This is the transcript to my latest Weekly Law Review vlog which is available on my LinkedIn profile and my YouTube channel.
After a short break, I have chosen a case which was handed down on the 19th of January 2021. The case is Travel Counsellors Ltd V Trailfinders Ltd and it was heard in the Court of Appeal.
The case was concerned with whether the defendants were liable for disclosing confidential information from their previous employer, Trailfinders, to their new employer, Travel Counsellors, and whether the new employer was also liable for accepting the confidential information.
The first instance decision, or the decision at the first trial, was given on 12 March 2020. That court heard that Mr L and Mr B worked for the claimant, Trailfinders which is a travel agency. Both Mr L and Mr B moved to work for the defendant, Travel Councillors Ltd. Mr L and Mr B took confidential information, belonging to Trailfinders, to Travel C,ouncillors, another travel company. The information consisted of customer information which was valuable and confidential information and had been taken from Trailfinders' IT systems. Mr B had collated the information over a 6 month period and Mr L had copied separate information on his last day.
At the trial in the High Court, the court was asked to determine:
The court found that yes, the information was confidential, yes, the two employees had breached their contractual and equitable duties to Trailfinders and, yes, Travel Counsellors was vicariously liable.
It was this decision which Travel Counsellors (but not Mr L or Mr B) appealed to the Court of Appeal.
There were three grounds of appeal. First, Travel Counsellers argued that the judge applied the wrong test when holding that Travel Counsellors Ltd owed an obligation of confidence relating to the confidential information received from Mr L and Mr B. This was rejected by the Court of Appeal. The court restated the test and the judge said that, “in my judgement, if the circumstances are such as to bring it to the notice of a reasonable person in the position of a recipient but the information, or some of it, may be confidential to another, then the reasonable person's response may be to make enquiries. Whether that person would make enquiries, and if so what enquiries, is inevitably context and fact dependent. If the reasonable person would make enquiries, but the recipient abstained from doing so, then obligation of confidentiality will arise".
The second ground was that the first judge's approach to the question, of what Travel Counsellors Ltd ought to have understood about the information, was wrong. This was a criticism of the first instance judge's findings of fact. The Court of Appeal did not accept that the findings of fact had been wrong.
The final ground was that the judge wrong to hold that travel Travel Counsellors Ltd was liable for breach of confidence, even though there had been a finding that Travel Counsellors Ltd had misused the confidential information. This ground was actually abandoned during the appeal hearing. Travel Counsellors Ltd admitted that the information had been stored on its systems and had been used to send marketing emails.
So the appeal was dismissed.
This case helpfully clarified the test which the court will use when asked to determine whether a third-party will be liable if it receives confidential information. As stated, the test is whether the reasonable person's response to receiving such information is that they would make enquiries. Whether the reasonable person would make enquiries, and the extent of those enquiries, is context and fact dependent.
In my view, this is good news for lawyers representing claimants. I say this because, cases which rely heavily on a particular finding of fact being made, tend to carry more risk and, as such, a defendant may be more likely to settle. This is because the defendant may wish to “buy off“ the risk of a finding of fact being made against them at trial.
The key takeaway point for businesses, is to be exercise caution when dealing with potentially confidential information when recruiting employees that have worked for a competitor. If the employee has breached his duties of confidentiality to its former employer, the new employer could be held liable too.
Copyright Melissa Worth 2021