Former employees liable to compensate for using confidential information

The recent Queensland District Court decision of Pro Wealth Corporation Pty Ltd v Property Investment Advisory Pty Ltd [2022] QDC 257 contains an interesting discussion of the various ways in which an employer can seek competition for a former employee using their materials or breaching the restraint. 

The employer in this case characterised claims against their former employees (and in the case of one, his wife) in a number of different ways –

  1. breach of the employment contract;
  2. misuse of confidential information;
  3. breach of fiduciary duty (or implied duties akin to fiduciary duties);
  4. breach of statutory duties;
  5. misleading and deceptive conduct (in relation to allegations that the employer’s copyright and confidential documents were being used).

The claim was made both under the employment agreement itself (which contained obligations in respect of confidential information and restraints) and equitable obligations of confidence.  Claims for breach of statutory duty under the Corporations Act were not pursued as they cannot be conducted through the District Court.

Employers often claim that employees owe to them fiduciary duties (ie duties of good faith).  Employees will owe fiduciary duties in some circumstances, but more often their obligations are the lesser obligations of fidelity and loyalty. 

In this case, it was found that the employees had obligations to keep information confidential, and that obligation continued after the ending of their employment.  It was also found that the restraints against competition were effective. 

His Honour found that the Defendants had breached their obligations of confidence and had breached restraints, and further, that the former employees had engaged in misleading conduct. 

The decision contains a useful discussion of the rights of employers against former employees and can be found here https://www.sclqld.org.au/caselaw/QDC/2022/257

For advice on employment issues, contact Peter Muller peterm@qbmlaw.com.au or Justin Mathews justinm@qbmlaw.com.au