What were the facts?
Mr Johnstone was a business development manager at SAI – a leading provider of search, settlement and conveyancing software and services. During his employment at SAI, he downloaded and copied two highly confidential computer files onto his personal USB containing information about customers. Mr Johnstone then resigned from SAI and was immediately placed on two weeks gardening leave, during which time he commenced working for a competitor of SAI. During his employment with SAI’s competitor, Mr Johnstone used the highly confidential SAI files to compare client bases.
In an action against Mr Johnstone, SAI compelled him to return all confidential files in his possession as well as the external storage devices on which they were stored. Although Mr Johnstone complied within a matter of days, SAI continued to pursue the matter in order to claim $4,230 in damages for the salary paid to him in the two week gardening leave period. They accrued almost $200,000 additional costs.
What were the legal issues?
The court had to decide whether SAI was entitled to claim $4,230 in damages and whether the additional $200,000 was proportionate to the matters in dispute.
What was decided by the Court?
Mr Johnstone was found to be in breach of his employment contract with SAI by copying confidential files and also by working for a competitor during the two week gardening leave period. Moshinsky J also held that Mr Johnstone breached obligations under sections 182 and 183 of the Corporations Act 2001 (Cth) not to use his position or information obtained through his position to benefit himself or another or to cause detriment to the corporation.
He was ordered to pay SAI $4,230 representing the salary paid to him during the two week gardening leave period, and an additional penalty of $5,000.
The court also held that approximately $10,000 worth of damages was disproportionate to the $200,000 additional costs incurred by SAI. An overarching purpose of civil procedure is to facilitate the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.1 The court refused to award these costs, as the substantive aims of the action had already been achieved.
What lessons can be learnt?
This case illustrates the importance of employees observing confidentiality obligations, as well as the dangers of pursuing an action in court when it may be unreasonable to do so.
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1 s 37M(2)(e) Federal Court of Australia Act 1976 (Cth)