The High Court has held, in the case of Brandeaux Advisers (UK) Ltd and others v Chadwick, that an employer was entitled to summarily dismiss an employee whose actions in transferring confidential information to her private email account amounted to a fundamental breach of contract. However, the employer was not entitled to reclaim the salary paid to the employee for the period between the date the breach occurred and the date the employer discovered the breach and dismissed her.

In January 2010, following disputes with her employer, Mrs Chadwick began sending large quantities of confidential information to her private email address. She claimed during the court hearing that she did so to "arm herself for the future", in case of a future legal action against her employer or an investigation by the financial services regulator. In May 2010 Brandeaux gave Mrs Chadwick three months' notice of redundancy. Following failed attempts to agree an exit package, she was placed on garden leave. Alerted by comments she had made during meetings, Brandeaux examined her email account and discovered the transfer of the confidential material. They carried out disciplinay proceedings and dismissed her for gross misconduct on 22 June 2010, some five months after the initial transfers took place.

The High Court held that the possibility of future disputes could not justify an employee transferring or copying confidential documents that might be relevant to such a dispute. Mrs Chadwick's actions in doing so amounted to a repudiatory breach of contract and Brandeaux had been entitled to dismiss her summarily.

Mrs Chadwick tried to argue that Brandeaux was not entitled to rely on her behaviour to dismiss her as it was already guilty of a repudiatory breach of contract, by virtue of its earlier conduct towards her. The High Court dismissed this argument. Even if Brandeaux had been in repudiatory breach, Mrs Chadwick had not accepted that breach by resigning. The contract between them therefore continued and the company was entitled to bring it to an end for good cause.

As a director, Mrs Chadwick owed fiduciary duties to Brandeaux and was, therefore, under a duty to inform the company of her wrongdoing. Had she done so she would have been dismissed at a much earlier date. Brandeaux therefore claimed damages equivalent to the salary she had received between the date it would have dismissed her, had it known of her gross misconduct, and the date of her actual dismissal. This claim failed. The High Court held that the employer had not suffered any loss as it had continued to receive the benefit of her work, in return for which it had paid her salary.

Impact on employers

  • This decision confirms that it is unlikely that contemplation of litigation will ever justify an employee trying to preserve evidence by copying their employer's confidential information. The employee will have to rely on the normal disclosure process to obtain the information if there is a subsequent legal dispute or regulatory investigation.
  • Employers concerned about employees copying confidential information should review their employment contracts and staff handbooks to ensure that such activities are clearly prohibited, rather than having to rely on the implied duty of confidentiality.
  • Email and IT policies should also set out sanctions for unauthorised electronic transfer of confidential information and systems should be put in place to monitor compliance.
  • The decision also confirms that, much as an employer will feel aggrieved at having continued to pay an employee or director who has committed an unidentified and fundamental breach of contract, they will not be able to reclaim that salary once the breach has been discovered. Their only sanction in the normal course of events will be to dismiss summarily (after a proper investigation and disciplinary process).
  • However, if the employee has used confidential information to obtain a competitive advantage in a competing business, other remedies, including damages, may be available.
  • This decision conflicts with the earlier decision of the High Court in RDF Media v Clements, which held that a party already in breach of contract cannot rely on the other party's subsequent breach to bring the contract to an end. The law on this issue is therefore not free from doubt until it has been determined by the Court of Appeal.