Does the improper disclosure of confidential information always result in damages?

June 01, 2017


Edac Inc. v. Tullo 1999 CanLII 14868 (ON SC)

Before resigning from his senior management employment position with the plaintiff, an employee disclosed confidential information to a third party during a written job interview. The employee then took an employment position with a former supplier of the plaintiff, and began arranging sales to the plaintiff’s customers. The court held that the employee had both a common law and contractual obligation of confidentiality. However, the improper disclosure of confidential information caused no actual harm, and in the absence of a non-competition restriction, the employee made no improper use of the customer lists.

Drafters acting for a disclosing party need to ensure that specific types of information are defined as confidential (e.g. customer lists), regardless of whether they are marked or treated as confidential. If the confidentiality agreement is ambiguous, the confidentiality of the information may depend on a subsequent finding of fact about whether the information was treated as confidential in a such way that the information was clearly considered to be confidential. Confidentiality restrictions are not sufficient by themselves to prevent an employee from competing with a former employer.

Details of the case:

In Edac Inc. v. Tullo, 1999 CanLII 14868 (ON SC), the plaintiff alleged that the defendant improperly used confidential information in breach of his contractual and common law duties. The employment contract provided that: In the course of your employment, you will become aware of confidential information about the Company that is not available in the public domain. By accepting this offer of employment, you will be bound to keep this information confidential and you will not reveal this information to third parties without the consent of the Company, either during or after your employment with the Company. The employee resigned and began working for a supplier of the employer, selling products to the clients of the former employer. Before resigning, the employee disclosed confidential information to a third party, as part of an unsuccessful employment application. The court held that there had been no damage caused by this breach of confidentiality. As for the client lists, the employee began by selling products not sold by the former employer. It was the clients themselves who requested sales of the same products sold by the former employee. In the absence of a non-competition clause the court held that the employee did not breach the confidentiality clause in the circumstances. The client lists could be discovered by the employee’s new employer, and he had not made improper use of the information.

Much of the court’s attention was focused on whether specific information was in the public domain. The court found that the prices and names of customers were commonly used in the course of business. “It is not clear to me that a company can claim that information is confidential where it is known to one segment of the market and not to others. Once the information has gotten into the public domain in any respect, it seems to me by definition to no longer be capable of being labeled confidential.” The court similarly ruled that the even if the information was confidential, there is no evidence it was used by the defendant. On the common law test for breach of confidence there has to be a misuse of confidential information and there has to be corresponding detriment. The court did not find that there was any detriment from the information that the defendant used. Thus, there was no breach of confidentially according to the court. The plaintiff similarly failed on his other claim for breach of the contractual confidentiality obligation.

To read the full case on CanLII, click here.

Employment Agreement
Confidential Information
Confidentiality Agreement