Where former employees breach a duty of confidence and make no use of that information such that the employer suffers no loss, the Court may award nominal damages of £1, despite the wrongdoing.

The Facts

Two employees of an asset management firm, Marathon Asset Management LLP, worked together to copy numerous files containing confidential information belonging to their employer in the months before they left. The volume of information was significant and was copied onto USB drives and removed from the employer's premises. After leaving, the two former employees set up a competing investment management business, along with a number of other former colleagues. The copying and removal of the confidential information was a breach of the employees' contractual duties to Marathon.

Whilst the two employees had clearly breached their contracts of employment, very few of the confidential files taken were accessed or used after they left their employment. Marathon could not show, and did not allege, that the two former employees had caused them any financial loss.

In the claim brought against the two former employees, Marathon argued that it was entitled to "Wrotham Park damages" of £15 million. This type of damages is sometimes referred to as "negotiation damages" or "hypothetical bargain damages" because they are calculated by reference to what Marathon alleged the former employees would have had to pay in a negotiation for the release of their contractual duties. The concept comes from a case dealing with restrictive covenants in a real estate context at Wrotham Park, a stately home in Hertfordshire.

The Court rejected the claim for £15 million and instead awarded nominal damages of £1 per employee. The principal reasoning was that the two former employees had not used the confidential files to obtain any benefit. Marathon's claim had been for "jackpot damages" based on breaches of contract, and not on any actual use of the information. The Court's role is not to punish, but to compensate for loss suffered or for unlawful gains.

What does this mean for employers?

The case is a useful reminder to employers pursuing former employees who have breached their contractual obligations. Even where the former employees' wrongdoing is blatant and they have plundered confidential information, it is vital to focus on the use which might have been made of it, and the gains made or the losses incurred, before embarking on costly and time-consuming litigation. Importantly, this case still leaves open the argument that a wronged employer can seek a remedy for use actually made of the information removed. It does though close the door to an open cheque-book style claim for damages to cover the use which could have been made of the information.

Marathon Asset Management LLP & Anor v Seddon & Ors [2017] EWHC 300