Claim No: IP-2021-000114 - [2023] EWHC 3153 (IPEC)

Turning then to quantification, I accept the Claimant’s submission that the Defendants’ approach to evidence which might be available to the Court on the question of loss and damage has been, through Mr Ludley, to seek to destroy (in the case of the 27 June Email recipients) or hide (in the case of the incomplete disclosure in the pleadings of the Claimant’s clients for whom work has been carried out by Greenscape) or mislead (in the case of untruthful evidence given to the Court), and in those circumstances it seems to me right that although the burden is and remains on the Claimant, the Court should view the Claimant’s attempts to quantify the loss benevolently, given its findings on the Defendants’ approach to evidence. To do otherwise would be to reward the Defendant for that approach, which is to be deprecated.

In my findings of fact I have rejected the suggestion that the Claimant failed to mitigate any loss because of the delay between the sending of the 27 June Email and the August Email in correction. I have also rejected the suggestion that at the time of the 27 June Email the Claimant was moving out of the landscaping and garden sector to focus on Engineering recruitment instead, finding that it did so “because it had to” after the 27 June Email caused the landscaping business to catastrophically decline.

Mr Goodfellow suggests two potential approaches that the Court might take to quantification of loss of profit and sets them out at paragraph 33 of his skeleton. In his words, with minor changes for clarification and to reflect closing submissions and the facts as I have found them, they are:

The Defendant submits that the top-down approach relies on evidence from a single paragraph of Mr Hilbeck’s witness statement which he accepts that he supported forcibly in cross-examination, but he describes as having very little substance to it. However, Mr Ludley took no issue with those figures. He further submits that the top-down approach takes no account of the fact that Mr Chapman was away for a period of time leaving the Claimant not trading, and I have found that this would have resulted in some loss of profit, although how much is difficult to assess. He further submits that Mr Ludley leaving would have caused some clients to move with him and I accept this is possible but so is it possible that Mr Chapman’s return would have energised the business further.

In my judgment, the top-down approach gives a result which is more likely to compensate the Claimant adequately for the loss of profit suffered. The bottom-up approach relies too heavily on disclosure by the Defendants, which I have found to be inadequate. I have considered reducing the figure somewhat to reflect the likely loss of profit caused by Mr Chapman’s absence, but set against that firstly that is likely to be a fairly low figure which I do not have any real ability to assess and secondly I have the Claimant’s evidence, which I accept, that the Landscape and Garden business still has not recovered from the hammer-blow dealt to it by the misrepresentation in the 27 June Email and these two matters can, I think, fairly be set against each other such that it is just for me not to amend the figure sought. This appears to me to be adopting a liberal approach in favour of the Claimant, whilst being careful not to punish the Defendants for their wrongdoing (applying the principles set out in Harmancited above). Accordingly I assess the damage for loss of profit at £38,079.93.

Mr Goodfellow acknowledges that it is tricky to arrive at a correct figure for damage to reputation. He submits that the £2,000 award in Draper and Trist in the late 1930s as a comparable means that the award sought by the Claimant of £20,000 is not unreasonable. Mr Roughton describes this as a stab in the dark. He does not suggest an alternative. I accept Mr Goodfellow’s reasoning and assess damage for loss of reputation at £20,000.

The Claimant further seeks an award of £1,499.99 for loss of management time per Mr Hilbeck’s and Mr Chapman’s evidence calculated on time spent as a proportion of their annual salary. Mr Roughton submits for the Defendants that this is inadequately pleaded and amounts to a mere request, but there is not much more that can be said when what is sought is x days at a salary of y. I have accepted that Mr Hilbeck spent this time as a result of dealing with the 27 June Email, that is a loss arising from the passing off, and so I award the sum sought.

Issue 2 – Are the Defendants liable to the Claimant in breach of confidence?

The leading case setting out the principles of the law of confidence in the context of an employer/employee relationship were set out by Neill LJ giving the judgment of the Court in Faccenda Chicken v Fowler [1987] Ch 117 at 136G onwards. Those include so far as is relevant to this case, that:

In Lansing Linde Ltd v Kerr [1991] 1 WLR 251 at page 260B Staughton LJ (with whom Butler-Sloss LJ agreed) defined a ‘trade secret’ as information:

In the context of customer lists, a person may be under an obligation to keep a particular document confidential even though the obligation would not apply to the same information in another form – for example where a document presents a collection of information which, while in theory available generally in component parts, would be difficult or costly to source and collate: Marathon Asset Management LLP v Seddon [2017] 2 CLC 182 at [119] and [120].

On the topic of customer lists generally, see Toulson & Phipps on Confidentiality, 4^th Edition (2020) at [13-028] – [13-035], where it is observed that if an employee is to be precluded from seeking the employer’s custom, this must be by a non-solicitation covenant which satisfies the requirement of not being in unreasonable restraint of trade. However, the author notes this proposition “does not give a licence to an employee who intends to leave their employment and work in competition with their employer, whether for a rival business or on their own account, to copy the current employer’s customer list, or to retain a copy of it, with a view to using it for competitive purposes after they have left”: see [13-030] and also the case of Robb v Green [1895] 2 QB 315 cited therein.

Separately from any express or implied obligation arising in contract, the Claimant pleads breach of an equitable obligation of confidence. The classic case of breach of confidence involves the claimant’s confidential information, such as a trade secret, being used inconsistently with its confidential nature by a defendant, who received it in circumstances where she had agreed, or ought to have appreciated, that it was confidential: Vestergaard Frandsen A/S v Bestnet Europe Ltd [2013] UKSC 31 at [23] (also see [22] and [25]).

A duty of confidence may arise in respect of materials that have been constructed solely from materials in the public domain: Coco v A.N. Clark (Engineers) Ltd [1968] FSR 415 at page 420.

In Trailfinders Limited v Travel Counsellors Limited and Ors[2020] EWHC 591 (IPEC) HHJ Hacon stated at [42] “[t]he short point is that the test regarding the defendant’s appreciation of whether the information was confidential, is objective in the sense that it requires the claimant to show that the defendant ought to have appreciated that it was confidential, irrespective of her actual state of mind. This corresponds to the test as formulated by Megarry J in Coco v A.N. Clark (Engineers) Ltd…:

“It seems to me that if the circumstances are such that any reasonable man standing in the shoes of the recipient of the information would have realised that upon reasonable grounds the information was being given to him in confidence, then this should suffice to impose upon him the equitable duty of confidence.”

HHJ Hacon went on to observe in Trailfindersat [43]:

“I think that, consistently with the law on implied contractual terms of confidence, the balance will generally be achieved if a former employer is entitled to enforce an equitable duty of confidence to restrain the use of his confidential information by a former employee except where that information forms part of the experience and skills acquired by the former employee during the normal course of doing his or her job, held in mind at the time of leaving the employment.”

In Trailfinders it was held that a former employee who had assembled a contact book containing the names, contact details and booking reference numbers of 136 customers (see [59]) had acted in breach of the equitable duty of confidence, and also the implied duty of confidence owed in his employment contract (see [117]-[118]). It was further held that TCL (the corporate defendant) was liable for breach of confidence, in circumstances where HHJ Hacon observed “[i]t is highly improbable that TCL believed that Trailfinders did not regard their customers lists, including the names and details of those customers who dealt with any one sales consultant, as being confidential…”: see [121].

The Claimant pleads that the Claimant’s Client List is Confidential Information as that term is defined at clause 46(b) in Mr Ludley’s employment contract, and that by sending the 27 June Email he breached clause 47 of his employment contract.

It further pleads that it was a necessary implied term of Mr Ludley’s contract of employment that he would serve the Claimant with good faith and fidelity, and that either as an incident of that duty, or pursuant to necessary implied terms of his contract of employment that he was obliged not to disclose or make use of any confidential or business sensitive information of the Claimant except in the proper exercise of his duties, whilst employed, and not to use any trade or business secret, or confidential information of sufficient sensitivity to warrant that level of protection, after his employee had terminated. It further pleads that both Mr Ludley and Greenscape owe the Claimant an equitable duty of confidence in respect of trade secrets or information warranting the same level of protection. It pleads that the Claimant’s Client List was such information such that sending the 27 June Email was a breach by Mr Ludley of the implied contractual terms and a breach by Mr Ludley and Greenscape of the equitable duty of confidence.

The Claimant relies on the authorities set out above to submit that it is simply not credible for the Defendants to argue that they have not acted in breach of both the contractual and equitable obligations of confidence by retaining and misusing the Claimant’s Client List, particularly in light of the admissions and concessions made by Mr Ludley in cross-examination, including that a mailing list is “possibly” something a recruitment company is likely to consider to be commercially sensitive information.

The Defendants submit that the information contained in the Claimant’s Client List and the Claimant’s Client List as a whole is not confidential information because it was available from public sources and could have been recreated at little cost and effort. They submit that even if it is confidential information it does not have the character of a trade secret and is information with a sufficiently high degree of confidentiality to warrant the same level of protection as a trade secret.

I am not with the Defendants for a number of reasons.

Firstly, there are extensive authorities that customer lists like the Claimant’s Client List can be protectable as confidential information and as trade secrets, including Lansing Linde, Marathon and Robb v Green, all cited out above.

Secondly, Trailfinders is authority that it is no defence to an allegation of breach of confidence by taking information from confidential data held by an employer that the information could have been obtained from publicly available sources (see also Coco v A. N Clarke in relation to equitable duties of confidence).

Thirdly, I am satisfied that the nature of Mr Ludley’s employment as a recruitment agent was such that it could only be carried out by regular and often cold-calling and emailing of clients to obtain instructions to search for a candidate to fill a job, or to put forward a candidate as suitable for employment at that client. That was Mr Ludley’s own evidence.

Fourthly, I am satisfied that the nature of the information itself, being contact information for clients, is of key importance to such a business. Mr Ludley accepted in cross-examination that a database of client contacts is valuable to a recruitment business (although he sought to downplay that value, which I have not accepted).

Fifthly, I am satisfied that such a list as the Claimant’s Client List would give competitors of the Claimant, and did give Mr Ludley and Greenscape, an advantage in competing with the Claimant compared to if they did not have such a list at all. This conclusion is supported by the fact that the Defendants sought to buy a commercial list after Mr Ludley destroyed his copy of the Claimant’s Client List, and he accepted that such a purchased list would not be as targeted, focused or useful as one built up by a business over time. It follows that I am satisfied the Claimant’s Client List falls within the definition of “trade secret” or information of sensitivity which warrants the same level of protection;

Sixthly, I am satisfied that Mr Ludley knew that the Claimant’s Client List was confidential (as he admitted in cross-examination he knew he was not free to simply take and use it), and that for the reasons given above, a “reasonable man standing in the shoes of the recipient of the information would have realised that upon reasonable grounds the information was being given to him in confidence” per Coco v A. N Clarke.

Finally, I am satisfied that Mr Ludley had actual knowledge of the terms of his contract of employment with the Claimant in which the Claimant expressly sought to control such confidential information.

It follows that:

It is convenient to note here that the Claimant seeks to rely on the case of Le Puy v Potter [2015] EWHC 193 (QB) at [40]-[45] where, in the context of the recruitment industry, Mr Richard Salter QC sitting as a deputy judge of the High Court considered whether there was a serious issue to be tried on the question of whether a previous employer could enforce certain post-termination restrictive covenants, including a confidentiality clause. He said it was “well-arguable that there is value to a recruitment agency in knowing, in advance of making contact, the name of the particular person that they should be speaking to and how to make contact with that person directly. If recruitment agencies saw no value in this information, why would they collect it?”. He went on to hold that it seemed to him to be “well arguable that [the confidential information] would be liable to cause real (or significant) harm to the previous employer, if disclosed to a competitor, by giving that competitor a real practical advantage in its attempts to compete… by comparison with the position that the competitor would have been in but for the disclosure”. Of course he did not finally determine the point, which was for another day, so this is not authority which binds me. However I set it out here as his preliminary assessment it is on all fours with the conclusions which I have independently arrived at in this case.

Summary

The Claimant has suffered loss and damage by the Defendants’ passing off, quantified at £59,579.92.

The Defendants are liable to the Claimant for breach of confidence.