“Can I Take Along Confidential Information When Leaving My Job?”

New Perspectives On The Law Of Confidentiality

In this age of information, companies often face vulnerability to the theft of confidential information, which is usually entrusted to senior personnel. Striking a balance between protecting the employer’s interests and an employee’s right to seek employment in similar industry with gained knowledge and experience from previous employment is a persistent challenge.

In the recent Court of Appeal decision in Karen Yap Chew Ling v Binary Group Services Bhd [2023] 4 MLJ 792, Lee Swee Seng, Abu Bakar Jais, and Nordin Hassan JJCA delved into the employees’ duties concerning confidential information.

Background facts

The employee, employed by the company since 2007, abruptly resigned in February 2019, citing a move to a different industry. However, in September 2019, it was discovered that the employee had joined the company’s rival. Crucially, a digital forensic investigation exposed the employee’s wholesale copying of the company’s sensitive database to her own storage and the employee’s forwarding of work emails to her personal email account.

In response, the company filed a lawsuit against the employee alleging, among others, breach of confidence.

The High Court ruled in favour of the company and held the employee to be liable. Dissatisfied, the employee appealed to the Court of Appeal, amongst others, against the finding of liability. Eventually, the Court of Appeal affirmed the liability of the employee.

There was a breach of confidence.

The law is trite that to succeed in an action for breach of confidence, the company must establish the following three conditions propounded by Megarry J. in Coco v AN Clark (Engineers) Ltd. [1969] RPC 41 (“Coco test”):

• The information sought to be protected by the company is confidential information;
• these information was communicated in circumstances importing an obligation of confidence; and
• there must be an unauthorised use of these information to the company’s detriment.

The Court began its comprehensive analysis of the breach of confidence with the employee’s employment contract, which explicitly outlined her duty to observe strict confidentiality during and after the termination of the employment contract. Besides, the employee was a fiduciary as the Head of Marketing and senior personnel being entrusted with the company’s confidential information.[1]

Although the employee argued that the company had not sufficiently particularised the confidential information[2], the Court disagreed. The Court recognised that there could be many expressions of confidential information in the business context, including but not limited to a list of customers and their details, schedules of information, technology and trade secret.[3] Since the employee did not state that she had any problem identifying the confidential information nor raised any allegation that the confidential information was vague to the extent that the injunction could not be complied with[4], the Court was satisfied that sufficient particulars had been disclosed for the Court to determine if the information is confidential in nature. Notably, the Court set out the following hypothetical question:[5]

[72]  Karen Yap only needed to ask the hypothetical question: ‘Would the company give me permission to copy and keep this information for my own use for the benefit of a competitor that I would soon be joining?’. To ask such a question would be to ask the obvious! These are not materials in the public domain, and they have been collected, collated, and curated over a course of time and would clearly be of substantial interest and value to a competitor.

Accordingly, the first two conditions in Coco test were satisfied. The Court referred to a Singapore decision in I-Admin (Singapore) Pte Ltd v Hong Ying Ting and others [2020] SGCA 32; 1 SLR 1130. In the I-Admin case, the Singapore Court of Appeal propounded a modified approach to the Coco test: once the plaintiff had satisfied the first two conditions in Coco test, an action for breach of confidence was presumed, and the evidential burden shifted to the defendant to rebut and refute.[6] Therefore, there is already a breach of confidential information by unlawfully accessing and storing it so that one may have ready access to it and deploy it whenever one needs it.[7]

It was noted that the employee pleaded in her Defence that she forwarded the work emails to herself in order to perform work assigned by the company. However, given the evidence provided by the company, including the type of information transferred by the employee and the extent and manner in which the employee transferred the confidential information, the Court held that the employee was liable for breach of confidence. Her unlawful copying and accessing of confidential information alone violated the company’s rights, such that a case for exemplary damages may be established.[8]

Key Takeaways

This case offers valuable insights into the complexities of safeguarding confidential information in the modern business landscape in the Information Age.

In this case, we observe the importance of a meticulously drafted employment contract regarding confidential information. The employers are advised to carefully craft the employees’ obligations of confidentiality during and after the termination of employment.

The decision also serves as a stern warning to employees attempting to store or misappropriate the employer’s confidential information without authorisation for improper use. As Lee Swee Seng JCA warns, “We live in days where all of us who use the internet will leave behind our digital footprints. There is no email sent, document saved, or file copied that cannot be traced by forensic IT experts.”[9]

The Court’s hypothetical question on confidential information suggests that employees nowadays should be more sensitive and careful in handling the information obtained during employment. This is especially critical for those employees who are part of senior management, as it is less likely for them to argue ignorance of the competitive value of this information.

Reference to the Singaporean Authority

Prior to this decision, the law on breach of confidence was trite in Malaysia as set out by the Federal Court in Dynacast (Melaka) Sdn Bhd & Ors v Vision Cast Sdn Bhd & Anor [2016] 3 MLJ 417, that the plaintiffs must satisfy all three conditions in Coco to establish a breach of confidence.[10]

However, the reference made to the I-Admin case decided by Singapore seems to suggest a move by the Malaysian judiciary to the modified approach of putting the burden on the defendants to prove their conscience. As one can observe, the Court held that there was quality of confidence since the employee did not plead ignorance and cluelessness about the company’s confidential information to refute the company’s allegation. Such a modified approach appears to be beneficial to the employers, for it has addressed the difficulties faced by employers, who are often unaware of the breach until years later.

In conclusion, this case shapes the legal landscape of confidentiality, providing insights that resonate in today’s technology-driven employment environment.

[1]           Karen Yap Chew Ling v Binary Group Services Bhd [2023] 4 MLJ 792, para. [45]
[2]           Ibid, para. [50]
[3]           Ibid, para. [69]; Schmidt Scientific Sdn Bhd v Ong Han Suan [1997] 5 MLJ 632. See Karen Yap Chew Ling v Binary Group Services Bhd [2023] 4 MLJ 792, para. [55] for a summary of cases which explained what categories of information identifiable as confidential information depends on the case facts.
[4]           Ibid, paras. [61] and [62]
[5]           Ibid, para. [72]
[6]           I-Admin (Singapore) Pte Ltd v Hong Ying Ting and others [2020] SGCA 32; 1 SLR 1130, paras. [61] and [62]
[7]           Karen Yap Chew Ling v Binary Group Services Bhd [2023] 4 MLJ 792, para. [90]
[8]           Ibid, para. [91]
[9]           Ibid, para. [5]
[10]             Dynacast (Melaka) Sdn Bhd & Ors v Vision Cast Sdn Bhd & Anor [2016] 3 MLJ 417, para [32]

Leonard Yeoh
Partner
T: +603 2050 1970
leonard.yeoh@taypartners.com.my

Chen Mei Yan
Associate
meiyan.chen@taypartners.com.my