The recent decision of New Aim Pty Ltd v Leung (No 4) is a timely reminder of how confidential information needs to be treated and restricted by businesses to allow it to be protected under law.

New Aim Pty Ltd (New Aim) conducts an online retail business in Australia. It sources and imports products from a range of suppliers predominantly in China and sells those products in Australia. New Aim alleged that the identity and contact details of all its suppliers (current and former) as at January 2021, which New Aim regarded as “reliable suppliers” were confidential.

New Aim commenced proceedings against, amongst others, a former employee, Mr Leung, alleging misuse of confidential information, breach of his employment contract and duties as a director.

While employed at New Aim, Mr Leung used his personal mobile for calls and WeChat (a messaging app) messages with suppliers and had stored the suppliers’ details to his WeChat account and phone. The key issue was whether this information was confidential and received in circumstances importing an obligation of confidence.

Finding against New Aim, the judge held that the identity and contact details of its reliable suppliers did not have the necessary quality of confidence. Relevant to this finding was:

1. According to expert evidence, it was not industry practice to regard the identity of past suppliers as confidential.
2. New Aim’s internal policy suggested that it sought to only protect information regarding suppliers with whom employees had dealings with in the previous 12 months.
3. Employees were not provided with work mobile phones and New Aim did not seek to restrict how supplier contact details were stored on personal devices. Employees were not required to delete data saved on personal devices at the end of their employment.
4. Employees were not required to sign employment agreements under which they agreed to keep confidential the identity or contact details for all New Aim’s suppliers.
5. Mr Leung was permitted to use his personal device to communicate with suppliers and he was not restricted in the way he stored supplier contact details on his device.

Lessons

The case highlights the detailed enquiry a Court will take in considering whether information is confidential and received in circumstances importing an obligation of confidence.

For companies which obtain products from overseas for re-sale, it is clear that mere white labelling of products may not save the day. While the Court recognised that New Aim’s white labelling of products and allocating own SKUs was a strong indicator that New Aim regarded the identity and details of its suppliers as confidential, this alone was insufficient.

Ultimately, New Aim’s failure to protect the information via an adequate employment agreement and internal policies proved fatal. This case reinforces that business ought to also:

• Have robust confidentiality clauses in relevant employment and supplier contracts;
• Expressly communicate to employees that the relevant information is confidential; and
• Have appropriate protocols in place upon termination of employment to safeguard confidential information.