Laptop audit: no breach of confidence

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Laptop audit: no breach of confidence

Confidential information obtained from a company defendant because of an employee’s breach of her employment contract can be used in a lawsuit against that defendant, the Supreme Court of Victoria has ruled.

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Confidential information obtained from a company defendant because of an employee’s breach of her employment contract can be used in a lawsuit against that defendant, the Supreme Court of Victoria has ruled.

Background


Management consultant IGP is suing a company called “Tactical Transformation Services and Associates” and its sole director Michael Nucifora. In this preliminary judgment on employee obligations and confidential information, it is not stated why IGP is suing Tactical.

Before the lawsuit began, one of IGP’s employees, Donna Murphy, worked on an unpaid basis for Tactical because she was the sister of Mr Nucifora.

Ms Murphy was working for Tactical in breach of her employment contract with IGP, which contained the following clause:

“You agree that during the employment you will not directly or indirectly be concerned or interested (except as a shareholder of a publicly listed company) in a business that is competitive with the business of IG Partners.”

Ms Murphy was using two laptops – one provided by IGP and the other by Tactical.

In late October 2017, Ms Murphy managed to copy a large amount of Tactical’s highly confidential material onto IGP computers. It appears from the judgment that, as a remote worker, she was trying to make sure that the data on her laptops was up-to-date with each company’s internet-based data storage systems.

This data included commercially sensitive documents such as employee induction processes, an employee timesheet template, various emails setting up commercial relationships, preparations for quotes and professional services fees, employment contracts, employee entitlements including pay and incentives, charge rates, and the identity of clients and potential clients.

Ms Murphy’s IGP laptop was provided to her subject to an Acceptable Use Policy, which gave IGP the right to audit her laptop. In late October, an independent IT consultant audited her IGP laptop and discovered the data that had been copied from Tactical.

A few days later IGP began a lawsuit against Tactical using Tactical’s confidential information.

Legal issue and question


Tactical sought to strike out IGP’s claim on the basis that IGP had unlawfully obtained and used its confidential information. A key issue was whether IGP should be made subject to an obligation of confidence given the circumstances in which it had obtained Tactical’s confidential information.

Held


Judge McDonald of the Supreme Court of Victoria noted that, in addition to being bound by the conflict of interest clause,  Ms Murphy was also bound by a duty of fidelity that was implied into her employment contract. That duty imposed an obligation upon her to not do anything that would impede the faithful performance of her obligations or which would be destructive of confidence between her and IGP.

The judge then went on to cite established case law that no-one should be allowed to benefit from his or her own wrongdoing. This is known as the “unclean hands” rule. As Tactical had benefited from Ms Murphy’s breach of her implied and contractual duties, then, because it had “unclean hands”, it should not be allowed to have IGP’s claim struck out.

“In the circumstances of the present case… it is not unconscientious for IGP to have declined to respect the confidentiality of [Tactical’s] confidential information. It obtained the information exercising a lawful right to audit an employee’s laptop. The sole reason [Tactical’s] confidential information was accessible was because [Tactical] engaged Ms Murphy to undertake work for it… that engagement facilitated a breach by Ms Murphy of express and implied contractual obligations which she owed to IGP.”

The judge dismissed Tactical’s application to have IGP’s claim struck out.

Integrated Global Partners Pty Ltd v Hyde & Ors [2018] VSC 45 (13 February 2018)
 
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