4th March 2021
The recent Court of Appeal case of Travel Counsellors v Trailfinders  highlights the risk of employers becoming liable for their employees’ misuse of confidential information.
The case clarifies the test that the courts will apply to determine whether a third party recipient of information (such as, here, an employer) owes a duty of confidentiality to the owner of that information.
Walker Morris’ Commercial Dispute Resolution and Employment specialists Nick McQueen and Charlotte Smith explain this important decision and offer practical advice for employers.
In this case two employees left the employ of Trailfinders and began to work for a competing travel company, Travel Counsellors. The employees took client names, contact details and other information from Trailfinders to Travel Counsellors in breach of confidence. Travel Counsellors then misused the information for the benefit of its business. The Court of Appeal found that Travel Counsellors was liable for the employees’ misuse of confidential information.
The key takeaways for employers to note are:
Employers receiving potentially confidential information from employees – particularly where new employees are joining from competing businesses – should proceed with caution. If there are any reasons at all for suspecting that information might be confidential (and, in reality, the context of the employee’s arrival from a competitor might be sufficient reason in itself), then failing to make enquiries will give rise to a duty of confidentiality.
Where an employer proceeds to use the information in those circumstances, that is likely to constitute a breach of the duty, resulting in primary liability for breach of confidence.
Employers also should beware their employees misusing confidential information, as this can give rise to vicarious liability on the part of the employer.
Having in place robust policies and procedures for the proper use of confidential and potentially confidential information, and the fostering of a corporate culture which recognises and respects confidentiality, can significantly minimise the risk of confidentiality breaches. Staff education, including the education of new/incoming staff, is crucial; as is ensuring that recruitment policies and practices are consistent with the business’ confidentiality culture.
The Travel Counsellors v Trailfinders ‘reasonable person in receipt of information’ test will mean that, in practice, the vast majority of cases concerning employers’/employees’ use of confidential information will be hugely fact- and context- specific. Such cases will turn, for example, on what happened in the particular case; who knew or said what; who did what with the information; were any enquiries made; would a reasonable recipient have made enquiries; what enquiries would a reasonable recipient have made? And so on.
In general, the more a case turns on factual (as opposed to purely legal) issues, the greater the element of ‘litigation risk’, and therefore the greater incentive for parties (often, in particular, defendants) to negotiate a settlement. As such, it is possible that the Court of Appeal’s decision in Travel Counsellors may prompt or encourage employers/businesses whose confidential information has been stolen, copied or otherwise misused, to take legal action.
Walker Morris’ cross-department team of specialist dispute resolution and employment lawyers are experienced in successfully advising employers through the entire process of protecting confidential information – from drafting policies, procedures and contracts effectively, through to conducting court proceedings and/or negotiating settlements if and when any confidentiality is compromised. Our lawyers understand that each situation has its own specific circumstances and commercial realities, and have the experience and expertise to be able to discuss the various options, and likely outcomes, with you.
If you would like any further advice in relation to any of the issues highlighted in this article, or if you would like assistance with staff training or the production/review of confidentiality clauses, policies or procedures, please do not hesitate to contact Nick McQueen or Charlotte Smith, any of whom will be very happy to help.
  EWCA Civ 38
 ‘blind eye’ knowledge is where a recipient may suspect that information is confidential but chooses not to find out (i.e. chooses to turn a blind eye)