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New employer breached equitable duty of confidence

Makbool Javaid, Partner - Simons Muirhead & Burton

In the case of Travel Counsellors Limited v Trailfinders Limited an 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.

If an employer receives information from ex-employees of another employer, it may have a duty to make enquiries about the confidentiality of that information.

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

The Court of Appeal rejected the appeal. The equitable duty of confidence arises where the recipient knows, or is on notice, that the information is confidential. Whether a person has notice is assessed objectively, by reference to a reasonable person in the position of the recipient.

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