What were the facts?
Mr Johnstone was employed as a business development manager with SAI, a leading provider of search, settlement and conveyancing software and services.
He downloaded and copied onto his personal USB two highly confidential SAI computer files containing information about customers.
Mr Johnstone subsequently resigned from SAI and was immediately placed on two weeks gardening leave, during which time he commenced working for a competitor of SAI. In the course of his employment with SAI’s competitor, Mr Johnstone used the highly confidential SAI files to compare client bases.
SAI took action to compel Mr Johnstone to return all confidential files in his possession as well as the external storage devices on which they were stored. Mr Johnstone had substantially complied within a matter of days. However, SAI then continued to pursue the matter in order to claim $4,230 in damages for the salary paid to Mr Johnstone 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?
Moshinsky J held that Mr Johnstone was in breach of his employment contract with SAI by copying confidential computer files and also by working for a competitor during the two week gardening leave period. Mr Johnstone was also found to have 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)