Contributors
In the recent case of Marathon Asset Management LLP and another v Seddon and others [2017] EWHC 300 (Comm), the High Court awarded just £2 compensation to an investment management business that had claimed £15 million in damages from former employees who had copied and retained files in breach of their contracts of employment. The High Court ruled that no injury had been sustained: the claimant had "missed the jackpot" and was only entitled to nominal damages.
Background
It is implied into every employment contract that an employee will carry out their employment with fidelity and good faith. The duty of fidelity includes an obligation on the employee to use confidential information solely for the purposes of the employment relationship.
Facts
James Seddon and Luke Bridgeman were employed by Marathon Asset Management (the Company). After they left the business, the Company sued them for having copied and retained confidential information prior to their departure from the business.
Mr Bridgeman admitted that his actions in copying documents with the intention of using them or keeping them for his own purposes amounted to a breach of his duty of fidelity. In addition to the implied duty of fidelity, Mr Bridgeman's employment contract also contained express confidentiality provisions. Mr Bridgeman admitted that before he had left employment in December 2012, he had copied a substantial number of files and had kept them until the summer of 2013 when proceedings were threatened against him, at which time he returned the files. Mr Bridgeman further accepted that he was in breach of his contract of employment in copying and retaining the files. Mr Seddon was also alleged to have copied files before he left the Company.
The Company's arguments
The Company's case against Mr Seddon and Mr Bridgeman was not that the files had been used or that any financial loss had been suffered by the Company but that Mr Seddon and Mr Bridgeman should pay the value of the data they had taken, which it estimated at £15 million.
The Company's main argument was that "if you take something, the law requires you to pay for it". It claimed the appropriate measure of damages in this case would be the sum agreed in a hypothetical negotiation between a seller (in the Company's position) and a buyer in the position of Mr Seddon and Mr Bridgeman to release them from the duties of which they were in breach.
The judge confirmed the position in principle for damages that "it is axiomatic that the general object of an award of damages for a civil wrong is to compensate the claimant for injury caused by the defendant's wrongful act. Such injury may consist of financial loss; or it may consist of non-financial injury of a kind for which the law provides monetary compensation".
The Company's second justification for seeking an award of substantial damages was that, although no actual financial loss or gain had been shown by copying the files and retaining them on leaving employment, Mr Bridgeman and to the extent of his involvement, Mr Seddon, had exposed the Company "to a risk of loss and acquired an opportunity for financial gain". In the judge's view the Company's second argument was even more threadbare than its first. The law does not compensate people for being exposed to a risk of injury.
The third argument advanced by the Company was based on uncertainty. It argued that it may be extremely difficult or practically impossible to identify what subsequent use had been made of the information to the detriment of the Company or benefit to the individuals and therefore the individuals should be required to pay a sum representing the value of the information assessed at the time of the breach of duty.
The Company relied on the 'dictionary' analogy (which was unsuccessfully raised in the case of Force India Formula One Team Ltd v Aerolab SRL [2013] EWCA Civ 780) that, even if someone only wanted to look up a few words, they would still have to buy the whole dictionary. The judge noted that the dictionary example bore no analogy to the facts of the present case and that the information copied and retained was not a single corpus of information, any part of which could only have been obtained lawfully by incurring the cost of acquiring all the information contained in those files. Rather, in this instance, the files were a disparate collection of individual documents.
Despite the fact that no alternative basis for assessing damages had been put forward by the Company, the judge considered whether damages should be assessed on an alternative basis. The judge concluded however that, given the way the Company had presented its case, it would not be just to adopt any other approach.
High Court decision
Mr Bridgeman admitted liability and the High Court found that Mr Seddon was liable for breaches of duties of confidence owed to the Company in contract and under the general law but the basis on which the Company had claimed substantial damages was rejected.
No financial loss or injury had been sustained for which the Company was entitled to be compensated in damages. The High Court held that the Company was only entitled to nominal damages and entered judgment for the Company against Mr Bridgeman and Mr Seddon in the sum of £1 in each case.
Comment
Mr Bridgeman and Mr Seddon are not the first departing employees to copy and retain files and they are unlikely to be the last. Unfortunately, this decision is unlikely to deter other employees from doing the same. It clearly demonstrates how difficult it can be to establish a value for commercial documents and the sums that can reasonably be claimed in damages in a case such as this.
