Could a company force a director to return confidential documents when there was no clause dealing with this in his employment contract?
No it couldn’t, said the High Court in Eurasian Natural Resources v. Judge. Companies will want to make sure their contracts contain an express requirement to return confidential information, because the High Court in this case refused to say that there was an implied term.
Companies may assume that they can require their senior employees, and indeed other employees, to return company confidential information when they leave the business. However, as this case highlights, if there is no express clause in the contract requiring the employee to do this, the company will be left trying to persuade a Court that there is an ‘implied’ contract term that does.
Terms are implied into a contract (any contract, including employment contracts) only in very limited circumstances. One of these might be where it is usual custom and practice to have such a term in a contract of the type in question. It may also be possible to imply a term into the contract where this is necessary for ‘business efficacy’.
In this case, the High Court could see no normal practice of putting terms requiring the return of confidential information in contracts of employment. This was the case even for directors’ contracts. So it would not imply a requirement to return confidential information on grounds of custom and practice.
Under the heading of business efficacy, the Court decided that it would be very difficult for directors to comply with a requirement to return all confidential information, as this may be stored across several email accounts, for instance, including work and personal accounts.
Furthermore, the Court could find nothing inherent in a directors’ official responsibilities and duties, that might require him/her to hand over confidential information and documents.
This case shows that it is absolutely essential that companies have clauses in their contracts which require staff to hand back confidential information when they leave.
Without a clause along these lines, companies may find themselves unable to recover information and documentation which they might quite understandably regard as their property.