What obligation does a recipient of information provided by a former employee of a competitor have to check the source and lawfulness of that information? The answer from the Court of Appeal in a judgment handed down yesterday is clear: if there is any reason to be suspicious, it should try and find out.
The story is a familiar one. Employees looking to leave their employer copy client information and take it with them to a competing business. That is essentially what happened in a case heard in the English High Court (in the Intellectual Property Enterprise Court) last year. The court found that former employees of the award-winning travel agent, Trailfinders, had acted in breach of confidence, and that the competitor that they had gone to work with, Travel Counsellors, was also liable for their acts.
The employees who were the subject of the trial last year, Mr La Gette and Mr Bishop, had copied down various pieces of information relating to Trailfinders’ clients, including names, email addresses, phone numbers and booking reference numbers, the last of which enabled them to log into the clients’ past booking information on a customer portal. They had then provided much of that information to Travel Counsellors, which had then uploaded the information to its database and used it to support Mr La Gette and Mr Bishop’s franchises.
Despite the defendants fiercely contesting that the information was capable of being protected as confidential information, the court found that it was confidential. The court also found that Mr La Gette and Mr Bishop were liable for disclosing it to Travel Counsellors and all were liable for using it in their businesses.
Mr La Gette and Mr Bishop did not appeal that judgment, but Travel Counsellors did. That appeal was made on three grounds: (1) that the court had applied the wrong test in finding Travel Counsellors held an obligation of confidence to Trailfinders where only some of the information provided by the former employee was confidential and was mixed up with non-confidential information, (2) that the court had applied the test wrongly and inconsistently, and (3) that Travel Counsellors should not have been found liable where there were no express findings that it has misused Trailfinders’ confidential information.
Travel Counsellors pursued the third ground up to the morning of the hearing, when it promptly dropped it having, belatedly, accepted that its own defence had admitted it had made use of the information (albeit, “very limited” use).
The first two grounds were also dismissed. The Court of Appeal, with Lord Justice Arnold giving the only substantive judgment, commented that the parties had agreed on the correct test, and that “at first blush ground 1 appears distinctly unpromising”. The court nevertheless considered the submissions made by Travel Counsellors, and dismissed the appeal on both of the remaining two grounds.
The judgment is reasonably short and confirms what was Trailfinders’ case at trial and on appeal, namely that an obligation of confidence arises where the recipient of the information knows, or has notice, that the information is being disclosed in breach of confidence. Whether the person has “notice” is to be assessed by reference to a reasonable person standing in the position of the recipient.
In this case the first instance judge had found that Travel Counsellors, having specifically asked new joiners to “feel free to bring your old customer contact list along with you”, ought to have been aware that the information being provided to it was, at least in part, made up of confidential information. The judge commented that “I have the impression that TCL did not wish to inquire”.
The particularly interesting point was whether it was enough that a reasonable person would make enquiries as to whether the information received by them was confidential, in all or in part. There was not much direct authority on the point. The best case referred to was Primary Group v RBS. The judge in that case, helpfully, was Arnold J (as he then was), and the newly minted Lord Justice Arnold was able to say with some authority what he had understood to be the law. He held that:
“… if the circumstances are such as to bring it to the notice of a reasonable person in the position of the recipient that the information, or some of it, may be confidential to another, then the reasonable person’s response may be to make enquiries. Whether the reasonable 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 abstains from doing so, then an obligation of confidentiality will arise.”
So the bottom line is that, while each case will turn on its own facts, where a party is receiving information from another person, and it has notice that at least some of it is confidential, it should check. The comparator case was another case involving Arnold LJ (and Lewison LJ, who also heard this case) where the recipient of the information had obtained a warranty that the information being provided was being done lawfully.
This is entirely sensible, especially where a business is receiving personal data. A business receiving such information should plainly be checking that it has a lawful basis to receive and process the information it is receiving.
Lewis Silkin acted for Trailfinders. Trailfinders’ counsel were Gavin Mansfield QC and Alex Robson of Littleton Chambers.
28. Accordingly, in my judgment, if the circumstances are such as to bring it to the notice of a reasonable person in the position of the recipient that the information, or some of it, may be confidential to another, then the reasonable person’s response may be to make enquiries. Whether the reasonable 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 abstains from doing so, then an obligation of confidentiality will arise.