A recent out of court settlement of a high profile restraint of trade case in the South Australian real estate agency industry highlights again the significant risks that businesses face if they hire an employee who has taken and misused confidential information of their former employer.
Toop&Toop Real Estate (the Company), a well-known independent real estate agency, reportedly received a payment of $750,000 from Harris Real Estate after it alleged in court that its former employee Arabella Hooper had misused the company’s confidential client data base, causing it to suffer a significant loss of revenue from existing client leads.
What was alleged by the Company?
The Company alleged that Ms Hooper had taken 700 pieces of confidential client data before her employment came to an end. While still employed at the Company, Ms Hooper is said to have changed records by marking ‘hot’ and ‘warm’ leads as ‘cold’ to avert agents checking in with clients, which resulted in 39 clients being taken to Ms Hooper’s new employer, Harris Real Estate.
Evidence was led by the Company to support its claim that Ms Hooper was planning on leaving the Company well before she resigned, and bringing clients with her.
The Company joined Harris Real Estate to the proceedings against Ms Hooper as a co-defendant and the parties settled on a record sum of $750,000. The confidential client data taken by Ms Hooper was also returned to the Company.
The case resonates with a number of recent Supreme Court of NSW decisions where the employer enforced their rights against a former employee who had resigned to join a competitor.
In the 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 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. The Court 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’. The Court 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.
Our article on this case can be read here.
In Grace Worldwide (Australia) Pty Limited (ACN 070 345 845) v Steve Alves  NSWSC 1296, Grace Worldwide sought to enforce restraints prohibiting employee senior executive, Steve Alves from:
The Court recognised the significant knowledge of confidential information held by Mr Alves and that his new employer was a principal competitor of Grace Worldwide. In light of this, and in recognising the importance of protecting the interests of the Company, the Court enforced a six month post-employment non-compete and non-solicit restraint of trade on Mr Alves.
Our article on this case can be read here.
What is the significance of these cases?
The cases reinforce the willingness of courts to enforce protection by a business of its legitimate business interests in confidential information and customer connections.
In particular, a business needs to ensure it:
Author: Michael Selinger & Adrian Zagami
Stephen Trew, Partner
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Michael Selinger, Partner
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Charles Power, Partner
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Benjamin Marshall, Partner
T: +61 3 9321 9864
Rachel Drew, Partner
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Published by Michael Selinger, Adrian Zagami