Accordingly, employers will not need to show that employees used the employer’s confidential information without authorization and to the employer’s detriment in order to succeed in a claim of breach of confidence. The mere possession of the employer’s confidential information by an employee could complete the action for breach of confidence.

This could be seen as a win for employers since with today’s technology, confidential information is easily accessed, copied and disseminated by employees potentially without the knowledge of the employer for long periods of time.

1. Overview

The appellant, I-Admin (Singapore) Pte Ltd (“I-Admin (SG)”) is in the business of payroll administrative data processing services and human resource information systems and it operates a number of wholly-owned subsidiaries including I-Admin (Shanghai) Ltd (“I-Admin (Shanghai)”).

The first and second respondents were former employees of I-Admin (SG) and I-Admin (Shanghai), respectively (the first and second respondents collectively, the “respondents”). The third respondent, Nice Payroll Pte Ltd (“Nice Payroll”) is a Singapore-incorporated company that provides payroll outsourcing services and HR management functions, which respondents had set up and worked for after resigning from I-Admin (SG) and I-Admin (Shanghai).

In 2013, I-Admin (SG) had discovered Nice Payroll’s website, which advertised payroll and HR systems in countries that overlapped with their geographical scope of services. This prompted I-Admin (SG) to conduct a search on Nice Payroll on the public records, which led I-Admin (SG) to discover that the respondents were directors of Nice Payroll. Due to the findings, I-Admin (SG) instructed a third party to conduct forensic investigations into the activities of the respondents. Subsequently, I-Admin (SG) obtained an Anton Piller order, and a search was conducted at Nice Payroll’s premises.

A number of the appellant’s materials were recovered from the first respondent’s laptop and Nice Payroll’s server. The Anton Piller order also revealed that the respondents had internally circulated some of these materials via email. These materials included I-Admin (SG)’s source codes, databases supporting the payroll systems and HR services, business development and client-related materials, as well as materials related to its operations. It was not disputed that copies of I-Admin (SG)’s confidential documents had been in the unauthorized possession of the respondents.

In light of this, I-Admin (SG) commenced proceedings against the respondents and Nice Payroll alleging, among other things, a breach of confidence.

2. Background to the appeal: High Court’s decision

The claims were rejected by the Singapore High Court (“HC”). The HC applied the well-established test for claims of breach of confidence set out in Clearlab SG Pte Ltd v Ting Chong Chai [2015] 1 SLR 163, which cited Coco v AN Clark (Engineers) Ltd [1969] RPC 41 (“Coco”), namely that:

(i) the information must possess the quality of confidence;

(ii) the information must have been imparted in circumstances importing an obligation of confidence; and

(iii) there must have been unauthorized use of the information to the detriment of the party from whom the information originated.

The HC judge found that the appellant’s claim failed on the third limb of Coco. While the respondents owed I-Admin (SG) obligations of confidence, there was no unauthorised use of its confidential information to I-Admin (SG)’s detriment as I-Admin (SG) had failed to show that any reference to and review of its materials resulted in the respondents’ creation of their own materials. Dissatisfied with the HC’s decision, I-Admin (SG) appealed to the CA.

3. The Court of Appeal’s decision

The CA allowed the appeal, finding that I-Admin (SG) should succeed in its claim for breach of confidence and ordering equitable damages to be assessed.

Having considered several cases and academic authorities, the CA agreed with I-Admin (SG) and recognized that the law of confidence sought to protect two distinct interests. These were a plaintiff’s interest to:

i) Prevent the wrongful gain or profit from its confidential information (“wrongful gain interest”), which is typically proved by showing that the defendant had used and profited from the use of the confidential information.

ii) Avoid wrongful loss, which was the loss occasioned to a plaintiff whose information had lost its confidential character or had that character threatened by the unconscionable acts of a defendant (“wrongful loss interest”), which can potentially be proved by showing that the defendant has wrongfully accessed or acquired the confidential information.

While the legal framework in Coco explicitly protected the wrongful gain, the CA opined that the Coco test does not necessarily protect the wrongful loss interest nor did it offer adequate recourse where there is wrongful loss. This issue was brought to the fore in the present case – whilst it was not proven that the respondents had directly profited from their use of the appellant’s confidential material (i.e. wrongful gain was not proven), this does not detract from the fact that the respondents knowingly acquired and circulated these materials without consent and dissipated the confidential character of the information (i.e. there was wrongful loss).

To address this imbalance, the CA formulated a modified approach to breach of confidence claims. The CA retained the first and second limbs from the test in Coco and held that upon satisfaction of those two limbs, an action for breach of confidence is presumed and the burden of proof is on the defendants to displace the presumption by showing the defendant’s conscience was not affected in the circumstances in which the plaintiff’s wrongful loss interest had been harmed or undermined. The CA considered this reversal in burden of proof not only places greater focus on the wrongful loss interest but it also addressed the evidential difficulties faced by owners of confidential information in bringing a claim of breach of confidence since breaches of confidence usually take place without the knowledge or consent of its owner often putting them on an evidentiary back-foot.

Accordingly, since I-Admin (SG)’s materials were confidential and the respondents were under an obligation to preserve the confidentiality of the materials, the respondents breached confidentiality when they acquired, circulated and referenced I-Admin (SG)’s materials without their permission and consent. The respondents had not displaced the presumption that their conscience was negatively affected, and this was sufficient for the CA to allow I-Admin (SG)’s appeal in respect of its breach of confidence claim as there was wrongful loss for the appellant.

In light of the breach of confidence, the CA held that I-Admin (SG) should be awarded equitable damages based on the value of the confidential information that the respondents had wrongfully accessed and acquired. To assess the value of I-Admin’s confidential information, the CA stated that it would be relevant to consider the time and expense that the respondents saved when setting up Nice Payroll by using I-Admin (SG)’s materials as a springboard to develop their own intellectual property and set up a competing business.

Key takeaways

This CA decision marks a major turning point on the Singapore courts’ approach to cases involving a breach of confidence and will likely be welcomed by owners of confidential information, including employers who grant employees access to vast amounts of such confidential information in the course of employment. I-Admin seeks to address significant legal and practical difficulties that owners of confidential information would traditionally have faced when their confidential information is taken by third parties or employees in view of how easily information can be accessed, copied and disseminated in our increasingly digitized society.

This significant decision confirms that the mere wrongful taking of confidential information constitutes a breach of confidence thereby removing the hurdle of the requirement to show that the confidential information has been used to the detriment to the owner of confidential information.

While I-Admin should in general be good news to employers for the reasons above, employers should still take note that two limbs of the traditional test of a breach of confidence under Coco still remain in place – namely that the information in question is confidential in nature and is imparted to the employees in circumstances importing the obligation of confidence.

This means that employers should, to the extent possible, continue to put measures in place to ensure that they preserve the confidential nature of information, and employees are reminded of the confidential nature of the information that they are receiving, so that employers can more easily show that the first two limbs of the Coco test are satisfied in the event of a claim of breach of confidence.