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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
”.

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