Enforcing post-termination confidentiality obligations is often easier said than done. Former employers can often face difficulties in obtaining the evidence to substantiate their complaints. To enforce such obligations, the former employer must show evidence of such breach to the Court, and cannot rely on assumptions or educated guesswork to prove its case.
This article discusses the case of Jayonik Sdn Bhd v Agriquip Machinery Sdn Bhd & Ors (Civil Suit No.: WA-22IP-66-11/2021), where a company sued its former employees for breach of confidence and conspiracy to injure.
Brief Facts
- The Plaintiff was the 2nd and 3rd Defendants’ former employer. One of the Plaintiff’s products was the “Airside GSE Simulator”.
- After leaving employment of the Plaintiff, the 2nd and 3rd Defendants were employed by the 1st Defendant, who also was the exclusive distributor of the Airside GSE Simulator.
- As part of the Exclusive Distributor Agreement between the Plaintiff and the 1st Defendant, the 1st Defendant agreed not to deal or negotiate with POS Aviation or AeroDarat, as the Plaintiff was already in discussions with these companies.
- At the 1st Defendant’s request, the Plaintiff supplied the 1st Defendant with a demonstration set of the Airside GSE Simulator , which was meant to assist the 1st Defendant in marketing the Airside GSE Simulator and the Plaintiff’s other products (“Demonstration Set”).
- Subsequently, the 1st Defendant was alleged to have committed several breaches of the Exclusive Distributor Agreement, such as contacting POS Aviation and AeroDarat, marketing and promoted the Airside GSE Simulator as if it is the 1st Defendant’s own inventions and products, and poaching the 2nd and 3rd Defendants to leave the Plaintiff and work for the 1st Defendant.
- Ultimately, the 1st Defendant and the Plaintiff entered into consent judgment. The Plaintiff continued with its action against the 2nd Defendant and 3rd Defendant for alleged breach of confidence in the disclosure of the Plaintiff’s trade secrets, and conspiracy to injure.
Court’s Findings
The High Court dismissed the Plaintiff’s action against the 2nd and 3rd Defendants. In doing so, the High Court observed that the Plaintiff had failed to plead the particulars of the private and confidential information of the Airside GSE Simulator that the 2nd and 3rd Defendants were alleged to have received in confidence and then misappropriated and communicated to the 1st Defendant.
The need for the Plaintiff to sufficiently plead the 2nd and 3rd Defendants exact roles in allegedly breaching the duty of confidence was heightened by the fact that the Plaintiff had earlier provided the 1st Defendant with the Demonstration Set. This meant that the 2nd and 3rd Defendants were not the sole link between the Plaintiff and the 1st Defendant.
Instead, the Plaintiff’s case was on the assumption that since the 1st Defendant marketed and traded the Airside GSE Simulator both during the subsistence of and after the termination of the Exclusive Distributor Agreement, then it was the 2nd and 3rd Defendants (who were the Plaintiff’s former employees) had provided that information and know-how to the 1st Defendant.
As the Plaintiff could not produce any concrete evidence beyond this assumption, the Court was unwilling to take this “quantum leap”.
Similarly, the Plaintiff’s claim for conspiracy to injure failed on similar grounds (ie: failure to plead sufficient details and not producing further evidence beyond mere assumptions).
Key Takeaways
This case highlights the importance of having sufficient evidence to prove one’s case, as the Courts are not ready to condemn or punish a former employee merely based on assumptions.
Given the challenges in gathering evidence in such cases, employers should proactively implement preventive measures, such as regular IT audits and robust security policies. Additionally, investing in effective investigative techniques, such as forensic examination of devices, can bolster the chances of establishing wrongdoing.
While a carefully crafted confidentiality clause is pivotal, its effectiveness hinges on the availability of supporting evidence to substantiate claims of breach.
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This article was written by Leow Ho Eng (Associate) from Donovan & Ho’s employment law practice. Donovan & Ho is a law firm in Malaysia, and our employment practice group has built a reputation for providing strategic employment advice to local and global organisations. Our team of employment lawyers provide advice on employment law and industrial relations including review of employment contracts, policies and handbooks, advising on workforce reductions, and managing dismissals of employees for poor performance or misconduct. We also represent clients in unfair dismissal claims and employment-related litigation.
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