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Saying goodbye to a favourite client when you leave a job is a wrench, but a recent court case has demonstrated taking them with you could not just land you in potential trouble, but any new employer as well.
The Court of Appeal has dismissed an appeal brought by Travel Counsellors against an earlier court decision that it breached its obligations of confidentiality in relation to client information brought by former employees of Trailfinders.
More than 40 staff left Trailfinders between 2016 and 2020 to become Travel Counsellors self-employed franchised homeworkers.
Trailfinders alleged four former staff had taken client contact details with them, and commenced legal proceedings.
At an original hearing in March 2020, the Intellectual Property Enterprise Court (IPEC) agreed with Trailfinders, ruling Travel Counsellors was in breach of obligations of confidentiality. Travel Counsellors went to the Court of Appeal on three technical issues, but saw its appeal dismissed.
In doing so, Appeal Court judges confirmed a recipient of confidential information should ask where it came from, making the case a reminder that litigation can not only be pursued against the ex-employee but also the new employer.
The court deliberated over whether a “reasonable person” within a company would have asked where new contacts had been sourced and concluded Travel Counsellors should have queried the new client lists.
Trailfinders was unsuccessful in a claim that Travel Counsellors was vicariously liable for the actions of its franchisees and allegations against the Travel Counsellors being liable as principal were rejected.
It’s worth noting this case does not stop people from building up a business using contacts not taken from their former employer.
Ami Naru, head of employment at TravLaw, said: “What the judgment of the Court of Appeal does is place a greater burden on the recipient of confidential information; namely if you’re a recipient of confidential information that a new member of staff has provided, you should make enquiries as to the confidential nature of that information if a reasonable person would do. You can’t just turn a blind eye.”
In the original proceedings, Trailfinders submitted examples from four former staff who it said had breached confidentiality. However, to comply with IPEC’s two-day trial time limit, only two were examined.
One of these had spent six months assembling a contacts book and, after leaving, used Trailfinders’ Viewtrail system to access records of 32 clients. Another had copied information on “five to eight” clients on their last day plus details of a high-spending customer.
During the original hearing, Judge Hacon said he had the impression that Travel Counsellors “did not wish to inquire” where such information had come from.
Travel Counsellors’ brochure wording said: “If you’re coming from a travel background already, feel free to bring your old customer contact list along with you. We’ll add them to your contact centre ready for your first day.”
In the original hearing, Judge Hacon said: “On the balance of probabilities, I find that potential franchisees were encouraged to bring with them details of existing clients and were not warned about any risk of breach of confidence.”
He added it was “highly improbable” Travel Counsellors thought Trailfinders’ customer lists were not confidential.
The original hearing also rejected a suggestion by Travel Counsellors that the information was not confidential because it was not “sufficiently protected” by Trailfinders.
Judge Hacon said: “The protection may not have been as rigorous as it should have been, but Trailfinders clearly took steps to ensure that the client information was not openly available to anyone by requiring the use of a password or, in the case of Viewtrail, limiting access to information to clients only if their name and booking reference was known.”
The Appeal Court found Trailfinders’ contacts were added to Travel Counsellors’ systems and that “a reasonable person” would have been suspicious of their origins.
“This case has said ‘this is obviously confidential information, you should have made enquiries’,” said Naru.
Naru said the case provided “several learning points”. Employers need to mark relevant items as confidential, she said, and should avoid telling new staff “to bring a client list”.
She advised: “You are in a much stronger position if you have it covered in a contract and post-termination restrictions. When people leave, remind them of duty of confidentiality – that exists post-employment as well – and send that to their next employer.”
The case may involve damages and costs against Travel Counsellors as well as potentially damages against individuals, Naru predicts.
Trailfinders founder and executive chairman Mike Gooley said the matter was still ongoing. “It would be reckless for us to make comment at this stage,” he said.
Travel Counsellors also declined to comment “due to ongoing proceedings”.
Meanwhile, there is a simple lesson to be learnt from the case. Naru said: “You cannot, as an employer, just sit back and not do anything.”
