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DANIEL TATTON-BROWN QC ON MISUSE OF CONFIDENTIAL INFORMATION AND INTERIM REMEDIES

A rogue employee leaving their employer and taking with him confidential information such as a customer or pricing list can potentially cause significant damage to the ex-employer’s business. Faced with evidence or suspicion that that has happened, there is a range of remedies that a claimant can seek including:

  • An order to prevent the (mis)use of confidential information (appropriately defined);
  • An order for the delivery up of confidential information;
  • An order that the defendant specify what (mis)use has been made of confidential information;
  • An order for the imaging of electronic devices in the control of the departing employee on which confidential information is or has been held; 
  • An order for the inspection of relevant electronic devices;
  • An order for the destruction of confidential information held on relevant electronic devices.

In Arthur J Gallagher Services (UK) Ltd and others v Skriptchenko and others [2016] EWHC 603 an initial order was made for the delivery up of all confidential information; an order for inspection of electronic devices and the destruction of information belonging to the claimant; and a requirement that the defendants explain in an affidavit what use had been made of the claimant’s documentation.

At a subsequent application an issue arose as to whether an order ought to be made to take an image of the defendants’ devices and to delete from them confidential information belonging to the claimant. The inclusion of an order for the destruction of confidential information represented an extension to the more familiar imaging and inspection order made in (eg) Warm Zones v Thurley & Another [2014] IRLR 791.

The interim destruction order was granted by Slade J. The court did so on the basis that the mandatory order for the destruction of the confidential information involved the least risk of injustice if it turned out to be wrong; because the claimant was entitled to protect its confidential information and the defendants were not entitled to have it or use it; and because the defendants had demonstrated a "high degree of subterfuge” in the use of the confidential material and could not be trusted to seek out and delete such material themselves. The judge applied the well known American Cyanamid principles.

Discussion

As anyone who practices in this area of law will know, the issue of costs often looms large. The claimant employer, typically with deeper pockets than the departing employee(s), can exert tremendous pressure by running up potentially crippling costs which it can then seek to recover from the defendants. The issue of costs can quickly assume disproportionate significance and become a bar to settlement.

The problem with a destruction order of the sort made in Skriptchenko is that it is likely to be very expensive. Disputes over search terms and whether particular documents contain confidential information are almost inevitable. The need to formulate a procedure that will protect the confidential information of the defendants whose devices are being analysed adds to the complexity and cost of the exercise. Implementing the order involve the use of forensic experts.

This was a feature that (surprisingly) did not feature heavily in the judge’s decision. CPR Part 1.1. now of course explicitly provides that the overriding objective of the court is to deal with cases justly and at proportionate cost. It appeared to be common ground that the Skriptchenko defendants had complied in full with the earlier extensive orders, including delivering up over 4,000 documents. In these circumstances, one might have thought that a key issue would be whether the additional costs generated by a destruction order, compared to (e.g.) an order backed by a penal notice not to (mis)use the claimant’s confidential information, was proportionate. That in turn would involve consideration of the commercial value of the information that had wrongly been taken, and the extent of any likely damage that would be caused if it were misused. This issue appears explicitly to have been raised by the defendants (see para. 52) but is not addressed by the judge. It is respectfully suggested that in with the modern emphasis on conducting litigation at proportionate cost, it ought to have been.

Daniel Tatton-Brown QC is frequently instructed in employee competition cases. In a recent edition of Chambers and Partners it was said that his "broad-based employment practice is founded on his core expertise in relation to restraint of trade issues”.

Posted: 12.07.2016 at 08:54
Tags:  Comments  Employment Law  Articles
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