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  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
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:
$4,230.00, representing the salary it paid Mr Johnstone for the
two week period after his resignation;
$1.00, as nominal damages for copyright infringement; and
$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
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
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
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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An employer's duty is very high and can include engaging experts to inspect things such as stairways for latent defects.
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