Employee ordered to pay more than £500,000 in legal costs in breach of restrictive covenants and data privacy case

Introduction

Following a trial in the High Court where an employer was awarded final injunctions to prohibit a former employee from breaching post-termination restrictions, the losing employee was ordered to pay 90% of his former employer’s legal bill.

Argus Media Ltd v Halim also considers whether an email trawl of an employee’s inbox infringes the employee’s privacy rights leading to the termination of their employment contract and freedom from any post-termination restrictions.(1)

Facts

Argus is a price reporting agency. Dr Halim was a business development manager working in the area of fertilisers. He left in August 2018 and soon after Argus discovered that he had set up a new business called Afriqom which offered fertiliser pricing reports for Africa to Argus’s clients. Argus brought claims against Halim, alleging that he had breached his post-termination restrictions.

Halim argued that he was not required to comply with his post-termination restrictions because Argus had breached his privacy rights by reading emails that Halim had sent to his wife from his work email account. As such, Halim argued that:

  • Argus had breached the implied term of trust and confidence (a clause found in every employment contract);
  • his contract had been terminated; and
  • Argus could no longer rely on the post-termination restrictions.

Do email trawls breach employees’ privacy rights?

While Halim was serving his notice period, his manager became suspicious that he was not completing his handovers and so requested access to his inbox. Argus had an electronic information and communications policy in their employee handbook which provided Argus with a right to access and inspect any materials created, sent, received or accessed using Argus’s IT systems without notifying the employee. Argus was also entitled to monitor or review the use of its IT systems to investigate breaches of contract.

After gaining access, Halim’s line manager found several emails to Halim’s wife about work-related matters and many emails sent to Halim’s personal account containing Argus’s confidential information. These emails were relied on at the trial as evidence of Halim’s misconduct. Halim argued that Argus’s policy had infringed his right to private life under Article 8 of the European Convention of Human Rights.

Judge Freedman held that the policy was not too broad and that the investigation carried out while Halim was on garden leave had been appropriate. This was helped by the fact that the emails Halim sent to his wife had clearly been work-related and the judge found that they had not been private communications. The judge also found that even if Halim’s privacy rights had been breached as a result of the investigation carried out, this did not justify a breach of the implied term of trust and confidence.

Costs

In a separate hearing, Freedman heard arguments on how costs should be dealt with. The usual rule in this type of litigation is that costs follow the event so that the loser pays the winner’s costs. In this case, Argus was successful in getting most of the relief that it had applied for. However, it was not successful across the board – the judge recognised this by ordering Halim to pay 90% of Argus’s costs for the trial. The last costs budget filed by Argus after the trial showed a total figure of £688,109.26. Even accounting for some significant reductions on the budget, Halim’s bill will amount to more than £500,000 for Argus’s legal fees.

Comment

This is a useful decision for employers, as it demonstrates that a reasonable and proportionate email trawl need not infringe an employee’s privacy rights and can uncover the strong evidence of wrongdoing needed to support an injunction to restrain a former employee. However, any searches carried out must be proportionate and special care must be taken where private communications are uncovered. For employees, this is a cautionary tale of how expensive it might be to rely on data privacy arguments as grounds to contend that a contract is at an end and post-termination restrictions no longer apply.

By Carla Feakins, Lewis Silkin, London

For further information on this topic please contact Carla Feakins at Lewis Silkin by telephone (+44 20 7074 8000​) or email (carla.feakins@lewissilkin.com). The Lewis Silkin website can be accessed at www.lewissilkin.com.

Endnotes

(1) The full judgment is available here.

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