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17th February 2021

New employer breached equitable duty of confidence

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In Travel Counsellors Limited v Trailfinders Limited the Court of Appeal (CoA) held that a new employer that had received confidential information from employees who moved from a competitor was liable to the former employer. The new employer had an equitable duty of confidence to the former employer because it knew or had notice that the information was confidential.

Two employees left Trailfinders and entered into franchise agreements with Travel Counsellors Limited (TCL), a competitor. TCL encouraged the ex-employees to bring across their customer contact lists. The High Court (HC) found that the ex-employees were in breach of implied contractual and equitable obligations of confidence. The HC also held that TCL had breached its equitable duty of confidence to Trailfinders because it had received information from ex-employees which it knew, or ought to have known, was regarded as confidential and it had used the information for the benefit of its business. TCL appealed the decision, arguing that it did not know that the information was confidential to Trailfinders.

The CoA rejected the appeal and held that the HC had correctly found that TCL was on notice that at least some of the information it had received from the ex-employees was likely to be confidential to Trailfinders, particularly as TCL treated its own customer contact lists as confidential. The CoA concluded that a reasonable person in TCL’s position would have made enquiries as to whether the information was confidential. Furthermore, one of the lists contained details of over 300 individuals which meant that TCL must have appreciated that the ex-employee would have been unable to carry all the information in their head, making it probable that they copied at least some of it from Trailfinders’ client database.

The decision is a prompt for employers to ascertain whether information brought across by new employees is confidential, in order to minimise the risk of being exposed to claims for breach of confidence or inducing breach of contract.

For more information on any of the items raised in this article please contact a member of the Employment Law team.