EX-EMPLOYEES AND CONFIDENTIAL INFORMATION

The protection of a former employer’s confidential information was recently considered by the Full Court of the Supreme Court of South Australia in N P Generations Pty Ltd v Feneley (judgment delivered 5 June 2001).

N P Generations Pty Ltd traded as LJ Hooker–Blackwood and employed Ms Feneley as the manager of its rental property business. One of her responsibilities was to keep the rent roll up to date.

Ms Feneley also kept a diary and an address book. Both contained information which she had handwritten. The entries included the names, addresses and telephone numbers of some of the landlords whose properties LJ Hooker–Blackwood was managing. Ms Feneley used the diary and the address book extensively in the course of her work and usually carried them with her. There was no secret about the existence of either.

Ms Feneley left the employment of LJ Hooker–Blackwood and took the address book and diary with her. She commenced employment with a competitor of LJ Hooker–Blackwood and contacted various of her former employer’s clients. Some of them terminated arrangements with LJ Hooker–Blackwood and retained Ms Feneley’s new employer as their property manager.

LJ Hooker–Blackwood started proceedings alleging that Ms Feneley had acted in breach of her duty of confidence in using the information in the address book and claimed damages and the delivery up of documents, including the address book and diary.

On appeal the Full Court affirmed the following principles:

  1. In the absence of a valid restraint of trade clause, a former employer cannot prevent a former employee from simply competing.
  2. As a general rule, a former employer cannot, therefore, prevent a former employee from contacting or even soliciting clients or customers of the former employer.
  3. After ceasing employment, an employee may not use confidential information obtained in the course of that employment for the purpose of competing with his or her former employer or indeed in any other way detrimental to the former employer’s interests.

The Address Book

The address book contained 115 separate entries. 65 related to landlords, 18 related to tradespersons and the like and of the remainder, some seemed to be private. It was initially compiled for a legitimate purpose – for Ms Feneley’s use in the course of her employment as LJ Hooker-Blackwood’s property manager.

It could be used for the purpose of assisting Ms Feneley in the management of LJ Hooker-Blackwood’s rental property business but not for any other purpose. The list of names and addresses had been confided to her for that specific and limited use. Once her employment ended, she could not use that list or any copy of it. The address book had to be delivered up. The fact that it contained almost 30 entries of a personal nature did not relieve her of that obligation. She should have been given an opportunity to make a copy of the personal entries, if she wished.

The Full Court stressed that notwithstanding that the entries in the address book had been made by Ms Feneley and that in a sense it was her own list for her own purposes, the fact remained that it was (except for the personal entries) a copy of what was in the employer’s rent roll. Ms Feneley would have remembered the names and addresses of some landlords and could have ascertained telephone numbers from a directory. To that extent it seems that there would not have been a breach of the duty of confidence, but it was plain that she did not remember all of the telephone numbers and addresses and had supplemented her memory by resorting, impermissibly, to the address book. The employer was entitled to have protected the integrity of confidential information, including a customer list.

The Diary

This was a work diary and the entries related overwhelmingly to Ms Fenely’s duties in her employment.

It indicated the names of some of the landlords and the addresses of some of the rental properties and could provide the base for the preparation of a list of at least some of LJ Hooker–Blackwood’s customers. In that sense the diary contained some confidential information which also appeared in the rent roll. But the information in the diary was not compiled from the rent roll. It was the accumulation of telephone calls or other requests which caused her to record appointments or property visits or inspections. It included information that was not confidential.

Additionally, Ms Fenely was under no obligation of confidence in relation to the diary. LJ Hooker–Blackwood had not required that it be confidential. It included information which could fairly be described as part of Ms Fenely’s general knowledge, skill and experience.

These factors pointed to the conclusion that the diary was not confidential information and did not have to be delivered up.

Summary

In reaching these conclusions, the Full Court affirmed a distinction between information which could fairly be regarded as the property of the employer and information which formed part of an employee’s stock of general knowledge, skill and experience. Factors relevant to the discrimination between the two included but were not limited to:

  1. the nature of the employment
  2. the nature of the information itself
  3. whether the employer had impressed upon the employee the confidentiality of the information
  4. whether the relevant information could be easily isolated from other information which the employee was free to use or disclose.

Further the outcome demonstrates the Court’s reconciliation of two competing interests:

  1. the right of any person to use and exploit for the purpose of earning his or her living all the skill, experience and knowledge at his or her disposal including the skill, experience and knowledge acquired in the course of previous employment

    2. and

  2. the right of an employer to have its secrets kept confidential.

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