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Thursday, 13 January 2011

Brandeaux stars in Last Tango with Chadwick

In general, since breach of confidence is an equitable tort, disputes involving the protection of trade secrets are heard in England and Wales in the Chancery Division of the High Court -- the old "home" of equity and the current home of the Patents Court. However, many confidentiality disputes, whether involving technical information in the form of know-how or merely commercially valuable data such as lists of customers and suppliers, actually turn on the nature of a contractual relationship between the party which claims ownership or control of the information and the party who allegedly misuses it. If a matter is seen as contractual rather than equitable, the court hearing it may well be the Queen's Bench Division of the High Court. That court, while it now (since 1873) has the power to dispense equitable relief too, is home to a large range of common law-based litigation. Contract disputes are part of its staple diet. One such case is Brandeaux Advisers (UK) Ltd and others v Ruth Chadwick [2010] EWHC 3241 (QB), a decision of Mr Justice Jack late last year but only recently spotted by this Kat.

In short, Brandeaux (a group of companies involved in investment fund management) sought the delivery up of confidential information held by Chadwick, a former employee, as well as repayment of some of her salary. Chadwick counterclaimed for damages for wrongful dismissal.

What caused this distressing state of affairs? While employed by Brandeaux, Chadwick -- telling no-one but her trusty solicitor -- had sent a vast number of confidential documents relating to Brandeaux's affairs to her personal email account. While she didn't make any actual use of the information contained in those documents, in the course of redundancy meetings she allegedly threatened to make a report to Brandeaux's industry regulator if Brandeaux did not offer her another position. Brandeaux was not very happy about this and, taking the view that Chadwick had been threatening it, placed her on "garden leave". It was only after having done so that Brandeaux found out about the mass transfer of confidential information and dismissed Chadwick for gross misconduct.

Brandeaux then (i) obtained an ex parte interim injunction to stop Chadwick divulging the material and to deliver it up and (ii) brought a claim against her for the repayment of salary monies paid to her from the point at which she should have reported her wrongdoing.

Jack J, in these proceedings, had to decider (i) if transferring Brandeaux's confidential material to Chadwick was a breach of her employment contract; (ii) if Brandeaux was entitled to an order for delivery up; (iii) whether Brandeaux was entitled to dismiss Chadwick summarily and (iv) whether Brandeaux was indeed entitled to a refund of some of Chadwick's salary. Chadwick argued that she should be allowed to hang on to the information because she might need it if any question arose in respect of her performance of her duties as the executive in overall charge of compliance and in connection with her wrongful dismissal claims. She also contended that, when it went for its ex parte relief, Brandeaux had failed to give full disclosure -- something that incurs the courts' displeasure -- and that this failure should be reflected in any future order.  In any event, she maintained, the way Brandeaux behaved towards her in the course of her employment was such as to constitute a repudiatory breach of contract: since Brandeaux had effectively repudiated it, they couldn't at a later stage terminate it and ask for their money back.

Jack J gave judgment in part for Brandeaux, but dismissed Chadwick's counterclaim.
* He doubted that the possibility of litigation against an employer would ever justify an employee in transferring or copying specific confidential documents for her own retention, in breach of her employment duties: if an employee needed documents for that litigation, she could apply to the court for disclosure of them [assuming, says Merpel, that the employer is so gentlemanly that he would never destroy documents that might attract criticism -- or worse -- from a regulatory body];
* While there were some "failures of substance" in the way the interim application had been made, these were the result of unnecessary haste, not intention to mislead the court.  With one exception, these failures of substance had no impact on the outcome of that application anyway.
* Chadwick had not established that there had been a repudiatory breach by Brandeaux. 
* The amount of confidential information which Chadwick transferred to herself was vast and, if it had been made public, Brandeaux's reputation among its investors would have been badly damaged.  This being so, Chadwick must known that Brandeaux would have objected very strongly if it knew what she was doing. It was simply impossible that she could have thought she was entitled to act as she did -- she committed a major breach of trust and demonstrated that she could not be relied upon to perform an important part of her duty in relation to confidential material.
* Brandeaux had failed to show any loss and had the benefit of the salary it had agreed to pay her.
The judge was not keen on unnecessary sophistry in the construction of plain words used in their normal context in the employment context:
"16. Byzantine arguments can be advanced whether or not what Ms Chadwick did in e-mailing the confidential documents was in breach of the obligations not to 'divulge to any person whatever or otherwise make use of' any confidential information'. It is, however perfectly clear that the transfers were not for her employer's purposes but for her own purposes. ..."
One wonders how many Chancery judges would be as quick to discourage Byzantine arguments on the meaning of 'divulge to any person whatever or otherwise make use of' any confidential information' as this Queen's Bench judge was.  Jack J won't get another chance to do this though -- he retired on Monday.

How to pronounce -eaux here
How to pronounce Chadwick in English here and in Strine here
Last Tango in Paris, starring Marlon Brando and Maria Schneider, and missing a golden opportunity for product placement by Lurpak, here
Brandeaux here
Brand X here

1 comment:

Anonymous said...

Perhaps Brandeaux are wondering if it was all worth it, when the Judge makes public that,

"The amount of confidential information which Chadwick transferred to herself was vast and, if it had been made public, Brandeaux's reputation among its investors would have been badly damaged."

Thank God they dodged that bullet...

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