In the recent case of PSN Recruitments Ltd v Ludley and another (2023), the Intellectual Property Enterprise Court (IPEC) held that the claimant (the former employer) had suffered loss and damage amounting to more than £80 thousand in proceedings for passing-off. The defendants were liable for breach of confidence, both contractually and in equity.

Mr Ludley was employed as a recruitment consultant by PSN Recruitments Limited, trading as Cosmopolitan Recruitment, a specialist recruitment agency in the gardening business. Just before his resignation in June 2021, Mr Ludley sent himself various documents containing PSN's client and prospective client information. He then set up a competing business called "Greenscape" and emailed approximately 500 of PSN's client contacts (the Email) explaining that Greenscape was PSN's new trading name, whilst providing his new email address.

PSN made a claim of passing-off (which occurs when a business misrepresents its goods and services as those of another business, thereby deceiving the customer) and for breach of confidence.

In respect of the passing-off claim, Mr Ludley accepted that PSN had goodwill in the Cosmopolitan Recruitment name and that the Email was a misrepresentation that the services of Greenscape were those of PSN. However, he denied that any damage was caused and so the claim for passing-off should be rejected. In other words, he claimed that none of the clients he emailed were sufficiently misled that they did business with Greenscape whilst thinking they were doing business with PSN.

In respect of the breach of confidence claim, Mr Ludley denied that the client list was confidential information, but rather "a collection of well-known contact details which are generally available from trade publication, email finders and cannot be described as a secret which can be protected".

There were two issues to be determined:

• Regarding the passing-off, had PSN suffered loss and damage and, if so, how much?
• Were Mr Ludley and his company liable to PSN for breach of confidence?

PSN claimed that immediately after the Email had been sent, its business suffered. From having experienced steady growth, the landscaping income "stopped overnight". It produced invoices showing that, in the 12 months before the Email, 13 clients were each invoiced between £2 thousand and £12 thousand. Since the Email, these clients had failed to send over any work and five of these had gone on to do business with Greenscape. In addition, a reduction of some £84 thousand was noted in respect of another of PSN's clients which had gone on to be invoiced by Greenspace for around £50 thousand over the following two years.

The judge was therefore satisfied that the Email did misrepresent Greenscape's position and did cause confusion with some of PSN's clients. This had caused work to be diverted from PSN to Greenscape. In addition, Mr Ludley did nothing to correct his misrepresentation. The judge also accepted that, as a result of Mr Ludley's actions, PSN incurred 33 hours of wasted management time in dealing with the problems Mr Ludley had caused them. The loss suffered by PSN amounted to both loss of profit and damage to reputation sufficient to complete the tort of passing-off.

Mr Ludley was also found to be in breach of confidence, as he had used confidential information comprising PSN's client list which amounted to a trade secret. The judge found that:

• customer lists can be protected as confidential information and trade secrets;
• it is no defence to show that the information taken could have been obtained from publicly available sources;
• the nature of the information (client contact details) was of key importance to a recruitment business;
• such a list would give competitors (and did give Greenscape) an advantage in competing with PSN, compared to the scenario where they did not have one at all;
• the client list fell within the definition of "trade secret"; and
• Mr Ludley knew that the list was confidential.

This case is a blatant example of passing-off. By breaching the confidentiality clauses in his contract of employment, Mr Ludley caused significant damage to PSN which lost revenue as a result and wasted considerable management time in dealing with the consequences of his breaches.

As an aside, the judge commented that Mr Ludley had been unwilling to make some obvious concessions and referred to some of his evidence as "not credible". As Mr Ludley had sought to hide evidence and deceive the court, the judge decided to quantify PSN's loss generously, as to do otherwise would have been to reward Mr Ludley for his dishonest behaviour.