PSN Recruitments Limited v Graeme Ludley & Anor

In passing off, proof of misrepresentation and goodwill completes the tort, but substantial damages require proof of loss. Loss may include diverted profits, injury to goodwill and reputation, and wasted management time. Where a defendant has destroyed or failed to disclose relevant evidence, the court may assess loss broadly and benevolently, without shifting the burden of proof.

A customer database may be confidential information or a trade secret even though some component details are publicly available. The relevant question is whether the compiled information is sufficiently valuable, confidential and difficult or costly to recreate to justify protection. An employee’s misuse of such a database may breach express contractual and equitable duties of confidence.

The claimant operated a specialist recruitment business trading as Cosmopolitan Recruitment. While employed, the first defendant copied business spreadsheets and a client database. Shortly before leaving, he established the second defendant and sent the database’s contacts an email falsely suggesting that the claimant’s business had changed its name to Greenscape.

The claimant brought claims in passing off and breach of confidence. The court had to decide whether the misrepresentation caused loss and damage, quantify that loss, and determine whether the client list was confidential information protected by the first defendant’s contract and by equity.

1. Passing off. The claimant proved that the email caused confusion among some clients, diverted work to Greenscape and damaged both profits and reputation. That was sufficient to complete the tort. The principles in Draper v Trist [1939] 3 All E.R. 513 supported awarding damages for injury to goodwill and reputation, in addition to lost profits.
2. The court preferred a broad “top-down” assessment of lost profit because the defendants’ disclosure was inadequate and relevant evidence had been destroyed. The claimant’s burden remained, but the court was entitled to assess the evidence benevolently so as not to reward the defendants’ conduct. Loss of profit was assessed at £38,079.93, loss of reputation at £20,000, and wasted management time at £1,499.99.
3. Contractual confidence. The client list fell within the express definition of confidential information in clause 46 of the employment contract. Copying it during employment and using it after employment to send the misleading email breached clause 47. Because the express terms resolved the issue, it was unnecessary to decide the scope of any implied terms.
4. Trade secret and equitable confidence. Applying the principles in Lansing Linde Ltd v Kerr [1991] 1 WLR 251, the list was used in the business, disclosure would give a competitor a significant practical advantage, and dissemination had not been encouraged. A compilation may remain confidential even if individual components can be obtained publicly, as explained in Marathon Asset Management LLP v Seddon [2017] 2 CLC 182. The defendants’ use was inconsistent with the information’s confidential nature. Both defendants therefore breached the equitable duty of confidence.
5. The claim succeeded in damages totalling £59,579.92, and the defendants were liable for breach of confidence.

First instance decision. No prior decision in the same proceedings is stated in the judgment.