Milking the system

JN Dairies Ltd v Johal Dairies Ltd and Gurbir Singh

It is well established in law that only trade secrets or other equally confidential information can be protected once someone’s employment has ended. In JN Dairies Ltd v Johal Dairies Ltd and Gurbir Singh, the High Court said that it was a breach of confidence when a former employee stole commercially sensitive information and gave it to a competitor.

Basic facts

JN Dairies supplied local shops and supermarkets with bread, milk and other dairy products. Drivers recorded what customers had taken and office staff then produced weekly invoices. These were stored in plastic wallets and stacked in a series of filing trays in the warehouse which the drivers distributed on their rounds every Monday.

On Monday 10 November 2008, however, Gurbir Singh - who had been dismissed the previous Saturday - entered the warehouse and took all the wallets from the trays. He then handed them over to Mr Surbjit Singh Johal, a director of Johal Dairies Ltd. Mr Singh started work for Johal Dairies on the same day, visiting the customers of his former employer, offering products at a reduced rate. He was paid £40,000 for his part in the scheme, plus other benefits.

JN Dairies sought an injunction but that application was refused, and the case was listed for a preliminary hearing to ascertain if there had been a breach of confidence or misuse of confidential information by either Mr Singh or Johal Dairies.

Legal arguments

Johal Dairies put forward two contrary arguments:

• that the information contained in the invoices was not confidential and had no commercial value, because everyone knew more or less what everyone else was charging, and
  that, as in the case of Faccenda Chicken v Fowler, it was information that employees must treat as confidential while employed but which then “becomes part of his own skill and knowledge, which he cannot be restrained from using after his employment ends”.

High Court decision

The High Court judge, however, rejected both arguments, saying that the information was of considerable commercial value, not least because Mr Singh was paid £40,000 for it. There was a substantial range in the prices charged for different goods between the dairies and it was clear that if invoices belonging to one dairy fell into the hands of another, they would then know the exact prices the other had been charging and be able to undercut them.

As to the Faccenda Chicken argument, the judge said that it was of no relevance in this case. Mr Singh had not memorised the information contained in the invoices because if he had, he would not have needed to steal it.

Instead the judge relied on the case of Coco v AN Clark (Engineers) Ltd, which identified three elements for a breach of confidence case to succeed:

• the information itself must "have the necessary quality of confidence about it."
  it must have been communicated in circumstances importing an obligation of confidence
  there must have been an unauthorised use of that information to the detriment of the party communicating it.

In this case, the information contained in the invoices had the necessary degree of confidentiality as it was not in the public domain and anyone disclosing it would be in breach of their duty of good faith to their employer.

When GS “communicated” the information he had obtained to Mr Johal, he knew that it was commercially valuable and that he had no right to have it or to pass it on to anyone else without the authority of his former employer. That was enough to impose a duty of confidentiality on him.

As for the final element, the judge found that there had been an unauthorised use of this information in the approaches made to the customers of JN Dairies. It had suffered as a result, in that it had lost business from some of its customers or had had to offer them better terms in order to keep business or win it back.