New Employer Potentially Liable For Misuse Of Confidential Information

Travel Counsellors Ltd v Trailfinders Ltd [2021] EWCA Civ 38

The Court of Appeal (CoA) rules that a new employer can potentially be liable for misuse of confidential information belonging to a competitor where the new employer recruits employees and encourages them to bring that information with them.

Facts

Trailfinders is a travel agent. In 2016, 40 key staff left to join a competitor, Travel Counsellors Ltd.

Travel Counsellors encouraged the employees to bring their customer contact list with them and did not warn the employees that they may be breaching confidence. Travel Counsellors added this information to its systems to use it for the purposes of its competing business.

The evidence was that Travel Counsellors regarded its own customer contact lists as confidential.

CoA case

The CoA were facing an appeal from Travel Counsellors against a finding in the Intellectual Property and Enterprise Court that Travel Counsellors were subject to an equitable duty of confidence over the information it received, preventing it from using the information for the benefit of its business.

The CoA upheld that decision:

“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.”

Things to think about:

  1. Employers who are recruiting new staff, particularly from a competitor, should be wary of encouraging them to bring confidential information with them and should be seen to be discouraging breaches of confidence or they risk themselves being liable as well as the recruited employees.
  2. Employers who lose staff and suspect that they have taken confidential information with them will have potential actions against both the employees concerned and the new employer. Those employers should take legal advice as to the steps to taken so as to investigate whether those suspicions are well founded and if so, how best to preserve and gather evidence, should it be necessary to take action.

How Nelsons can help

For further information on the subjects discussed in this article or any related topics, please contact Laura Kearsley in our Employment Law team or Emma Ward in our Dispute Resolution team on 0800 024 1976 or via our online enquiry form.