Malaysia: Breaches Of Confidentiality.

Legal News & Analysis - Asia Pacific - Malaysia - Regulatory & Compliance

29 November, 2016

 

In Dynacast (Melaka) Sdn Bhd v Vision Cast Sdn Bhd [2016] 3 MLJ 417, the Malaysia Federal Court found that the respondent, Mr Cheok, had not breached his confidentiality obligations due to the fact that the statement of claim was insufficient and Mr Cheok was entitled to know the exact nature of the private and confidential information he had allegedly misappropriated.

 

Background The appellants in Dynacast (Melaka) Sdn Bhd v Vision Cast Sdn Bhd were part of Dynacast's group of companies and were in the business of die-casting components for customers. The second respondent, Mr Cheok, was employed by Dynacast in 1980 and after rising to become the regional director, he resigned in 2002. A year later, Mr Cheok set up Vision Cast, the first respondent, to also engage in the same business of die-casting components. The appellants alleged that Vision Cast had, without permission, reproduced their photographs in a promotional booklet/leaflet.

 

Dynacast sued both Vision Cast and Mr Cheok in the High Court for infringement of copyright, the first claim. Dynacast also sued Mr Cheok on the basis that he had misappropriated confidential information belonging to Dynacast and by doing so he had breached the terms of his employment contract and employee confidentiality agreement as well, as a deed of restrictive covenants that he had signed, the second claim. Decisions High Court decision The High Court held Mr Cheok liable for breaching his confidentiality obligations under the agreements by encroaching on Dynacast's projects and poaching its customers.

 

However, they dismissed Dynacast's first claim for breach of copyright as Dynacast had failed to prove that it had ownership of the images and photographs that were used in the promotional booklet/leaflet. Vision Cast and Mr Cheok appealed to the Court of Appeal and Dynacast also appealed against the dismissal of its first claim against Vision Cast and Mr Cheok for copyright infringement. Court of Appeal decision The Court of Appeal upheld the High Court's decision in dismissing Dynacast's first claim against Vision Cast and Mr Cheok for copyright infringement for the same reasoning as the High Court, detailed above.

 

However, the Court of Appeal held that the High Court erred in allowing the second claim against Mr Cheok. Dynacast had failed to identify with sufficient particularity in their pleadings what the 'confidential information' was that Mr Cheok had misused and whether that information formed part of Dynacast's intellectual property. The pleadings were held to be too vague and the Court of Appeal held that it was insufficient for Dynacast to only state that Mr Cheok had "misappropriated the private and confidential information of Dynacast". The Court of Appeal also ruled that the trial judge had failed to properly and sufficiently appreciate the totality of evidence in finding Mr Cheok liable. Mr Cheok was entitled to know what the private and confidential information that he had allegedly misappropriated was so that he could challenge the claims of privacy and confidentiality made against him. The Court of Appeal overturned the High Court's decision and dismissed Dynacast's claim for breach of confidentiality and Dynacast appealed to the Federal Court. Federal Court decision The Federal Court agreed with the Court of Appeal that it was insufficient for Dynacast to only state in its pleadings that Mr Cheok had "misappropriated the private and confidential information of Dynacast" and not provide any further details. Consequently the Federal Court dismissed Dynacast's appeal.

 

The Federal Court held obiter dicta that should it have been necessary to answer the leave question of whether the law laid out in Svenson Hair Centre Sdn Bhd v Irene Chin Zee Ling, that the protection of confidential information has no time limit was correct, then the answer would have been yes. However, the Federal Court declined to answer the leave question posed to it as the answer would not have altered the reasons why Dynacast's claim had failed. What this means for employers The mere existence of a confidentiality agreement is not enough to protect a company's information in the event of a dispute. In claims for breach of confidentiality it is important to clearly and carefully identify the information in issue and how it has been misused by the employee. Failure to do so with sufficient particularity will result in such claims failing. 

 

herbert smith Freehills

 

For further information, please contact:

 

Fatim Jumabhoy, Of Counsel, Herbert Smith Freehills LLP

[email protected]