Australia: Ex-employer enforces confidentiality obligations

Last Updated: 16 December 2016
Article by Michael Bishop, Amelita Hensman and Ben Drysdale

The Federal Court has awarded damages and nearly $200,000 in costs against an ex-employee who failed to comply with post-employment obligations. Justice Moshinsky's recent decision in SAI Global Property Division Pty Limited v Johnstone [2016] FCA 1333 encompassed employee duties and the commerciality of aggrieved employers pursuing breaches.


Liam Johnstone, a business development manager, was employed by SAI Global ('SAI') via a contract of employment on 3 August 2015 ('Employment Contract'). SAI is the leading provider in Australia of search, settlement and conveyancing software and services. Mr Johnstone telephoned through his resignation just a few months later, on 29 October 2015. In an exit interview that day, Mr Johnstone was told that he was being placed on paid garden leave for the two weeks of his notice period, and was reminded of his post-employment obligations to SAI before being escorted from the building.

Mr Johnstone commenced employment at InfoTrack – a direct competitor of SAI – on 2 November 2015, in spite of his obligation not to work for a competitor until 12 November.

Due to concerns from SAI's management about Mr Johnstone's conduct, independent computer experts were engaged to examine the laptop used during his employment. It was discovered that Mr Johnstone had copied two files containing sensitive customer information ('SAI Confidential Information') from his work laptop to a personal USB stick just three days before his resignation.

On 7 December 2015, SAI made a successful ex parte application for orders restraining Mr Johnstone from deleting SAI Confidential Information stored on any computer or external storage device and for delivery up of all such computers and devices.

At a hearing on 11 December 2015, Mr Johnstone handed up his personal laptop and USB stick containing the SAI Confidential Information, serving an affidavit sworn by him that day substantially admitting to everything in dispute. A week later, his new employer InfoTrack also delivered up the laptop they had issued to Mr Johnstone.


At trial on 29 June 2016, the Court declared that Mr Johnstone had infringed SAI's copyright, broken his employment contract, and breached duties arising under sections 182 and 183 of the Corporations Act 2001. Mr Johnstone was ordered to delete all copies of the SAI Confidential Information and was restrained from disclosing to any person the contents of the documents.

In an interesting twist SAI also adduced evidence that, during his employment, Mr Johnstone had brought to SAI's email system a document containing confidential information belonging to a former employer and SAI competitor, GlobalX. No declaration was made on this point; SAI later satisfying GlobalX out of Court that the document had been permanently deleted.

There being no injury to SAI stemming from Mr Johnstone's actions, the Court awarded damages in the following amounts:

  1. $4,230.00, representing the salary it paid Mr Johnstone for the two week period after his resignation;
  2. $1.00, as nominal damages for copyright infringement; and
  3. $5,000.00, as additional damages pursuant to section 115(4) of the Copyright Act 1968. Additional damages (awarded to SAI because of the flagrancy of Mr Johnstone's infringement) are similar to exemplary damages, being used for punishment and deterrence.


SAI sought an order for the full payments of its costs in the proceeding, arguing that costs should follow the event. Counsel for Mr Johnstone submitted that SAI had incurred costs which were disproportionate to the importance and complexity of the matters in dispute, citing the overarching obligations contained in sections 37M and 37N of the Federal Court of Australia Act 1976.

The Court agreed that SAI's total costs – $275,469 – were out of proportion with the matters in dispute in the proceeding, in part because SAI had secured the most important relief it sought at the first hearing. A 50% 'discount' was therefore applied to the costs incurred by SAI after 12 December 2015.

Mr Johnstone faces a costs order for $196,416.54, plus his own legal fees. Despite their success in pursuing litigation, SAI Global are left with a costs shortfall of nearly $80,000.


The decision is an interesting one for employers; presenting as both a win and a warning. Whilst it is comforting to receive an emphatic affirmation of (ex) employees' duty of confidentiality, the costs incurred by SAI were potentially prohibitive for smaller companies. In such scenarios litigation is often necessary, but employers should also consider their alternatives, ensuring that the security of their confidential information remains the key objective.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Michael Bishop
Ben Drysdale
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