Garner v Central Innovation Pty Limited [2022] FCAFC 64

30 Jun Garner v Central Innovation Pty Limited [2022] FCAFC 64

Employees often build a well of knowledge in the course of employment that they wish to take with them to another employer, however some of this information may be confidential. This case is a further illustration that customer contact information, types of software licences/subscriptions sold to customers, expiry dates, and pricing information are all examples of confidential information that an employee can be restrained from using in subsequent employment.

Facts

During the course of his employment with Central Innovation Pty Ltd and Intercad Pty Ltd (jointly operating as “CI Group” with Intercad being a wholly owned subsidiary of Central Innovation), Gary Garner gained knowledge of confidential information. It was claimed he misused this information in his successive employment with N C Cadcam Systems Pty Ltd (“NCCS”), now in liquidation. The key misuse alleged was that Mr Garner misappropriated confidential information to get subscriber customers of CI Group to become subscriber customers of NCCS. The primary judge found that Mr Garner had successfully poached 37 customers, resulting in a loss of profits for CI Group. Damages were to be awarded to CI Group to compensate for the loss of profits amounting from Mr Garner’s breach of contract and breach of statutory duty to not improperly use information as a director, officer, or employee under s 183(1) of the Corporations Act 2001 (Cth). Mr Garner appealed this to the Full Federal Court, asserting that the primary judge erred in his decision.

Decision

Justices Charlesworth, Stewart, and Halley of the Full Federal Court agreed with the primary judge’s assertion that NCCS was in ‘direct competition with Intercad and indirect competition with Central Innovation and that NCCS had the incentive to obtain and use information about their customers to advance its competitive objectives’ [at 178]. The confidential information in question, known as the “Output Files” and “SUGAR Reports”, comprised of customer contact details, types of software licences/subscriptions sold to customers, expiry dates, and pricing data. This information was deemed confidential because it was not publicly accessible and could be defined as confidential information pursuant to clause 14.1 of Contract One, Mr Garner’s employment contract with CI Group. This clause specified that members of the CI Group must not ‘…during your employment or at any time thereafter, without the prior written consent of the CI Group or as otherwise required by law, disclose directly or indirectly to any person…any Confidential Information…’ [at 146]. Clause 14.1 of Contract One further defines confidential information as including but not limited to ‘trade secrets, information, process…customer information, prices or data belonging to the CI Group’, ‘…software and computer records’, and ‘lists of clients or customers of the CI Group’.

The Full Court agreed with the primary judge in finding that Mr Garner had no suitable reason to access and download the data and information and that as such, the ‘access that took place was likely to have been for an improper purpose’ [at 206]. Additionally, Mr Garner attempted to argue that the information he entered into an NCCS customer relationship management system known as Hatchbuck was done so via his memory. This was rejected by the Full Court, claiming it was fanciful and not credible as the sheer amount of customer contact information recorded could not possibly have been a result of Mr Garner’s memory. The relevant customer information included the customer’s name, relevant dates relating to when they were entered into the system and when their first asset was acquired, the employee overseeing their file, contact name, contact email, office telephone number, office address, and the reason for becoming a client.

Furthermore, the Full Court established that Mr Garner in misusing confidential information caused the loss of 37 customers to CI Group. Notably, there was no evidence that these 37 customers would have changed over to NCCS of their own accord. In fact, it was likely they would have renewed their subscriptions with CI Group as none of these customers had expressed dissatisfaction and majority of them had been loyal customers.

The Court ordered that the appeal be dismissed, and agreed with the primary judge’s finding that damages be paid in accordance with the loss of profits to CI Group.