Chicken Nuggets: Re-reading Faccenda Chicken

1. Chicken Nuggets: Re-reading Faccenda Chicken Lionel Bently

2. Overview • Faccenda Chicken v. Fowler [1987] 1 Ch 117 • Critiques of Faccenda • Re-reading the decision • Consequences of the re-interpretation

3. Faccenda Chicken v Fowler: The Facts • Fowler employee at chicken factory. Proposed scheme for delivering fresh chickens to customers. The scheme became a success. • Fowler accused of theft and resigned. Set up competing business, taking/attracting some of FC’s customers. • Fowler’s contract contained no restraint of trade or confidentiality clause. Could Faccenda prevent him from carrying on his business in this way?

4. Faccenda Chicken:The Decision • CA held Fowler not liable • Implied obligation on post employee only extends to trade secrets (or their equivalent) • In deciding whether a trade secret look at nature of employment, nature of information, whether employer impressed on the employee the secrecy of the information and its separability from general skill, experience and knowledge • Details of customers, routes and prices were not trade secrets

5. Leading case but problems…. • Identifying trade secrets • Inconsistency between employees and others (e.g. independent contractors) • The problem of restrictive covenants • The issue of sales • The effect of repudiatory breach by the ex-employer on the implied obligation • Compatability with TRIPs, Art 39

6. Identifying Trade Secrets • What is difference between ‘trade secret’ and ‘confidential information’? Is some information ‘more confidential’ than other? • Lancashire Fires v Lyons [1996] F.S.R. 628 (“distinction…may often on the facts be very hard to draw”) • CMS Dolphin Ltd v Simonet [2001] B.C.L.C. 704 (para.109) (“the distinction is sometimes difficult to apply in practice”)

7. Identifying Trade Secrets • The four Faccenda factors: nature of information/separability bear on nature and content of information • But how does the ‘nature of employment’ and the behaviour of the employer relate to nature of information?

8. Compatability with TRIPs, Art 39 • ‘undisclosed information’: • (a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question; • (b) has commercial value because it is secret; • (c) has been subject to reasonable steps under the circumstances, by persons lawfully in control of the information, to keep it secret."

9. Diversity amongst employees • Mark Freedland, The Personal Employment Contract (2003) (emphasising ‘false unity’ of concept of employee and ‘false duality’ of distinction between employees and independent contractors) • It might be rather strange to describe sensitive information of some employers as ‘trade secrets’: e.g. MoD or personal assistant.

10. Inconsistency Between Employees and Others Allison Coleman, The Legal Protection of Trade Secrets (1992) 61-2 (employee cases “exception” to “norm”, obligation on independent contractors “reverts more to the norm.”) But note Take v BSM Marketing [2006] EWHC 1085

11. Re-reading Faccenda • Most see as case concerning type of information protected • But what if think of it as concerned with existence of an obligation? • Thesis: Faccenda identifies circumstances in which person who has not agreed to keep confidential will have obligation imposed on him or her • It is only if the information is a trade secret or equally confidential that a person should come under an obligation

12. Faccenda and basic principles of confidence • Assumptions about the law of confidence • Coco v Clark: (i) quality of confidence; (ii) obligation (iii) detriment • A tendency to treat question of form and substance of information as distinct from question of obligation • Trade secret requirement in Faccenda seen as limitation on (i) quality of confidence • Recent rise of cases where information is ‘obviously confidential’ and gives rise to an obligation: AG v Guardian (No. 2)

13. Faccenda and Obligation • The assumption that a duty of good faith • Hull, for example, cites Lamb v. Evans [1893] 1 Ch 218, Robb v. Green [1895] 2 Q.B. 315, Faccenda • But do they support?

14. But does the duty of fidelity ‘survive’ termination? • Hawkins J. in Robb v. Green [1895] describes termination as (“the dividing line between owing his master a duty and owing him none”) • Widely recognised that ex-employee can compete • Del Casale v Artedomus [2007] NSWCA per Campbell JA: “there is room to doubt that prior authority provides strong support for the duty of good faith continuing to operate after the termination of the employment contract.”

15. So where does the obligation on former employees derive from? • Certainly there are many cases recognising an implied obligation post-employment (some equitable, some implied contract) • But this imposition of an obligation needs to be justified

16. Imposition of an Obligation • Coco v Clark (1969): Megarry J: ‘reasonable person standing in the shoes of the recipient would understand on reasonable grounds that the information was being given in confidence’. • A.G. v Guardian (No. 2) (1988) per Lord Goff. Principle extends beyond ‘recipients’ to those who come across ‘obviously confidential information’ • HL in Campbell and Douglas (2007) treat Lord Goff’s obiter dictum as a breakthrough in the development

17. So when should an obligation be imposed on an ex-employee? • General reluctance to impose obligations when no express agreement • “Obviously confidential”: nature of information, how treated, whether signalled to be “confidential”, whether separable from information a person is entitled to use • i.e. not merely ‘subjective’ • Richard Arnold, ‘Circumstances Importing an Obligation of Confidence’ (2003) LQR 193

18. Advantages with this Re-reading • No radical effect on results…but • Removes confusion over two standards of confidentiality. Threshold is information that has ‘the necessary quality of confidence’ • Makes sense of two of the four factors: nature of employment, and whether employer impressed confidentiality of information on the employee • Consistent with Neill LJ’s observation that neither sales/price information “could reasonably be regarded as plainly secret or sensitive.”

19. Implications: employees and independent contractors • Employees not a special category • Removes discontinuity with independent contractors

20. Implications: TRIPs • Protect ‘undisclosed information’ (not just a more limited category of ‘trade secret’) • But only give natural and legal persons "the possibility of preventing information from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices." • Only contrary to honest commercial practices where breach ‘obligation’

21. Dangers with Re-reading (1) • Broadening of Ex-employee’s obligations? The objection based on Ixora Trading Inc v. Jones [1990] FSR 251. • But, still subject to doctrine of restraint of trade. There would be no violation of duty if ex-employee were using ‘skill, knowledge and experience’

22. Dangers with Re-reading (2) • Fails to add clarity. • Clarification just introduces new question: when is information ‘obviously confidential’? • Agreed, we have a long way to go before we fully understand the answer: but at least it will provide some consistency. And some cases will be dismissible on basis that not obviously confidential without having to aske question about skill, knowledge, experience.