Reading time: 6 minutes

Employers should take action to prevent current and former employees from taking a business’ confidential information when they leave a company. In circumstances where an employee takes confidential information, employers should immediately investigate concerns and take action to prevent any misuse of the information.

The Federal Court in SAI Global Property Division Pty Ltd v Johnstone [2016] FCA 1333 discussed the type of remedy an employer may receive from an employee that has taken or distributed confidential information, including:

  • orders for an employee to stop sharing the confidential information;
  • orders for an employee to destroy any/all copies of the confidential information;
  • damages for breach of contract;
  • damages for copyright infringement; and
  • orders for an employee to reimburse their employer’s legal costs.

We unpack each remedy below as well as the Court’s reasoning in reaching their decision.

The Facts: What Happened With the USB?

SAI Global is a leading provider of conveyancing software and property search services in Australia. The respondent, in this case, Mr Johnstone, was employed by SAI Global as a business development manager until he resigned on the 29th October 2015.

Before leaving, Mr Johnstone copied two computer files onto a USB. One of the files contained information about SAI’s customers that the Court described as ‘highly sensitive’.

Following his resignation, the respondent continued working for SAI Global for two weeks. During this period, while he was still technically an employee of SAI Global, Mr Johnstone also began working for one of their competitors.

Mr Johnstone then accessed the files on the USB multiple times to determine which customers were common to both SAI Global and his new employer. He did this without the knowledge of SAI Global.

In response, SAI Global commenced legal proceedings. They were able to obtain urgent orders for Mr Johnstone to deliver any external storage device, and to swear an affidavit about the matters at hand. 

The Issues

Mr Johnstone admitted to commencing employment at a competing company while still employed at SAI Global. He also admitted to copying confidential information onto a USB and using that confidential information at his new place of employment.

The Court then turned their attention to the following key issues:

  • whether the Court should order an injunction given that Mr Johnstone had already delivered the USB (an injunction is a court order to do (or refrain from doing) a specific act);
  • whether SAI Global was entitled to damages for breach of contract;
  • whether the Court should award additional damages under s115(4) of the Copyright Act 1968 (Cth); and
  • whether Mr Johnstone should have to cover SAI’s costs for the proceeding.

Was SAI Entitled to Injunctive Relief?

SAI Global sought to prevent Mr Johnstone from further sharing the information except when legally required or with explicit, written permission to do so from SAI Global. In response, Mr Johnstone said that there was little risk of him sharing the information, especially given that he had already delivered up the USB.

The Court granted the injunction. Their reason for doing so was Mr Johnstone’s flagrant disregard for maintaining the confidentiality of SAI Global’s information. This disregard meant that it was entirely possible that he would share it in the future if the Court did not grant an injunction.

Was SAI Entitled to Damages for Breach of Contract?

The Court decided that SAI Global was entitled to damages. Mr Johnstone’s salary during the two-week period was $4,230. The Court looked at his employment contract and reasoned that SAI Global’s payment depended on Mr Johnstone not accepting any offers of employment during the two-week period. As a result of Mr Johnstone’s breach of his contract, SAI Global did not receive any benefits by employing Mr Johnstone. SAI Global was then entitled to receive $4,230 as damages for breach of contract.

Was SAI Entitled to Recover Additional Costs Under the Copyright Act?

SAI Global wanted Mr Johnstone to pay a nominal amount of $1 for copyright infringement. They also sought additional damages under s115(4) of the Copyright Act 1968 (Cth). The section provides that courts may award further damages where they are satisfied that copyright infringement is blatant and/or that there is a need to deter others.

The Court determined that Mr Johnstone’s acts were serious enough to award an additional $5,000 to SAI Global. Mr Johnstone secretively copied files containing confidential information onto the USB, knowing that SAI Global would oppose him doing so. He then proceeded to make use of these documents in his new position. These acts were sufficiently unethical that the Court also referred to the need to deter others from engaging in such behaviour.

Was SAI Global Entitled to Costs?

SAI Global submitted that Mr Johnstone should be responsible for their legal costs since the matter had arisen as a result of his behaviour. In response, Mr Johnstone argued that SAI Global had incurred costs which were disproportionate to the complexity of the matters in dispute. 

On this issue alone, the Court agreed with Mr Johnstone. During the proceedings, SAI incurred a total of $275,469. The documents Mr Johnstone had copied contained highly sensitive information. It was, therefore, perfectly reasonable for SAI Global to commence legal proceedings to recover them. The Court, however, reasoned that since Mr Johnstone had delivered the USB at a very early point in the proceedings, SAI Global created disproportional costs and delay by further pursuing the matter.

As a result, SAI Global breached their obligations to resolve disputes efficiently and at limited expense. Mr Johnstone was responsible for SAI Global’s costs up and until the date on which he delivered the USB. He was also required to cover the costs SAI Global incurred when they employed someone to draft a report on the matter shortly after the USB’s delivery. Mr Johnstone was then only responsible for half of SAI Global’s costs.

Key Takeaways

If an employee takes your confidential information, employers may obtain orders through the courts or seek damages. Employers should note that a court will unlikely make a costs order where it is disproportionate to the complexity of the matter.

If you have questions about confidential information or concerns about an employee using or sharing your sensitive data, get in touch with us on 1300 544 755. Our lawyers can work with you to reach a solution.


Redundancies and Restructuring: Understanding Your Employer Obligations

Thursday 7 July | 11:00 - 11:45am

If you plan on making a role redundant, it is crucial that you understand your employer obligations. Our free webinar will explain.
Register Now

How to Sponsor Foreign Workers For Your Tech Business

Wednesday 13 July | 11:00 - 11:45am

Need web3 talent for your tech business? Consider sponsoring workers from overseas. Join our free webinar to learn more.
Register Now

Advertising 101: Social Media, Influencers and the Law

Thursday 21 July | 11:00 - 11:45am

Learn how to promote your business on social media without breaking the law. Register for our free webinar today.
Register Now

Structuring for Certainty in Uncertain Times

Tuesday 26 July | 12:00 - 12:45pm

Learn how to structure to weather storm and ensure you can take advantage of the “green shoots” opportunities arising on the other side of a recession.
Register Now

Playing for the Prize: How to Run Trade Promotions

Thursday 28 July | 11:00 - 11:45am

Running a promotion with a prize? Your business has specific trade promotion obligations. Join our free webinar to learn more.
Register Now

Web3 Essentials: Understanding SAFT Agreements

Tuesday 2 August | 11:00 - 11:45am

Learn how SAFT Agreements can help your Web3 business when raising capital. Register today for our free webinar.
Register Now

Understanding Your Annual Franchise Update Obligations

Wednesday 3 August | 11:00 - 11:45am

Franchisors must meet annual reporting obligations each October. Understand your legal requirements by registering for our free webinar today.
Register Now

Legal Essentials for Product Manufacturers

Thursday 11 August | 11:00 - 11:45am

As a product manufacturer, do you know your legal obligations if there is a product recall? Join our free webinar to learn more.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards