Out-Law News 3 min. read

Invoice theft breached confidence, rules High Court

The handing over of a set of stolen invoices from one dairy wholesaler to its most bitter rival was a breach of confidence, the High Court has ruled. The taking of the invoices by an ex-employee and their user by the rival broke the law, it said.

The law of confidence protects information which is private and which is communicated in a clear context of confidentiality.

Cases can be complicated when they involve ex-employees because they are allowed to use some information gathered at one employer in their work at the next, particularly that which forms part of their general working experience.

In a case involving midlands dairy wholesalers JN Dairies and Johal Dairies, though, the Court said that the theft of the invoices by ex-JN Dairies worker Gurbir Singh made the issue clear.

"It seems somewhat artificial to refer to the information being 'communicated' in circumstances in which it was stolen by [Singh]," said His Honour Judge David Cooke. "It is clear that when he took it he knew that it was [JN Dairies's] commercially valuable information, and that he had no right to obtain it or to pass it on to anyone else without [JN Dairies's] authority."

The Court said that its decision must follow that in an earlier case on breach of confidence involving Coco and AN Clark (Engineers). The judge in that case laid out a three-step test for breach of confidence.

"First, the information itself … must 'have the necessary quality of confidence about it'," said that judge. "Secondly, that information must have been imparted in circumstances importing an obligation of confidence. Thirdly, there must be an unauthorised use of that information to the detriment of the party communicating it."

The case centred on Singh's taking of a batch of invoices very early one morning two days after he had lost his job at JN Dairies. He took the invoices from JN and gave them to Johal Dairies, a local rival which battled shop by shop for business with JN Dairies, the Court said.

Singh then accompanied a Johal Dairies driver on his usual round offering shops a better deal and worked for Johal for three weeks.

The Court heard that Singh was paid £40,000 for the actions, plus his expenses to relocate to India, where he remains.

His Honour Judge Cooke said that when that three-step test was applied in the dairies' case, it was clear that a breach of confidentiality had taken place.

"So far as the first element is concerned, in my judgement information such as was contained in the claimant's invoices about the quantities of goods purchased by a particular customer and the prices charged to him is information which possesses the necessary degree of confidentiality."

"It is plainly not in the public domain; being only ascertainable from the claimant's records, from the knowledge of its employees or of course from the customers themselves. Insofar as known to the claimant's employees, it is information which it would be in breach of their duty of good faith to their employer to disclose," he said.

He said that information about the identity of JN Dairies' customers could be found by other means, such as by following delivery vans, but that this did not affect the fact that it was confidential.

"A list or collection of names of customers is not something that the claimant or anybody in its position would ordinarily make public precisely because of the commercial advantage that competitors can obtain from it by targeting their competitive efforts," he said.

The Court also ruled that the second condition was satisfied. "It is clear that when [Singh] took [the information] he knew that it was [JN Dairies'] commercially valuable information, and that he had no right to obtain it or to pass it on to anyone else without the [JN Dairies' authority]," said the judge.

"I am more than satisfied that when [Singh] communicated this information to the [Johal Dairies], by passing the entire bundle of invoices to Mr Surbjit Johal, [Johal Dairies] through him knew full well of the confidential nature of the material and the circumstances in which it had been obtained, and that was sufficient to impose the same duty of confidentiality on [Johal Dairies]," he said.

The Court was equally convinced, despite Johal Dairies' owners' protestations to the contrary, that it had made use of the commercially sensitive information.

"As for the final element, it is again plain from the facts that I have found that there has been an unauthorised use of this information in the approaches that have been made to [JN Dairies's] customers, and that this has been to the detriment of [JN Dairies] to some degree at least, in that it has lost business from some of those customers, even if only temporarily in some cases, or been obliged to offer them better terms in order to keep business or win it back," said His Honour Judge Cooke.

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