Industrial espionage in the recycling trade – Court of Appeal ruling

Tales of industrial espionage are not restricted to fiction and a Court of Appeal case revealed an alleged conspiracy within the recycling trade that was said to have been exposed by forensic examination of a disloyal senior employee’s computer and mobile phone.

The woman’s employer became suspicious after she resigned. IT specialists were called in and discovered significant evidence that she had been passing confidential and commercially sensitive information to two competitors. Their findings indicated that all three had conspired to divert business away from the employer with a view to establishing the woman in a rival venture.

The employer launched proceedings and later reached terms of settlement with the woman and one of the competitors. The latter agreed to pay £275,000 in full and final settlement of the claim and the former made full admissions that she had, amongst other things, breached her duties of good faith and fidelity and conspired with the competitors to injure the employer by unlawful means.

Following the settlement, the other competitor argued successfully before a judge that the employer’s claim against it should be struck out. That was on the basis that, a judgment by consent having been agreed and satisfied, the wrong done to the employer had been remedied and there was thus no claim left to bring.

In ruling on the employer’s appeal against that decision, the Court agreed that it was barred by the settlement from proceeding with its damages claim against the other competitor in respect of the alleged conspiracy. In allowing the appeal in part, however, the Court found that the employer was entitled to proceed with its claims for an injunction and damages for breach of confidence and inducing or procuring a breach of contract. Those claims had been made individually against the other competitor and had not been the subject of the settlement.