The cost of deceit: recovery of costs to retrieve confidential information

Posted: 15/05/2013

The High Court recently handed down a decision that is extremely helpful for employers in situations where ex-employees have retained company property or information and are refusing to return it.

In the case of Kaplan Financial Limited v Locke, Mr Locke had been employed by Kaplan as head of business development. He handed in his notice and informed Kaplan that he planned to take a new job with Kaplan’s principal competitor before the end of his notice period. In response Kaplan immediately placed Mr Locke on garden leave and required him to return all company property, including all documents. Kaplan’s IT department examined Mr Locke’s laptop and phone and it appeared that he had copied various confidential documents onto a USB stick and emailed others to his private email address.

Kaplan requested the return of any confidential information and asked Mr Locke to confirm that he had not retained any copies. In response to this, Mr Locke confirmed that he had not retained any such information.

Kaplan didn’t believe Mr Locke’s response and obtained an order for the delivery up of any confidential information Mr Locke held. He complied with that order and in doing so revealed that he had retained a considerable amount of highly confidential material and admitted that he had falsely stated he had not retained any confidential information.

On the back of Mr Locke’s admission, Kaplan sought an order for its costs relating to the order for delivery up in the sum of £350,000. Mr Locke claimed that no costs order should be made as the application for delivery up was unnecessary as the matter could have been dealt with between the parties without the need to resort to court intervention. The High Court disagreed citing Mr Locke’s dishonesty as a reason why Kaplan was justified in the steps it took. Therefore, it was, in the High Court’s view, appropriate in the circumstances for Mr Locke to pay Kaplan’s costs. The court stated that in this instance Mr Locke had effectively bought the application for delivery up on himself as a result of his deliberate lies and he should therefore bear the costs of the other party.

Although seeking court intervention to recover confidential information is a costly business, this case is a timely reminder to employees that if they take confidential information with them in breach of their contractual restrictions, they may have to bear the costs of any legal action required to recover that information. Whilst this decision will not stop every employee taking confidential information, reminding leaving employees of the outcome of this case will hopefully be enough of a deterrent to make most think twice.

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