UK: Pre-Action Disclosure: Another Weapon Against Data Theft

All employers know how important it is to protect their confidential information particularly when a key employee moves to a competitor.  The everyday use of email, memory sticks, pda and mobile phones highlight the need for employers to ensure that their electronic systems usage policies are up to date.   Employers should have the ability to search systems to see whether confidential information has been downloaded or passed on.  The courts have also recognised a changing world with a seemingly less rigid approach to granting injunctive relief or enforcing restrictive covenants. 

A recent case, by a recruitment agency against one of its former employees, shows that employers have another weapon at their disposal in the fight to protect confidential information namely pre-action disclosure. 

Pre-action disclosure

Often the problem facing the employer is to work out what confidential information is in the employee's possession.  The employer has suspicions but little or no proof.  In these circumstances it may still be inadvisable to apply for interlocutory relief notwithstanding a more sympathetic legal system.  The employer must still prove wrong doing on the part of the employee. 

Pre-action disclosure, allows a party which is contemplating but has not yet brought proceedings to seek disclosure of documents in the other party's possession. 

Case Law

In the case of Hays Specialist Recruitment (Holdings) Limited (HSR) and anor v Ions and anor High Court 2008 IRLR904 the High Court considered an application for pre-action disclosure.  The facts of the case were not unusual.  HSR was a specialist recruitment agency and it employed Mr I as a Recruitment and Management Consultant.  In 2007, after 6 and a half years service, Mr I left to establish his own company.  Upon leaving Mr I was bound for a period of 6 months by restrictive covenants preventing him from soliciting, canvassing, dealing with or accepting instructions from clients or applicants with whom he had dealt or had contact during his employment a standard form of restrictive covenant.

During his time at HSR Mr I joined a professional networking site very similar in structure to social networking sites such as Face Book and MySpace.  On the website users create a profile and invite others to join and "network" with them.  The site Mr I joined was purely designed for professional networking and included a feature that allowed a user to upload his or her email contacts and to invite them to join. 

HSR suspected that Mr I, in breach of his restrictive covenants and/or his duties of confidentiality, had used the site to upload client and client details from its database to his account and applied to the High Court for pre-action disclosure. 

HSR was partially successful in that it obtained a limited order for pre-action disclosure.  The High Court felt that its application was too wide and constituted a "fishing expedition" in the hope of unearthing something that supports its case against Mr I.  The rules of standard disclosure applied namely that a party to an action is required to disclose any documents on which it relies, documents that adversely affect its own case, documents that adversely affect or support another party's case and any documents that it is required to disclose relevant direction of the court.  In the case of pre-action disclosure an order must also be desirable to dispose fairly of the proceedings or to save costs. 

Considerations

If any disclosure requested is more targeted and can satisfy the test of relevance to the proposed action the courts are more likely to be compliant.  Furthermore employers are likely to be able to gauge their options and the prospect of a claim succeeding.  The case also highlights the relatively new risk of confidential information being appropriated by using a professional or social networking site.  In industries such as recruitment where contacts are businesses' most valued asset the need for clear policies on computer use and confidentiality remains paramount.

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