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Charlotte Davies on Proving Misuse of Confidential Information

Ex-employers need to protect their confidential information. Some of the most potent weapons in the ex-employers’ armoury are orders for preservation, return and protection of confidential information. However, two recent cases provide a warning of the dangers of making assumptions in relation to applications for that relief, and show the stringent approach taken by the courts to orders for the protection of confidential information.

MPT Group Ltd v Peel and others

In the first, the case of MPT Group Ltd v Peel and others [2017] EWHC 1222 (Ch) which was heard in the High Court in May 2017, the claimant applied for relief including a springboard injunction to prevent the defendants obtaining an ongoing advantage from having taken and used its confidential information. In particular, the claimant argued that the defendants had taken and used technical information in order to produce specialist machinery which was being sold in competition with that produced by the claimant.

There was clear and undisputed evidence that the defendants had taken vast amounts of the claimant’s confidential information, and a strong inferential case of at least some misuse of this information. In particular, the defendants’ evidence was that they had disposed of the hard drives onto which they had copied the claimant’s information, although they insisted they had not misused that information before doing so. However, despite the Judge’s understandable skepticism at this evidence, ultimately he found that the claimant had not shown a sufficiently strong case that the misuse of the claimant’s confidential information had contributed to any ongoing springboard advantage.

Although this was determined at the higher NWL v Woods standard, rather than the usual American Cyanamid standard (i.e. not merely a serious issue to be tried, but whether the claimant would be likely to succeed at trial), it is still striking that despite the strong evidence before him, the Judge was not satisfied that there was sufficient proof of specific misuse to justify the springboard relief. This suggests the Court is becoming more wary of granting such strong relief.

Capita plc and another v Darch and others

The second case of Capita plc and another v Darch and others [2017] EWHC 1248 (Ch) was also heard in the High Court in May 2017. The claimant alleged an unlawful team move and conspiracy, and as part of its interim application applied for various orders for the preservation, return and protection of confidential information.

However, despite finding that there was clear evidence of competitive activity giving rise to serious issues to be tried, the Judge refused to make any orders for the protection of the claimant’s confidential information.

In particular:

• The Judge refused to make an order against the defendants prohibiting them from destroying, tampering or parting with the claimant’s property (including documents, books, materials records and other listed items). In doing so, he accepted the defendants’ argument that the burden was on the claimant to establish an arguable case that they had broken or intended to break their obligations in relation to such property, and found that the claimant had failed to do so on the evidence. Further, he stated that “…if [the claimant] had a serious concern that the Defendants might act in this way, I would have expected an application for such relief to have been made without notice to the Defendants…”. This is a particularly high bar to set for orders of this nature, which are often included in an application made with notice, and as part of a range of other relief. Such an approach appears to be in contrast to a number of recent cases which have condemned unnecessary without notice applications.
• The Judge also refused an order for the return of confidential information, pursuant to a contractual obligation for delivery up on termination of employment. This was refused on the basis that there was no evidence that the relevant defendants had actually breached this obligation by taking confidential information in the first place. It was not enough to point to the fact that other defendants involved in the team move had done so.
• Finally, the Judge refused to make an order preventing the defendants from misusing confidential information pending trial, finding that the definition of confidential information was too wide and uncertain and therefore fell foul of the ‘cardinal rule’ set out in Lawrence David Ltd v Ashton [1989] ICR 123 that any injunction must be framed with sufficient precision so as to enable a respondent to know what he is prevented from doing.

Practical lessons

Whilst recognising that the findings in both these cases turned on the particular facts, they do provide timely lessons as to how to approach applications for interim orders to protect confidential information, and perhaps point to a new trend of reluctance amongst the judiciary to grant swingeing interim relief. Three key points from these cases are:

• The more detailed the evidence of actual or threatened misuse of confidential information, the stronger the prospect of obtaining relief. Neglecting this aspect could prove fatal.
• In cases involving multiple defendants, be careful to analyse the evidence against each defendant separately and consider whether there is sufficient evidence to show misuse by each individual rather than applying a blanket approach.
• When asking for springboard relief, ensure that the evidence demonstrates a link between the particular misuse of confidential information and the alleged ongoing advantage.

This article was written by Charlotte Davies