Hivac Ltd v Park Royal Scientific Instruments Ltd

 

Hivac Ltd v Park Royal Scientific Instruments Ltd

EMPLOYMENT; Other Employment: CIVIL PROCEDURE

COURT OF APPEAL

LORD GREENE MR, MORTON AND BUCKNILL LJJ

4, 5 FEBRUARY 1946

Master and Servant – Duty of servant – Skilled manual worker assisting trade competitor during spare time – Whether breach of duty.

Injunction – Interlocutory – Procuring breach of service contract – Servant not party to proceedings – Alternative remedy dismissal of servant – Balance of

convenience.

The appellant company manufactured thermionic valves, including midget valves for incorporation in hearing aids for the deaf. The making and assembling

of these midget valves required considerable skill. The respondent company, a newcomer in this particular field, manufactured not merely thermionic valves

for use in hearing aids but complete hearing aids embodying thermionic valves. The appellant company had amongst its employees, five manual, though

highly skilled, workmen, who had been in the company’s employ for several years on a normal 5 1/2 day week agreement subject to 24 hours notice. Sunday

was a free day. Without the knowledge and consent of the appellant company, these five employees, at the invitation of two directors of the respondent

company and two former employees of the appellant company, worked, on Sundays, for the respondent company, for a considerable period, at the task of

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assembling midget valves. There was no evidence that these five employees had made use of any confidential information. On an appeal against the refusal

of an interlocutory injunction restraining the respondent company from employing or procuring these employees to be employed by them, the question for

consideration was whether it was at least a prima facie breach of contract on the part of these employees to devote their spare time or part of it to the service of

the respondent company, and, if so, whether, in the balance of convenience, the appropriate remedy was an interlocutory injunction. It was contended on

behalf of the respondent company that, even if a prima facie case had been made out, this was not a case for an injunction because, inter alia, in the absence of

the employees in question as parties the action was not properly constituted, and that there was an alternative remedy viz, dismissal of these employees for

misconduct:—

Held – (i) The appellant company had made out a prima facie case of breach of the employees’ obligation to serve them with good faith and fidelity, which

was an implied term in the contract of service.

(ii) there was a sound practical reason why the employees should not be joined in the action and there was no reason why the court should not be able to

decide the question satisfactorily and in their absence.

(iii) having regard to the Essential Work Order, which applied, and to the shortage of labour, it would be both difficult and unreasonable to expect the

appellant company to adopt the course of dismissing these employees.

(iv) on consideration of the balance of convenience the appropriate remedy in the case was an interlocutory injunction, which should be granted.

Notes

There appears to be no direct authority on the legal position arising when an employee devotes his spare time to placing his skill at the disposal of a potential

competitor of his employer. Such activity, however, would seem to come within the dictum of A L Smith LJ, when he said, in Robb v Green, that there is an

implied term in a contract of service that the servant undertakes to serve his master with good faith and fidelity. It is clear that a servant may not disclose

confidential information obtained during the course of the employment, even after the employment has terminated. There was no such disclosure in the case

under consideration, but the services rendered to the competitor were extremely likely to lead to this, and the court holds that a balance of convenience makes

it a suitable case for granting an interlocutory injunction on the facts as disclosed, to restrain the employment of the servant. Under normal conditions the

appropriate remedy of the employer would be the dismissal of the servant, but this is a remedy difficult to exercise in view of the Essential Work Order.

As to Duties of Servant to Master during Employment, see Halsbury, Hailsham Edn, Vol 22, pp 183, 184, para 307; and for Cases, see Digest, Vol 34, p

118, Nos 893–898.]

􀂭 350􀀉

Cases referred to in judgments

Wessex Dairies Ltd v Smith [1935] 2 KB 80, Digest Supp, 104 LJKB 484, 153 LT 185.

Robb v Green [1895] 2 QB 315, 34 Digest 121, 928, 64 LJKB 593, 73 LT 15.

Nichol v Martyn (1799), 2 Esp 732, 34 Digest 167, 1306.

Interlocutory Appeal

Interlocutory Appeal of the plaintiffs from an order of Cohen J, dated 14 December 1945, refusing to grant an interlocutory injunction restraining the

defendants from employing or procuring to be employed certain employees of the plaintiffs. The facts are fully set out in the judgment of Lord Greene MR.

Andrew Clark KC and G C D S Dunbar for the appellants.

Gerald Upjohn KC and I J Lindner for the respondents.

5 February 1946. The following judgments were delivered.

LORD GREENE MR. This appeal is concerned with a branch of the law which has not as yet been fully explored. The reason why that is so I shall mention

later, or, rather, what appears to me to be the reason.

The appellants, the plaintiffs in the action, are seeking to obtain an injunction against the defendants to restrain them from “employing or procuring to be

employed in the service of the defendants, or any of them, any servant or employee of the plaintiff company whilst still in the service or employment of the

plaintiff company so as to cause such servant or employee to commit a breach of his contract of employment or service with the plaintiff company or a breach

of duty.” In normal times, if it had not been for war and post-war conditions and regulations, this particular controversy probably would never have sprung up

because the plaintiffs would have had in their hands the obvious remedy of discharging the employees in question and replacing them with others more

trustworthy. In the present circumstances, although they have a ground of complaint, and a serious ground of complaint, against their employees, they are not

disposed to get rid of them for reasons which are easily understood. The employees in question are five in number, and they are employed, and have for some

years been employed, in the business of the plaintiff company who manufacture thermionic valves. The particular branch of their business concerned in the

present litigation is that in which they make what are called midget valves for incorporation in what are known as hearing aids for the deaf. The valves in

question are very small, and it is said in evidence that it requires considerable skill on the part of those concerned in making and assembling these valves, and,

accordingly, that, until a person has been trained at the job, he is not likely to be efficient.

The five employees concerned in this case are, so far as their contractual relations with the plaintiffs are concerned, employed apparently on 24 hours’

notice. There is no written contract. They are in fact manual workers, although their work is undoubtedly highly skilled. Although that appears to be the

contractual nature of the service, it is affected by the Essential Work Order; I need not go into that. It is sufficient to say that the relationship of employee and

employer is, to a considerable extent, from the practical point of view, stabilised by that Order. The plaintiffs are a scheduled undertaking, and their powers to

get rid of their employees, even if, in present conditions they could find persons to take their place, is very severely restricted. Accordingly it is not possible

for them, or, at any rate, not practical from a business point of view, to take the action, which, one imagines, they would probably take in normal

circumstances, of discharging these employees against whom they have this complaint.

The defendants are a limited company, a newcomer into this particular field, and two directors of that company, Smith and Bernhart, and a man named

Raymond Davies and his wife, who were formerly in the employment of the plaintiff company, and held positions of responsibility in which skill and

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knowledge in this particular branch of work was required. The present motion does not attempt to seek any relief against those two persons in respect of their

action in the past in working for the defendant company at a time when they were still in the employment of the plaintiffs, which apparently they did. We are

concerned only with the five employees, and the possibility of there being others in the future.

􀂭 351􀀉

The defendant company, as I have said, is a newcomer to this type of manufacture. Its main object appears to be to make, not merely thermionic valves

for use in hearing aids, but complete hearing aids embodying thermionic valves. For the purpose of making such aids they themselves have taken up the work

of manufacturing these midget valves.

I ought to say at this stage that in dealing with an interlocutory appeal we can, of course, only pay regard to the evidence in fact before the court which is

not necessarily complete, and anything I say with regard to this case must be taken as being said on the footing of the evidence before us, and any observations

I may make upon the law applicable are made in reference to the facts so far as they are before us. It may very well be, in and when this action comes for trial

and the complete facts are ascertained, that a different aspect may be given to the matter. What we have to consider is whether or not a prima facie case is

established, and, if so, whether the case is one where the appropriate remedy would be an interlocutory injunction, or whether matters should be allowed to

rest until the trial.

It appears to me on the evidence, and I think the judge took the same view, that the defendant company must, for all practical purposes, be regarded as

competitors of the plaintiffs. The plaintiffs, as I understand it, do not themselves make complete hearing aids, but their business of supplying valves for such

aids is quite clearly likely to be affected detrimentally by the entry on the market of the defendant company as manufacturers of valves. It again appears that

the defendant company could not have got, at any rate, as far as it has got in the setting up of its business and the doing of the necessary experimental work,

and so forth, in making this hearing aid and the valves incorporated in it without the assistance of persons skilled in the assembly of such valves. That being

so, it was clearly of the greatest importance to the defendants that they should, if possible, obtain such persons to assist them.

According to the evidence, Davies was from a comparatively early stage active in procuring the promotion of the defendant company, and he was doing

that at a time when he was in a responsible position in the service of the plaintiffs. He therefore knew what the defendant company would require in the shape

of skilled assistance and skilled work-people, and, according to the evidence, it was he and his wife who had the idea of inviting these five employees of the

plaintiff company to come and work for the defendant company. They were, it is said, personal friends of the Davies, and it is said in their evidence that they

worked for the defendant company in return for their expenses. What exactly that may mean nobody at present can tell, but one thing that is clear is that for a

period—varying with each employee, but in some cases for many months—those employees were working on Sundays for the defendant company at the task

of assembling midget valves for the defendant company. The whole of the time when they were doing that they were employees of the plaintiffs. That their

conscience was not easy is, I think, a fair inference from the facts because they must have known what the defendant company was trying to do, and must have

known, I should have thought, that the defendant company, if it succeeded in getting on its feet, would be competitors of the plaintiffs, and would affect the

plaintiffs’ goodwill. They nevertheless did not think it proper to inform their employers of what they were doing and ask their permission. Another matter is

clear, and that is that it was on the invitation of the defendants—and I say deliberately “the defendants,” meaning all of them—that these five employees came

and worked for the defendant company at a time when they were in the employment of the plaintiffs. The plaintiffs after a considerable time discovered what

was going on. While making their inquiries they received a very disingenuous answer from the defendant, Smith, who again showed the uneasiness of his

conscience by not mentioning anything about these five employees. It is no concern of ours to comment on the question of commercial morality; all we are

concerned with is the question: Has there, or has there not, been a breach of the law on the part of these defendants?

The position, summing it up, is this: the defendants secretly procured these employees of the plaintiffs to come and work for them, and to put at their

disposal their skill and experience for the purpose of enabling the defendant company to get its business going and to become successful in this particular field.

The defendants and the employees, on the evidence, appear quite clearly 􀂭 352􀀉 to have known exactly what they were doing, and they knew that, at any

rate, it was morally reprehensible, if not legally wrong. If they had not known that it was wrong, it is not conceivable that they would not have told the

plaintiffs. The actual time which these employees were bound by their contract of give to the plaintiffs appears to have been the normal 5 1/2 days a week.

There are provisions in the Essential Work Order by which, in certain circumstances, and provided certain conditions are complied with, employees who fall

under that Order can be compelled to work overtime, but nothing of that sort comes into question here. The time in which these employees were working for

the defendant company was unquestionably what may be described as their own spare time. The question we have to decide for the purpose of this

interlocutory appeal is whether or not the five employees were committing a breach of their obligation to their employers in using their spare time for the

purpose of assisting a company which they must have known was either in competition, or proposing to enter into competition, with their employers; and, if

so, whether the defendants procured that breach.

I said at the beginning that a question of this kind in normal times would not have been likely to arise, for the very simple reason that these employees

could have been got rid of on 24 hours’ notice, and no doubt there were skilled people who could have been obtained to take their place. It may very well be

that this class of question has never arisen in the past because there was no practical reason why it should. But now, in present conditions, the question has

arisen, and we have to consider on the facts before us whether or not a question of importance and difficulty is raised, and what prima facie view the court

takes of it, and whether, in the circumstances, we ought to grant an interlocutory injunction.

There is one matter which I think I can get out of the way at once. It is argued on behalf of the plaintiffs that on the evidence what may be called

confidential information must have been disclosed or utilised by these five employees for the benefit of the defendant company. The judge took the view that

no such case had been made out. I do not in any way differ from that view. It seems to me that, having regard particularly to the evidence of Mr Gill,

confidential information has not down to the present, at any rate, been made use of by these five employees, if, indeed, they were in possession of any such

information. Of course, when one gets into the area of confidential information the law is fortunately much more certain, but once that particular element is

excluded, we are in an area which has not, as I have said, been sufficiently explored.

The argument on behalf of the plaintiffs with regard to confidential information was also to the effect that, even assuming no confidential information has

as yet been disclosed, and assuming there is no threat to disclose it or use it for the benefit of the defendants, it will, nevertheless, be inevitable, if those

employees continue to work for the defendants, that they will put at the disposal of the defendants any confidential information which, in the course of their

work for the plaintiffs, they may obtain. It is said, and said with force, that employees engaged in this particular work are bound to become acquainted with

any improvements or any experiments which the plaintiffs may make in the course of their business in relation to these midget valves because they would be

given the task of constructing or assembling valves for the purpose of incorporating such improvements, and so forth. That is, I think, a matter which the court

cannot ignore. After all, one has to be practical in these matters, and one has to consider what the practical result will be. It may very well be said that to say

that people in these circumstances can, so to speak, make a division in their minds between what is confidential and what is not, and be quite careful while

they are working for the defendants to keep the confidential information locked up in some secret compartment of their minds theoretically may be all very

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well, but from the practical point of view has a certain unreality.

Leaving that on one side for the moment, and looking at the question from another angle, it has been said on many occasions that an employee owns a

duty of fidelity to his employer. As a general proposition that is indisputable. The practical difficulty in any given case is to find exactly how far that rather

vague duty of fidelity extends. Prima facie it seems to me on considering the authorities and the arguments that it must be a question on the facts of each

particular case. I can very well understand that the obligation of fidelity, 􀂭 353􀀉 which is an implied term of the contract, may extend very much further in

the case of one class of employee than it does in others. For instance, when you are dealing, as we are dealing here, with mere manual workers whose job is to

work 5 1/2 days for their employer at a specific type of work and stop their work when the hour strikes, the obligation of fidelity may be one the operation of

which will have a comparatively limited scope. The law would, I think, be jealous of attempting to impose on a manual worker restrictions the real effect of

which would be to prevent him utilising his spare time. He is paid for 5 1/2 days in the week. The rest of the week is his own, and to impose upon a man, in

relation to the rest of the week, some kind of obligation which really would unreasonably tie his hands and prevent him adding to his weekly money during

that time would, I think, be very undesirable. On the other hand, if you have employees of a different character, you may very well find that the obligation is

of a different nature. A manual worker might say: “You pay me for 5 1/2 days work. I do 5 1/2 days work for you. What greater obligation have I taken upon

myself? If you want in some way to limit my activities during the other day and a half of the week, you must pay me for it.” In many cases that may be a

very good answer. In other cases it may not be a good answer because the very nature of the work may be such as to make it quite clear that the duties of the

employee to his employer cannot properly be performed if in his spare time the employee engages in certain classes of activity. One example was discussed in

argument, that of a solicitor’s clerk who on Sundays, it was assumed, went and worked for another firm in the same town. He might find himself embarrassed

because the very client for whom he had done work while working for the other firm on the Sunday might be a client against whom clients of his main

employer were conducting litigation, or something of that kind. Obviously in a case of that kind, by working for another firm he is in effect, or may be,

disabling himself from performing his duties to his real employer and placing himself in an embarrassing position. I can well understand it being said: “That

is a breach of the duty of fidelity to your employer because as a result of what you have done you have disabled yourself from giving to your employer that

undivided attention to their business which it is your duty to do.” I merely put that forward, not for the purpose of laying down the law or expressing any

concluded opinion, but merely as illustrating the danger of laying down any proposition and the necessity of considering each case on its facts.

The authorities which have been cited are few, and the facts with which they were concerned differed from the facts of this particular case. For instance,

the authority on which reliance was principally placed was Wessex Dairies Ltd v Smith. There the defendant, who was a dairy roundsman, in his master’s time

proceeded to solicit customers of his master for the purpose of obtaining their custom in a business which he was shortly about to set up for himself. That is I

should have thought, a perfectly clear case, because he was doing it first of all in his master’s time; and in his master’s time he was making use of the

information which his master had placed at his disposal, namely, the identity of the various customers and their particular requirements. Creer LJ in the course

of his judgment, did place some emphasis on the fact that the case was one in which the servant was using his master’s time for the purpose of furthering his

own interest. He said this ([1935] 2 KB 80, at p 84):

‘… the defendant would nevertheless be under the ordinary implied obligation existing between master and servant—namely, that during the

continuance of his employment he will act in his employers’ interests and not use the time for which he is paid by the employers in furthering his own

interests.’

Then lower down he says this:

‘During the subsistence of the contract of service and during his master’s time the servant has to look after, not his own interests, but those of his

master.’

Then he quotes Hawkins J in Robb v Green. Hawkins J had referred to utilisation of the hours of service by being false to the master’s interests. Then at

the conclusion of his judgment Greer LJ says:

‘In this case the defendant acted contrary to his duty. During the last week of his service with the plaintiffs, while pursuing his duty by calling on

customers and delivering milk to them, he tried to induce them to become his customers after his employment with the plaintiffs was terminated.’

􀂭 354􀀉

The judgment of Maugham LJ started with the following words ([1935] 2 KB, 80, at p 85):

‘The claim in this case raises a question of some interest in relation to the duty of a servant to his master during the period of his employment.’

He goes on and examines the earlier case of Nichol v Martyn, which is not satisfactorily reported, and Robb v Green, and he then says this, after looking

at Hawkins J’s judgment in the case, (ibid at p 88):

‘That appears to show that HAWKINS, J., did not take the view, which the other passage I read seems to indicate, that a servant can properly

canvass his master’s customers for himself as from a near approaching day. The question to be determined essentially depends upon the term to be

implied in the ordinary case of a contract of employment in the absence of express agreement.’

Then he refers to the fact that there was a reference to the duty of fidelity in the contract, but he said that he wished to decide the case on a wider ground.

He quotes (ibid at p 88) a passage from A L Smith LJ, in Robb v Green. where he said ([1895] 2 QB, 315 at p 320):

‘I think that it is a necessary implication which must be engrafted on such a contract that the servant undertakes to serve his master with good faith

and fidelity.’

Then Maugham LJ says ([1935] 2 KB, 80, at p 89):

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‘On the other hand, it has been held that while the servant is in the employment of the master he is not justified in making a list of the master’s

customers … ’

That is what had been done in Robb v Green. That immediately introduces a quite different set of ideas because if a servant took copies of his master’s

list of customers, he would be obviously committing a breach of duty in making use of something which is the master’s property, namely, the list of

customers, for an improper purpose, other than that for which he was employed. Then Maugham LJ says (ibid):

‘Another thing to be borne in mind is that, although the servant is not entitled to make use of information which he has obtained in confidence in his

master’s service, he is entitled to make use of the knowledge and skill which he acquired while in that service …’

There he is dealing with the position of the employee after the service has terminated, and is calling attention to the well known distinction between a man’s

skill, which is his own property, part of his own equipment, and confidential information which he has acquired during his service. Then again he points out

that the facts complained of were done by the roundsman while going his round, and he said that was a deliberate canvassing at a time when the defendant was

under an obligation to serve the plaintiffs with fidelity. Talbot J appears to have agreed with both the judgments pronounced, and we have to consider to what

extent the judgments assist us in deciding, on an interlocutory application, the proper course for this court to pursue.

I repeat again my warning that everything that I say on this matter stands, of course, to be varied and corrected when the full facts are known, but prima

facie, it appears to me, the question we have to consider resolves itself into these elements. First of all, what was done here was done in the spare time of the

employees. That leads to this: we have to consider what implication, if any, needs to be read into the contract of service with regard to the employee’s use of

his spare time? Does that implication in any way restrict him, or, rather (which is the practical question here) did that implication make it a breach of duty on

his part to do what he did, with the consequential result that the defendants, in persuading the employees to do what they did, procured a breach of contract? I

think the judgment of Maugham LJ which is quite deliberately placed by him on a broad ground, does lead to this. Although the case before him was

concerned with an employee who had done certain things in his employer’s time, I cannot find that in his reasoning that was regarded as an essential part of

the offence. I cannot read the judgment as meaning that, if the roundsman had on a Saturday afternoon, when his work was over, gone round to all these

customers and canvassed them, he would have been doing something he was entitled to do. It would be a curious result if, quite apart from making use of the

list of customers of his special knowledge or anything of that kind, he could set himself during his spare time deliberately to injure the goodwill of his master’s

business by trying to get his customers to leave him. There again 􀂭 355􀀉 the question here is not a question of getting the customers to leave the business but

a question of building up a rival in business to the prejudice of the goodwill of the employer’s business.

I am not ashamed to confess that in the course of the argument my mind has fluctuated considerably on this question. As I see it, the court stands in a

sense between Scylla and Charybids, because it would be most unfortunate if anything we said, or any other court said, should place an undue restriction on

the right of the workman, particularly a manual workman, to make use of his leisure for his profit. On the other hand, it would be deplorable if it were laid

down that a workman could consistently with his duty to his employer, knowingly, deliberately and secretly set himself to do in his spare time something

which would inflict great harm on his employer’s business. I have endeavoured to raise the questions in the way that they appeal to me and, on the best

consideration I can give to the matter, I think that the plaintiffs are prima facie right in this case.

That being so, what is the right course for this court to pursue? Counsel for the defendants took several points, on the assumption that a prima facie case

was established, to suggest that it was not a case for an injunction. He said, for instance, that in the absence of the five workpeople in question the action was

not properly constituted. There is no doubt that, in a way, it is unfortunate in an action complaining of procuring breach of contract, not to have before the

court the contracting party whose breach of the contract, it is said, the defendants have procured, but the circumstances of the present case are peculiar. There

is a very good practical reason why these workpeople should not be joined, and I can see no reason why the court should not be able to decide the question

satisfactorily and in their absence.

Then counsel said there is no case for an injunction because if the plaintiffs are right the workpeople could be dismissed for serious misconduct. That is a

much more difficult thing under the Essential Work Order than would appear from that bald statement, because the plaintiffs have not the last word in the

matter. It would be unreasonable to expect them, in the circumstances of the shortage of labour and the difficult procedure they would have to go through, to

take any such course. The times are peculiar, and it seems to me that the plaintiffs are entitled to have the position considered in the light of the circumstances

as they in fact exist, and not in the light of some circumstances, which might have existed, in more normal times, and would have given them a remedy ready

to their hand which would have made it unnecessary for them to invoke the assistance of the court.

Then counsel said, in any case there is no case for an interlocutory order. I do not think myself that any of those arguments ought to be allowed to

prevail.

I conclude by saying that this is a case of deliberate and secret action by these employees, deliberate and secret action by the defendants in circumstances

where both the employees and the defendants must have known the exact result of what they were doing and must have realised that what they were doing was

wrong, even if they did not distinguish in their minds between the question of commercial morality and legal obligation. That being so, and there being in my

opinion a prima facie case and the balance of convenience and fairness being in favour of an injunction, I think the judge who took the other view came to the

wrong conclusion. I should perhaps have mentioned that he did not think that, once the question of confidential information was excluded, there was sufficient

left in the action of the plaintiffs’ workpeople to constitute a breach of any implied obligation. It is on that point that I take a different prima facie view. The

way the matter struck me was that prima facie, in the absence of direct authority on the point, he did not feel he ought to say that the obligation of the servants

in this case went as far as it was said it did. I have come to the opposite conclusion without expressing any final judgment on the matter, because we have not

all the facts before us. I think that prima facie on the facts of this case, so far as they at present appear, the conclusion ought to be the opposite one. That is

the extent of our difference. In my opinion, the injunction asked for should be granted.

MORTON LJ. I am of the same opinion, but in this somewhat unusual case I shall express my reasons for arriving at that conclusion in my own words as

briefly as I can. The question arising on this motion is whether it was a 􀂭 356􀀉 breach of contract on the part of five employees of the plaintiff company to

devote their spare time, or part of their spare time, to the service of the defendant company in the circumstances set out in the affidavits. If their conduct was a

breach of their contract of service I think there would be no doubt that an interlocutory injunction should be granted. I cannot doubt that the whole matter was

done with the knowledge and approval of the defendant company and its directors and, although in one part of his evidence Davies described these five

employees as volunteers for the work, there was other evidence that invitations were issued to them by Davies or by his wife. On the other hand, if the court

thinks that the breach of contract is not clear but that there is a substantial question to determine at the trial and that the plaintiffs have made out a prima facie

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case of breach of contract, then the court must consider the question of the balance of convenience.

It is clear that the five employees in question have not broken any express term of their contract of employment. It was not provided in their contract, for

instance, that they should give their time exclusively to the work of the plaintiff company. What implied term, if any, has been broken? I am content, as

Maugham LJ was content in Wessex Dairies Ltd v Smith ([1935] 2 KB 80, at p 88), to quote from A L Smith LJ, in Robb v Green when he said ([1895] 2 QB

315, at p 320):

‘I think that it is a necessary implication which must be engrafted on such a contract [that is a contract of service] that the servant undertakes to

serve his master with good faith and fidelity.’

In all the circumstances of the case, have these five employees observed the obligations of good faith and fidelity? I do not propose to recapitulate the

facts, but I must start from this point, that the work done for the defendants was done in what is usually described as the employees’ spare time. No cases were

cited to us in which work so done was held to be a breach of the obligation of fidelity to the employer. I do not propose to express any view of such a general

nature as that all work done for a firm in the same line of business as the employers in the spare time of the employees is a breach of contract, but I do say that

in my view the obligation of fidelity subsists so long as the contract of service subsists, and even in his spare time an employee does owe that obligation of

fidelity. In my view, a prima facie case of a breach of that obligation is made out in the present case and I shall refer briefly to certain points which impressed

me in the course of the evidence.

In the first place, it is plain from the affidavit of Diggle in para 5 that the plaintiff company is at the moment the only source of supply in this country of

midget valves for hearing aids other than the defendant company. When I say it is clear, that is the evidence before us, although, as my Lord has said, the

evidence at the trial may throw more light on the matter. I couple with that piece of evidence from Diggle the evidence of Smith, who is a director of the

defendant company and is a practical man. He says in para 2 of his affidavit: “Since the year 1925 I have been engaged in various branches of the radio

engineering and vale amplifier industry and I have for several years been concerned with the manufacture of hearing aids.” Then he refers to the fact that

there is a limited market for hearing aids and that they have been sold in his view at too high a price and that he intends to put on the market a hearing aid at a

lower price. That is a direct form of competition which is contemplated by the defendant company. Davies makes it plain that while he, Davies, was

occupying the important post of production engineer at the plaintiffs’ factory at Harrow he was assisting in the promoting of the defendant company and

co-operating with Smith. His conduct is not before us on this occasion and I make no comment on that. There is thus in this case assistance given to a

competitor whose activities would, I think, inevitably result in damage to the plaintiff company if they were successful.

In the second place, I am impressed by the secrecy which was maintained throughout the time when these employees of the plaintiff company were

working for the defendant company. I think that is a pretty plain indication that the employees knew perfectly well they were breaking an implied term of

their contract of employment. I do not doubt that if the plaintiff company had been asked, “Have you any objection to our doing this in our spare time?” The

answer would have been “You have no right whatever in view of your 􀂭 357􀀉 contract of service with us to do any such thing.” I suspect that the employees

knew that perfectly well, and that is why nothing was said about it.

In the third place, although these workmen are doing manual labour, it is manual labour of a very skilled kind and it has been, as the evidence shows, of

the very greatest assistance to the defendant company in bringing their activities up to the point when they can develop their business. The circumstances are

that in this particular case these men have assisted the defendant company to develop its business from the early stages to that of a competitor.

The last fact, and a very important one, which I would mention is this. It is true that it is not established on the evidence as I see it that any confidential

information has passed or could have passed in the past from the employees to the defendant company, but I think it is right to say, as counsel for the plaintiffs

pointed out, any improvements in the assembly of the valves which may be introduced by the plaintiff company will almost inevitably be put into operation by

the defendant company through these employees. It is very difficult to conceive that if the plaintiffs were showing the employees a new and improved way of

making midget valves there would be no mention and no demonstration of that whatsoever to the defendant company.

With regard to Wessex Dairies Ltd v Smith it is true that the operations which were objected to were carried out by the milk roundsman actually in the

time when he was employed about his master’s business, but for my part I think if those same operations had been carried out while he had been employed by

that master in the evening or on a Saturady afternoon, they would also have been held to be a breach of his duty of fidelity. It is true that Greer LJ in the

course of his judgment lays some emphasis upon the fact that the hours of service were utilised for these purposes, but I do not think that any member of the

court throws any doubt upon the proposition that those activities would have been improper even if they had been done in the employee’s spare time. Having

regard to all the facts, I think the plaintiffs have made out a prima facie case here, and one has to consider the balance of convenience.

Looking at it from the defendants’ point of view, it does not seem to me that any irreparable harm will be done to the defendant if an injunction is granted

and if it should subsequently turn out at the trial that an injunction should not have been granted. Smith says in para 5 of his affidavit: “The defendant

company is now in a position to advise the Board of Trade that it will be able to obtain and execute orders, and so apply for and obtain the necessary priorities

to secure skilled labour. There will be no difficulty in securing the labour although it may involve some delay, and if in the interim the defendant company is

prevented from using the services of the persons mentioned in para 11 of the affidavit of Harry Giggle, the production of the company will to some extent be

handicapped.” Then he goes on to say that production can be continued without the services of those persons. So much for the position of the defendants.

On the other hand, taking the position of the plaintiffs, it seems to me a most unfortunate position if the plaintiffs are compelled to have in their

employment persons who week by week are assisting their rivals in the way described in the evidence. The judge suggested that the plaintiffs might impose a

condition that the employees should not accept employment for any part of their time with the defendants, but I see grave difficulties in the plaintiff company

achieving that result, having regard to the terms of the Essential Work Order, and for my part I do not see why they should be faced with the alternative of

trying to impose such a condition and possibly losing by so doing the services of valuable workmen. I think it is an intolerable position that this should be

allowed to continue.

Finally, if one looks at it from the standpoint of the five employees in question, although they are not before the court, each of them in his or her affidavit

uses the same phrase, which is a curious one. “I receive payment by way of expenses for my work.” I am not quite sure what that means, but I apprehend it is

intended to convey the impression that they have only had their expenses paid. Under those circumstances, it does not seem to me that it will involve any

hardship on those five employees if they are prevented from making use of their leisure time in doing this no doubt rather hard work and getting nothing more

for it than their expenses. I cannot think that the sorrow which they might 􀂭 358􀀉 feel at being deprived of that occupation should induce the court to refuse

to grant an injunction. In my opinion the appeal should be allowed and an injunction granted in the terms of the notice of motion.

BUCKNILL LJ agreed.

All England Law Reports 1936 - books on screen™

All ER 1946 Volume 1

Preamble

Appeal allowed; injunction granted; appellants’ costs in Court of Appeal and below costs in the cause.

Solicitors: Lawrance, Messer & Co (for the appellants); Harold Benjamin (for the respondents).

F Guttman Esq Barrister.

[1946] 1 All ER 359