05 September 2017
Published by Natasha Jones
In the recent decision of Dargan Financial Pty Ltd ATF the Dargan Financial Discretionary Trust (trading under “Home Loan Experts”) v Nassif Issac  NSWSC 1077, the Supreme Court of New South Wales found that a contractor breached his post-engagement confidentiality obligations by taking and using a client list from his former firm, in circumstances where the client names were accessible on the former firm’s Facebook page. The Court also found that the contractor had breached his post-engagement obligations, by soliciting and accepting approaches from clients of his former firm. In this article, we focus on the Court’s findings on the confidentiality claims and the lessons for employers.
Mr Isaac, the contractor, was engaged as a mortgage broker of Home Loan Experts from 8 August 2012 to 30 November 2016 pursuant to a contractor agreement (Agreement). On 30 November 2016, Mr Isaac terminated his Agreement with Home Loan Experts and commenced work as a mortgage broker with its competitor, RAMS Financial Group Pty Ltd (RAMS), in December 2016.
At the time of Mr Isaac’s departure, he was directly managing 25% of Home Loan Experts’ clients. Mr Isaacs also had access to client lists, which contained sensitive financial information of Home Loan Experts’ clients. Mr Isaacs acknowledged that he retained, used and disclosed these lists to RAMS. After termination of the Agreement with Home Loan Experts, Mr Isaacs continued to provide services to Home Loan Experts’ clients at RAMS. Mr Isaac argued that Home Loan Expert’s client list was no longer confidential, because some of its clients were identifiable from postings on Home Loan Experts’ Facebook page.
Home Loan Experts commenced proceedings against Mr Isaacs, claiming that Mr Isaacs breached the Agreement and, among other things, was in breach of the equitable duty of confidence by reason of Mr Isaacs retaining and continuing to use Home Loan Experts’ client list at RAMS (Confidentiality Claim).
Relevant to the Confidentiality Claim, the Agreement specified that:
“the customer and lead database…[was] the property of [Home Loan Experts]”; and Mr Isaacs was required to: “return or destroy [Home Loan Experts’] Intellectual Property”; and
“during the Agreement and for a period of not less than 10 years after the termination of this Agreement, keep secret and confidential all Confidential and Proprietary Information and not use, publish, discuss or disclose any confidential information regarding [Home Loan Experts’] business, including…, among other things, details of clients (including without limitation, client lists and client details)...”.
The confidentiality claim
In his decision, Sackar J had to consider whether the information which Home Loan Experts argued to be confidential had a quality of confidence, and whether, by any public disclosure of that information, it had lost its quality of confidence.
In making his decision, Sackar J referred to the following established principles on confidential information and the equitable duty of confidence:
Inherent in these requirements is need for specificity and confidentiality, that is:
The quality of confidence of certain information may be lost once it enters the public domain.[iii]
Sackar J rejected Mr Isaac’s argument that the client list had lost its ‘quality of confidence’, because some of its clients were identifiable from postings on Home Loan Experts’ Facebook page. Rather, Sackar J found that the clients’ postings on Facebook did not diminish the quality of confidence of the client list, in circumstances where:
Specifically, Sackar J found that the client list contained not only the identity and contact details of the client, but also more intimate information concerning the clients’ assets and liabilities and their ability to service loans - the latter of which was of the greatest commercial value to Home Loan Experts. Sackar J found that this information ‘plainly has the necessary quality of confidence and [was] imparted in circumstances importing an obligation of confidence given its commercial value and the degree of detail and intimacy concerning the financial profile of its clients’ at .
Sackar J held on this basis that Mr Isaacs had breached his contractual and equitable duties of confidence by retaining and using Home Loan Experts’ client list.
On this basis, in respect of the Confidentiality Claim, Sackar J ordered injunctions, which restrained Mr Isaac from using or disclosing Home Loan Experts’ client list and ordered damages for the loss incurred from the breach of Mr Isaac’s contractual obligations.
Lessons for employers
The decision in Dargan Financial Pty Ltd ATF the Dargan Financial Discretionary Trust (trading under “Home Loan Experts”) v Nassif Issac  NSWSC 1077 highlights the need for employers to ensure that:
your business deals with confidential information in a way that ensures that it may be characterised as confidential. In particular, consider how confidential information is shared with employees or contractors, and whether that information is clearly imparted to them in confidence;
your business controls how confidential information is shared within the business – for example, restricting access to confidential information to key staff, and ensuring information is not broadly published within your business or outside your business; and
your business protects confidential information which is disclosed during the employment relationship. In particular, ensure that your employment contracts and contractor arrangements specify information which is confidential to your business and how workers are to deal with any confidential information they have access to, both during and after employment.
Author: Natasha Jones
[i] Coco v A N Clark (Engineers) Ltd 65 RPC 41, per Megarry J.
[ii] In Streetscape Projects (Australia) Pty Ltd v City of Sydney  NSWCA 2, per Barrett JA at .
[iii] Ibid, at .
Stephen Trew, Managing Partner, Sydney
T: +61 2 8083 0439
Michael Selinger, Partner
T: +61 2 8083 0430
Charles Power, Partner
T: +61 3 9321 9942
Benjamin Marshall, Partner
T: +61 3 9321 9864
Rachel Drew, Partner
T: +61 7 3135 0617
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Published by Natasha Jones