trailfinders v travel counsellors

Our Offices
Fusion Legal

Call us on 0800 024 1976

New Employer Potentially Liable For Misuse Of Confidential Information

Written by Laura Kearsley and Emma Toes

Travel Counsellors Ltd v Trailfinders Ltd [2021] EWCA Civ 38

The Court of Appeal (CoA) rules that a new employer can potentially be liable for misuse of confidential information belonging to a competitor where the new employer recruits employees and encourages them to bring that information with them.

Trailfinders is a travel agent. In 2016, 40 key staff left to join a competitor, Travel Counsellors Ltd.

Travel Counsellors encouraged the employees to bring their customer contact list with them and did not warn the employees that they may be breaching confidence. Travel Counsellors added this information to its systems to use it for the purposes of its competing business.

The evidence was that Travel Counsellors regarded its own customer contact lists as confidential.

The CoA were facing an appeal from Travel Counsellors against a finding in the Intellectual Property and Enterprise Court that Travel Counsellors were subject to an equitable duty of confidence over the information it received, preventing it from using the information for the benefit of its business.

The CoA upheld that decision:

“If the circumstances are such as to bring it to the notice of a reasonable person in the position of the recipient that the information, or some of it, may be confidential to another, then the reasonable person’s response may be to make enquiries. Whether the reasonable person would make enquiries, and if so what enquiries, is inevitably context and fact-dependent. If the reasonable person would make enquiries, but the recipient abstains from doing so, then an obligation of confidentiality will arise.”

Things to think about:

Employers who are recruiting new staff, particularly from a competitor, should be wary of encouraging them to bring confidential information with them and should be seen to be discouraging breaches of confidence or they risk themselves being liable as well as the recruited employees.
Employers who lose staff and suspect that they have taken confidential information with them will have potential actions against both the employees concerned and the new employer. Those employers should take legal advice as to the steps to taken so as to investigate whether those suspicions are well founded and if so, how best to preserve and gather evidence, should it be necessary to take action.

How Nelsons can help

For further information on the subjects discussed in this article or any related topics, please contact Laura Kearsley in our Employment Law team or Emma Ward in our Dispute Resolution team on 0800 024 1976 or via our online enquiry form .

We're here to help.

Main Contact Form

Used on contact page

Name (required) *
Phone number (required) *
Nature of enquiry *
Tick to accept our privacy notice

Request a document we are storing for you

Join our mailing list to keep up to date with our latest news and events.

Search Menu
Sign in through your institution
Advance articles
Author Guidelines
Submission Site
Open Access Options
About Journal of Intellectual Property Law & Practice
Editorial Board
Advertising and Corporate Services
Journals Career Network
Self-Archiving Policy
Dispatch Dates
Journals on Oxford Academic
Books on Oxford Academic

Article Contents

Legal context.

Practical significance
< Previous

Can you keep a secret? The trail of confidential information and the need for reasonable enquiries

Article contents
Figures & tables
Supplementary Data

Alexandros Antoniou, Can you keep a secret? The trail of confidential information and the need for reasonable enquiries, Journal of Intellectual Property Law & Practice , Volume 16, Issue 6, June 2021, Pages 468–472, https://doi.org/10.1093/jiplp/jpab086

Permissions Icon Permissions

Travel Counsellors Ltd v Trailfinders Ltd [2021] EWCA Civ 38, 19 January 2021

Trailfinders Ltd v Travel Counsellors Ltd and Ors [2020] EWHC 591, 12 March 2020

In dismissing an appeal against the decision of the Intellectual Property Enterprise Court (IPEC) in Trailfinders Ltd v Travel Counsellors Ltd and Ors [2020] EWHC 591, the Court of Appeal of England and Wales held that an equitable duty of confidentiality arises when the recipient of information is reasonably expected to have made enquiries in relation to the confidential nature of that information but fails to do so.

Trade secrets are valuable commercial assets in that they allow businesses to gain a competitive edge over their rivals without competitors knowing how that advantage is achieved. In the UK, trade secrets can be protected under two different regimes: the common law of confidentiality and the statutory regime under the Trade Secrets (Enforcement, etc) Regulations 2018.

Email alerts

Citing articles via.

About Journal of Intellectual Property Law & Practice
JIPLP Weblog
Recommend to your Library

Affiliations

Online ISSN 1747-1540
Print ISSN 1747-1532
Copyright © 2024 Oxford University Press
About Oxford Academic
Publish journals with us
University press partners
What we publish
New features
Open access
Institutional account management
Rights and permissions
Get help with access
Accessibility
Advertising
Media enquiries
Oxford University Press
Oxford Languages
University of Oxford

Oxford University Press is a department of the University of Oxford. It furthers the University's objective of excellence in research, scholarship, and education by publishing worldwide

Copyright © 2024 Oxford University Press
Cookie settings
Cookie policy
Privacy policy
Legal notice

This Feature Is Available To Subscribers Only

This PDF is available to Subscribers Only

For full access to this pdf, sign in to an existing account, or purchase an annual subscription.

Strictly confidential: Trailfinders case sheds light on trade secrets protection

In a case brought by established travel agency, Trailfinders, the High Court has for the first time considered the application of the so-called Trade Secrets Directive, which was implemented into UK law in June 2018.

The recent decision emphasises how the common law and statutory regimes operate alongside one another to afford businesses and individuals a wide scope of protection over the unauthorised use of confidential information, as well as shedding light on what constitutes a trade secret under UK law.

BACKGROUND: THE TRADE SECRETS DIRECTIVE AND UK REGULATIONS

While most of the substantive provisions contained in the Trade Secrets Directive are already contained in UK common law, the UK regulations are concerned primarily with limitation and prescription periods, procedural issues and remedies. However, they do provide the UK’s first statutory definition of a trade secret (transposed from Article 2(1) of the Directive), which must meet three distinct criteria:

it is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
it has commercial value because it is secret; and
it has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

The Directive also out what constitutes an unlawful acquisition of a trade secret and provides in Article 4(4) that the acquisition, use or disclosure of a trade secret is unlawful whenever a person “ knew or ought to have known that the trade secret had been obtained directly or indirectly from another person who was using or disclosing the trade secret unlawfully. ” These provisions are not replicated in the UK regulations since they are already provided for by the common law.

THE FACTS AND ARGUMENTS

In 2016, a group of Trailfinders employees left the company to join Travel Counsellors Ltd (“TCL”), which trades using a franchise model with franchisee travel consultants.

Trailfinders asserted that the former employees, before resigning, took preliminary steps to obtain and use the company’s trade secrets to assist them in setting up in competition as TCL. The trade secrets specifically related to names, contact details and further information regarding its clients. Trailfinders further alleged that the former employees had accessed its customer database following their departure from the company.

Trailfinders submitted that the former employees were in breach of the implied terms of their employment contracts and/or in breach of confidence. Moreover, it was contended that TCL owed Trailfinders an obligation of confidence because it had received customer information from the former employees of the company which it knew or ought to have known was confidential.

In his decision, the judge considered in some depth the key cases dealing with the establishment of an implied duty of good faith, in which he approved the three classifications of employment information set out in the 1985 Court of Appeal decision in Faccenda Chicken Ltd v Fowler , namely:

Information that is not confidential;
Confidential information which remains in the employee's head and becomes part of his knowledge and experience; and
Trade secrets.

This case clarified that an employee cannot use or disclose information in the third classification even after the employment ceases, whereas the prohibition on an employee’s use or disclosure, for his or her own purposes, of information in the second classification is generally prohibited only during employment. Nonetheless, copying or making a list of the employer's customers during the period of employment for use after the term of employment ends, or deliberately memorising the list for such, was liable to constitute an act in breach of confidence.

In the Trailfinders case, the judge stated that the Directive represented the "best guide" to determining whether information was to be classified as confidential. He ruled that the client information obtained by the former employees during the period of their employment at Trailfinders was confidential.

The copying of this information constituted a breach of the implied duty of good faith under the former employees’ employment contracts with Trailfinders. Furthermore, the disclosure of the information to TCL and the subsequent use of the information by the former employees was also a breach of their equitable obligation of confidence to their former employer, which subsists following termination of employment and is based on conscience. Likewise, the acts would have been considered unlawful pursuant to Article 4 of the Directive, if that had been pleaded.

The judge further ruled that TCL had breached the equitable duty of confidence (and would have breached Article 4(4) of the Directive) on the basis that it received information it knew or ought to have known was fairly and reasonably considered to be confidential.

IMPLICATIONS

Unfortunately, this judgment provides no further interpretation of the legal concepts contained in the Trade Secrets Directive which require clarification, such as what establishes the information’s “ commercial value ” under Article 2(1) (Regulation 2(a) of the UK regulations).

Nonetheless, the case has interesting things to say about the impact of the Directive, which was deemed to shine “an occasional light" on the interpretation of the common law principles already in place. The decision confirms that the earlier law remains relevant, yet Article 2(1) of the Directive is now the best guide available to determine what is in fact confidential. The case also emphasises that the definition of a trade secret in Article 2(1) encompasses confidential information that may not previously have been considered a trade secret, maximising the scope of subject matter protected by law.

The Directive and the UK regulations could accordingly be useful to businesses that find themselves in a similar position to Trailfinders. The factual scenario is by no means unusual; former employees establishing a rival company and using customer information belonging to their former employer to do so constitutes a threat to businesses in all sectors. The threat may be all the greater during the Coronavirus epidemic, when so many employees are using their employer’s confidential information while working from home.

KEY TAKEAWAYS

LATEST INSIGHTS

Brexit: Intellectual property in a post-Brexit landscape

23 Sep 2021

LEGAL UPDATE

The case of a not so wily fox

30 Jun 2021

IP Blueprint for Growth

05 Mar 2021

Hollow Crown? Vodafone’s “crown use” defence overturned by Court of Appeal

High Court grants summary judgment in Duchess of Sussex’s long running breach of privacy case

19 Feb 2021

An IP overview of 2020: a UK-China perspective

20 Jan 2021

Insights & events

Court of Appeal: employers beware employees bearing secrets

You have recruited a new sales person from your competitor. The new employee arrives on their first day and – smilingly – presents you with some rather useful information from their former employment, for example, some recent business plans or customer lists. Do you say thank you very much and proceed to use it? Or do you tell the employee to destroy it immediately? A recent Court of Appeal decision confirms that in this sort of situation the new employer should normally make enquiries about the source of the information.

The dispute [i]

A number of employees left Trailfinders and entered into franchise agreements with Travel Counsellors Ltd. (TCL). TCL expected and positively encouraged new franchisees to bring customer contacts with them, without warning of the risks of breaches of confidence. The ex-employees noted down lists of Trailfinders customers before they left their employment, including email addresses and contact numbers. They then transferred these details to TCL’s database.

High Court decision

In March 2020, the High Court found that TCL had breached its equitable duty of confidence by using the information brought to it by the ex-employees for the benefit of its own business. An equitable duty of confidence arises whenever a person “receives information he knows or ought to know is fairly and reasonably to be regarded as confidential.” It was held that a reasonable person in the position of TCL’s CEO would have been aware that at least part of the information provided by the ex-employees would have belonged to Trailfinders, and was confidential customer information. TCL did not ask the ex-employees where the information had come from and showed no desire to find out. Further details of this judgment can be found in our earlier article here .

TCL appealed the decision, its main ground of appeal being it did not believe the High Court judge had applied the right legal test to determine whether TCL owed an obligation of confidence to Trailfinders. TCL argued that it could not be liable just because a reasonable person would make enquiries as to whether some part of the information it had received was confidential.

The Court of Appeal unanimously dismissed the appeal. Arnold LJ noted, however, that there is surprisingly little authority on the point raised by TCL. He cited his own judgment in Primary Group (UK) Ltd v Royal Bank of Scotland plc [2014] EWHC 1082 (Ch) which sets out the test for an equitable obligation of confidence to arise: confidential information must have been communicated in circumstances importing such an obligation. Arnold LJ confirmed that the High Court judge correctly applied this test. The only other authority which touches on this point is the Court of Appeal's decision in Racing Partnership Ltd v Done Brothers (Cash Betting) Ltd [2020] EWCA Civ 1300 which highlights that it is relevant to consider what, if any, enquiries a reasonable person would make.

The Court of Appeal held that the recipient must know or be on notice that at least some of the information is confidential to another party. If this is the case, as assessed by reference to a reasonable person in the recipient’s position, then the reasonable person’s response may be, depending on the context and the facts, to make enquiries about the source of the information. If a reasonable person would make those further enquiries, but the recipient chooses not to, then an obligation of confidence arises. Actual knowledge, or turning a blind-eye is not required for an equitable duty of confidence to arise.

TCL was on notice that at least some of the information it received from its new franchisees was confidential. Taking into account the circumstances of how it received the information (for example the quantity of information, and the invitation to bring old customer contact lists), it should have made further enquiries of the ex-employees as to the source of the customer lists.

An increased burden on recipients of information

This decision and the comments contained within the judgment will be most helpful in an area of the law on confidentiality where authority is sparse. It may increase the burden on those who receive potentially confidential information to make further enquiries of the discloser as to the nature and source of the information if a reasonable person would do so, but whether a reasonable person would do so will be very context and fact dependent.

[i] Travel Counsellors Ltd v Trailfinders Ltd [2021] EWCA Civ 28

Contact our experts for further advice

Search our site

Apps & Integrations

Travel Counsellors Ltd v Trailfinders Ltd

Information Technology and Data Protection
Information
Intellectual Property
Confidential Information
Employment and Labour Law
Employment Relationship
Law of Wrongdoing
Practice and Procedure
Court Structure
Contracts Law

[2021] EWCA Civ 38

Lord Justice Lewison

Lady Justice Asplin

Lord Justice Arnold

Case No: A3/2020/0886

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE, BUSINESS AND PROPERTY

COURTS, INTELLECTUAL PROPERTY ENTERPRISE COURT

His Honour Judge Hacon

[2020] EWHC 591 (IPEC)

Royal Courts of Justice

Strand, London, WC2A 2LL

Ian Mill QC and Tom Cleaver (instructed by Pinsent Masons LLP ) for the Appellant

Gavin Mansfield QC and Alexander Robson (instructed by Lewis Silkin LLP ) for the Respondent

Hearing date: 13 January 2021

Approved Judgment

Introduction

The Claimant (“Trailfinders”) is a travel agent with 37 branches in the UK and Ireland, employing over 700 sales consultants. The Second, Third, Fourth and Fifth Defendants (“the Individual Defendants”) are former sales consultants at Trailfinders. In 2016 they left to join the First Defendant (“TCL”), as did about 40 others by the date of the Particulars of Claim. TCL is a competitor to Trailfinders which trades using a franchise model. It has around 1,250 franchisee travel consultants.

In these proceedings Trailfinders alleges that, when the Individual Defendants left, they took with them names, contact details and other information about their clients which was stored in a Trailfinders computer system called Superfacts. It also alleges that, after they left, they accessed a Trailfinders computer system called Viewtrail to obtain further client information. Trailfinders contends that the Individual Defendants thereby acted in breach of implied terms in their contracts of employment and in breach of equitable obligations of confidence owed to Trailfinders. It also contends that TCL acted in breach of an equitable obligation of confidence.

For reasons of economy and to ensure that a trial on liability could be completed in two days, in accordance with normal procedure in the Intellectual Property Enterprise Court, Trailfinders selected two of the Individual Defendants against whom to pursue its case to trial, namely the Second Defendant (“Mr La Gette”) and the Fifth Defendant (“Mr Bishop”). The claim was stayed as against the other two Individual Defendants.

His Honour Judge Hacon concluded, for the reasons given in his judgment dated 12 March 2020 [2020] EWHC 591 (IPEC) , [2020] IRLR 448 , that Mr La Gette and Mr Bishop had both acted in breach of their contracts of employment and in breach of equitable obligations of confidence to Trailfinders and that TCL had acted in breach of an equitable obligation of confidence.

TCL now appeals. There is no appeal by Mr La Gette or Mr Bishop. Although formally the Individual Defendants are parties to the appeal, they have not participated in it.

Although the judge referred in his judgment to European Parliament and Council Directive 2016/943 /EU of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure, it is common ground that the Directive did not apply to the events in question because they occurred in 2016.

Summary of the judge's main findings and conclusions

It is convenient to begin by summarising the judge's main findings and conclusions, although I shall have to consider some of the facts in more detail later in this judgment.

Superfacts records a wide range of information about clients. Superfacts is of particular value when a client calls a sales consultant. The software recognises the telephone number of the client and causes other information relating to that client to appear on the consultant's screen. Sales consultants access Superfacts using an identification unique to them and a password.

Viewtrail is accessible by clients. At the relevant time, a client could access their details online by using their booking reference number and surname or by using a hyperlink sent by a Trailfinders sales representative.

The judge held that Mr La Gette and Mr Bishop had acted in breach of their respective duties to Trailfinders in the following respects:

i) Mr La Gette had, on his last day of work at Trailfinders, copied client information about five to eight clients from Superfacts onto an A4 sheet of paper for the purposes of his new role with TCL. Mr La Gette combined this information with client information obtained from other sources (such as his personal accounts and devices and publicly available sources) in order to compile a client list which he subsequently sent by email to TCL (“the List”). ii) Mr La Gette had, before leaving Trailfinders, printed two hard copies of client information relating to an individual referred to in the proceedings as “Client A”. Client A was a long-standing and high-value client of the Trailfinders' Nottingham office. When Mr La Gette left Trailfinders he was in the process of booking two large trips for Client A. Mr La Gette wanted the information about those trips so that he could complete the bookings for Client A after he left Trailfinders. iii) Mr Bishop had, in the last six months of his employment with Trailfinders, assembled a “contact book”. This contained the names, contact details and other information (including booking reference numbers that could be used to access those customers' Viewtrail accounts) about clients he had dealt with. The majority of this information was taken from Superfacts. Mr Bishop took the contact book with him when he left. Mr Bishop supplied the information contained in the contact book to TCL. iv) Mr Bishop had, after the termination of his employment with Trailfinders, accessed the records of 32 of Trailfinders' clients stored on Viewtrail.

The judge's principal findings and conclusions with respect to TCL were as follows:

i) TCL did not supply new franchisees with potential customers; they were expected to bring their own. In the case of travel consultants coming from the travel business, they were expected by TCL, and positively encouraged, to bring their customer contact list with them. They were not warned by TCL about any risk of breach of confidence in doing so. ii) TCL added the client information brought by Mr La Gette and Mr Bishop from Trailfinders to TCL's computer system for use by Mr La Gette and Mr Bishop. iii) A reasonable person in the position of TCL's CEO, Stephen Byrne, and other persons of significance within TCL's operations would have been aware that at least part of the contact information brought to TCL by Mr La Gette and Mr Bishop was likely to have been copied from Trailfinders' customer data. Such persons at TCL knew or ought to have known that Trailfinders reasonably regarded the information as confidential. iv) Accordingly, TCL received such information subject to an equitable obligation of confidence. v) TCL was in breach of that obligation because it used the information for the benefit of its business.

TCL's grounds of appeal

TCL appeals on three grounds:

i) Ground 1 is that the judge applied the wrong legal test in holding that TCL owed an obligation of confidence to Trailfinders in respect of confidential information received by TCL from Mr La Gette and Mr Bishop. ii) Ground 2 is that the judge's approach to the question of what TCL ought to have understood about the information provided to it by Mr La Gette and Mr Bishop was wrong and inconsistent with his own conclusions on other issues. iii) Ground 3 is that the judge erred in holding TCL liable for breach of confidence despite making no findings that TCL had misused any confidential information.

It should be noted before proceeding further that there is no challenge to the judge's conclusion that some of the information disclosed by Mr La Gette and Mr Bishop to TCL was information confidential to Trailfinders. Nor is any issue raised concerning the distinction between confidential information which forms part of an ex-employee's own skill, experience and knowledge and confidential information which amounts to a trade secret of the former employer.

In order for an equitable obligation of confidence to arise, confidential information must have been communicated in circumstances importing such an obligation. It is common ground that the correct test is the test that I derived from earlier authorities in Primary Group (UK) Ltd v Royal Bank of Scotland plc [2014] EWHC 1082 (Ch) , [2014] RPC 26 at [223], which was approved by this Court in Matalia v Warwickshire County Council [2017] EWCA Civ 991 , [2017] ECC 25 at [46]:

“It follows from the statements of principle I have quoted above that an equitable obligation of confidence will arise not only where confidential information is disclosed in breach of an obligation of confidence (which may itself be contractual or equitable) and the recipient knows, or has notice, that that is the case, but also where confidential information is acquired or received without having been disclosed in breach of confidence and the acquirer or recipient knows, or has notice, that the information is confidential. Either way, whether a person has notice is to be objectively assessed by reference to a reasonable person standing in the position of the recipient.”

Given that this is essentially the same test as that articulated by the judge at [42] and [124] and applied by him at [131]–[132], at first blush ground 1 appears distinctly unpromising. Counsel for TCL submitted, however, that the judge had not correctly applied this test to the facts. In order to put this submission in ...

To continue reading

Subscribers can access the reported version of this case.

You can sign up for a trial and make the most of our service including these benefits.

Why Sign-up to vLex?

Over 100 countries.

Search over 120 million documents from over 100 countries including primary and secondary collections of legislation, case law, regulations, practical law, news, forms and contracts, books, journals, and more.

Thousands of Data Sources

Updated daily, vLex brings together legal information from over 750 publishing partners, providing access to over 2,500 legal and news sources from the world’s leading publishers.

Find What You Need, Quickly

Advanced A.I. technology developed exclusively by vLex editorially enriches legal information to make it accessible, with instant translation into 14 languages for enhanced discoverability and comparative research.

Over 2 million registered users

Founded over 20 years ago, vLex provides a first-class and comprehensive service for lawyers, law firms, government departments, and law schools around the world.

Subscribers are able to see a list of all the cited cases and legislation of a document.

Subscribers are able to see a list of all the documents that have cited the case.

Subscribers are able to see the revised versions of legislation with amendments.

Subscribers are able to see any amendments made to the case.

Subscribers are able to see a visualisation of a case and its relationships to other cases. An alternative to lists of cases, the Precedent Map makes it easier to establish which ones may be of most relevance to your research and prioritise further reading. You also get a useful overview of how the case was received.

Subscribers are able to see the list of results connected to your document through the topics and citations Vincent found.

United Kingdom
Chancery Division
23 March 2023
Court of Appeal (Bermuda)
13 December 2023

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy . ACCEPT

Court of Appeal upholds High Court decision that a travel agency was in breach of equitable obligations of confidence in relation to client information supplied to it by two former employees of a competitor agency

Insights Court of Appeal upholds High Court decision that a travel agency was in breach of equitable obligations of confidence in relation to client information supplied to it by two former employees of a competitor agency

March 16, 2021

In 2016, over 40 sales consultants left the employment of Trailfinders Ltd, a travel agent with 37 branches in the UK and Ireland, to join Travel Counsellors Ltd (TCL), a competitor of Trailfinders.

Trailfinders issued proceedings against two individuals, Mr La Gette and Mr Bishop, alleging that when they left, they took with them names, contact details and other information about Trailfinders’ clients in breach of implied terms in their employment contracts and in breach of equitable obligations of confidence owed to Trailfinders. Trailfinders also sued TCL for breach of an equitable obligation of confidence. At first instance, His Honour Judge Hacon found in favour of Trailfinders.

In relation to TCL, HHJ Hacon found that:

i) in the case of travel consultants joining TCL, TCL expected and encouraged them to bring their customer contact list with them; TCL did not warn them about any risk of breach of confidence in doing so;
ii) TCL added the client information brought by Mr La Gette and Mr Bishop from Trailfinders to TCL’s computer system for use by Mr La Gette and Mr Bishop;
iii) a reasonable person in senior positions at TCL would have been aware that at least part of the contact information brought to TCL by Mr La Gette and Mr Bishop was likely to have been copied from Trailfinders’ customer data; such persons at TCL knew or ought to have known that Trailfinders reasonably regarded the information as confidential;
iv) accordingly, TCL received such information subject to an equitable obligation of confidence; and
v) TCL was in breach of that obligation because it used the information for the benefit of its business.

TCL appealed, but Mr La Gette and Mr Bishop did not.

In terms of whether TCL owed an equitable obligation of confidence to Trailfinders in respect of confidential information brought to it, TCL argued that HHJ Hacon had not correctly applied the legal test to the facts.

TCL submitted that an equitable obligation of confidence would only arise if the recipient of information knew or had notice that the information was confidential, and whether the recipient had notice was to be assessed objectively by reference to a reasonable person standing in the position of the recipient. It was not enough, it submitted, to say that a reasonable person would make enquiries as to whether the information received by him, or some of it, was confidential.

Referring to The Racing Partnership Ltd v Done Brothers (Cash Betting) Ltd [2020] EWCA Civ 1300, in which it was implied that it was relevant to consider what, if any, enquiries a reasonable person would make, Lord Justice Arnold found that if the circumstances were such as to bring it to the notice of a reasonable person in the position of the recipient that the information, or some of it, might be confidential to another, then the reasonable person’s response might be to make enquiries. Whether the reasonable person would make enquiries, and if so what enquiries, was inevitably context- and fact-dependent. If the reasonable person would make enquiries, but the recipient did not, then an obligation of confidentiality would arise.

Arnold LJ understood TCL’s argument to be that nothing less than blind-eye knowledge that the information was confidential would suffice. Arnold LJ disagreed. He said that blind-eye knowledge was equated with actual knowledge, and was subjective. Whether a person had notice was an objective question to be assessed by reference to the standards of the reasonable person.

Arnold LJ also disagreed with TCL’s submission that it was not sufficient that a reasonable person in the position of TCL would have been aware that, as the judge had found, “at least part of” the information received from Mr La Gette and Mr Bishop was (likely to be) confidential. There was no reason why an obligation of confidence should only arise if the recipient was on notice that all the information received was likely to be confidential, Arnold LJ said. The obligation would be limited to the information that was confidential, but that was a different point.

Arnold LJ also rejected TCL’s submission that it was not sufficient that a reasonable person in the position of TCL would have been aware that (some of) the information received from Mr La Gette and Mr Bishop was “ likely” to be confidential. If someone was so aware, Arnold LJ said, a reasonable person in TCL’s position would make enquiries. TCL did not do so. If it had done so, and Mr La Gette and Mr Bishop had told TCL the truth about the sources of the information, TCL would have discovered that some of the information had come from Trailfinders’ client database and was therefore confidential to Trailfinders.

TCL also challenged the judge’s finding that TCL would have been aware that at least part of the contact information brought to TCL was likely to have been copied from Trailfinder’s customer data because there was too much client information for it to have been carried in their heads. Arnold LJ rejected this argument, not only because it was a question of fact that TCL did not have permission to appeal, but also because he agreed with HHJ Hacon that there was indeed too much information to be held in the employees’ heads. For example, one of the lists supplied consisted of the titles, first names, surnames, addresses, email addresses and telephone numbers of 313 individuals. TCL must have appreciated that this could not have been carried in one person’s head, which made it probable that at least some of it had been copied from Trailfinders’ client database (as was in fact the case). Yet, TCL neither warned Mr La Gette not to bring any of Trailfinders’ confidential information, nor asked him whether he had done so or even what the source or sources of the list was or were.

The appeal was dismissed. (Travel Counsellors Ltd v Trailfinders Ltd [2021] EWCA Civ 38 (19 January 2021) — to read the judgment in full, click here ).

Wiggin's expertise, delivered direct to you

Cookies on this website
Strictly Necessary Cookies
Google Analytics Cookies
Privacy and Cookie Policy

This website uses cookies so that we can provide you with the best user experience possible. Cookies necessary for the operation the site are stored on your computer automatically. We need your consent before we can set cookies which aren't necessary, but which help us understand which sections of the website you find most interesting and useful, and which carry out other visitor analytics.

Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings.

To provide these analytics we would like to be able to set Google analytics cookies to help us collect anonymous information, such as the number of visitors to the site, and the most popular pages on the site.

Google's privacy policy relating to these cookies is available here . You can read more about how we use Google analytics cookies in our privacy policy which is set out below .

The slider shows your current preference. Please leave or change it as required, and then click Save.

Please enable Strictly Necessary Cookies first so that we can save your preferences!

This Privacy Notice ( Notice ) describes how Wiggin collects and uses your personal data. All our data processing is carried out in accordance with our obligations under the EU General Data Protection Regulation ( GDPR ) and the Data Protection Act 2018.

This Notice tells you what personal data Wiggin collects, why we need it, how we use it and what protections are in place to keep it secure.

Wiggin , we , us and our mean or refer to Wiggin LLP, a limited liability partnership with registered number OC308767 and with registered office at Jessop House, Jessop Avenue, Cheltenham, Gloucestershire GL50 3WG, UK. Wiggin is registered as a data controller at the Information Commissioner’s Office with registration number Z5732337.

personal data means information about individuals (including you), and information from which such individuals could be identified.

you means any individual whose personal data we process, including Wiggin clients, Wiggin client personnel, counterparties, counterparty personnel, other solicitors and advisors, witnesses, suppliers, supplier personnel and general business contacts.

Data Controller

Wiggin LLP is a data controller in relation to your personal data and we take care to protect the privacy rights of individuals.

Information Protection Manager

We are not required under the GDPR to appoint a Data Protection Officer. We have, however, appointed a Data Protection Manager, currently Alexander Ross, who is responsible for overseeing our compliance with the GDPR and any other applicable data protection legislation and regulation. In addition, our Compliance Officer for Legal Practice, currently Alan Owens, oversees compliance with our professional responsibilities and with legislative requirements.

The Data Protection Manager can be contacted at [email protected] .

How does Wiggin obtain your personal data?

In many cases we obtain your personal data from you directly, including through your use of this website or when you contact us direct. In other cases we will obtain your personal data from a third-party source, for example, we may collect information from our clients or our clients’ personnel, agents and advisors; other law firms and advisors which represent you; the company for whom you work; other organisations and people with whom you have dealings; our associated and related businesses (including INCOPRO , Overmorrow , Viewfinder , Reviewed & Cleared , Cirkus ); intermediaries; government agencies; credit reporting agencies; information or service providers; and publicly available records.

What about personal data relating to others which you provide to Wiggin?

If you provide information to us about someone else (such as one of your associates, directors or employees, or someone with whom you have business dealings) you must ensure that you are entitled to disclose that information to us and that the person understands that we, without taking any further steps, may process that information in accordance with this Notice.

What personal data does Wiggin collect from (and about) you?

If we collect and use personal data about you, the types of data we collect will vary in nature depending on the circumstances and purpose of processing. Here are some illustrative and non-exhaustive examples:

personal data about you: name, address, date of birth, marital status, nationality, race, gender, preferred language, job title, work life, CV, restrictions and/or required accommodations, and possibly personal data about your family life;
personal data to contact you at work or home: name, address, telephone, and email addresses;
personal data which may identify you: photographs and video, passport and/or driving licence details, electronic signatures;
personal data to process any payment we might need to make to you personally: bank account details, HMRC numbers and references (where applicable);
personal data to monitor your use of our website: see the ‘website cookies and trackers’ section below.

Why do we need to collect and use your personal data?

If we collect and use personal data about you, we will do so for one or more of a number of reasons, the primary purpose being to provide legal advice and services to our clients, and this may involve the use of your personal data in one or more of the following (non-exhaustive) ways:

to contact you if you are involved in a matter we are undertaking for a client, whether in your professional or personal capacity;
to carry out investigations, risk assessments and client due diligence;
to review, draft and disclose correspondence and other documents, including court documents;
to instruct third parties on behalf of our clients;
to prepare legal opinions and provide legal advice; and
to enable the exchange of information between Wiggin and our affiliated and related businesses.

We may also process your personal data for business management purposes, which are likely to involve the use of your personal data in one or more of the following (non-exhaustive) ways:

to engage and contact suppliers;
to interview prospective members of staff;
to carry out marketing and general business development activities;
to carry out internal reviews, investigations and audits;
to conduct business reporting and analytics;
to help measure performance and improve our services;
for regulatory and legislative compliance and related reporting; and
for the prevention and detection of crime.

What is Wiggin’s lawful basis for processing your personal data?

Under the GDPR, we must identify a lawful basis for processing your personal data, and that basis may vary according to the type of personal data processed and the individual to whom it relates, and the nature of the processing.

Performance of a contract with you (where applicable)

If you are a private client or an individual supplier or other individual with a direct contractual relationship with us, we process the personal data we require in order to fulfil our obligations under our contract with you.

The legitimate interests of Wiggin or a third party

We may process your personal data on the lawful basis that it is in our legitimate interests and/or the legitimate interests of a third party to do so. This will primarily apply when we provide legal advice and services to our clients. Our legitimate interest in such instances is the proper performance of our role as an authorised and regulated provider of legal services. Our clients also have a legitimate interest (and a more general right in law) in obtaining legal advice and services.

Our broad interest in the provision of legal services as a basis for processing your personal data, and our clients’ corresponding interest in the receipt of such services, can be broken down into more discrete categories which may include (but are not limited to):

contacting individuals relevant to our work and our clients’ matters, which may involve the use of your personal data;
reviewing documents and correspondence that have been disclosed to us, our clients and third parties which may contain your personal data;
reviewing and analysing evidence available to us and our clients which may contain your personal data;
adducing legal arguments and preparing documents and correspondence which may contain your personal data;
disclosing documents and correspondence which may contain your personal data to various parties in the furtherance of our clients’ objectives;
instructing third parties on behalf of our clients;
receiving payments from our clients and third parties and facilitating payments to our clients and third parties; and
to allow for all of the above, the secure management and storage of your personal data within our IT environment and hard copy filing systems.

We may also process your personal data on the basis that it is necessary for our legitimate interest in the effective management and running of our firm, which may include (but is not limited to): engaging suppliers and supplier personnel; interviewing prospective staff members; ensuring that our systems and premises are secure and running efficiently; for regulatory and legislative compliance and related auditing and reporting; for marketing and general business development purposes; for insurance purposes; to facilitate, make and receive payments, and to collect money owing to us.

We do not consider that the processing of your personal data on the basis of our legitimate interests as described above is likely to result in any unwarranted prejudicial effect on your rights and freedoms or your own legitimate interests, and we regularly review our systems and processes to ensure that remains the case.

Compliance with a legal obligation to which Wiggin is subject

In certain circumstances, we may be obliged process personal data in order to comply with our legal obligations. This might include, but is not limited to, processing where required for tax and accounting purposes; where required by our regulators for conflict checking purposes; where required by the order of a court or tribunal; or to enable us to fulfil our compliance and other obligations under relevant legislation or regulation.

More information relating to the lawful bases for processing personal data can be found on the Information Commissioner’s Office website (see details below) or by contacting our Data Protection Manager (contact details below).

Special category personal data

If we process any special category personal data, which is data relating to your racial or ethnic origin, political opinions, religious and philosophical beliefs, trade union membership, health data, biometric data or sexual orientation, we will obtain your explicit consent to that processing, unless this is not required by law (because, for example, it is processed for the purpose of exercising or defending legal claims) or the information is required to protect your health in an emergency. Where we are processing personal data based on your consent, you have the right to withdraw that consent at any time by emailing us at [email protected] and describing the specific consent that you wish to withdraw.

To whom do we disclose your personal data?

We will disclose your personal data internally within Wiggin LLP and (if applicable) its associated businesses to those members of staff who provide legal services to you or your business, and/or to other members of staff with whom you or your employer or agent makes contact.

We may disclose your personal data to third parties (outside Wiggin), but only when it is necessary to do so, and subject to our obligations of confidentiality. Such recipients include but are not limited to: other clients and contacts; co-counsel, other solicitors/barristers/experts/foreign law firms whom we instruct on your behalf; our insurance brokers and underwriters; our bank, auditors and accountants; debt collectors; our outsourced IT providers and other suppliers; HMRC; the Solicitors Regulation Authority; the Law Society; the Home Office and HM Passport Office; the other side and/or other parties on any given matter (lay and solicitor).

We may also need to disclose your personal data in the course of business to our consultants who operate in the UK and in the USA, to staff in our Brussels office, and to our associated and related businesses (including INCOPRO , Overmorrow , Viewfinder , Reviewed & Cleared , Cirkus ).

Your personal data is also likely to be disclosed to one or more third party service providers who provide us with IT and other technical services, and those service providers act as data processors under our control. We take suitable steps as required by law to ensure that, where the other party concerned is a data processor, they have appropriate data security systems in place and process data solely in accordance with our instructions.

Is your personal data transferred outside the EEA, and if so what safeguards are in place?

Some of the third-party service providers we use and some of our consultants are based in, or carry out their activities in, the European Economic Area (EEA). Until such time as the Brexit transition period expires on 31 December 2020 no additional safeguards are required for the transfer of data to/from the EEA. Some of the third-party service providers we use and some of our consultants are based in, or carry out their activities in, countries outside the UK and the EEA. If in the course of providing services to us any of the latter service providers process personal data, we have made sure to include in their contract with us standard clauses approved by the European Commission (sometimes called ‘the EU Model Clauses’) to ensure that their processing meets the security standards required within the EU. You can view the Commission’s decision which includes these standard clauses via this link: http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32010D0087&from=en . After the decision of the CJEU in the Schrems II case, in which the CJEU found that the US/EU Privacy Shield does not afford sufficient protection for personal data when transferred to the US, we have been monitoring the instances in which personal data is transferred to the US to establish whether any such transfer presents a significant risk to your rights and freedoms even when done under the relevant EU Model Clauses. If it does, we commit to making necessary changes.

How do we protect your personal data?

We have robust security arrangements in place to guard against unauthorised access, use, alteration or destruction of, or the accidental loss of, your personal data. We take appropriate technical and organisational security measures and have rules and procedures in place to ensure that any personal data we hold that is particularly sensitive, or highly confidential, is not accessed by anyone unauthorised to access it, and where applicable to ensure client confidentiality. We have in place, and strictly comply with, an information security policy which determines the security standards we use to protect your personal data.

When we use third-party organisations to process your personal data on our behalf, we require them to have appropriate security arrangements in place, they must comply with our contractual requirements and instructions, and they must ensure compliance with the GDPR and any other relevant data protection legislation, all as required under the GDPR.

How long will your personal data be retained by Wiggin?

It is our policy to retain your personal data for no more than the length of time required for the specific purposes for which it is processed by us and which are set out in this Notice. However, we may be obliged to keep your personal data for a longer period, for example, where required by our legal and regulatory obligations, or in order to ensure we have effective IT back-up systems. In such cases, we will ensure that your personal data will continue to be treated in accordance with this Notice, we will restrict access to any archived personal data, and we will ensure that all personal data is held securely and kept confidential.

Website cookies and trackers

The only cookies we ourselves use on our website are the following session registration cookies:

When you fill in your details on our registration form (for example where you wish to register to receive communications or other services from us), this cookie remembers the details that you load into the registration form so that if you make a mistake or have to redo the form, your details are not all erased (which could be annoying and inconvenient). The cookie is a ‘session’ cookie in that it dies after you have completed and submitted the form. We assume that you are happy with this cookie but if you wish to withhold your consent you can do so by modifying your browser settings to block cookies – please see http://www.wikihow.com/Adjust-Browser-Settings .
Our email marketing messages may direct you to a web page which uses an ASPSESSIONID% cookie. This cookie allows the page to remember certain settings you use. This cookie is temporary and is destroyed each time you close your browser.

For more information about cookies generally, please visit All About Cookies .

We also use Google Analytics, the web analysis service provided by Google. Google utilises the data collected to track and examine the use of our website, to prepare reports on its activities and share them with other Google services. Google may use the data collected to contextualise and personalise the ads on its own advertising network. The personal data that is collected is cookie and usage data, and that processing takes place in the USA under Google’s standard terms and privacy policy, which you will find here . You have the option of refusing to accept Google Analytics cookies when you first visit our website.

What are your rights?

You have various rights in relation to your personal data under Data Protection law. The UK’s Information Commission’s Office website provides a helpful and informative summary of your rights which you can access here: https://ico.org.uk/your-data-matters/ . In particular, we’d like to remind you that you have:

the right of access to a copy of the personal data we hold about you;
the right to require us to correct any inaccuracies in your personal data;
the right to object to decisions about you being taken by automated means (although we do not make any decisions by automated means);
where we have sought your consent, the right to withdraw your consent at any time; and
the right to ask us not to process your personal data for direct marketing purposes.

You may also have the following rights in relation to your personal data in certain circumstances:

the right to restrict or object to our use of your personal data;
the right to require us to provide a copy of your personal data to others; and
the right to require us to erase your personal data.

If you wish to exercise any of your rights please contact our Data Protection Manager at [email protected] .

There are exceptions to the rights of individuals in relation to their personal data and, particularly if we are processing your personal data for the purpose of providing legal advice to our clients, your rights may be limited. We will, at all times, respect your personal data and seek to be as transparent as possible, but please be aware that in some instances we may be restricted by law from even acknowledging that we process your personal data.

How to make a complaint

If you have a question about the information provided in this Notice, or you have a concern or complaint about the way in which we process your personal data, please contact our Data Protection Manager at [email protected] . In any event you have the right to address a complaint to the Information Commissioner. The Information Commissioner can be contacted at: –

Information Commissioner’s Office, Wycliffe House, Water Lane, Wilmslow, Cheshire, SK9 5AF www.ico.org.uk . The ICO helpline number is 0303 123 1113.

Last updated 28 September 2021

Are confidential information protections still fit for purpose? (Travel Counsellors Ltd v Trailfinders Ltd)

Table of contents.

What are the practical implications of this case?
What was the background?
What did the court decide?
Ground three
Case details

Article summary

Information law analysis: This case is an appeal by Travel Counsellors Ltd (TCL) against the decision of the High Court in Trailfinders Ltd v Travel Counsellors Ltd, in which the High Court held that both defendants were liable for disclosing confidential information from their previous employer (Trailfinders Ltd (TFL)) to their new employer (TCL), and that TCL was also liable for having accepted the same. TCL’s appeal was unsuccessful on all grounds. Written by Adam Richardson, barrister, at One Essex Court, Chambers of Ian Mayes QC.

To continue reading this news article, as well as thousands of others like it, sign in with LexisNexis or register for a free trial

EXISTING USER? SIGN IN CONTINUE READING GET A QUOTE

Access this content for free with a 7 day trial of LexisNexis and benefit from:

Instant clarification on points of law
Smart search
Workflow tools
41 practice areas

** Trials are provided to all LexisNexis content, excluding Practice Compliance, Practice Management and Risk and Compliance, subscription packages are tailored to your specific needs. To discuss trialling these LexisNexis services please email customer service via our online form. Free trials are only available to individuals based in the UK, Ireland and selected UK overseas territories and Caribbean countries. We may terminate this trial at any time or decide not to give a trial, for any reason. Trial includes one question to LexisAsk during the length of the trial.

Get your quote today and take step closer to being able to benefit from:

36 practice areas

Get a quote for Lexis+

* denotes a required field

Confidential information, privacy and injunctions

Practical steps to protect or obtain access to confidential information
Pre-Action Protocol on Media and Communications Claims
Confidentiality clause
Confidentiality letter—mutual
Do you have a non-disclosure agreement (NDA) for use with a consultant?
What are the implications of reducing the term of an NDA from five years to two years?

Are recorded conversations between lay people legal and can they be used in legal proceedings?

Are recorded conversations between lay people legal and can they be used in legal proceedings?The law relating to the recording of conversations between private individuals and the use of those recordings in court proceedings is a developing area. As a matter of first principles, there is no offence

Managing a breach of confidentiality or information security

Managing a breach of confidentiality or information securitySTOP PRESS—Impact of the Retained EU Law (Revocation and Reform) Act 2023: This document contains references to retained EU law (REUL) and associated terms introduced by the European Union (Withdrawal) Act 2018 in connection with Brexit.

Confidential information, privacy and injunctionsSTOP PRESS—Impact of the Retained EU Law (Revocation and Reform) Act 2023: This document contains references to retained EU law (REUL) and associated terms introduced by the European Union (Withdrawal) Act 2018 in connection with Brexit. From 1

0330 161 1234

International Sales(Includes Middle East)
Latin America and the Caribbean
Netherlands
New Zealand
Philippines
South Africa
Switzerland
United States

HELP & SUPPORT

Legal Help and Support
Tolley Tax Help and Support

LEGAL SOLUTIONS

Compliance and Risk
Forms and Documents
Legal Drafting
Legal Research
Magazines and Journals
News and Media Analysis
Practice Management
Privacy Policy
Cookie Settings
Terms & Conditions
Data Protection Inquiry
Protecting Human Rights: Our Modern Slavery Agreement

Practice areas
Testimonials

Trailfinders and Travel Counsellors Court of Appeal Judgment: Use of Confidential Information by Ex-Employees

In an industry where customer relationships and client contacts are key, a travel business’s confidential inf ormation is always likely to include traveller names, addresses, contact details and booking information. When an employee leaves a travel business, there is inevitably a risk that, unless properly protected, the confidential information of the business could leave with them.

The Court of Appeal , in a judgment handed down on 19 th January 2021, has dismissed an appeal brought by Travel Counsellors Limited against a decision in the Intellectual Property Enterprise Court ( IPEC ) that the company breached its obligations of confidentiality after using client information brought by employees of its competitor, Trailfinders Limited.

In a case which confirms that a recipient of confidential information should make enquiries as to the conf identiality of that information if a reasonable person in their position would have done so, there are v ital issues to be addressed for all travel businesses who rely on their workers, employees, consultants and home-workers to bring with them their own client contacts.

Background

Between 2016 and 2020 over 40 travel consultants left Trailfinders to join Travel Counsellors’ franchise model as homeworkers . Proceedings were brought by Trailfinders against Travel Counsellor s and four former employees, with Trailfinders alleging that when their former employees left the business they took with them names, contact details and other pertinent client information stored in the business’ computer systems. Further, after the employees left th e business, they accessed Trailfinders’ computer systems again to obtain further client information, which was then passed on to Travel Counsellors and added to their client lists.

Court of First Instance

To ensure that the trial could be completed in two days (as required by IPEC rules of procedure) Trailfinders pursued their case to trial against Travel Counsellors and only two of the four individual defendants – Mr La Gette and Mr Bishop.

The evidence put before the Court was that:

Mr La Gette copied client information in respect of 5 to 8 Trailfinders clients onto an A4 sheet of paper on his last day of working for the business, for the purposes of his new role at Travel Counsellors.
Mr La Gette also printed two hard copies of client information relating to a particularly high value and long standing client of Trailfinders. .
Mr Bishop, in his last six months at Trailfinders, assembled a ‘contact book’ with the names, contact details and booking reference numbers of clients he had dealt with. The majority of this information was sourced from Trailfinders’ computer systems. Mr Bishop took the contact book with him when he left and supplied the information contained in it to Travel Counsellors.
Mr Bishop had, after the end of his employment with Trailfinders, accessed the records of 32 Trailfinders’ clients stored on the business’ computer systems – again, with the aim of providing this information to Travel Counsellors .

H is Honour Judge Hacon concluded that in taking this confidential information and supplying it to a competitor , Mr La Gette and Mr Bishop had both breached implied provisions in their contracts of employment. Notably, these are not express confidentiality provisions, but confidentiality provisions implied by law on the basis that an employee owes a duty of fidelity and good faith to his employer.

The Court found that , by virtue of this duty of good faith, there were implied terms of con fidentiality in those contracts, which both individuals had acted in breach of.

In addition, both individuals owed an equitable duty of confidence to Trailfinders . This equitable obligation arises where the recipient of the relevant information appreciated, or ought to have appreciated that it was confidential . In disclosing information which they knew, or ought to have known was confidential, that duty was breached.

HHJ Hacon found, in respect of Travel Counsellor’s role:

Travel Counsellors did not supply new franchisees/home-workers with potential customers – they were expected to provide their own. In respect of individuals coming from another travel business, they were expected and encouraged by Travel Counsellors to bring their customer contact list with them, and were not warned by Travel Counsellors of any legal risk in doing so.
Travel Counsellors added the client information brought from Trailfinders by Mr La Gette and Mr Bishop to the Travel Counsellors computer system.
A reasonable person in the position of Stephen Byrne, Travel Counsellor’s CEO (and other persons of significance within Travel Counsellors) would have been aware that at least part of this information would have been likely copied from Trailfinders’ customer data.

Accordingly, the Court found that Travel Counsellors received such information subject to an equitable duty of confidence. In using the confidential information provided for the benefit of its business, Travel Counsellors was in breach of that duty of confidence.

The Court ruled in Trailfinders’ favour and found that Mr La Gette, Mr Bishop an d Travel Counsellors had effectively broken the law by their actions.

Court of Appeal

Travel Counsellors appealed the decision of HHJ Hacon on three grounds:

That the judge applied the wrong legal test in holding that Travel Counsellors owed an obligation of confidence to Trailfinders in respect of the confidential information which it received from Mr La Gette and Mr Bishop.
That the judge’s approach to the question of what Travel Counsellors ought to have understood about the information provided to it was wrong.
That the judge erred in holding Travel Counsellors liable for breach of confidence despite making no findings that Travel Counsellors had misused any confidential information.

Travel Counsellors did not challenge the judge’s conclusion that the information which was disclosed to them by Mr La Gette and Mr Bishop was information which was confidential to Trailfinders.

The three Court of Appeal Judges found as follows, on each of the grounds raised above.

If the circumstances are such that the recipient of the information has it brought to their notice that the information is, or may be confidential, and a reasonable person in that recipient’s situation would make enquiries about the confidentiality of that information, then an obligation of confidentiality will arise where the recipient fails to make those enquiries.
Though the judge had previously stated in his judgment that ‘by itself, the existence of clients which were common to both Trailfinders and Travel Counsellors proved nothing’, he had then gone on to consider and make findings as to what Travel Counsellors knew or ought to have known about the client information it received. There was no inconsistency in the Judge’s findings.
The extent of the misuse of confidential information was not a question of law but an issue for the quantification of damages, and as such should be dealt with at the assessment of damages stages. No errors had been made by the trial judge.

For the reasons given above, the appeal was dismissed, and the decision of the Court of First Instance (IPEC) was upheld.

Analysis

This case and its subsequent appeal are signif icant for a number of reasons. Much was made in the trial of Travel Counsellor’s expectation that their franchisees bring with them their own client lists. The brochure which they provided to potential franchisees read as follows:

“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 – a great start to a rewarding career running your own travel business.”

The Court found it improbable that Travel Counsellors could believe that Trailfinders did not regard their customer lists (including names and details of customers) as confidential.

Secondly, the ability of Trailfinders to rely on implied terms of confidentiality in its contracts of employment was significant. Whilst we would always advise that well-drafted employment contracts with appropriate confidentiality and anti-compete clauses will stand you in good stead for any future issues with employees , the duty of fidelity and good faith which an employee owes to its employer may be relied upon in these cases.

Thirdly, the finding of the Court of Appeal is sig nificant because it introduces a new test for misuse of confidential information, which may impose a greater burden on a recipient of potentially confidential information to make enquires as to the nature of that information.

If the circumstances are such as to bring it to the notice of a reasonable person in the recipient’s position that the information (or some of it) may be confidential to another, then the reasonable person’s response may, depending on the context and the facts, be to make enquiries.
If the reasonable person would make enquiries, but the recipient abstains from doing so, then an obligation of confidentiality will arise .

This will be significant when bringing any new person into a business. Are they bringing any client data with them? If so – where did it come from , and do they have the relevant legal standing to pass it on to you? If not, their breaches of confidence could result in your business being drawn into a lengthy and costly claim.

Comment from Ami Naru – Head of Employment

“ This case is an important and timely reminder in the current climate that a business’s mo st important assets can come in the form of intangible confidential information. Protection of this confidential information is crucial to a travel company’s commercial success, but is often overlooked when considering employment issues. We all know that client relationships are king in the travel industry, and this case is a pertinent example of what that really looks like in practice , when the confidential information giving access to those relationships is mishandled. ”

Practical Points

Mark documents which are confidential clearly as ‘Confidential’ .
If your employees have access to customer and client databases, ensure make sure that access is revoked at an appropriate time when they leave to go to a competitor.
Ensure that your database security is up to date, with all relevant files encrypted and/or password protected.
Your employment contracts and internal data protection and confidentiality policies are key to protecting your vital customer information. Make sure that these are up to date and enforceable. Take legal advice if you are unsure.
Ensure that all employees (especially after they have handed their notice in) are aware of their legal responsibilities. An explanation of the consequences of the consequences of their actions in taking client information with them could help you to avoid costly litigation.

The judgment discussed in this article can be read in full here: https://www.bailii.org/ew/cases/EWCA/Civ/2021/38.html .

If you have any questions about the issues raised in this case, and want further advice on protecting your confidential information, contact Gemma Wilson in the Commercial and Corporate Governance Team on [email protected]

If you require assistance in relation to your employees and employment contracts, contact Ami Naru, Head of Employment, on [email protected]

This article was originally published on: 24 February 2021

Latest news

Judgment Highlights Why You Need to Keep Your Conditions Up to Date

A recent Judgement has highlighted the significance of keeping your travel businesses’ Terms and Conditions up to date, explains our…

Did Significant Changes Just Get More Significant?

In this article Nick Parkinson explores how the recent decision in Sherman –v- Reader Offers puts organisers at risk of…

Let’s Get One Thing Straight #3 – Cooling Off Periods

Does the 14-day ‘Cooling Off Period’ apply to Travel and Leisure? Anna Wendel settles the debate in this, the third…

France (FR)
Germany (DE)
Netherlands

United Kingdom

United States
Intellectual Property
SnIPpets Blog
(Trail)finders keepers (again!): Court of Appeal upholds obligation of confidence on the recipient o

(Trail)finders keepers (again!): Court of Appeal upholds obligation of confidence on the recipient of information

See our blog on the IPEC decision, where for the first time a UK court considered the impact of the Trade Secret Directive on UK principles governing the protection of confidential information: (Trail)finders keepers: High Court considers interplay of Trade Secrets Directive and breach of confidence for the first time | Fieldfisher

Recap of the facts

Travel Counsellors Limited (TCL) and Trailfinders are two competing travel agencies in the UK. In 2016 around 40 employees left Trailfinders to join TCL and took with them client names, contact details and other information. The judge noted that this was " was expected and positively encouraged by TCL ". The IPEC ruled that this constituted breach of the ex-employees' employment contracts. More pertinently, the court further ruled that TCL had breached its equitable obligation of confidence to Trailfinders. TCL appealed the decision.

The Court of Appeal recognised that there was little authority on the test but confirmed that whether a recipient should have known the information was confidential is determined by considering whether a reasonable person standing in the position of the recipient would have known. So, a duty of confidence does not only arise where a recipient knew or turns a blind eye to whether information is confidential. On the facts, TCL were aware that at least some of the information brought to them by their new employees came from Trailfinders’ database. Any reasonable person in that position would have made enquiries into whether the information in question was confidential.

The judge confirmed that this obligation also arises if the recipient is only on notice that parts of the information are likely to be confidential.

This case clarifies the key principles for determining breaches of confidence outside of the usual contractual scenario. Recipients of information from third parties must exercise caution and positively make enquiries if they suspect that the information might be confidential.

With special thanks to trainee, Fabia Breuer, for her contribution to this blog.

Areas of Expertise

Employers' Liability For Employees' Confidentiality Breaches

Contributor.

Watch our recent webinar 'Stopping departing employees taking confidential information and competing' here.

Why is Travel Counsellors v Trailfinders of interest?

The recent Court of Appeal case of Travel Counsellors v Trailfinders 1 highlights the risk of employers becoming liable for their employees' misuse of confidential information.

The case clarifies the test that the courts will apply to determine whether a third party recipient of information (such as, here, an employer) owes a duty of confidentiality to the owner of that information.

Walker Morris' Commercial Dispute Resolution and Employment specialists Rebecca Jackson, Nick McQueen and Charlotte Smith explain this important decision and offer practical advice for employers.

What are the key takeaways for employers?

In this case two employees left the employ of Trailfinders and began to work for a competing travel company, Travel Counsellors. The employees took client names, contact details and other information from Trailfinders to Travel Counsellors in breach of confidence. Travel Counsellors then misused the information for the benefit of its business. The Court of Appeal found that Travel Counsellors was liable for the employees' misuse of confidential information.

The key takeaways for employers to note are:

When a third party, such as an employer, receives information belonging to another, that party/employer may owe obligations of confidentiality to the owner in respect of that information. If the recipient misuses the information, they may be directly liable for breach of confidence.
Where the person giving another's information to a third party (such as, in this scenario, an employee giving information belonging to its ex-employer to its new employer) does so in breach of any contractual or equitable duties of confidence, the third party/employer recipient can become vicariously liable for breach of confidence.
The correct test to determine whether a third party recipient of information [vicariously] owes a duty of confidentiality to the owner of the information is whether the reasonable person in receipt of such information would make enquiries as to its confidentiality.
If the reasonable person would make enquiries but the recipient in fact has not done so, then a duty of confidentiality on the part of the recipient will arise.
In the case of primary liability for misuse of confidential information, then the 'reasonable person in receipt of information' test (as explained above) will suffice.
In the case of vicarious liability for misuse by another person, more - such as actual or 'blind eye' 2 knowledge that the information is confidential may be required - may be required.

What practical advice arises?

Employers receiving potentially confidential information from employees - particularly where new employees are joining from competing businesses - should proceed with caution. If there are any reasons at all for suspecting that information might be confidential (and, in reality, the context of the employee's arrival from a competitor might be sufficient reason in itself), then failing to make enquiries will give rise to a duty of confidentiality.

Where an employer proceeds to use the information in those circumstances, that is likely to constitute a breach of the duty, resulting in primary liability for breach of confidence.

Employers also should beware their employees misusing confidential information, as this can give rise to vicarious liability on the part of the employer.

Having in place robust policies and procedures for the proper use of confidential and potentially confidential information, and the fostering of a corporate culture which recognises and respects confidentiality, can significantly minimise the risk of confidentiality breaches. Staff education, including the education of new/incoming staff, is crucial; as is ensuring that recruitment policies and practices are consistent with the business' confidentiality culture.

The Travel Counsellors v Trailfinders 'reasonable person in receipt of information' test will mean that, in practice, the vast majority of cases concerning employers'/employees' use of confidential information will be hugely fact- and context- specific. Such cases will turn, for example, on what happened in the particular case; who knew or said what; who did what with the information; were any enquiries made; would a reasonable recipient have made enquiries; what enquiries would a reasonable recipient have made? And so on.

In general, the more a case turns on factual (as opposed to purely legal) issues, the greater the element of 'litigation risk', and therefore the greater incentive for parties (often, in particular, defendants) to negotiate a settlement. As such, it is possible that the Court of Appeal's decision in Travel Counsellors may prompt or encourage employers/businesses whose confidential information has been stolen, copied or otherwise misused, to take legal action.

How can we help?

Walker Morris' cross-department team of specialist dispute resolution and employment lawyers are experienced in successfully advising employers through the entire process of protecting confidential information - from drafting policies, procedures and contracts effectively, through to conducting court proceedings and/or negotiating settlements if and when any confidentiality is compromised. Our lawyers understand that each situation has its own specific circumstances and commercial realities, and have the experience and expertise to be able to discuss the various options, and likely outcomes, with you.

1 [2021] EWCA Civ 38

2 'blind eye' knowledge is where a recipient may suspect that information is confidential but chooses not to find out (i.e. chooses to turn a blind eye)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Employment and HR

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

The Dispute Adviser

Confidential information: travel counsellors ltd v trailfinders ltd.

This is the transcript to my latest Weekly Law Review vlog which is available on my LinkedIn profile and my YouTube channel .

After a short break, I have chosen a case which was handed down on the 19th of January 2021. The case is Travel Counsellors Ltd V Trailfinders Ltd and it was heard in the Court of Appeal.

The case was concerned with whether the defendants were liable for disclosing confidential information from their previous employer, Trailfinders, to their new employer, Travel Counsellors, and whether the new employer was also liable for accepting the confidential information.

The first instance decision, or the decision at the first trial, was given on 12 March 2020. That court heard that Mr L and Mr B worked for the claimant, Trailfinders which is a travel agency. Both Mr L and Mr B moved to work for the defendant, Travel Councillors Ltd. Mr L and Mr B took confidential information, belonging to Trailfinders, to Travel C,ouncillors, another travel company. The information consisted of customer information which was valuable and confidential information and had been taken from Trailfinders' IT systems. Mr B had collated the information over a 6 month period and Mr L had copied separate information on his last day.

At the trial in the High Court, the court was asked to determine:

whether the information was confidential;
whether Mr L and Mr B had breached their equitable and contractual duties owed to Trailfinders by disclosing the information; and
whether Travel Counsellors was liable for Mr B's and Mr L's actions because the two had misused the information in the course of their employment at that company. In other words, was Travel Counsellors vicariously liable for Mr B and Mr L’s actions?

The court found that yes, the information was confidential, yes, the two employees had breached their contractual and equitable duties to Trailfinders and, yes, Travel Counsellors was vicariously liable.

It was this decision which Travel Counsellors (but not Mr L or Mr B) appealed to the Court of Appeal.

There were three grounds of appeal. First, Travel Counsellers argued that the judge applied the wrong test when holding that Travel Counsellors Ltd owed an obligation of confidence relating to the confidential information received from Mr L and Mr B. This was rejected by the Court of Appeal. The court restated the test and the judge said that, “i n my judgement, if the circumstances are such as to bring it to the notice of a reasonable person in the position of a recipient but the information, or some of it, may be confidential to another, then the reasonable person's response may be to make enquiries. Whether that person would make enquiries, and if so what enquiries, is inevitably context and fact dependent. If the reasonable person would make enquiries, but the recipient abstained from doing so, then obligation of confidentiality will arise ".

The second ground was that the first judge's approach to the question, of what Travel Counsellors Ltd ought to have understood about the information, was wrong. This was a criticism of the first instance judge's findings of fact. The Court of Appeal did not accept that the findings of fact had been wrong.

The final ground was that the judge wrong to hold that travel Travel Counsellors Ltd was liable for breach of confidence, even though there had been a finding that Travel Counsellors Ltd had misused the confidential information. This ground was actually abandoned during the appeal hearing. Travel Counsellors Ltd admitted that the information had been stored on its systems and had been used to send marketing emails.

So the appeal was dismissed.

This case helpfully clarified the test which the court will use when asked to determine whether a third-party will be liable if it receives confidential information. As stated, the test is whether the reasonable person's response to receiving such information is that they would make enquiries. Whether the reasonable person would make enquiries, and the extent of those enquiries, is context and fact dependent.

In my view, this is good news for lawyers representing claimants. I say this because, cases which rely heavily on a particular finding of fact being made, tend to carry more risk and, as such, a defendant may be more likely to settle. This is because the defendant may wish to “buy off“ the risk of a finding of fact being made against them at trial.

The key takeaway point for businesses, is to be exercise caution when dealing with potentially confidential information when recruiting employees that have worked for a competitor. If the employee has breached his duties of confidentiality to its former employer, the new employer could be held liable too.

Travel Counsellors Ltd v Trailfinders Ltd [2021] EWCA Civ 38 (19 January 2021)

Last Updated on April 20, 2021 by LawEuro

Neutral Citation Number: [2021] EWCA Civ 38 Case No: A3/2020/0886

IN THE COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM THE HIGH COURT OF JUSTICE, BUSINESS AND PROPERTY COURTS, INTELLECTUAL PROPERTY ENTERPRISE COURT His Honour Judge Hacon [2020] EWHC 591 (IPEC)

Royal Courts of Justice Strand, London, WC2A 2LL 19 January 2021

B e f o r e : LORD JUSTICE LEWISON LADY JUSTICE ASPLIN and LORD JUSTICE ARNOLD ____________________ Between: TRAVEL COUNSELLORS LIMITED Appellant – and – TRAILFINDERS LIMITED Respondent ____________________ Ian Mill QC and Tom Cleaver (instructed by Pinsent Masons LLP) for the Appellant Gavin Mansfield QC and Alexander Robson (instructed by Lewis Silkin LLP) for the Respondent Hearing date : 13 January 2021 ____________________

Covid-19 Protocol: This judgment was handed down remotely by circulation to the parties’ representatives by email, release to BAILII and publication on the Courts and Tribunals Judiciary website. The date and time for hand-down is deemed to be at 10:30am on 19 January 2021

Lord Justice Arnold:

Introduction

1. The Claimant (“Trailfinders”) is a travel agent with 37 branches in the UK and Ireland, employing over 700 sales consultants. The Second, Third, Fourth and Fifth Defendants (“the Individual Defendants”) are former sales consultants at Trailfinders. In 2016 they left to join the First Defendant (“TCL”), as did about 40 others by the date of the Particulars of Claim. TCL is a competitor to Trailfinders which trades using a franchise model. It has around 1,250 franchisee travel consultants.

2. In these proceedings Trailfinders alleges that, when the Individual Defendants left, they took with them names, contact details and other information about their clients which was stored in a Trailfinders computer system called Superfacts. It also alleges that, after they left, they accessed a Trailfinders computer system called Viewtrail to obtain further client information. Trailfinders contends that the Individual Defendants thereby acted in breach of implied terms in their contracts of employment and in breach of equitable obligations of confidence owed to Trailfinders. It also contends that TCL acted in breach of an equitable obligation of confidence.

3. For reasons of economy and to ensure that a trial on liability could be completed in two days, in accordance with normal procedure in the Intellectual Property Enterprise Court, Trailfinders selected two of the Individual Defendants against whom to pursue its case to trial, namely the Second Defendant (“Mr La Gette”) and the Fifth Defendant (“Mr Bishop”). The claim was stayed as against the other two Individual Defendants.

4. His Honour Judge Hacon concluded, for the reasons given in his judgment dated 12 March 2020 [2020] EWHC 591 (IPEC), [2020] IRLR 448, that Mr La Gette and Mr Bishop had both acted in breach of their contracts of employment and in breach of equitable obligations of confidence to Trailfinders and that TCL had acted in breach of an equitable obligation of confidence.

5. TCL now appeals. There is no appeal by Mr La Gette or Mr Bishop. Although formally the Individual Defendants are parties to the appeal, they have not participated in it.

6. Although the judge referred in his judgment to European Parliament and Council Directive 2016/943/EU of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure, it is common ground that the Directive did not apply to the events in question because they occurred in 2016.

Summary of the judge’s main findings and conclusions

7. It is convenient to begin by summarising the judge’s main findings and conclusions, although I shall have to consider some of the facts in more detail later in this judgment.

8. Superfacts records a wide range of information about clients. Superfacts is of particular value when a client calls a sales consultant. The software recognises the telephone number of the client and causes other information relating to that client to appear on the consultant’s screen. Sales consultants access Superfacts using an identification unique to them and a password.

9. Viewtrail is accessible by clients. At the relevant time, a client could access their details online by using their booking reference number and surname or by using a hyperlink sent by a Trailfinders sales representative.

10. The judge held that Mr La Gette and Mr Bishop had acted in breach of their respective duties to Trailfinders in the following respects:

i) Mr La Gette had, on his last day of work at Trailfinders, copied client information about five to eight clients from Superfacts onto an A4 sheet of paper for the purposes of his new role with TCL. Mr La Gette combined this information with client information obtained from other sources (such as his personal accounts and devices and publicly available sources) in order to compile a client list which he subsequently sent by email to TCL (“the List”).

ii) Mr La Gette had, before leaving Trailfinders, printed two hard copies of client information relating to an individual referred to in the proceedings as “Client A”. Client A was a long-standing and high-value client of the Trailfinders’ Nottingham office. When Mr La Gette left Trailfinders he was in the process of booking two large trips for Client A. Mr La Gette wanted the information about those trips so that he could complete the bookings for Client A after he left Trailfinders.

iii) Mr Bishop had, in the last six months of his employment with Trailfinders, assembled a “contact book”. This contained the names, contact details and other information (including booking reference numbers that could be used to access those customers’ Viewtrail accounts) about clients he had dealt with. The majority of this information was taken from Superfacts. Mr Bishop took the contact book with him when he left. Mr Bishop supplied the information contained in the contact book to TCL.

iv) Mr Bishop had, after the termination of his employment with Trailfinders, accessed the records of 32 of Trailfinders’ clients stored on Viewtrail.

11. The judge’s principal findings and conclusions with respect to TCL were as follows:

i) TCL did not supply new franchisees with potential customers; they were expected to bring their own. In the case of travel consultants coming from the travel business, they were expected by TCL, and positively encouraged, to bring their customer contact list with them. They were not warned by TCL about any risk of breach of confidence in doing so.

ii) TCL added the client information brought by Mr La Gette and Mr Bishop from Trailfinders to TCL’s computer system for use by Mr La Gette and Mr Bishop.

iii) A reasonable person in the position of TCL’s CEO, Stephen Byrne, and other persons of significance within TCL’s operations would have been aware that at least part of the contact information brought to TCL by Mr La Gette and Mr Bishop was likely to have been copied from Trailfinders’ customer data. Such persons at TCL knew or ought to have known that Trailfinders reasonably regarded the information as confidential.

iv) Accordingly, TCL received such information subject to an equitable obligation of confidence.

v) TCL was in breach of that obligation because it used the information for the benefit of its business.

TCL’s grounds of appeal

12. TCL appeals on three grounds:

i) Ground 1 is that the judge applied the wrong legal test in holding that TCL owed an obligation of confidence to Trailfinders in respect of confidential information received by TCL from Mr La Gette and Mr Bishop.

ii) Ground 2 is that the judge’s approach to the question of what TCL ought to have understood about the information provided to it by Mr La Gette and Mr Bishop was wrong and inconsistent with his own conclusions on other issues.

iii) Ground 3 is that the judge erred in holding TCL liable for breach of confidence despite making no findings that TCL had misused any confidential information.

13. It should be noted before proceeding further that there is no challenge to the judge’s conclusion that some of the information disclosed by Mr La Gette and Mr Bishop to TCL was information confidential to Trailfinders. Nor is any issue raised concerning the distinction between confidential information which forms part of an ex-employee’s own skill, experience and knowledge and confidential information which amounts to a trade secret of the former employer.

14. In order for an equitable obligation of confidence to arise, confidential information must have been communicated in circumstances importing such an obligation. It is common ground that the correct test is the test that I derived from earlier authorities in Primary Group (UK) Ltd v Royal Bank of Scotland plc [2014] EWHC 1082 (Ch), [2014] RPC 26 at [223], which was approved by this Court in Matalia v Warwickshire County Council [2017] EWCA Civ 991, [2017] ECC 25 at [46]:

“It follows from the statements of principle I have quoted above that an equitable obligation of confidence will arise not only where confidential information is disclosed in breach of an obligation of confidence (which may itself be contractual or equitable) and the recipient knows, or has notice, that that is the case, but also where confidential information is acquired or received without having been disclosed in breach of confidence and the acquirer or recipient knows, or has notice, that the information is confidential. Either way, whether a person has notice is to be objectively assessed by reference to a reasonable person standing in the position of the recipient.”

15. Given that this is essentially the same test as that articulated by the judge at [42] and [124] and applied by him at [131]-[132], at first blush ground 1 appears distinctly unpromising. Counsel for TCL submitted, however, that the judge had not correctly applied this test to the facts. In order to put this submission in context, it is necessary to set out a little more fully the facts found by the judge which are relevant to TCL’s state of mind at the relevant time.

16. At the time when TCL was first in contact with Mr La Gette and Mr Bishop, TCL knew that they were employed by Trailfinders as sales consultants. The brochure provided by TCL to potential franchisees such as Mr La Gette and Mr Bishop stated:

17. Mr La Gette resigned from Trailfinders on 30 September 2016. On 16 August 2016 he discussed his proposed move from Trailfinders to TCL in a phone conversation with Cathy Oldfield, an employee of TCL. During the course of the conversation Mr La Gette said:

“I mean, I’ve been, I’m a good, decent person, I promise you, but I’ve been taking what I need to take at the moment. I’ve got my, I’m only interested in my clients, I’m not tapping up other people but I’ve got my details and I’ve been keeping email trails clear and stuff cos I’m aware they may be looking. It’s all so exciting. It’s like being a spy.

I feel dreadful, you know, I do not like it. And I’m not, I’m not going to, people get to know me over time and I’m not saying, you know, I’m perfect this, perfect that but I just, it does feel a bit, you do feel a bit sort of, you question yourself I think. Am I being a bit underhand here, but at the end of the day I’m only taking contacts.”

18. The judge found that this passage was too ambiguous for him to conclude that Mr La Gette was saying that he had copied, or that he intended to copy client information, from Trailfinders’ records. He may just have been telling Ms Oldfield that he intended to bring clients with him to TCL, which he did.

19. On 21 September 2016 Mr La Gette had a further phone conversation with Helena Thompson of TCL during which Ms Thompson said:

“Yeah, the only thing we need to have is their title so that’s Mr, Mrs or whatever, first name, surname and email address, there are also fields for their phone number and their postal address if you’ve got them, you can put them in and they will get uploaded automatically. …. if you haven’t got all their details don’t worry about it, it’s just the email we need really at this stage.”

20. On 14 October 2016 Mr La Gette sent the List to an unidentified person at TCL by email. The recipient replied thanking him, and added “fantastic you have so many contacts”. Mr La Gette confirmed in cross-examination that there were more than 200 contacts in the List. (Indeed, according to counsel for TCL, the correct number was 313.)

21. The judge found that it was highly improbable that TCL believed that Trailfinders did not regard such client information as being confidential, since TCL maintained that its own equivalent information was confidential.

22. The judge did not make any specific findings of fact concerning any discussions between Mr Bishop and TCL.

23. Against this background the judge held as follows (emphases added):

“131. In my view a reasonable person in the position of Mr Byrne or other person of sufficient significance in TCL’s operations would have been aware that at least part of the contact information brought to TCL by Mr La Gette and Mr Bishop was likely to have been copied from Trailfinders’ customer data. There was too much of it to have been carried in their heads. Such persons at TCL knew or ought to have known that Trailfinders would regard the information as confidential. A belief that TCL was thereby receiving confidential information could only have been reversed if Mr La Gette and Mr Bishop had given TCL convincing reasons why this was not the case. They did not and I have the impression that TCL did not wish to inquire.

132. In those circumstances TCL ought to have known that they were in receipt of information which Trailfinders reasonably regarded as confidential. Equity imposed on TCL an obligation of confidence and it was in breach of that obligation.”

24. Although counsel for TCL made a number of specific criticisms of the judge’s reasoning which I will address, his central submission was that the judge had fallen into error because an equitable obligation of confidence would only arise if the recipient of information knew or had notice that the information was confidential, and whether the recipient had notice was to be objectively assessed by reference to a reasonable person standing in the position of the recipient. It was not enough, he submitted, that a reasonable person would make enquiries as to whether the information received by him, or some of it, was confidential.

25. As counsel for TCL acknowledged, there is surprisingly little authority which directly addresses this question. The nearest which either counsel was able to find is the following passage in Primary Group:

“238. I have already touched on the position where information confidential to A is disclosed by B to C in circumstances where C knows, or ought to appreciate, that the disclosure is a breach of B’s obligation of confidence to A. As explained above, in those circumstances, C will become subject to an equitable obligation of confidence owed to A. Accordingly, if C makes unauthorised use of the information, C will be liable to A for breach of confidence.

239. What if C knows, or ought to appreciate, that the information is confidential to A, but C believes, and a reasonable person standing in his shoes would also believe, that B is entitled to disclose the information to C for a particular purpose? In these circumstances C will come under an equitable obligation to A only to use the information for that purpose. (It is not necessary for present purposes to consider whether C will also owe a duty to B.) If it turns out that, in fact, B was not entitled to disclose the information to C, then C will not be liable to A for breach of confidence for using the information for that purpose. If, on the other hand, C proceeds to use the information for a different purpose, then C will be liable to A for breach of confidence.

240. In some cases, the circumstances may be such that a reasonable person in the position of C would make further inquiries – and in particular would ask A if he or she consented – before making a particular use of the information. If C makes such use without making such inquiries, then in my judgment C will be liable for breach of confidence: cf. Volkswagen AG v Garcia [2013] EWHC 1832 (Ch), [2014] FSR 12 at [38] (Birss J).”

26. Although counsel for TCL argued that the statement of principle in [240] was confined to its specific context and that it was unsupported by the decision in the Volkswagen case cited, he did not go so far as to submit that it was wrong. In any event, I see no reason to alter the view which I expressed there.

27. The only other authority cited which touches on the point is The Racing Partnership Ltd v Done Brothers (Cash Betting) Ltd [2020] EWCA Civ 1300, [2021] FSR 2. Although counsel for TCL submitted the judgment of the majority on issue 3 in that case supported TCL, I disagree. Lewison LJ, with whom Phillips LJ agreed, said at [206]:

“… the judge was rejecting the argument that anyone with horseracing knowledge would have known that the Tote [the supplier of the information] could not sub-license the information. If I add to that the fact that SIS [the recipient] both made inquiries of the Tote, and received not only assurances but also a contractual warranty, I find it difficult to see what else a reasonable person should have done. …”

It is implicit in this reasoning that it is relevant to consider what, if any, enquiries a reasonable person would make.

28. Accordingly, in my judgment, if the circumstances are such as to bring it to the notice of a reasonable person in the position of the recipient that the information, or some of it, may be confidential to another, then the reasonable person’s response may be to make enquiries. Whether the reasonable person would make enquiries, and if so what enquiries, is inevitably context- and fact-dependent. If the reasonable person would make enquiries, but the recipient abstains from doing so, then an obligation of confidentiality will arise.

29. Counsel for TCL argued that nothing less than blind-eye knowledge that the information was confidential would suffice. I do not accept this. Blind-eye knowledge is to be equated with actual knowledge, and is subjective. Whether a person has notice is an objective question to be assessed by reference to the standards of the reasonable person. (I should make it clear, however, that the position may be different where the issue is not one of primary liability for misuse of confidential information, but accessory liability for misuse by another person. In the latter case actual knowledge or blind-eye knowledge may be required: see Vestergaard Frandsen A/S v Bestnet Europe Ltd [2013] UKSC 31, [2013] 1 WLR 1556 at [40]-[43] and Primary Group at [250].)

30. Turning to the detailed criticisms, counsel for TCL first submitted that it was not sufficient that a reasonable person in the position of TCL would have been aware that “at least part of” the information received from Mr La Gette and Mr Bishop was (likely to be) confidential. I do not accept this. There is no reason why an obligation of confidence should only arise if the recipient is on notice that all the information received is likely to be confidential. The obligation will be limited to the information which is confidential, but that is a different point.

31. Secondly, counsel for TCL submitted that it was not sufficient that a reasonable person in the position of TCL would have been aware that (some of) the information received from Mr La Gette and Mr Bishop was “likely” to be confidential. I do not accept this either. If aware that some of the information was likely to be confidential, a reasonable person in TCL’s position would make enquiries. TCL did not do so. If it had done so, and Mr La Gette and Mr Bishop had told TCL the truth about the sources of the information, TCL would have discovered that some of the information disclosed to it by Mr La Gette and Mr Bishop came from Trailfinders’ client database and hence was confidential to Trailfinders.

32. Thirdly, counsel for TCL submitted that the judge’s finding in the first sentence of [131] did not amount to a finding that a reasonable person in TCL’s position would have been aware that the information was confidential to Trailfinders. This submission is based on selective quotation. As can be seen, later in the same paragraph the judge said that “[s]uch persons knew or ought to have known that Trailfinders would regard the information as confidential”. Moreover, he went on in [132] to hold that “TCL ought to have known that they were in receipt of information which Trailfinders reasonably regarded as confidential”.

33. Fourthly, counsel for TCL submitted that the judge’s finding in the first sentence of [131] was unsupported by the point made by the judge in the second sentence of [131], namely that there was too much client information for it to have been carried in their heads. I do not accept this submission for a number of reasons. First, it is an attack on the judge’s finding of fact, which TCL does not have permission to appeal, rather than on the legal test applied by him. Secondly, I do not think it is a fair reading of the judgment to conclude that the finding in the first sentence was solely based on the second sentence. On the contrary, I consider that it was also based on the other findings made by the judge which I have set out in paragraphs 16-21 above. Thirdly, I agree with the judge that the quantity of client information disclosed by Mr La Gette and Mr Bishop to TCL was a factor which supported the conclusion that TCL was on notice that at least some of the information was likely to be confidential to Trailfinders. Take the List, which consisted of the titles, first names, surnames, in some cases addresses, email addresses and telephone numbers of 313 individuals. As the judge said, TCL must have appreciated that Mr La Gette could not have carried all that information in his head, which made it probable that he had copied at least some of it from Trailfinders’ client database (as was in fact the case). Yet, consistently with its invitation to potential franchisees to bring their old customer contact lists with them, TCL neither warned Mr La Gette not to bring any of Trailfinders’ confidential information, nor asked him whether he had done so or even what the source or sources of the List was or were.

34. Fifthly, counsel for TCL pointed out that the judge had recorded at [78] that in closing Trailfinders had “relied only on acts admitted by Mr La Gette, although it maintained the position that there were likely to have been other, similar acts in breach of confidence”. The judge only made findings in respect of the acts admitted by Mr La Gette, and did not find that Mr La Gette had committed any other acts in breach of confidence. Furthermore, the judge accepted Mr La Gette’s evidence as to what he had done. Counsel for TCL then pointed out that it was Mr La Gette’s evidence that the only client information he had copied from Superfacts was the telephone numbers of five to eight clients, whereas the discussion between Mr La Gette and Ms Thompson showed that the important information was the clients’ email addresses. Moreover, he submitted that, as discussed below, TCL’s only relevant act of misuse of confidential information was the sending of marketing circulars to clients by email. Leaving aside the point that this is another attack on the judge’s findings of fact rather than his legal analysis, in my view none of these matters undermines the judge’s conclusions in [131]-[132] concerning the information which TCL received from Mr La Gette. The fact remains that TCL received a large quantity of client information from Mr La Gette in circumstances which put it on notice that some of the information was likely to be confidential to Trailfinders. The extent of TCL’s use of information which was in fact confidential to Trailfinders is a separate question to which I will return.

35. Sixthly, counsel for TCL repeated a submission he had made to the judge in closing that sales consultants started to leave Trailfinders for TCL in 2015 and by the time Mr La Gette left at least 20 had left, yet Trailfinders had not made any complaint to TCL about misuse of confidential information by the time Mr La Gette and Mr Bishop joined TCL, and so there was no reason for TCL to believe that Trailfinders had any concern about this. Counsel for Trailfinders informed us that this was factually inaccurate, since solicitors acting for Trailfinders had sent a letter before claim to TCL on 28 July 2016, before Mr La Gette and Mr Bishop joined TCL. In reply, counsel for TCL did not dispute that such a letter had been sent, but relied upon the fact that no claim had been issued by the relevant dates. In my view this is a hopeless argument. For the reasons given by the judge, TCL must have appreciated that Trailfinders was likely to regard such information as confidential. The letter before claim would have confirmed this. The fact that proceedings had not yet been commenced is immaterial. Furthermore, as counsel for Trailfinders pointed out, there was no evidence from TCL’s witness Mr Byrne that this had led TCL to conclude that Trailfinders was not concerned.

36. In substance, ground 2 is an attack on the judge’s findings of fact. The principal point relied upon counsel for TCL in this regard was an argument that the judge’s findings were inconsistent with his finding at [90] concerning a set of data called the “Overlap Data” which consisted of all the customer information that appeared in both (i) Trailfinders’ client database and (ii) the client databases maintained by TCL for Mr La Gette and Mr Bishop. The judge did not find this to be of much value. As he put it at [90]:

“By itself, the existence of clients which were common to both Trailfinders and TCL proved nothing. It could mean that names were passed by Mr La Gette and/or Bishop to TCL in breach of confidence, or alternatively that the identities of overlap clients of TCL were within the experience and skills of Mr La Gette or Mr Bishop, or had been acquired from publicly available sources.”

37. Counsel for TCL submitted that the judge was correct to reach this conclusion, and that it was inconsistent with his finding that TCL ought to have appreciated that some of customer information supplied by Mr La Gette and Mr Bishop was likely to be confidential to Trailfinders.

38. I do not accept this argument. The key words in the passage quoted above are “By itself”. As the judge explained, the Overlap Data were produced by Trailfinders during the course of the proceedings i.e. around three years after the material time. Moreover, the judge went on to consider and make findings as to what TCL knew or ought to have known about the client information it received from Mr La Gette and Mr Bishop at that time, which led him to the findings he set out in [131]-[132]. There is no inconsistency between those findings and what he said at [90].

39. Counsel for TCL did not pursue ground 3 as formulated in TCL’s grounds of appeal and set out above. On the contrary, he properly conceded that TCL had made what he described as limited admissions that it had used the confidential information it received from Mr La Gette and Mr Bishop by storing the information in its computer system and by using it to send marketing emails to clients. Furthermore, he confirmed that TCL was not pursuing an argument advanced in its skeleton argument (although not in its grounds of appeal) that Trailfinders had suffered no detriment as a result of TCL’s unauthorised use of the confidential information, and that detriment was required to complete the cause of action. Rather, he explained that TCL was concerned that the judge had merely made a general finding at [118] that “TCL used [the client details it received from Mr La Gette and Mr Bishop] for the benefit of its business”, which left open the question of the extent of such use (which affects the quantum of damages payable by TCL). Although counsel for TCL initially submitted that the matter should be remitted to the judge for him to make findings on this question, he subsequently sensibly accepted that it would be more cost efficient for this question to be addressed as part of the inquiry as to damages.

40. This just leaves two points. The first is the point discussed in paragraph 34 above. For the reasons I have explained, this does not affect the judge’s judgment as to liability, but it will be open to TCL to argue on the inquiry that it does affect the assessment of damages.

41. The second is that there is an issue between the parties as to whether any use of the information to conclude contracts with clients constituted use solely by Mr La Gette and Mr Bishop (as TCL contends) or use both by Mr La Gette and Mr Bishop and by TCL (as Trailfinders contends) given that TCL is party to the contracts. For the avoidance of doubt, this is another issue for the inquiry.

42. For the reasons given above, I would dismiss this appeal. It follows that it is not necessary to consider a Respondent’s notice served by Trailfinders.

43. I agree.

Lewison LJ:

44. I also agree.

Equitable duty of confidence not affected by Trade Secrets Directive (High Court)

Practical law uk legal update case report w-024-5374 (approx. 4 pages), get full access to this document with a free trial.

Try free and see for yourself how Practical Law resources can improve productivity, efficiency and response times.

About Practical Law

This document is from Thomson Reuters Practical Law, the legal know-how that goes beyond primary law and traditional legal research to give lawyers a better starting point. We provide standard documents, checklists, legal updates, how-to guides, and more.

650+ full-time experienced lawyer editors globally create and maintain timely, reliable and accurate resources across all major practice areas.

83% of customers are highly satisfied with Practical Law and would recommend to a colleague.

81% of customers agree that Practical Law saves them time.

Confidentiality
General Contract and Boilerplate
Restraint of Trade, Confidentiality and IP
Sponsorship

Duty of Confidence: Protect your neck.

In the recent dismissal of the Travel Counsellors Ltd appeal against the High Court decision in favour of Trailfinders ( Travel Counsellors Ltd v Trailfinders Ltd [2021] EWCA Civ 38) , the Court of Appeal has provided further guidance on the equitable obligations of confidentiality where a business has found its confidential information being misused by a competitor who has received the confidential information by virtue of that business’ ex-employees.

This decision is welcomed as it gives authority as to whether a business is owed a duty of confidentiality by a competitor via a third party on whom an obligation of confidentiality was never imposed or whether the duty remains only with that third party initially receiving any confidential information/ trade secret from a business.

What happened?

In summary, ex-employees of Trailfinders found themselves entering into franchise agreements with Travel Counsellors. Travel Counsellors consistently invited franchisees to bring their old customer contract lists with them without any warning of the risks associated with a breach of confidence. Subsequently, these ex-employees transferred a list of Trailfinders’ customer information (including email addresses and contact numbers) which they had collated prior to leaving Trailfinders’ employment.

When Trailfinders brought action against Travel Counsellors, the High Court found that the equitable duty of confidence was still in existence and Travel Counsellors had breached this duty by using the confidential information disclosed to it by Trailfinders’ ex-employees for its own benefit. The High Court stated that an equitable duty of confidence arises “ whenever a person receives information he knows or ought to know is fairly and reasonably to be regarded as confidential ” and therefore it was held that Travel Counsellors would have been aware that at least some of the information provided to them by the ex-employees was Trailfinders’ confidential information, in particular noting that Travel Counsellors would have maintained that its own equivalent information was confidential.

In Travel Counsellors’ appeal, they argued that they could not be liable simply because a ‘reasonable person’ would have made enquiries as to whether a part of the information provided to them by the ex-employees was confidential. The appeal was unanimously dismissed by the Court of Appeal, whereby Arnold LJ cited the test as to whether an equitable obligation of confidence has arisen ( Primary Group (UK) Ltd v Royal Bank of Scotland plc [2014] EWHC 1082 (Ch) ). This test being that confidential information must have been communicated in circumstances importing such an obligation and that the recipient must know, or be on notice that, at least some of the information is confidential to another party. Therefore if on the facts, a reasonable person would make enquiries as to whether the information was confidential and its source, but the recipients does not, then there is an equitable duty of confidentiality. The Court of Appeal concluded that it isn’t essential that the recipient knew the information was confidential or even intentionally turned a blind-eye as to whether to information was confidential; the lack of reasonable enquiries may be sufficient to breach the equitable duty of confidence.

An additional point to note is the consideration by the High Court that this case fell within the definition of Article (4) of the Trade Secrets Directive (Directive 2016/943), being that the use or disclosure of a trade secret shall be considered unlawful when the recipient know or ought to have known in the circumstances that the trade secret had been obtained unlawfully or, in breach of any contractual duty or, any other duty to limit the use of the trade secret. The Court of Appeal did not address this any further considering that the events which occurred did so prior to the Directive’s implementation but it is an indication that the relationship between the Trades Secrets Regulations and the common law of confidentiality will inevitably crop up in future case law.

This ruling serves as a clear authority in situations where a business receives information that relates to a competitor; emphasising the importance in considering the source of that information. A few practical steps would be to:

Impress upon employees that they do not use information which they have obtained from a competitor’s business without express consent. Ideally, this principle should be built into an IP and IT security policy which they should all sign on joining and which should be linked to their obligations in their employment contract. Such policies should not just be left for them to find for themselves on the company intranet;
Always confirm with potential employees at the interview stage what their employment contract with the employer they are leaving contains in terms of confidentiality, IP ownership and restrictive covenants; and
In instances where they receive any information from employees/ third parties, be aware that there is potentially a duty upon them to make reasonable enquiries as to whether such information is confidential and, where it is, not to use it .

Employers would be well advised to take all these measures. Otherwise, what looks like the dream employee could turn out to be a nightmare.

Butterflies, berries, and beetles: the sparkling future of Cambridge colour
Fantastic funding opportunities for UK medtech companies
Finfluencers, the FCA and brand reputation
Design and copyright law following the Retained EU Law (Revocation & Reform Act) 2023
The UKIPO’s updated stance on enforcing the address for service requirement

Latest Insights

Marks & Clerk recognised as a leading patent law firm by the Financial Times 2024 Europe rankings

That’s Stentertainment

Marks & Clerk Canadian Managing Partner Jonathan Colombo recognized as a Global Leader in the WTR Global Leaders:Private Practice rankings

swarb.co.uk

May the law be with you – lex vobiscum

Travel Counsellors Ltd v Trailfinders Ltd: CA 19 Jan 2021