentially good trading counterparts including the six companies with whom it has subsisting agency agreements in the general matters set out in the summons. The plaintiff has not stated with sufficient particularity what its claims are. This court cannot even begin to try to evaluate whether the alleged material is each capable of being a trade secret or highly confidential information. In my view, the plaintiff's application on the force of A to H and other undisclosed alleged material is unsustainable without further particulars. Plainly, there is no way in which I can determine whether there is any serious question to be tried.

44. The defendant explains that the general headings A, D and E are governed by the market conditions and on a job-to-job basis. Subcontractors are also selected on each occasion and as the Vice-President of the Hong Kong and Kowloon Engineering Contractors' Association Limited, he inevitably knows a great many of them. Customers in heading C are no longer a live issue. We are concerned with suppliers. But customers are few and their wants are known in advance. The defendant maintains that the plaintiff had no fixed pricing structure or tactics during his employment and that no consistent market strategy has since 1983 been maintained as a result of the political negotiations.

45. These 18 companies are well known suppliers. No doubt, they are sound and profitable principals or potential principals, but the plaintiff has not even identified any particular area in which these companies or what they have to offer are said to be of special value to it. Except for Aero Environment Ltd. and Capco Pty. Ltd., the defendant could not have failed to remember these names after 14 years' service. It is not suggested that the defendant had in any way been instructed that data in relation to these companies are particularly sensitive or confidential. It is also disputed as to whether any of these information or data was exclusively reserved for top or senior management. I shall deal with more of these material circumstances later. In conclusion, the plaintiff has failed to satisfy me that there is any serious question to be tried, and if I had to embark on the Cyanamid ⁽²¹⁾ exercise, I would have to take into account all relevant circumstance including these together with the impossible task of considering whether and to what extent the defendant's permissible use and disclosure of his stock of knowledge and information can be isolated as well as the wide and vague terms of the proposed injunctions.

46. The plaintiff relies heavily on Thomas Marshall case^(8c), particularly the observation of the Vice-Chancellor on soliciting from the former employer's suppliers at p. 226. The learned Vice-Chancellor indorsed counsel's view as "at least a good arguable case":

"that it was by acting as Managing Director of the Company that the defendant had established his relationship with the suppliers and customers of the Company, and that even if he ceased to be a managing director of the Company or to be subject to the service agreement, he could not claim instant freedom to use for himself the relationship which he had established on behalf of the company. " (The emphasis is mine)

47. Megarry, V.C., therefore, held as tenable the contention that the former managing director must not use his "detail knowledge of his employer's suppliers" at the termination of his employment. At p. 228, the learned Vice-Chancellor pressed the point to its, perhaps tentative, conclusion :-

"The test that I think he indicated was whether a man of average intelligence and honesty would think that there was anything improper in his putting his memory of the matters in question at the disposal of his new employer. Judged by the standard, I think it would be remarkable if a man of average intelligence and honestly were to think that there was nothing improper in using his detailed knowledge of his employer's suppliers and customers for the purpose of dealing with them in place of his employer. "

48. However, the learned Vice-Chancellor's decision was widely based. In fact, almost following his last observation that I have just quoted, he expressed misgivings in this particular limb canvassed by counsel :-

 

"From what I have said it can be seen that in my judgment, the implied duty of fidelity and good faith, plainly warrants the grant of an injunction in such terms. I feel less certain about the claim placed on the duty of a director based on Cook v. Deeks, but on the whole I think that this too suffices to support the soliciting order. "

49. Sir Robert Megarry had "a heavy motion" in Thomas Marshall^(8c) and it took the learned Vice-Chancellor over two weeks to have the law and allegations unravelled. There existed then a grey area in the juridical basis for post-employment activities of an ex-employee. No distinction between ordinary confidential information and highly confidential information equivalent to a trade secret was sought to be drawn before the learned Vice-Chancellor. In his consideration of one of counsel's limbs of argument under the heading "implied duty" and its consequential fidelity and good faith, confidential information was considered generally in one sense. As to the passages I have cited of the Vice-Chancellor in Thomas Marshall ^(8c), he clearly had reservations. The view of the Vice-Chancellor was borrowed from the fidiciary duty of a company director not to take benefit of activities he had initiated on behalf of the company. Thomas Marshall^(8c) was referred to in Faccenda Chicken^(2c). What was highlighted in Faccenda Chicken^(2c) was the attributes of information of such a sufficiently high degree of confidentiality as would amount to a trade secret. "Implied terms" was unanimously accepted as the correct fountain-head of an ex-employee's obligations. The passages I have quoted from Thomas Marshall^(8c) must therefore be taken as having been inferentially overruled.

50. In Faccenda Chicken^(2c) case, the ex--sales manager had knowledge of sales information comprising names and addresses of customers, the most convenient routes for reaching these customers, their particular requirements, both as to quantity and quality, time for deliveries desired by them and the prices charged to particular customers. Eight employees of his former employer joined him. He competed and, more significantly, undercut his ex--employer. In the absence of an express restrictive covenant, the ex-sales manager was not restrained.

51. In a case before the Supreme Court of New South Wales, Metrans Pty. Ltd. v. Courtney-Smith & Ors.^(11b) the ex-sales manager was assumed to have knowledge of names of all the customers of her ex-employer, the turnover of each customer together with the pricing procedure of her former company, the discount structure it used and its management and operational procedures. It was held that such knowledge of her ex-employer's customers and methods and procedures of his business fell "into the category of general knowledge inevitably acquired by her as a necessary consequence of her employment". See p. 191, lines 43-46. At p. 192, lines 3, 6-9, Mr. Justice Kearney condemned as unreal an attempt to regard such classes of information and knowledge as being the property of her ex-employer "on the footing that it was so confidential that a man of ordinary intelligence and honesty would regard it as being the property of the plaintiff rather than something which inevitably rubbed off on (her) in consequence of her employment in an executive capacity". Knowledge of the way in which an ex-employer was running his business cannot. generally be protected. See The Littlewoods Organisation Ltd. v. Harris^(5d).

52. The defendant was not connected with sales. For the past few years, he had never been engaged in matters on a job-to-job basis. He was confined to overall supervision and administration. He had countless opportunities of meeting overseas suppliers. It is not suggested that there is any pending negotiation with these suppliers, of which the defendant has played a part or with which he has been actively involved.

53. I have no full details of his meetings with Mr. Ward, the Managing Director of Atlas Air or Mr. Blaxall of the Dewplan Group. I have been fed bare accusations and an outline of the defendant's version. The defendant denies any misconduct. He may possibly be condemned as being somewhat disloyal to the plaintiff in the tail-end of his employment by volunteering news his own imminent departure and his belief of the like intention of other personnel. He may also possibly lay himself widely open to the criticism that he had not seen fit to pass on the information of Atlas' threatened cancellation to the plaintiff.

54. Mr Ward's alleged proposal clearly raised a conflict of interest and was obviously detrimental to the plaintiff. It is unlikely that any further explanation could be forthcoming. However, all these matters will have to be determined, if relevant, at the trial. I should refrain from passing judgment on affidavits prepared in haste, particularly when I am little concerned with any alleged misconduct in the past but with matters which fall squarely within the amended prayers in the summons.

55. Coming to the Cyanamid principles, if need be, it would be very hard to assess the quantum of damages on both sides, though the defendant has yet to approach and deal with these suppliers. It is not all true that the defendant merely wishes to preserve his options with these 18 suppliers. He maintains that they are well-known names. He complains that if he were to be precluded from approaching or dealing with all the plaintiff's suppliers, he would be virtually prevented from earning a livelihood and that he would not be able to continue to work in his special field if he were to be shut out from those 18 suppliers except perhaps Aero and Capco. If the plaintiff failed, it would probably have little difficulty in meeting an award in favour of the defendant in damages. The resources of the defendant have not been disclosed. Just as I would infer the plaintiff's sound financial capability, I think I would be equally justified in assuming that the defendant is not a man of straw after his years of successful endeavours in our business community.

56. If the plaintiff were to succeed at the trial, he would not be adequately compensated by an award of damages. Damages would also not provide the defendant with an adequate remedy. One must then turn to the other matters in "balance of convenience". Status quo should not be of great importance principally because in most of the cases involving the activities of an ex-employee, the suppliers or customers of the ex-employer have not been wholly or have yet to be approached. There would be advantages and disadvantages to both. The uncompensatable disadvantages to each party would not appear to me to differ too widely. Taking into account the miserably vague and wide terms of the proposed order and my predicament in not being able to ascertain whether the subject-matters in the proposed injunctions could easily be separated from the defendant's stock of knowledge and information, I would refuse the plaintiff's application. If ever the relative strength of each party's case as revealed on the affidavit evidence called for an evaluation in the final analysis, bearing in mind the plaintiff's failure to take advantage of the many opportunities to supplement its allegations, I would tip the balance in favour of the defendant.

57. In conclusion, the plaintiff has failed to establish that there is any serious question to be tried as the plaintiff has not even disclosed any prima facie right to be protected as regards these suppliers or at all. If the Cyanamid principles had to be invoked, I would also refuse the application. Consequently, the application is dismissed with an order nisi for costs against the plaintiff.

58. The defendant has been willing and ready to give an undertaking in terms I have set out above in respect to the six companies having agency agreements with the plaintiff. If the plaintiff is prepared to give a cross-undertaking as to damages, this offered undertaking and the further undertaking in respect to Atlas Air will be duly recorded.

(1)    Curry "Breach of Confidence" Chapter VIII p. 179
(1a)  Chapter V, page 92
(1b)  Chapter V, pages 93 & 95

(2)    [1986] F.S.R. 291
(2a)    [1986] F.S.R. 291 at p. 303
(2a)    [1986] F.S.R. 291 at 303
(2b)    [1986] F.S.R. 291 at pp. 301 & 302
(2c)    [1986] F.S.R. 291 at p. 302
(2c)    [1986] F.S.R. 291 at p. 302

(3)    [1969] R.P.C. 41 at p. 51, lines 25-27
(3a)    Ibid., p. 47, lines 12-18
(3b)    Ibid., at p. 48, lines 13-17

(4)    [1972] 2 A.E.R. 759
(4a)    [1972] 2 A.E.R. 759, p.765f; p. 766h-j
(4b)    [1972] 2 A.E.R. 759 at p. 766j.
(4c)    [1972] 2 A.E.R. 759 at p. 766h

(5)    [1978] 1 A.E.R. 1026 }
(5a)    [1978] 1 A.E.R. 1026 at p.1033 c/d
(5b)    [1978] 1 A.E.R. 1026, 1038
(5c)    [1978] 1 A.E.R.1026 at p.1038 f
(5d)    [1978] 1 A. E. R. 1026 at 1033 f
(5d)    [1978] 1 A.E.R.1026 at p. 1033 f

(6)    [1970] R.P.C. 147
(6a)    [1970] R.P.C. 147 at p. 149, lines 23-24
(6b)    [1970] R.P.C.147 at p.149, lines 14-15

(7)    [1966] R.P.C. 81

(8)    [1979] F.S.R. 208 at pp. 229 & 230
(8a)    [1979] F.S.R. 208 at p. 229
(8b)    [1979] F. S.R.208 at p. 230
(8c)    [1979] F.S.R. 208

(9)    [1895] 2 Q.B. 315

(10)    [1974] R.P.C. 162 at p. 172, line 20
(10a)    [1974] R.P.C.162 at p.172, lines 22-23
(10b)    [1974] R.P.C.162 at p.172, line 13

(11)    [1983] 1 IPR 185 at p. 187
(11a)    [1983] 1 IPR 185
(11b)    [1983] 1 IPR 185, at p. 190, line 47

(12)    [1895] 73 L.T. 226
(12a)    [1977] F.S.R. 202 at p.209, lines 36-37

(13)    [1939] 1 A.E.R. 290

(14)    [1952] 69 R.P.C. 10 at p.15, line 38, per Evershed, M.R.
(14a)    [1952] 69 R.P.C. 10 at p. 23, lines 20-21, per Denning L.J.
(14b)    [1952] 69 R.P.C.10 at p.14, line 8

(15)    [1974] R.P.C. 83 at p.86, line 25
(15a)    [1974] R.P.C. 82 at p. 87, lines 1-5 and lines 12-13

(16)    [1965] R.P.C.239 at p.255, lines 43-49; p.256, lines 33-45
(16a)    [1965] R.P.C.239 at p.256, line 49 to p. 257, line 2
(16b)    [1965] R.P.C. 239 at p.247, lines 5-10

(17)    [1977] R.P.C. 202 at p. 206 lines 23-25

(18)    Vol 8 Intellectual Property Decision No. 2nd April 1983: IPD 8020 and PID 8021

(19)    The Times, 23rd May 1986

(20)    [1973] R.P.C. 675 at p. 676, line 45 to p. 677, line 5

(21)    [1975] A.C. 396 at p. 408