Monday, 25 January 2021

Travel Counsellors Ltd v Trailfinders Ltd: breach of confidence and the reasonable person

What happens when ex-employees of a competitor bring client information with them when they go to work with a new employer? In Travel Counsellors Ltd v Trailfinders Ltd [2021] EWCA Civ 38, the Court of Appeal held that an equitable duty of confidence on the new employer arises if a reasonable person would make enquiries about whether it is confidential, but the recipient fails to do so. 

The appellant argued that the judge had applied the wrong legal test in holding that the appellant owed an obligation of confidence to its rival in respect of the relevant information. According to the appellant, the equitable obligation would only arise if the recipient knew or had notice that the information was confidential. Whether it had notice of the confidential nature of the information has to be assessed objectively, by reference to a reasonable person standing in the recipient's position. And just because a reasonable person would make enquiries about whether the information (or some of it) was confidential was insufficient for an obligation of confidence to arise.

Arnold LJ, with whom Lewison LJ and Asplin LJ agreed, noted that there was surprisingly little authority. He cited his own judgment in Primary Group (UK) Ltd v Royal Bank of Scotland plc [2014] EWHC 1082 (Ch), as well as the Court of Appeal's decision in Racing Partnership Ltd v Done Brothers (Cash Betting) Ltd [2020] EWCA Civ 1300. On the basis of these cases he decided 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

On the other hand, where the issue is accessory liability for misuse by another person rather than primary liability for misuse of confidential information, it may be necessary to show actual knowledge or turning a blind eye.

Cases like this are always fact-dependent, but the decision seems to place a significant burden on the recipient of information - although it does seem from the judgment that anyone offered information about clients in these circumstances really ought to sense that something is not quite right.

No comments:


blogger templates | Make Money Online