Passing off and Breach of Confidence - Cosmopolitan Recruitment v Ludley and Another
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Intellectual Property Enterprise Court (HH Judge Melissa Clarke) PSN Recruitments Ltd v Ludley and another [2023] EWHC 3153 (IPEC) (8 Dec 2023)
This was a claim by PSN Recruitment Ltd (trading as Cosmopolitan Recruitment ("Cosmopolitan") against its former employee, Graeme Ludley ("Mr Ludley"). Mr Ludley had emailed to himself particulars of Cosmopolitan's clients. set up a Greenscape Specialist Recruitment Ltd ("Greenscape") as a competing business and told Cosmopolitan's clients that he was still working for the same employer but from a different location and under a different corporate name. Cosmopolitan sued Mr Ludley and the company for breach of confidence and passing off in the Intellectual Property Enterprise Court ("IPEC"). Their defence to the breach of confidence claim was that the information was easily obtainable from trade publications and email finders and thus not really confidential. As for passing off, they denied that the misrepresentation had caused loss or damage to Cosmopolitan.
The Issues
At a case management conference, HH Judge Hacon ordered a trial of the following issues:
"i) In relation to the Claimant's passing off claim, whether the Claimant has suffered loss and damage and if so, how much; and
ii) Whether the Defendants are liable to the Claimant for breach of confidence."
"i) In relation to the Claimant's passing off claim, whether the Claimant has suffered loss and damage and if so, how much; and
ii) Whether the Defendants are liable to the Claimant for breach of confidence."
The Trial
The action came on for trial before HH Judge Melissa Clarke on 2 and 3 Oct 2023. Her Honour handed down judgment on 8 Dec 2023 (see PSN Recruitments Ltd (t/a Cosmopolitan Recruitment) v Ludley and another [2023] EWHC 3153 (IPEC) (8 Dec 2023), By para [99] of her judgment, Judge Melissa Clarke held that the claimant had suffered loss and damage by the defendants' passing off, quantified at £59,579.92. In para [100] she held that the defendants were liable to the claimant for breach of confidence.
The Misrepresentation
On 27 Jue 2021, Mr Lydley circulated the following email to over 500 of Cosmopolitan's clients:
"GreenScape. A New Name
A change of name and location, but no change in our commitment to matching the best candidates to jobs that will develop and advance their careers!
We never liked the name "Cosmopolitan Recruitment". It sounds like a cocktail, has no connection with what we do, and it's difficult to use on the telephone.
So, as we are more likely to have a pint and we work exclusively in the Landscaping and Gardens sector we felt that GreenScape was a much better alternative.
The contact number remains the same BUT the address and, importantly the e-mail have changed. GreenScape wasn't available as a domain so we've added an 'r' on the end for recruitment and become GreenScaper (graeme@greenscaper.co.uk)."
"GreenScape. A New Name
A change of name and location, but no change in our commitment to matching the best candidates to jobs that will develop and advance their careers!
We never liked the name "Cosmopolitan Recruitment". It sounds like a cocktail, has no connection with what we do, and it's difficult to use on the telephone.
So, as we are more likely to have a pint and we work exclusively in the Landscaping and Gardens sector we felt that GreenScape was a much better alternative.
The contact number remains the same BUT the address and, importantly the e-mail have changed. GreenScape wasn't available as a domain so we've added an 'r' on the end for recruitment and become GreenScaper (graeme@greenscaper.co.uk)."
Effect on Cosmopolltan's Business
Meanwhile, Greenscape started to bank £10,000 for July 2021.
The learned judge summarized their submissions as follows in para [64] of her judgment:
"The Defendants say that the Claimant's case in damage is insufficiently pleaded. I find it convenient to deal with their submissions relating on this point first. The Defendants submit that:
i) damage to reputation and goodwill claimed in the Particulars of Claim is said to be as a result of the Landform transaction;
ii) lost sales by way of lost profits are also claimed and said to be as a result of the Landform transaction;
iii) there is no evidence at all of lost profit or of the expenses on which those profits might be calculated;
iv) further no Wrotham Park, exemplary or user principle damages are pleaded or claimed;
v) save for the figures contained at paragraph 28 (2) (iii) of the Particulars of Claim which estimates that the revenue the Claimant has earned from placements in the period from 16 June 2021 to 31 October 2021 has reduced by a sum in the region of £44,000 by the Defendants' wrongdoing, giving a loss of profit in the region of £22,000 to 31 October 2021 and continuing, which the Defendants submit are 'opaque', no basis for the damages calculation has been claimed, pleaded or evidenced and there is no evidence that the Landform transaction resulted in lost profits of £44,000."
The "Landform" transaction mentioned above refers to a message that the claimant received from Gina Di Gregorio of a company called "Landform" which stated:
"I have seen that you are still writing from the Cosmopolitan email address. I thought it had changed its name to Greenscaper, as we received an email from Graeme Ludley about it"
"I have found that the Claimant's business underwent a significant and immediate decline after the 27 June Email was sent, that Mr Ludley sent that email not in a moment of madness but as the culmination of a plan of action to start his own business which started with transferring the Claimant's documentation and information for himself, that it was precipitated by Mr Chapman leaving the employ of the Claimant so that he was the only recruitment consultant left, that he sent the 27 June Email hoping that it would produce marketing leads for Greenscape and that Greenscape did immediately win new business such that he was invoicing a client of the Claimant just over a month after the 27 June Email. I have found that the 27 June Email caused confusion with some of the Claimant's clients which caused work to be diverted from the Claimant to Greenscape, and that Mr Ludley did nothing to correct that misrepresentation. That is damage amounting to both loss of profit and damage to reputation, in my judgment, sufficient to complete the tort of passing off."
The judge awarded the claimant £38,079.93 for the loss of profits of the business that it had suffered as a result of the defendants' email, £20,000 for its loss of reputation and £1.499.99 for lost management time.
"Confidential Information means any information disclosed by or on behalf of the Employer (or any Group Business) to the Employee during their employment that at the time of disclosure (whether in writing, electronic or digital form, verbally or inspection of documents, computer systems or sites or pursuant to discussions or by any other means or other forms and whether directly or indirectly) is confidential in nature or may reasonably be considered to be commercially sensitive, and which relates to the business and affairs of the Employer (or any Group Business) including but not limited to: (a) all Employment IPRs (b) all Employment Inventions and (c) all analyses, compilations, studies and other documents prepared by the Employee which contain or otherwise reflect or are generated from the information referred to above."
"i) where parties are or have been linked by a contract of employment, the obligations of the employee are to be determined by the contract between him and his employer (135G);
ii) it is only in the absence of any express term that the obligations of the employee in respect of the use and disclosure of information are the subject of implied terms (135 G);
iii) there is an implied term of duty of good faith or fidelity on the employee during the course of employment (135H) which will be broken if an employee makes or copies a list of the customers of the employer for use after his employment ends, although except in special circumstances there is no general restriction on an ex-employee canvassing or doing business with customers of his former employer (136A-B);
iv) the implied term after the determination of the employment is more restricted in its scope than that which imposes a duty of good faith during the employment, but includes that the ex-employee will not make use of the employer's 'trade secrets' or information with a sufficiently high degree of confidentiality to warrant the same level of protection (136C-D);
v) in order to determine whether any particular item of information falls within the implied term so as to prevent its use or disclosure by an ex-employee, the Court must consider all the circumstances of the case (137B) including:
a) the nature of the employment;
b) the nature of the information itself;
c) whether the employer impressed on the employee the confidentiality of the information;
d) whether that information can be easily isolated from other information which the employee is free to use or disclose."
ii) which, if disclosed to a competitor, would be liable to cause real (or significant) harm to the owner of the secret;
iii) in respect of which the owner has limited the dissemination of it or at least has not encouraged or permitted widespread publication."
She noted that the learned Lord Justice had observed at 260C that trade secrets include, in an appropriate case, "the names of customers and the goods which they buy" though he had qualified that statement with the reflection that
On the topic of customer lists generally, the learned judge cited paras [13-028] – [13-035] of Toulson & Phipps on Confidentiality, 4th Edition (2020) which 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, she noted that the authors had warned at para [13-030] that that proposition
The learned judge rejected the defendants' arguments for the following reasons:
Issue #1: Passing off - whether Cosmopolitan has suffered Loss and Damage and if so, How Much?
Lord Oliver said in Reckitt and Colman Products Ltd v Borden Inc. and Others [1990] 1 WLR 491, [1990] 1 All ER 873, [1990] UKHL 12, [1990] RPC 341 that the ingredients of an action for passing off are goodwill or reputation, misrepresentation and damage. The defendants admitted the first two but denied the third.
The learned judge summarized their submissions as follows in para [64] of her judgment:
"The Defendants say that the Claimant's case in damage is insufficiently pleaded. I find it convenient to deal with their submissions relating on this point first. The Defendants submit that:
i) damage to reputation and goodwill claimed in the Particulars of Claim is said to be as a result of the Landform transaction;
ii) lost sales by way of lost profits are also claimed and said to be as a result of the Landform transaction;
iii) there is no evidence at all of lost profit or of the expenses on which those profits might be calculated;
iv) further no Wrotham Park, exemplary or user principle damages are pleaded or claimed;
v) save for the figures contained at paragraph 28 (2) (iii) of the Particulars of Claim which estimates that the revenue the Claimant has earned from placements in the period from 16 June 2021 to 31 October 2021 has reduced by a sum in the region of £44,000 by the Defendants' wrongdoing, giving a loss of profit in the region of £22,000 to 31 October 2021 and continuing, which the Defendants submit are 'opaque', no basis for the damages calculation has been claimed, pleaded or evidenced and there is no evidence that the Landform transaction resulted in lost profits of £44,000."
The "Landform" transaction mentioned above refers to a message that the claimant received from Gina Di Gregorio of a company called "Landform" which stated:
"I have seen that you are still writing from the Cosmopolitan email address. I thought it had changed its name to Greenscaper, as we received an email from Graeme Ludley about it"
The defendants accepted that the message appeared to show that Ms Di Gregoriobelieved that the claimant had changed its name but they argued that that did not mean that any trade had been diverted from the claimant to the second defendant nor that it had damaged Landform's perception of the claimant. They also pointed out that the claimant did not call or adduce any evidence from Ms Di Gregorio on that point.
The judge rejected the defendants' contentions:
"[65] The Defendants' submissions are ill-founded, in my judgment. In relation to points (i), (ii) and (v), the Particulars of Claim do not plead that the loss of reputation/goodwill and loss of profits claimed arises out of the Landform transaction. At paragraph 20 of the Particulars of Claim it pleads that it is a reasonable inference that the 27 June Email was sent to the entirety of the Claimant's 500 client contacts (as I have found) and at paragraph 21 that "the Claimant's clients have been actively misled by the content of the said email". It refers to the Landform email as an exemplar of a client who was misled by its content and had understood that the Claimant had changed its name (as I have also found). In paragraph 23, in case there was any doubt, it pleads that 'For the avoidance of doubt, it is the Claimant's case that the extent of the Defendants' wrongdoing is not limited to that set out above and the Claimant reserves the right to amend these Particulars of Claim following disclosure'. As [counsel] submits for the Claimant, and I accept, despite the work accruing to Greenscape almost immediately after the company started trading around the time of the 27 June Email, the Defendants have provided no documentary disclosure of how this work came to be generated, and indeed almost nothing in the way of witness evidence either, and so it is unsurprising that no application has been made to amend the Particulars of Claim as the facts are simply unknown to the Claimant. [The claimant's counsel] in closing submissions described that new business as 'coming out of thin air from a disclosure perspective', which I consider to be an apposite description.
"[65] The Defendants' submissions are ill-founded, in my judgment. In relation to points (i), (ii) and (v), the Particulars of Claim do not plead that the loss of reputation/goodwill and loss of profits claimed arises out of the Landform transaction. At paragraph 20 of the Particulars of Claim it pleads that it is a reasonable inference that the 27 June Email was sent to the entirety of the Claimant's 500 client contacts (as I have found) and at paragraph 21 that "the Claimant's clients have been actively misled by the content of the said email". It refers to the Landform email as an exemplar of a client who was misled by its content and had understood that the Claimant had changed its name (as I have also found). In paragraph 23, in case there was any doubt, it pleads that 'For the avoidance of doubt, it is the Claimant's case that the extent of the Defendants' wrongdoing is not limited to that set out above and the Claimant reserves the right to amend these Particulars of Claim following disclosure'. As [counsel] submits for the Claimant, and I accept, despite the work accruing to Greenscape almost immediately after the company started trading around the time of the 27 June Email, the Defendants have provided no documentary disclosure of how this work came to be generated, and indeed almost nothing in the way of witness evidence either, and so it is unsurprising that no application has been made to amend the Particulars of Claim as the facts are simply unknown to the Claimant. [The claimant's counsel] in closing submissions described that new business as 'coming out of thin air from a disclosure perspective', which I consider to be an apposite description.
[66] Similarly it is not correct to say in point (iii) there is no evidence of lost profit. I have summarised evidence on the point contained in [the claimant's director's] witness statement which was produced by his finance manager and [the first defendant] confirmed that he took no issue with those figures in oral evidence."
The defendants argued that Mr Ludley was very well known in the industry and several of the clients who had placed business with Greenscape were his personal friends. The judge rejected that contention on the ground that the only evidence to that effect came from Mr Ludley and she could not rely on it without corroboration.
She concluded at [68]:
"I have found that the Claimant's business underwent a significant and immediate decline after the 27 June Email was sent, that Mr Ludley sent that email not in a moment of madness but as the culmination of a plan of action to start his own business which started with transferring the Claimant's documentation and information for himself, that it was precipitated by Mr Chapman leaving the employ of the Claimant so that he was the only recruitment consultant left, that he sent the 27 June Email hoping that it would produce marketing leads for Greenscape and that Greenscape did immediately win new business such that he was invoicing a client of the Claimant just over a month after the 27 June Email. I have found that the 27 June Email caused confusion with some of the Claimant's clients which caused work to be diverted from the Claimant to Greenscape, and that Mr Ludley did nothing to correct that misrepresentation. That is damage amounting to both loss of profit and damage to reputation, in my judgment, sufficient to complete the tort of passing off."
Issue #2 - Whether the Defendants were liable to Cosmopolitan for Breach of Confidence."
Cosmopolitan had pleaded that its client list was "confidential Information" as that term was defined at clause 46 (b) of Mr Ludley's employment contract:
The claimant alleged that Mr Ludleuy had breached clause 47 of his contract of employment by sending the offending email:
"During your employment, you may have access to Confidential Information concerning us and our business. During and after your employment, you must not use or disclose or allow anyone else to use or disclose any of our Confidential Information, except:
a. as necessary to perform your duties for us, properly, or
b. with our consent; or
c. as required by law or ordered by a court that has jurisdiction; or
d. to make a protected disclosure within the meaning of Section 43A of the Employment Rights Act 1996."
Cosmopolitan also alleged 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, Either as an incident of that duty or pursuant to necessary implied terms of his contract of employment, 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 while his employment continued.
"During your employment, you may have access to Confidential Information concerning us and our business. During and after your employment, you must not use or disclose or allow anyone else to use or disclose any of our Confidential Information, except:
a. as necessary to perform your duties for us, properly, or
b. with our consent; or
c. as required by law or ordered by a court that has jurisdiction; or
d. to make a protected disclosure within the meaning of Section 43A of the Employment Rights Act 1996."
Cosmopolitan also alleged 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, Either as an incident of that duty or pursuant to necessary implied terms of his contract of employment, 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 while his employment continued.
After his employment had been terminated he was not to use any trade or business secret or confidential information of sufficient sensitivity to warrant that level of protection. Both defendants owed the claimant an equitable duty of confidence in respect of trade secrets or information warranting the same level of protection. The claimant's client list was such information. Sending the offending email was a breach by the first defendant of the implied contractual terms. It was also a breach by both defendants of the equitable duty of confidence.
The defendants submitted that the information contained in the claimant's client list was not confidential information because it was available from public sources and could have been recreated at little cost and effort. They submitted that even if it was confidential information it did not have the character of a trade secret.
The defendants submitted that the information contained in the claimant's client list was not confidential information because it was available from public sources and could have been recreated at little cost and effort. They submitted that even if it was confidential information it did not have the character of a trade secret.
In considering the parties' submissions, Judge Melissa Clarke referred to Lord Justice Neill's judgment in Faccenda Chicken v Fowler [1987] Ch 117 for the following principles of the law of confidence in the context of an employer/employee relationship:
ii) it is only in the absence of any express term that the obligations of the employee in respect of the use and disclosure of information are the subject of implied terms (135 G);
iii) there is an implied term of duty of good faith or fidelity on the employee during the course of employment (135H) which will be broken if an employee makes or copies a list of the customers of the employer for use after his employment ends, although except in special circumstances there is no general restriction on an ex-employee canvassing or doing business with customers of his former employer (136A-B);
iv) the implied term after the determination of the employment is more restricted in its scope than that which imposes a duty of good faith during the employment, but includes that the ex-employee will not make use of the employer's 'trade secrets' or information with a sufficiently high degree of confidentiality to warrant the same level of protection (136C-D);
v) in order to determine whether any particular item of information falls within the implied term so as to prevent its use or disclosure by an ex-employee, the Court must consider all the circumstances of the case (137B) including:
a) the nature of the employment;
b) the nature of the information itself;
c) whether the employer impressed on the employee the confidentiality of the information;
d) whether that information can be easily isolated from other information which the employee is free to use or disclose."
She also considered Lord Justice Staughton's definition of a trade secret in Lansing Linde Ltd v Kerr [1991] 1 WLR 251 at page 260B:
"information:
i) used in a trade or business;ii) which, if disclosed to a competitor, would be liable to cause real (or significant) harm to the owner of the secret;
iii) in respect of which the owner has limited the dissemination of it or at least has not encouraged or permitted widespread publication."
"some may say that not all such information is a trade secret in ordinary parlance. If that view be adopted, the class of information which can justify a restriction is wider, and extends to some confidential information which would not ordinarily be called a trade secret."
Referring to paras [119] and [120] of Mr Justice Leggatt's judgment in Marathon Asset Management LLP and Another v Seddon and others [2017] EWHC 300 (Comm), [2017] 2 CLC 182, [2017] IRLR 503, [2017] WLR(D) 138, [2017] ICR 791, [2017] FSR 36, Judge Melissa Clarke said at [78]:
"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."
However, she noted that the authors had warned at para [13-030] that that 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";
The authors had relied on Robb v Green UKLawRpKQB 131; (1895) 2 QB 315 (16 July 1895) in support of that proposition.
The judge also noted that an obligation of confidence can arise separately from an obligation in contract. She referred to para [23] of Lord Neuberger's judgment in Vestergaard Frandsen A/S v Bestnet Europe Ltd and others [2013] 1 WLR 1556, [2013] IRLR 654, [2013] 4 All ER 781, [2013] WLR(D) 200, [2013] UKSC 31, [2013] ICR 981, [2013] RPC 33, [2013] EMLR 24:
"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 – see eg per Lord Goff in Attorney-General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109, 281. Thus, in order for the conscience of the recipient to be affected, she must have agreed, or must know, that the information is confidential."
"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 – see eg per Lord Goff in Attorney-General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109, 281. Thus, in order for the conscience of the recipient to be affected, she must have agreed, or must know, that the information is confidential."
Referring to Coco v A.N. Clark (Engineers) Ltd [1968] FSR 415 at page 420, Judge Melissa Clarke added that a duty of confidence may arise in respect of materials that have been constructed solely from materials in the public domain. She quoted para [42] of Judge Hacon's judgment in Trailfinders Limited v Travel Counsellors Limited and others [2020] IRLR 448, [2020] EWHC 591 (IPEC):
"[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.'"`
"[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.'"`
Her Honour also mentioned para [43] of Judge Hacon's judgment in Trailfinders:
"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."
"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."
She concluded as follows at para [84] of her judgment:
"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]."
"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 learned judge rejected the defendants' arguments for the following reasons:
[91] 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).
[92] 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.
[93] 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).
[94] 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;
[95] 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.
[96] 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."
Her Honour concluded at para [97 (I)] of her judgment that Cosmopolitan's client list was "Confidential Information" within the meaning of clause 46 of Mr Ludley's contract of employment. By emailing that list to Mr Ludley's personal account and using it to send the email of 27 June 2021, Mr Ludley had breached clause 47 of that contract. She did not find it necessary to consider the contract's implied terms. She also held that Mr Ludley had broken his equitable duty of confidence.
Finally, she referred to paras [40] tp [45] of Richard Salter QC's judgment in Le Puy v Potter and another [2015] IRLR 554, [2015] EWHC 193 (QB) where the issue was the enforceability of a post-termination restrictive covenant and confidentiality clause in the recruitment industry. The deputy judge 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?" Mr Salter also said that it seemed 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" Though this judgment was not binding on Judge Melissa Clarke she noted that it was on all fours with her own.
Comment
Given the facts of this case, the outcome is not surprising. It is perhaps surprising that this case was not settled earlier but that may have been for reasons that would not be obvious to those who were not privy to this litigation.
It is also surprising that neither the parties nor the judge mentioned Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure which codified trade secrecy law shortly before the UK's departure from the EU. Art 2 (1) of the Directive defined "trade secret" as
It is also surprising that neither the parties nor the judge mentioned Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure which codified trade secrecy law shortly before the UK's departure from the EU. Art 2 (1) of the Directive defined "trade secret" as
"information which meets all of the following requirements:
(a) it is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
(b) it has commercial value because it is secret;
(c) it has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret."
(a) it is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
(b) it has commercial value because it is secret;
(c) it has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret."
Similarly, it is surprising that no reference was made to The Copyright and Rights in Databases Regulations 1997 (SI 1997 No 3032). From the judge's description, the spreadsheet containing the client list would have been a database within the meaning of reg. 6 of those Regulations, The removal of the client list would seem to be "extraction" as defined by reg 16 (1) and its use to send the 27 June 2021 email seems to be "re-utilization."
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