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The recent Court of First Instance decision in Tahoe Life Insurance Company Ltd v Cheung Wai Yi [2024] HKCFI 782 serves as a reminder that employers should take proactive steps to safeguard their confidential information when dealing with departing employees.
Background
Tahoe Life Insurance Company Limited (Employer) is an insurance company which offers a range of insurance products in Hong Kong. Ms Cheung (Employee) was employed as an Executive Assistant. Clause 13 of her employment contract (Use of Information Clause) provided that:
“13. Use of Information
Duty of confidentiality of all staff to the [Employer] and its agents or customers is governed by the Personal Data (Privacy) Ordinance as well as the common law. Without limiting your duty under the law, and in addition thereto, you must not, during and/or after termination of your employment with the [Employer], directly or indirectly divulge, disclose, or communicate to any person, firm or corporation in any manner and for any purpose whatsoever, including, without limitation, for financial gain in any way (except necessary for the proper performance of your duties under this employment or with the written consent of the [Employer]) any information of any kind, nature, or description concerning any matter affecting or relating to the business of the [Employer], or any matter affecting or relating to its agents or customers, including without limitation to:-
(i) any trade secrets or any correspondence, accounts, connections or dealings of the [Employer] or any knowledge gained in relation thereto during your employment; and
(ii) any information whatsoever concerning any past or present agents or customers of the [Employer]“.
The Employee’s employment was terminated six months after she started working for the Employer. The Employee commenced a claim in the Labour Tribunal but subsequently withdrew that action.
Five days after withdrawing the action, the Employee sent two emails to the CEO of the Employer copying various parties including the Labour Tribunal, the Employer’s HR department and other officers of the Employer. In the emails, the Employee requested that the Employer reimburse her for the alleged deterioration caused to her physical and mental health as a result of her employment with the Employer. To demonstrate the level of work that she was able to accomplish prior to her deteriorated health, the Employee attached minutes and PowerPoints of the Employer’s management meeting and executive committee meeting prepared by her during her employment.
Alarmed by the Employee’s possession and disclosure of the confidential material, the Employer conducted a search of the log of the Employee’s work email and discovered that during her employment, the Employee had sent more than 20 emails from her work email to her personal email accounts. In total, the Employee had attached 40 internal documents which contained confidential information of the Employer, including board monitoring reports, budget reports, expense, details of auditors and bank accounts.
The Employer commenced an action against the Employee for breach of her duty of confidentiality, seeking interim injunctive relief against the Employee from divulging any of the 40 documents attached in her emails. The Court found in favour of the Employer and granted the interim injunctive relief.
Duty of confidentiality
The Employee’s duty of confidentiality was expressly provided for in her employment contract and implied under the principles explained in Faccenda Chicken Ltd v Fowler and others [1987] 1 Ch 117 (Faccenda). In particular, the Use of Information Clause expressly provided that the Employee owed a duty to the Employer, its agents and customer to not, during and/or after termination of the Employee’s employment with the Employer, disclose any information including trade secrets, correspondence, accounts, information gained during employment, and information of the customers and agents of the Employer.
Interim injunction
Applying American Cyanamid Co. v Ethicon Ltd [1975] AC 396, the Court found that the balance of convenience favoured the Employer in granting an interim injunction prohibiting the Employee from further disclosure of the documents. In coming to this conclusion, the Court’s findings were as follows:
- there was at least a serious issue to be tried regarding the disclosure of the 40 documents and the information they contained. This disclosure was either expressly prohibited by the Use of Information Clause in the Employee’s employment contract, or by the implied terms under the principles elaborated in Faccenda because they contained trade secrets;
- given the nature of the documents and the information they contained, their disclosure would result in irreparable damage to the Employer;
- a risk of further disclosure could be inferred from how the Employee handled the documents; and
- the Employer was able to pay damages caused to the Employee for reason of this interim injunction if its claim ultimately failed.
Key takeaways
The case serves as a timely reminder that employers should take proactive steps to safeguard their confidential information when dealing with departing employees. Unauthorised transfer of confidential information may go undetected during the course of employment or even after termination. Employers should also maintain records of the access in order to monitor the flow of confidential information, which will be useful in restraining unauthorised disclosure of confidential information through legal action.
The case also emphasises the importance of carefully drafted confidentiality obligations. Although employees generally owe an implied duty of confidentiality to their employers even after the termination of their employment, the protection afforded by such duty only applies to trade secrets and not all confidential information. Employers should regularly review their confidentiality provisions to ensure that they continue to provide the best protection.
Key Contacts
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