Confidentiality: Mandatory Injunctions & A Clear Irony

21 May

The High Court has recently granted an order allowing the imaging and inspection of personal computers belonging to two ex employees following claims that they had breached the confidentiality agreements contained in their contracts, and disclosed commercially sensitive material to the company’s competitors.

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The High Court has recently granted an order allowing the imaging and inspection of personal computers belonging to two ex employees following claims that they had breached the confidentiality agreements contained in their contracts, and disclosed commercially sensitive material to the company’s competitors (Warm Zones v Thurley & Buckley [2014] EWHC 988 (QB)).

At first blush the granting of this mandatory injunction doesn’t appear to be a particularly big deal, but there is potential for a precedent to be set in cases such as these, and it would not be at all surprising if there were to be an influx of similar applications in restrictive covenant type cases brought by ex- employers.

Clearly the confidentiality clauses of an employment contract need to be upheld and enforced, but can it be said that in this case the court has made the ‘wrong decision’? There is a fine balance between protecting the intellectual property rights of the company and the employees’ right to privacy and private life under the ECHR. The well-stated principles for the court in determining an application for a mandatory injunction require the court to basically take the decision which would result in the ‘least injustice’ if it eventually turns out to be wrong; determining the lesser of two evils appears a rather unsatisfactory way to resolve the issues.

The facts of the case can be briefly summarised. Both Defendants to the application had worked for the company Warm Zones, a not- for- profit organisation operating in a ‘competitive market’. During the time of their employment, they had access to the Claimant’s database, which was ‘proprietary information valuable to any competitor’. It was alleged by the Claimant that the Defendants had used the sensitive material available to them in order to gain employment with a competitor in the same market. The Employer sought a mandatory injunction forcing it’s ex employees to deliver up their personal computers so that the data upon it could be imaged, inspected and retained/ returned if necessary.  The Defendant’s resisted the application, claiming it was simply a form of harassment and that they had not disclosed any material that was confidential to Warm Zone, rather any material that was used was widely available to the general public.

The conclusion of the court is, with respect, somewhat worrying. In allowing the mandatory injunction, the decision appears to be influenced, at least in part, as set out paragraph 36 of the judgement ‘if, as the defendants have strongly maintained, they have done nothing wrong, this order is likely to bring the litigation to a swift end, because it will identify no wrong doing on their parts’. It is of course the case that the right to private life under Article 8 is a qualified one, which can be interfered with if proportionate and for a legitimate purpose, but one wonders whether reasoning akin to ‘if they’ve got nothing to hide it shouldn’t be a problem’ is justification enough? At the end of the day he who brings the case must prove the case and one is not entitled to simply go on a ‘fishing expedition’ in the hope that something may come out of the woodwork. If this were the case, the courts would very quickly become clogged up with frivolous applications for disclosure.

The obvious irony that jumps out of this case is the desire to preserve the confidentiality of the company’s Intellectual Property risks breaching the confidentiality of the previous employees, particularly in the case of the First Defendant who raised the question of third party material held on her computer. The Claimant’s Counsel assured the court that the employers would provide ‘safeguards’ in respect of such data, without offering any suggestion or explanation as to what these safeguards would be. It is presumed that entirely independent Counsel would have been appointed in order to identify which material ought not to be handed to the employers, although bearing in mind the very nature of the material the Claimant’s were seeking to locate, identifying that which is confidential to Warm Zone and that which is confidential to the employee is likely to be a very difficult task indeed.

To add to the risk of the Employer’s coming into possession of material that they ought not too, as the First Defendant was embroiled in Tribunal Proceedings against Warm Zone relating to the termination of her employment, it is likely that there would be material which attracted legal privilege on her computer too. Similar safeguards would also need to be addressed.

Another reason, which appears from the judgement to have swayed the balance in favour of granting the injunction, was the fact that the cost of the imaging and inspection by an independent solicitor was to be met by the Claimant. Further, Warm Zone was also offering an undertaking in damages if in due course it did turn out to be the ‘wrong’ decision. It is queried whether monetary compensation can represent an appropriate remedy for the invasion of privacy in this way, particularly as the ruling in this case took account of the fact that damages would not be an adequate remedy to the Claimant in the circumstances. 

Whilst the High Court in determining this particular application did not make any specific finding of fact or ruling as to whether the Defendant’s had disclosed the material as alleged, it seems that the Judge felt that there was on the evidence presented in the application a ‘strong, objectively, justified basis for the Claimant’s suspicion in respect of the Defendants’ conduct’. This assessment of the Claimant’s prospects of success will no doubt have been a further influencing factor in the decision making process.

It is not suggested that the High Court has erred in the granting of the mandatory injunction, but this case does raise a lot of interesting issues dealing with the balance of competing rights to confidentiality and privacy. Each case will, as always, turn on its own facts, but certainly in this case it appears that the balance has been determined in favour of the employers. It is noteworthy that the Claimant was represented by Counsel in this case whereas both Defendants appeared as litigants in person; one wonders whether they would have had better prospects of resisting the order if they were properly represented?

Gemma White

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