In PSN Recruitments Ltd (t/a Cosmopolitan Recruitment) v Ludley & Anor [2023] EWHC 3153, the Intellectual Property Court (IPEC) dealt with a case relating to use of PSN’s client list by a former employee (Mr Ludley). Mr Ludley had used the list to induce PSN’s clients to work with his own company by misrepresenting his company as being the new name of his former employer, PSN. This is known as “passing off”. It was also contrary to an express confidentiality clause in Mr Ludley’s contract of employment.
Background
The First Defendant, Mr Ludley, was employed by PSN as a recruitment agent. During his employment, Mr Ludley forwarded documents belonging to PSN containing client information to his personal email address.
In June 2021, Mr Ludley gave PSN one week’s written notice of his resignation, claiming to have found another job in a larger recruitment company. That week, he registered his own recruitment company, Greenscape Specialist Recruitment Limited (the Second Defendant), of which he was sole director and shareholder.
A few days after his employment ended, Mr Ludley sent an email to PSN’s clients, using the client information he had forwarded to his personal email address. In this email, he claimed that Greenscape was a continuation of PSN’s business under a new name, and asked them to correspond with him directly on his new Greenscape email address.
PSN brought claims against Mr Ludley and his limited company for passing off and breach of confidence and claimed losses of over £80,000.
Decision
In relation to passing off, damage to goodwill and reputation were admitted, therefore PSN only had to prove that damage had been caused as a result.
(a) Passing off
In this case, the IPEC held that the claim satisfied the elements of the tort of passing off. In particular:
- Mr Ludley admitted that there was goodwill attached to PSN’s name;
- Mr Ludley accepted that representing Greenscape as PSN under a new name, was a misrepresentation that Greenscape was the same as PSN; and
- The defendants actions had caused damage to PSN’s business as a result of their misrepresentation, by diverting work away from PSN to Greenscape.
(b) Breach of duty of confidentiality
The judge was also satisfied that PSN’s client list constituted ‘confidential information’ within the meaning of the term contained in the Mr Ludley’s employment contract.
Further, the court recognised that client or customer lists are protected as confidential information and trade secrets, even if some of the information is available to the public.
By sending the list to a personal email account and using it to contact the clients, Mr Ludley had breached both the contractual duty of confidentiality in his employment contract, and his equitable duty of confidentiality by using it in a way which was inconsistent with its confidential nature and in circumstances that he knew or should have known was confidential.
In total, the IPEC awarded PSN just under £40,000 in loss of profits, £20,000 for reputational damage, £1,500 for lost management time and costs. In making its award, the IPEC took into account Mr Ludley’s poor behaviour during the proceedings, as he had sought to hide evidence and mislead the court.
Comment
The outcome of this case is perhaps not surprising given the blatant nature of Mr Ludley’s misrepresentation. As well as serving as a reminder of the elements of the tort of passing off, it also highlights the importance of including robust confidentiality clauses in employment contracts. In addition, employers should ensure they have policies and IT protection in place to monitor employee’s use of their systems and to try and prevent the misuse of confidential information.
What is surprising, however, is that the judgement does not make reference to the Trade Secrets Directive, an EU law which became part of UK law before Brexit took effect, and which codifies the law on trade secrets.
Similarly, the Copyright and Rights in Databases Regulations 1997 was not considered. Based on the description given of PSN’s client list, it could fall into the definition of ‘database’, and so its unauthorised use by the Mr Ludley could well have infringed the Regulations.
Finally, the case also serves as a reminder that it is important for employers to act quickly where they suspect a breach of contractual obligations to protect their position.