Confidential information: No implied term requiring directors to deliver up confidential information on termination of appointment

The High Court has held that there is no implied term requiring a director to deliver up company confidential information on termination of the appointment. Employers should therefore ensure that directors' terms of appointment contain an express obligation to do so.

Eurasian Natural Resources Corporation Ltd v Judge

Sir Judge was appointed as a non-executive director of Eurasian Natural Resources.  His letter of appointment provided that all information acquired during his appointment was confidential to the company and should not, without the prior approval of the Chairman, be disclosed to third parties or used for any reason other than in the interests of the company, either during the appointment or following termination.  There was no express obligation requiring him to deliver up confidential documents on termination.

Following allegations that Sir Judge had leaked confidential information to the press, he was not re-elected at the Annual General Meeting and his appointment as a non-executive director came to an end.  The company brought proceedings against him arguing, amongst other things, that he was required to deliver up confidential information belonging to the company on termination of his appointment. The company argued that such obligation arose either as an implied term of his contract or from his fiduciary duties to the company.

High Court Decision

The High Court rejected the company's claim on the following grounds:

  • had it been the "obvious but unexpressed intention of the parties" that Sir Judge be required todeliver up confidential information on termination of his appointment, as the company had argued, the Court would have expected it to be incorporated into the terms of his appointment;
  • the Court had not been shown any legal authority, code of practice, guidance or other evidence that would suggest that a requirement to deliver up was the "norm" for directorships;
  • in practice, it would be difficult for directors to comply with this duty particularly where they are directors of multiple companies, as Sir Judge was, and where company documents had been sent to a mixture of personal and company email addresses; and
  • fiduciary duties owed by directors do not require delivery up of confidential information.

Comment

The High Court made it clear that delivery up of confidential information could still be ordered as part of an injunction to protect the company's confidential information, (to be decided at a later date).

In view of the High Court's decision, a requirement to give back confidential information on the termination of a director's appointment must be expressly stated in the contract.  The same would apply to contracts of employment for employees where the implied duty of confidentiality is extremely limited, and would not extend to a requirement to deliver up confidential information.

It would also be prudent for employers to check their contracts to ensure that there is an obligation to return confidential information and not to retain any copies in any format.