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Misuse Of Confidential Information Obtained During Employment In Litigation – What Can the Employer Do?

05.06.24

Nicholas Siddall KC analyses the recent decision of the High Court in Payone Gmbh-v-Logo [2024] EWHC 981 (KB) – Saini J- and seeks to extract the learning to be gained as to when a court will order an injunction to restrain the use of such material.

He also addresses the additional learning which this decision provides as to whether the taking of such material amounts to gross misconduct by the employee.

A               The Facts

The facts of this matter shall be depressingly familiar to a number of practitioners. They can be taken from Saini J’s judgment:

“[5]         This is a claim brought by the Claimant against the Defendant, Jerry Kofi Logo (“Mr Logo”) arising out of an employment relationship. That relationship has ended. Mr Logo claims to be a “whistleblower”. He has made substantial disclosures of confidential documents which he unlawfully copied or removed from Payone during his employment. Mr Logo has also deployed such documents extensively in Employment Tribunal (“ET”) proceedings brought against the Claimant. As appears below, the main issue before me is whether, in these circumstances, Mr Logo should be restrained by final injunction from making further use of documents which he misappropriated during his employment.

[9]            In the course of his employment, Mr Logo was required to handle information relating to sales and account management for UK clients in what was called the “Fashion and Lifestyle vertical” at Payone. In particular, when “onboarding” a new client, it was Mr Logo’s responsibility to carry out anti-money laundering and “know your client” (KYC) verifications. This role required him to obtain and review personal data, including sensitive financial information, from individuals. In carrying out his work, Mr Logo was able to access the following locations on Payone’s internal network and third party platforms: intranet (a Sharepoint environment), shared network folders of the sales teams, enterprise resource planning software, client relationship management tools, HR self-service tools used for booking holidays, mandatory e-learning materials, as well as applications for expense management.

[17]        As to the nature of the misappropriation, I will provide a brief overview. From 2018 to the termination of his employment with the Claimant, Mr Logo sent numerous emails from his work email account to one or more of his personal email accounts. Through forensic investigation of the email logs on his work laptop, the Claimant has identified approximately 150 emails being sent from the Defendant’s work email account to his personal accounts. Forensic evidence indicates that on 5 January 2021 and 7 January 2021, Mr Logo “double-deleted” sent items from the email server, so that it would not be possible to identify what was sent on those dates. On 6 January 2021, Mr Logo was signed off as unfit to work due to sickness, and did not return to work. The Claimant is unable to identify how many emails were sent, to whom, or the contents of any attachments. I accept however that by necessary implication, all such emails and attachments are Company Records as defined at Clause 15.1 of the Contract and therefore are the Claimant’s property. Moreover, they inevitably will have contained Confidential Information as defined at Clause 14.1 of the Contract, and for the purposes of the equitable doctrine of confidence.

[19]        Mr Logo also, on various occasions during his employment between October 2020 and December 2020, made covert recordings of conversations with employees of the Claimant. There was no legitimate business reason for him to record information in this way. These audio recordings are Company Records as defined at Clause 15.1 of the Contract and therefore are the Claimant’s property. The audio recordings contain Confidential Information as defined at Clause 14.1 of the Contract, and for the purposes of the equitable doctrine of confidence.

The Defendant’s contract contained standard Confidential Information restrictions and delivery up obligations on termination of employment (as detailed above).

The essential basis of the Defendant’s defence to the order for an injunction was that the Confidential Information had been extensively deployed in Employment Tribunal litigation and thus the necessary element of confidence had been lost rendering an injunction inappropriate. He contended that the use of the documents for that purpose meant that they had entered ‘the public domain’.

Of note, and perhaps unusually, the Claimant had taken no steps to protect the confidence of the material during the course of the Employment Tribunal proceedings.

B               The Statutory Background

CPR 31.22 governs the situation where a disclosed document is used in open court and the extent to which its use in other circumstances may be permitted.

31.22

(1) A party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed, except where—

  • the document has been read to or by the court, or referred to, at a hearing which has been held in public;
  • the court gives permission; or
  • the party who disclosed the document and the person to whom the document belongs agree.

(2) The court may make an order restricting or prohibiting the use of a document which has been disclosed, even where the document has been read to or by the court, or referred to, at a hearing which has been held in public.

(3) An application for such an order may be made—

(a) by a party; or

(b) by any person to whom the document belongs.

(4) For the purpose of this rule, an Electronic Documents Questionnaire which has been completed and served by another party pursuant to Practice Direction 31B is to be treated as if it is a document which has been disclosed

A similar approach is accepted to apply in Employment Tribunal proceedings. As explained in Frewer-v-Google UK Limited [2022] EAT 34 at [32-34] the Employment Tribunals have the power to make orders restricting “open justice” in order to protect trade secrets and commercially confidential information. As described by Judge Tayler in that decision and in his judgment in Rozanov  the familiar “open justice” principle as developed and explained in a number of decisions of the higher courts applies to ET proceedings.

Rule 50 of the ET Rules allows for a hearing, or some parts of it, or some of the material that would otherwise be disclosed in it, to be kept private. The ET can issue an order at any stage in order to prevent or restrict public disclosure of any aspect of the proceedings (including even after a public judgment has named a person: see TYU-v-ILA SPA Limited [2022] ICR 298). As in other courts, the test is whether this is in the interests of justice, is necessary to protect the Convention rights of any person, or is necessary in certain specific circumstances.

C              Is the Misuse of Such Material Misconduct?

Following a series of decisions commencing with the decision of Jack J in Chadwick-v-Brandeaux [2011] IRLR 224 it is generally recognised that the taking of material by an employee from their employer for the purposes of its use in litigation is an act of gross misconduct. However Jack J left open the question of whether the Claimant was seeking to make a protected disclosure might affect that analysis.

Saini J addressed this point and concluded it did not. In a passage -likely frequently to be cited by employers- the court said this:

“[42]      … In any event, it is hard to see what defence Mr Logo would have had. It is well-established that the courts will not sanction employees helping themselves to, or retaining, their employer’s documents for the purposes of future litigation, or anticipated regulatory issues or protected disclosures, or even taking legal advice.”

It is to be noted that Saini J’s judgment went further than previous decisions to record that an employee taking such material to make a protected disclosure, to make a report to a regulator or indeed to take legal advice was unlawful.

 

D              Saini J’s Analysis on Loss of Confidence

The Court’s conclusion that the majority of the documents had not lost the quality of confidence and thus a final injunction was appropriate.

A distinction was drawn between documents which had been the subject of express reference in the Employment Tribunal judgment and documents which had more generally been utilised.

“[51]      …In short, I conclude that the Confidential Information as defined has not lost the quality of confidence. Save insofar as express references are made to it in the ET Judgment, neither the information nor documents including the information have entered the “public domain” so as to defeat the entitlement of the Claimant to restrain further disclosure consistently with free speech considerations.”

Saini J then went on to explain that a balancing exercise was to be conducted in such cases by reference to the following factors (emphasis added):

“[52] I will refer in more detail to relevant case law below, but at a high-level I consider the relevant legal principles to be as follows:

(i) Disclosure or reference by the ET will not necessarily negate confidentiality.

(ii) That confidentiality may be lost in one of two ways, which can broadly be summarised as factual (i.e., the publicity has destroyed the secrecy necessary for confidentiality) and legal (i.e., the principle of open justice requires that the information be deemed public).

(iii) Whether confidentiality is lost is a question of fact and degree.

(iv) Where the open justice principle applies, the default will be that confidentiality is lost, but this may be rebutted if there is good reason.

(v) A tribunal can impose confidentiality restrictions in advance of, or during, an open hearing. Restrictions on information once made public may even be imposed after the hearing or judgment referring to such information. The fundamental question remains the balance of competing interests. Delay in seeking restraints may be relevant.

(vi) Documents subject to the open justice principle in ET proceedings may be applied for and disclosure may be ordered after a hearing. The applicant must explain why they want the information and how granting him access will advance the open justice principle.

(vii) When considering such an application, the ET will carry out a fact-specific analysis, balancing competing interests (including confidentiality as well as practicality).

(viii) A key question will be the extent to which disclosure of the information would enable the public to understand the proceedings to which it relates.”

(ix) Partial reference to a document does not mean that the entire document should be deemed to have been referred to in open court.

(x) A person may be treated differently to the general public because of continuing duties they owe in contract or equity.”

E               Application of Those Principles to the Facts

Saini J conducted a close factual analysis of the material and concluded that much of the same had not entered the public domain. By way of example (emphasis added):

“[62]      Factually, none of the information outside the ET Judgment itself (or indeed any other public judgment in this case) was readily accessible to any member of the public. On the evidence before me, no true third parties (including the press) attended the hearings or applied to the ET for access to documents. There has been no reporting of the proceedings other than by Mr Logo himself or by legal publications which only make reference to what is in the ET Judgment. No application was made by any third party for the witness statements or closing submissions during or after the hearing before the ET. The evidence of the Claimant establishes that there remains secrecy in the underlying information and documents which it is entitled to protect. Whilst some Company Records and Confidential Information have been publicly referred to in the ET Judgment, the underlying documents themselves are not readily accessible to the public. I will provide some examples by way of illustration. The ET Judgment of 15 September 2023 made it publicly known that the Claimant entered into a contract with Westgate shopping centre. However, the underlying terms of that contract remain confidential and could only be obtained by the public or press if an application were to be made to the ET (or, theoretically, a superior court or tribunal). The same point can be made about financial records such as the turnover of the Claimant’s major clients. The fact that such turnover may have been referred to in the ET Judgment at a particular point does not render all aspects of the underlying turnover documents non-confidential

[63]… Where parts of documents are referred to in the ET Judgment, that already reflects a deliberate choice by the ET to extract the information which is necessary to explain its reasoning without unduly revealing confidential information. Meanwhile, many of the documents in the Main Bundle were of no relevance either to the claim itself or to the decision reached by the Tribunal. Indeed, there is no evidence that many of them were even read by the Tribunal, let alone referred to in the hearing.

Saini J also appeared willing to forgive the Claimant’s failure to seek contemporaneous protection of its material for the following reasons:

“[68]      I reject the proposition that an employer whose confidential documents have effectively been stolen and then deployed against them in the ET waives rights of confidence in those documents against the employee unless the employer applies under Rule 50 for extensive restrictions, including a private hearing in the ET. …Lack of contemporaneous restrictions is no bar to confidentiality trumping open justice. On the basis of Mr Logo’s arguments, the Claimant should have taken the wholly unrealistic steps of seeking privacy restrictions in relation to almost the entire Main Bundle and a hearing in private of all parts of the trial where documents he had taken from the Claimant were going to be referred to. That in itself would have been a major in-road on the principle of open justice. The history of the proceedings also makes clear to me that agreeing some form of privacy or confidentiality regime with Mr Logo would have been time-consuming and, most likely, impossible.”

 

F               The Salutary Warning

Saini J appeared to consider that document theft cases by an employee were in a different general category when making this observation:

[64]      Meanwhile, to the extent that open justice is engaged, on the facts before me it is in my judgment substantially outweighed by the interests of the Claimant and affected third parties, who would suffer prejudice if the information was made public. Indeed, that threatened prejudice was the very basis on which the claim has succeeded and on which Linden J granted interim relief. It is significant that, unlike in the authorities set out above, the relevant documents were put before the ET by the person seeking to use them. In other words, Mr Logo pre-empted the ordinary disclosure process by unlawfully appropriating documents at his whim, then introduced them regardless of relevance into the ET Bundles. It would be an odd situation indeed for confidentiality to be lost in these circumstances. It would allow the open justice principle to be abused to enable a person in Mr Logo’s position to nullify his obligations under contract and in equity – or at the very least afford him a windfall.”

G              The Learning to Be Taken from Payone

The decision of Saini J shall be welcomed by employers as confirmation of the fact that the taking of Confidential Information (even when asserted to be for the purposes of a protected disclosure/regulatory report/legal advice) shall not be permitted by the court. Further it displays that (the often asserted point) merely placing Confidential Information into an Employment Tribunal bundle shall cause the documents to enter the public domain is incorrect.

Finally the willingness of the court to forgive the employer from failing to take steps to protect the Confidential Information in the course of the Employment Tribunal proceedings will be welcomed by employers but that was a decision based on a balancing exercise conducted by the court on the evidence deployed. Such a conclusion shall not necessarily follow in all cases.

Notwithstanding the above the best course is generally -when faced with conduct such as that of the Claimant in this matter- is to seek an interim injunction for the return of the material at an early stage and to seek to introduce some form of ‘confidentiality club’ in the Employment Tribunal proceedings to avoid another judge taking a less benevolent view of the effect of the material being used in open court.

Nicholas Siddall KC is a leading practitioner in whistleblowing and business protection litigation and accepts instructions from both employees and employers in those regards.

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