In house counsel - the test for conflicts

31/05/12

Generics (UK) Limited -v- 1) Yeda Research and Development Company Limited 2) Teva Pharmaceutical Industries Limited [2012] EWCA Civ 726

The Court of Appeal has considered the question whether an in house lawyer who moves to a new employer is subject to the strict rules on conflicts of interest laid down for external firms of solicitors by the House of Lords in Prince Jefri Bolkiah v KPMG.

The Court of Appeal was divided on this issue. Sir Robin Jacob held that the Bolkiah test does apply in this situation. In his judgment, an in house lawyer can act for a new employer only where it can be demonstrated that doing so will not give rise to any real risk of disclosure of the former employer's confidential information.

Lord Justice Etherton held that Bolkiah test does not apply to in house counsel, who instead fall to be treated in the same way as other employees. That is to say, it was an implied term of the employment contract that only "trade secrets" would be protected from disclosure after the employment ceased (see Faccenda Chicken v Fowler) and it would be very rare that a "barring out" injunction would be granted to restrain the activities of an ex employee. The burden of showing that trade secrets  were at risk of disclosure would lie with the former employer. Whether or not a restrictive covenant to widen the scope of protected information would be effective was an important matter which it was not necessary for him to decide.

Lord Justice Ward declined to reach a final finding on the proper test to apply, but gave a reasoned judgment essentially sympathising with the approach of Lord Jutsice Etherton.

The judgment is here.