A recruitment agent who sent an email to client contacts misrepresenting that his new business was a new name for his former employer caused loss and damage by passing off and is liable for breach of confidence, according to a judgment by Her Honour Judge Melissa Clarke in the English IP Enterprise Court (IPEC).
The case was brought by PSN Recruitments Limited, which traded as Cosmopolitan Recruitment and specialised in the landscape, horticulture and gardening sector. On 16 June 2021, Graeme Ludley resigned as a recruitment agent at the company. 11 days later he emailed over 500 client contacts stating that his new company, GreenScape, had taken over its business. The email said:
“We never liked the name ‘Cosmopolitan Recruitment’. It sounds like a cocktail, has no connection with what we do, and it's difficult to use on the telephone.
So, as we are more likely to have a pint and we work exclusively in the Landscaping and Gardens sector we felt that GreenScape was a much better alternative.”
In oral evidence, Mr Ludley described sending the email as “the stupidest thing I have done for at least 10 years”. The court judgment bears out that assessment, with an award of £59,579.92 made to the claimants.
Passing off
The defendants argued that there was no damage from the email, as most of the recipients would have ignored it. However, the judge found that the claimant had proved both loss of profit and damage to reputation.
In particular, PSN had showed a loss of business following the email being sent while GreenScape immediately won new business. It was also the case that the email caused confusion with some of PSN’s clients which caused work to be diverted, and Mr Ludley did nothing to correct that misrepresentation.
Quantifying the damages, HHJ Clarke noted that the defendants had sought to destroy, hide or mislead “and in those circumstances it seems to me right that although the burden is and remains on the Claimant, the Court should view the Claimant's attempts to quantify the loss benevolently, given its findings on the Defendants' approach to evidence. To do otherwise would be to reward the Defendant for that approach, which is to be deprecated”.
She awarded £38,079.93 for loss of profit, based on the revenue reduction from landscaping clients in the year following the email being sent, plus £20,000 for damage for loss of reputation and £1,499.99 for loss of management time dealing with the email.
Confidential information
The defendants argued that the list of clients used to send the email was not confidential information, as it was a collection of well-known contact details that were generally available.
However, the judge disagreed, saying the transfer of the information was in breach of Mr Ludley’s contract of employment. She added:
“I am further satisfied that both Mr Ludley and Greenscape are in breach of the equitable duty of confidence, as they have both used the Claimant’s Client List, which is confidential information amounting to or akin to a trade secret (meeting all the requirements set out in Lansing Linde), inconsistently with its confidential nature, and I am satisfied that each of them received it in circumstances where they agreed (in relation to Mr Ludley), or ought to have appreciated (in relation to Greenscape who is fixed with the knowledge of its sole director and shareholder Mr Ludley), that it was confidential.”
What does this mean?
This case is a warning to any individuals who seeks to exploit their association with a previous employer when setting up a new business.
Creating a new company is relatively easy, especially in professional services such as recruitment, but it is vital to obtain advice on what you can and can’t do with previously acquired information. Failing to do so can result in a significant damages order.
Get in touch to discuss IP issues relating to employment and starting a new business.
To find out more about the issues raised in this blog contact Rosie Burbidge, Intellectual Property Partner at Gunnercooke LLP in London - rosie.burbidge@gunnercooke.com