28th March 2017

Jackpot damages

It is not uncommon for a business to be in dispute with a former employee who leaves their role having copied and retained confidential and commercially sensitive documents and electronic files.

It is not uncommon for a business to be in dispute with a former employee who leaves their role having copied and retained confidential and commercially sensitive documents and electronic files.

When this happens, the business will seek to establish that the employee was in breach of his or her contract of employment and common law duties of confidence. Liability and breach of duty is usually established quickly – but there remains the question of damages.

The issue of damages was highlighted in the recent High Court case of Marathon Asset Management v Seddon and others. Former employees of Marathon had left the organisation taking confidential documents with them. The defendants admitted downloading a substantial number of confidential files onto USB drives, and then sharing them.

However, the evidence - including that provided by forensic IT experts – revealed there had been limited use of the material. The claimant argued that even if little or no use was made of the information, the defendants were required to pay for the value of the material (estimated at £15million).

The court awarded the nominal sum of £2 on the basis that the claimant had not sought a remedy for the use of the confidential material. The judge stated that “punishment and deterrence are not purposes for which damages for civil wrongs can be awarded in English law”. There was, the judge said, a “vast gulf” between the very limited use of the material and the use the defendants could have made. Although the defendants were liable in English law, the purpose of an award of damages is to compensate the injured party for loss; and in this case there was no loss. Further, the claimant had not brought a case based on the actual use of the information, but had gone for "jackpot damages".

In a subsequent ruling on costs, the judge also found that “in a commercial case such as this, a judgment for only nominal damages is a defeat". The defendants had made an offer of £1.5million which had been rejected. As a result, the claimant was ordered to pay the vast majority of the defendants' costs.

This case is an important reminder that a claim for damages against an individual must focus on the loss suffered, even where there is clear wrongdoing.

For help and advice on dispute resolution issues, please contact David Patterson


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