Manager accused of handling ex-employer’s information after joining rival firm
The Supreme Court of Queensland recently dealt with a case involving allegations of misuse of confidential information by a former employee who left to work for a competitor.
The dispute centered around a company's attempts to compel a former industry sales manager to disclose details about his handling of company information after he resigned to join a rival firm.
The worker argued that he had returned all relevant materials, that much of the information in question was publicly available or outdated, and invoked privilege against self-incrimination.
Misuse of employer’s confidential informational
The employer, a company that designs, manufactures, installs, and services equipment for the food processing industry, discovered that one of its industry sales managers had accessed and potentially transferred confidential company information before resigning.
The worker's employment contract included provisions related to confidentiality and protection of company data.
The worker's role involved supervising and training account managers and leading the sale of complex food processing solutions.
After he gave notice of his resignation on 22 January 2024, the company learned he was going to work for a competitor. They asked him to sign an undertaking about observing his contractual obligations, but he declined to do so.
The employer then alleged that before giving notice, the worker had attempted to transfer confidential information to his new employer. They also claimed he had accessed company information in December 2023 and January 2024.
Investigation of accessed confidential data
A forensic examination of company laptops revealed that multiple external storage devices had been connected and used to access folders labelled as containing company documents.
Some of the accessed information included internal sales presentations on company research and technologies, marketing specifications marked for internal use only, client-specific pricing and discount information, and detailed factory layouts for customer facilities.
The court noted: "[The employer] has demonstrated that there has been a transfer of confidential information in a way which is inconsistent with [the worker's] contractual obligations."
The employer sought court orders compelling the worker to provide an affidavit detailing his handling of company information, including to whom he had disclosed information, what specific information was disclosed, and the means and dates of communication.
Confidential or publicly available information?
The worker resisted the application on several grounds. He claimed to have returned all relevant material to the employer. He also argued that much of the information was publicly available or outdated.
Notably, the worker invoked privilege against self-incrimination, citing potential exposure to civil penalties under the Corporations Act.
His lawyer stated in an affidavit: "[The worker] is concerned that deposing to the matters listed ... may expose him to civil penalty under Corporations Act 2001 section 183 or otherwise may tend to incriminate him or expose him to civil penalty."
Privilege against self-incrimination
The court considered the application of "Norwich Pharmacal" principles, which can allow for discovery orders against parties involved in alleged wrongdoing. It referenced previous cases that had expanded the scope of these orders beyond just identity discovery.
The court stated: "It is now well established that the principles expressed in Norwich Pharmacal are not limited to identity discovery, but extend to information discovery, as is sought here."
In assessing the worker's claim of privilege, the court referred to established legal principles. It noted that a mere statement of concern about self-incrimination is not sufficient to establish privilege.
The court said: "A mere statement by a witness that the answer may tend to incriminate that witness is not sufficient to found the claim for the privilege against self-incrimination."
Ultimately, the court rejected the worker's claim of privilege, finding he had not adequately substantiated a genuine risk of self-incrimination. The court ordered the worker to provide an affidavit detailing his handling of company information.
The court reasoned: "Anything that [the worker] might say in response to an order made in accordance with the interlocutory relief sought would not expose him to any greater risk than presently exists."
The case underscores the importance of clear confidentiality agreements and the potential value of forensic IT investigations when companies suspect data misuse. It also demonstrates the high bar for avoiding disclosure in such cases based on claims of privilege.
