The recent case of Marathon Asset Management LLP and another v Seddon and another, involved a claim brought by Marathon Asset Management LLP (Marathon) against two former employees who breached their duties of confidence by unlawfully removing approximately 40,000 documents when they resigned in order to set up a competing business.
Despite the fact that the documents taken by the former employees were very valuable, Marathon were unable to produce evidence that:
- the former employees made significant use of the documents;
- Marathon suffered financial loss purely as a result of the removal of the documents; and
- the former employees made any financial gain purely as a result of the removal of the documents.
Therefore, Marathon could not claim conventional damages and instead sought to argue that the former employees should pay the value of the data as at the date they had taken it, which it estimated at £15million. However, on the trigger date chosen by Marathon, no misuse of the material had actually occurred. The High Court concluded that it would not assume future wrongdoing when assessing remedy. The Court instead adopted the approach of ascertaining what hypothetical ‘licence fee’ the former employees would pay for copying and retaining (but not using) the confidential information at the time it was taken.
The High Court found that no financial loss or injury had been sustained for which Marathon was entitled to be compensated. The Court held that Marathon was only entitled to nominal damages (in respect of the hypothetical licence fee) and entered judgment for Marathon against the former employees in the sum of £2 (£1 from each employee).
The decision in this case is likely to ring alarm bells for employers. The case seems to indicate that the value of such claims is entirely dependent on the employer’s ability to produce evidence of material, widespread misuse of documents and also prove that it has suffered an identifiable loss or that the wrongdoer has made an identifiable profit.
It is worth noting that the Supreme Court is due to examine aspects of ‘licence fee’ damages in greater detail in the case of One Step (Support) Ltd v Morris-Garner. The good news therefore for employers is that the Marathon case is unlikely to have the ‘final word’ on this matter. The bad news, however, is that this decision is unlikely to deter other employees from copying and retaining files when leaving a company.
If you would like to discuss the implications of this case for your business, please contact a member of the Employment team.