Faccenda Chicken Ltd v Fowler and Others

Faccenda Chicken Ltd v Fowler and Others [1986] IRLR 69, CA

Facts

Faccenda Chicken Ltd. (the plaintiff) was a company involved in the business of breeding, rearing, killing, and preparing chickens for sale. Mr. Fowler, as sales manager, developed a significant van sales operation for the company, where fresh chickens in refrigerated vehicles were daily offered to traders like butchers, supermarkets, and catering establishments. Each of the ten van salesmen knew specific sales information for their sector, including customer names and addresses, sector limits, daily routes, usual requirements (quantity and quality), delivery times, and varying prices. This "sales information" was later alleged by Faccenda Chicken Ltd. to be confidential.

Mr. Fowler resigned as sales manager and subsequently established his own new business selling fresh chicken from refrigerated vehicles. He advertised for employees, and several van salesmen, their supervisor (Mr. Finch), and two office staff from Faccenda Chicken Ltd. left to join his new company, Fowler Quality Poultry Products Ltd.. None of the employment contracts with Faccenda Chicken Ltd. contained an express term prohibiting the use of confidential information or trade secrets after employment ceased. Faccenda Chicken Ltd. initiated an action, alleging breach of contract by the former employees for using confidential sales information to the company's detriment, and a conspiracy by the former employees and Fowler's company to injure Faccenda Chicken's goodwill and connections by abusing confidential information and inducing breaches of customer contracts.

Held

The court classified information acquired by an employee into three categories regarding confidence, where no express agreement exists.

First class

Trivial information or easily accessible from public sources, not considered confidential, and employees are free to use it during or after employment.

Second class

Information that is confidential during employment (either explicitly stated or obvious from its character) but, once learned, necessarily remains in the employee's head and becomes part of their own skill and knowledge. While employment continues, its use or disclosure is a breach of contract. However, upon leaving service, the law allows the former employee to use this full skill and knowledge for their own benefit in competition with their former master, unless protected by an express restrictive stipulation.

Third class

Specific trade secrets so confidential that, even if learned by heart, they cannot lawfully be used for anyone's benefit but the master's after the employee has left.

The court held that the sales information relied upon by Faccenda Chicken Ltd. fell into the second class. Since the employees had left the company's service and there was no express stipulation restraining them from competing, they were free to use the skill and knowledge they had acquired, including their knowledge of customers' whereabouts, requirements, prices, and routes. Accordingly, the claim for breach of contract based on the use of confidential information failed.

Regarding the allegation of conspiracy, the court found that for a combination to be an actionable conspiracy where the act would not be actionable by one person alone, the sole or predominant purpose of the combination had to be to injure the plaintiff. The evidence failed to show that the defendants' predominant purpose was to injure Faccenda Chicken Ltd.; rather, it was to promote their own interests. Furthermore, the alleged wrongful acts of abusing confidential information and inducing contract breaches were not established or were abandoned. Therefore, the action for conspiracy also failed and was dismissed.

In a separate but related action, Mr. Fowler was awarded £12,326 for outstanding commission against Faccenda Chicken Ltd., and Faccenda Chicken Ltd. was awarded £435 on a conceded counterclaim.

Comment

This case provides a significant clarification on the types of information an employee can use after leaving employment, particularly in the absence of restrictive covenants. The judgment underlines that knowledge that becomes inherently part of an employee's skill and experience during their service is generally not protected as confidential trade secret information once the employment ceases, allowing the former employee to compete and solicit former customers using that knowledge. The "springboard doctrine," which prevents a former employee from using confidential information as a "springboard" for competitive activities, is limited in master-servant cases by the employee's freedom to compete after termination unless expressly restrained.

The court explicitly noted that Faccenda Chicken Ltd. was attempting to extend the law on confidence beyond its proper limits, essentially trying to remedy its own omission to include restrictive stipulations in its employment contracts. The case highlights the critical importance for employers to implement express contractual clauses if they wish to restrict former employees from competing or using information gained during employment that would otherwise be considered part of their general skill and knowledge. The judge also commented that the lengthy litigation could have been resolved with "much less time and expense".