When Is Client Contact Information Confidential?
Confidentiality is a key consideration in any commercial endeavour. To retain a competitive edge in the market, a business will often do its utmost to maintain the confidentiality of client information and business strategies.
This is a particularly sensitive issue in the post-termination context – i.e., in disputes between an employer and an ex-employee. The law recognises that an employer may commence legal action to restrain an ex-employee from unauthorised use of trade secrets (or confidential information of equivalent status). Yet, an employer may not restrain an ex-employee from deploying his own skill and knowledge for the benefit of himself and his new employer or in a manner that is otherwise unreasonable under the doctrine of restraint of trade.
The recent judgment of Conpak Management Consultants Limited v Luk Wai Ting [2024] HKCU 3803 explores the boundaries of confidential information in the post-termination context, providing insights into the challenges employers face in proving confidentiality and potential pitfalls in actions against ex-employees.
Background
The Plaintiff is a certified public accountants firm in Hong Kong. Among its clients is Angenvoort Asia Pacific Limited ("Angenvoort").
The Defendant is a professional accountant. Between 29 August 2016 and 31 July 2018, the Defendant was employed by the Plaintiff as a Tax Manager. As part of his employment, the Defendant agreed to a term of his employment contract as well as a company policy not to disclose the Plaintiff's confidential information. It transpired that, during the period of his employment with the Plaintiff, the Defendant forwarded 223 emails from his company (Conpak) email account to his personal email account ("223 Emails").
After his employment with the Plaintiff was terminated, the Defendant joined APEC Taxation Services Limited ("APEC Tax") and sent an email dated 8 April 2020 from his APEC Tax email account to Angenvoort ("Angenvoort Email"). There was also evidence that the Defendant sent emails to the Plaintiff's clients identified in the 223 Emails "solely as a gesture of updating the previous clients as to his current posting".1
The Plaintiff's Claim for Breach of Confidence
Against the above context, the Plaintiff claimed (among other things) that the Defendant had made unauthorized use of Confidential Information, which it defined in its pleadings as "information contained in the emails sent to the Defendant's Conpak Email Account, including contact information of former and current clients of the Plaintiff".2
In particular, the Plaintiff submitted that by sending the Angenvoort Email, the Defendant misused the contact information of Angenvoort as the relevant confidential information; and that there was a real risk that the Defendant would misuse the 223 Emails.3
On this basis, the Plaintiff sought the following relief:4
- An injunction to restrain the Defendant from using or disclosing the Confidential Information or otherwise acting in further breach of the terms of his employment contract;
- Delivery up of all documents and/or materials in the possession, custody, or control of the Defendant the use or disclosure of which would offend against the foregoing injunction; and
- An inquiry as to damages or an account of profits by reason of the breaches of confidence and/or breach of the employment contract.
Confidential Information in the Post-Termination Context
The Court considered the fundamental question to be what the information in question was and whether the information has the quality of confidence for the remedies the Plaintiff sought.5
Summarising well-established principles, the Court then distinguished "trade secrets and confidential information of an equivalent status" from "[c]onfidential information of lesser significance" – only the former was protected in the post-termination context.6
Further, the plaintiff-employer had "the burden of identifying with precision what trade secrets (or confidential information of equivalent status) he seeks to protect",7 which entailed establishment of the following elements:8
"(1) The information must be used in a trade or business.
(2) The information is confidential, that is, not already in the public domain.
(3) The information can be easily isolated from other information which the employee is free to use,
(4) The disclosure of the information would be liable to cause real or significant harm to the owner.
(5) The owner of the information must limit its dissemination or at least not encourage or permit its widespread
(6) publication or otherwise impress upon the employee the confidentiality of the information."
The Confidentiality of Client Contact Information
In relation to the client contact information of Angervoort used in the Angervoort Email, the Court found that while the information may have come in the course of the Plaintiff's business, this did not mean that it was not publicly available.9 As the Plaintiff had failed to lead sufficient evidence in this regard, the Court was not satisfied that the information had the requisite quality of confidence.10
In making this determination, the Court distinguished the present case from that of Willwin Development (Asia) Company Ltd and another v Wei Xing and others, HCA 797/2012, 8 March 2016 ("Willwin"). In Willwin, the relevant confidential information was not the client's names and contacts as such but rather such names and contacts in association with the clients' "product designs, product plans and specifications, forecasts, research and other information". In particular, the Court in Willwin accepted that certain information would not have been available to the public such as "[t]he contact of different employees in different departments of the clients" and the "uncommon materials and parts" specified for production to meet the clients' needs.11
In relation to the 223 Emails, the Court found the Plaintiff's case to be similarly deficient. The Plaintiff had not made known the identities of the clients in the 223 Emails and had not pleaded or adduced evidence of the contents of the 223 Emails. There was therefore no basis for the Court to conclude that any part of the 223 Emails was confidential.12
Interestingly, the Court reasoned that its determination as to the non-confidentiality of client contact information was justified from the perspective of the restraint of trade doctrine as well. Employers could find recourse by enforcing a reasonable restraint of trade clause (for example, as a general rule of thumb, a restraint of 6 – 12 months) or by applying to Court for a springboard injunction (which would operate to reverse the effects of any undue advantage gained by an ex-employee from the misuse of the ex-employer's confidential information). In the absence of a finding that the client contact information had the requisite quality of confidence, to prohibit the Defendant from using them indefinitely would be to impose an (unreasonable) restraint of trade for no limits.13
As ancillary points:
- The Court did not determine the issue of whether email chains appended to the Angervoort Email (chains which had been sent during the Defendant's employee with the Plaintiff) had the requisite quality of confidence. The Plaintiff did not plead this and was therefore prohibited from pursuing this issue at trial.14
- The Court found that the Defendant did disclose the client contact information of Angervoort used in the Angervoort Email to a third party – namely, APEC Tax. This was even though the Defendant himself was the natural person behind APEC Tax receiving the information. However, this issue was moot as the information lacked the requisite quality of confidence.15
- The Court found that there was no evidence that the 223 Emails had been disclosed to third parties.16
Overall, the Court dismissed the Plaintiff's claim for breach of confidence in its entirety and refused to grant the injunctive relief sought.17
Conclusion
The decision in Conpak v Luk Wai Ting highlights the importance of having a clear and defined legal strategy for an action in breach of confidence, especially in the post-termination context. The burden that falls on the plaintiff-employer is a high one, requiring it to be able to identify with precision matters such as the information that has been allegedly misused, the nature of such information, the manner it has been misused, and the loss and damage occasioned from such misuse. Any deficiency in terms of the case pleaded or evidence adduced could be fatal to such action.
As a practical alternative to litigation and its inherent risks, an employer may consider seeking advice on well-crafted confidentiality clauses, non-compete clauses, or non-solicitation clauses. These contractual mechanisms may provide a stronger basis for legal action or, at the very least, function as effective deterrents to errant ex-employees.
