In the recent case of Marathon Asset Management LLP and another v Seddon and another (2017), the High Court considered a claim against the first and third defendants for taking and using confidential documents.
Marathon carry on an investment management business. A long-running dispute between the firm’s three founders led to one of them leaving, followed by employees who worked with him. Arbitration proceedings and the below litigation have ensued. The arbitration claims were resolved and some of the claims made within the proceedings have been settled. The remaining claims are against the first defendant (Mr Seddon) and the third defendant (Mr Bridgeman) for taking confidential documents.
Mr Bridgeman admitted that over a period of several months before he left Marathon’s employment, he copied onto USB drive a substantial number of confidential files. Mr Bridgeman further admitted that by copying and retaining the files (until the proceedings were threatened) he was in breach of his contract of employment. That left two issues in dispute:
1. Was Mr Seddon liable for copying some of the files?
2. What, if any, damages are payable by Mr Bridgeman and, if liable, Mr Seddon?
The first issue surrounded the purpose for which Mr Seddon shared a number of files containing confidential information about Marathon’s business with Mr Bridgeman. Marathon submitted that Mr Seddon shared these files for Mr Bridgeman to add to the other files that he planned to keep.
In relation to the second issue, it was common ground that the files which Mr Seddon shared with Mr Bridgeman were never used after they left Marathon’s employment. Mr Bridgeman used a few of the many files he had copied but there is no allegation that this caused any loss to Marathon.
Marathon’s case is that it does not matter that no loss has been shown but that the defendants unlawfully took confidential information and must pay for the value of what they took from Marathon. Marathon estimated that this level of confidential information taken amounted to £15m.
The High Court determined that:
1. Mr Seddon copied a number of file to a share drive with the intention that Mr Bridgeman would save them to a USB drive so that they would be available after Mr Seddon left Marathon. The judge held that Mr Seddon “was seriously interested in the idea of starting up a new business with Mr Bridgeman”.
2. Mr Bridgeman was in breach of his duties of “confidence owed to Marathon in contract” and under the general law in respects of (i) copying files containing confidential information for his own purposes, (ii) retaining said files for an extended period of time and (iii) accessing those files on a number of occasions.
3. Mr Seddon was (i) in “breach of such duties in copying” the files to a shared drive and (ii) is jointly liable with Mr Bridgeman for breach of confidence “pursuant to a common design”
Marathon contended that the appropriate measure of damages was £15m. Marathon produced a report from a forensic accountant and in response, Mr Bridgeman served an expert report of his own. Marathon’s report made calculations based at the time of the defendants’ leaving Marathon’s employment and ignoring hindsight. The calculations came to a range of values between £2.5m and £39.4m. Mr Bridgeman’s expert produced different calculations which ranged from US$200,000 and US$13.8m.
The overall range was therefore from US$200,000 to £39.4m which the High Court stated reflected the “inherent indeterminacy of the task”.
The High Court held that Mr Bridgeman had admitted liability and the court had found Mr Seddon liable for breaches of duties of confidence but that the court would reject the claim for “substantial damages”. The High Court held that Marathon’s argument “fails to match the remedy to the wrong”.
The High Court stated that it was self-evident 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” and that where “no injury has been sustained for which Marathon is entitled to be compensated in damages” then “it is hard to see how Marathon could be entitled to any remedy other than an award of nominal damages”.
The High Court stated that Marathon had “missed the jackpot” and would only be entitled to nominal damages of “a sum of £1” for each case.
This case shows that although establishing liability may be clear cut, establishing loss can be less so. Practically, when calculating loss, this case highlights that the best route to take is to understand the realities of the situation at hand.
It highlights how wide the range of valuations can be from the final amount ordered and how hard it can be to value the taking and usage of commercial documents.
There have been critics of the High Court decision who feel that the generally adopted position that the person who detains property belonging to another with the intention of making use of it should pay the equivalent reasonable hire price has somewhat forgotten about. The judge had determined that the copying of electronic data does not deprive the employer of anything as they still retain the information themselves and that it is only when the employee utilises the data that the employer has suffered loss. It is well known that information can be worth substantial amounts of money and the importance of information is only being emphasised through the introduction of the new General Data Protection Regulation.
Interestingly, a similar case will be heard in the Supreme Court this year. The Marathon judgment will likely be a useful tool for the Supreme Court however their decision will ultimately reflect the court’s understanding and expectations in relation to protecting information going forward.