Double Rise Development Ltd v. Leung Kit Chuen HCA 1321/2010

In brief:

The Defendant employee took a job with a customer of the Plaintiff employer. The Plaintiff brought a number of claims against the Defendant and its principal concern was that its confidential information would be used, which was in breach of the employment contract and a Confidentiality Agreement. It also alleged that the Defendant owed fiduciary duties as a senior employee.

The court found that the Defendant had not divulged confidential information and the Plaintiff’s perception of what constituted confidential information did not accord with the legal position. The court disagreed with the Plaintiff’s assertions that the identity of its suppliers amounted to confidential information and confirmed that pricing information would be protected.

The court also held that the Defendant was not sufficiently senior to owe fiduciary duties and on this basis, the notion that he was privy to confidential information was also rejected. It is interesting to note that the Defendant’s low salary was a persuasive factor in the court’s analysis of whether he was a senior employee or a director of the Plaintiff.

The court held that the Plaintiff’s reliance on implied terms to prevent the Defendant from soliciting or competing with the Plaintiff were unenforceable, as there was no limit on time or geographical location.

Take away points:

  1. It is advisable to use restrictive covenants to protect business interests and guard against competition rather than to take the route of proving that there has been a breach of express or implied confidentiality obligations. It is very difficult to evidence such a breach and this case illustrates that employers must meet a high threshold to prove that the information amounts to a trade secret or an equivalent confidential status.
  2. The Defendant in this case was a slight anomaly as in practice, he was doing a senior role on the basis that he had full access to both customers and suppliers but this de facto seniority was not evidenced by his pay or title. Ultimately this disconnect allowed him to defect to the customer thus depriving the Plaintiff of their business and a remedy against the Defendant.