The High Court has awarded an employer minimal damages of £2 in a case where two former employees were found to have copied and retained confidential information in breach of their contracts of employment.
Why was there such a low award in the employer's favour? The case of Marathon Asset Management LLP v Seddon and another is discussed below.
The High Court found that two employees (A and B) had both acted in breach of their contracts of employment. Whilst both were still employed by Marathon Asset Management (Marathon) A saved a considerable amount of confidential information on a shared drive. Before B's employment ended, he copied that information onto a memory stick. The court found that A had saved the information on the shared drive with the intention that B would subsequently copy and retain it. Having left Marathon, A and B set up a rival business.
Marathon became aware of the theft and threatened B with litigation. At that stage B returned the confidential information and admitted being in breach of contract.
It was common ground between all the parties that neither A nor B had made any use of the confidential information that B had copied from the shared drive.
The court found that Marathon had not suffered any financial loss as a result of A and B's actions. Further, neither of the employees had financially gained from taking the information.
As a result of there being no actual financial loss or gain, the court ordered nominal damages of £1 per employee.
Marathon had originally claimed £15m in damages on the basis that this was the value that the employees would have had to have paid for the confidential information at the time it was taken if they had wanted to purchase it legitimately. However, the court was not prepared to make an award based on a speculative analysis of the value of the information where the employees had not, in fact, accessed it or gained from it in any way.
The employees in this case had breached their contracts of employment by conspiring to take the confidential information. Not only were they in breach of the express terms of their contracts, they were also in breach of the implied term of fidelity that all employees owe to their employers.
However, the case shows that expensive litigation may not be in an employer's best interests, even if breaches of contract are admitted. From a commercial point of view, it will be vitally important to assess the level of loss to the business and/or gain to the former employees before deciding whether to proceed with court action. Where it is clear that the employees have not used the confidential information, and it has been returned, it may be that there is little financial merit in taking matters to court.
The case also highlights the general importance of having written contracts of employment that contain suitable clauses concerning confidential information and the duties of each employee. For example, should certain employees be put under a contractual duty to report their own wrongdoing and the wrongdoing of others?