IEM SA v FLOWBIRD MALAYSIA SDN BHD

Case Significance

Illustrates that a third party who knowingly receives and exploits a company's confidential information obtained through its employees' breach of duty may be held liable for its misuse, the Court of Appeal upholding findings against a foreign competitor that used a Malaysian company's confidential information to pursue rival projects.

This Court of Appeal decision, one of two related appeals heard together, concerns the liability of a foreign company for the misuse of a competitor's confidential information and the breach of fiduciary duty by that competitor's former employees. The respondent, a Malaysian company in the business of providing car-parking solutions and part of an international group, alleged that two of its former employees had, before and around the time of their resignations, disclosed its confidential business information to the appellant, a company incorporated in Switzerland engaged in a similar business, and that the information had been used to pursue parking-solution projects in New Zealand, Indonesia and Malaysia. This record concerns the appeal by the foreign company. The High Court had found in the respondent's favour, and on appeal the court examined whether the evidence established that the appellant had knowingly received and used the respondent's confidential information. Reviewing the sequence of events — the meeting of the former employees with the foreign company at an industry event, the emails transmitting information belonging to the respondent while they were still its employees, their resignations shortly afterwards, and the subsequent incorporation of related entities that went on to bid for parking-solution projects in Malaysia, Indonesia and New Zealand — the court held that the evidence established the misuse of the respondent's confidential information. It treated the close correspondence between the timing of the disclosures, the resignations, and the pursuit of competing projects as cogent evidence that the information had been received and turned to account rather than independently generated, and that the separate corporate identity of the entities later formed did not insulate the foreign company from responsibility for that misuse. The court accordingly upheld the findings of the High Court against the appellant. Having dismissed the appeal on that basis, the court ordered that the parties bear their own costs of the appeal. The judgment illustrates that a third party who knowingly receives and exploits a company's confidential information, obtained through its employees' breach of duty, may be held liable alongside those employees.