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Preservation of evidence and misconduct during employment: is the law right?

By Daniel Tatton-Brown QC

An employee believes that the working relationship with her employer is breaking down. She anticipates future disputes about a bonus, and any imminent future termination. Wanting to ensure that she has key documents available in case she needs to seek advice or prove a future claim, she emails some of them – including confidential documents – to a hotmail account. Has she done anything wrong?

The answer appears to be clear: yes.

In Farnan v Sunderland Association Football Club Ltd [2016] IRLR 185 the Claimant’s wrongful dismissal claim failed in part because he had “banked” confidential documents by forwarding them to his wife’s hotmail, anticipating future litigation. Mr Farnan’s wife apparently carried out much of his administration. There was no evidence or suggestion that the documents, such as confidential board minutes, had ever been further disseminated or used, or that the emails had caused any loss.

The judge (Whipple J) held that this conduct breached a fairly standard express term of Mr Farnan’s service agreement, which prohibited the use or disclosure of confidential information to any person, unless that disclosure was authorised by the Board. The breach was held to be repudiatory. In reaching that conclusion the judge followed a recent line of authority:

The Courts have confirmed that the possibility of future litigation with an employer does not justify an employee in transferring or copying specific confidential documents for his own retention: see Brandeaux Advisers (UK) Ltd v Chadwick [2011] IRLR 224 per Jack J, and more recently, Tokio Marine Kiln Insurance Services Ltd v Yi Yang [2013] EWHC 1948 (QB),14 June 2013, unreported per Coulson J:
‘As a matter of common sense, it cannot be right for a defendant to retain information in breach of contract simply to bolster its claim in the Employment Appeal Tribunal. If there are documents to be disclosed in that dispute, they will be disclosed in the normal way. This sort of pre-emption is not therefore valid’.


In Chadwick Jack J said this:

It is doubtful if the possibility of litigation with an employer could ever justify an employee in transferring or copying specific confidential documents for his own retention which might be relevant to such a dispute. If such a dispute arises, in the ordinary course the employee must rely on the court’s disclosure processes to provide the relevant documents. Even if the employee is distrustful about whether the employer will willingly meet its disclosure obligations, he must rely on the court to ensure that the employer does.

The principle articulated by Whipple J, and which appeared to be “common sense” to Coulson J, is, it is suggested, too inflexible and to that extent, wrong.

The key assumption – that employees ought to leave any issue of disclosure to the courts – overlooks the focus of modern dispute resolution on avoiding litigation altogether. Litigation is not only notoriously uncertain: it is also notoriously expensive. Indeed, the cost of litigation is said to hinder access to justice. Because of this parties are strongly encouraged – most obviously with the Pre-Action Protocols – to exchange information and documentation at an early stage in order to settle disputes without the need for proceedings. Litigation, we are expressly told, “should be a last resort”: see paragraph 8 of the Practice Direction on Pre-Action Conduct.

If an employee is to treat litigation as a last resort, why should she be expected to await the production of key documents via a litigation based disclosure process?

Moreover, the principles that underpin that process include the preservation of documentation. Paragraph 7 of Practice Direction 31B states that

“As soon as litigation is contemplated the parties’ legal representatives must notify their clients of the need to preserve disclosable documents”.

The act of an employee “banking” documents once litigation is contemplated ought to be considered in the context of this obligation.

Aside from the specifics of the CPR there is an air of unreality about the court’s zero-tolerance approach to the practice of an employee “banking” confidential documents. Many litigants do not fully comply with their disclosure obligations, or do so only reluctantly and after much expensive arm twisting. Disclosure anyway typically takes place at a relatively advanced stage of litigation, after considerable expense has already been incurred. The employee will know that if the employer knowns at an early stage that she retains key documentary evidence, her potential claims are more likely to be taken seriously, and a swift and advantageous settlement is more likely. There is a public interest in swift quick settlements.

Jack J’s comments, quoted above, were prefaced by his stating

“I should not get drawn into any wide statements of principle which are unnecessary to my decision”.

The subsequent treatment by the courts of his words as articulating a statement of principle is regrettable. The question of whether the copying or retention of confidential documentation by an employee amounts to repudiatory conduct is nuanced and fact specific. As Jack J observed, the motive for the employee acting as she did is most important. Also relevant ought to be the sensitivity and volume of the copied documentation, whether there are reasonable grounds for any belief that the employer would fail to produce or destroy the copied documents, the extent to which the banked documents were kept securely and the significance and value of the confidential documents to the anticipated future dispute.

But on the current state of the authorities none of these factors really matter: pre-emptive copying or retention of confidential documentation is highly likely to be found to amount to gross misconduct.

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