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What to do if any employee decamps with confidential information: A case analysis of Karen Yap v Binary
“Real integrity is doing the right thing, knowing that nobody’s going to know whether you did it or not.” ~ Oprah Winfrey
The Court of Appeal recently released its Grounds of Judgment in Karen Yap Chew Ling v Binary Group Services Bhd [CIVIL APPEAL NO.: M-02(NCVC)(W)-613-03/2021]. In an illuminating judgment, the Court of Appeal conclusively set-out the parameters as pertains a breach of confidentiality.
The CA also set-out a comprehensive analysis on damages and the interplay between accepting the failure of a Defendant to testify as against an expert’s report. The CA further analysed the approach which a Court should take when one party appears in-person, whereas the other insists on Zoom.
Factual background
Karen Yap was an employee of Binary. She left the company (on false pretenses) and took a tranche of confidential information with her.
She was discovered through a combination of social media sleuthing and a forensic digital analysis of her computer. Binary discovered that she had downloaded entire tranches of confidential information, all of which was detected by software.
Binary sued for breach of confidential information and conversion. They adduced expert evidence (in the form of a PWC report as to the value of the confidential information). Binary’s witnesses were cross-examined.
Karen Yap tried to have the trial adjourned. She claimed that Covid was raging (it was at that time) and that she could only attend to trial via Zoom. Binary’s witnesses attended in-person.
The High Court refused her application and Karen Yap closed her case without giving evidence.
The High Court’s decision
The High Court held Karen Yap liable for the breach. The HC further took the valuation provided by PWC in toto (USD10.1m) and found Karen Yap liable for the same.
The CA
On appeal, the CA was tasked with determining whether:
1. Karen Yap had been denied of her right to trial when she was refused Zoom;
2. Whether there had been a breach of confidential information as alleged; and
3. Whether the quantum awarded was reasonable.
The CA’s decision
The CA undertook a meticulous and detailed analysis of the law. In his trademark style, His Lordship Lee Swee Seng carefully set-out the facts (with much literary flourish) and determined the questions posed.
Did the refusal of a Zoom trial deny Karen Yap of her right to natural justice?
Firstly, the Court of Appeal held that Karen Yap had not been denied of any right to natural justice. The Plaintiffs’ witnesses were also based abroad but they could attend to the proceedings. There was no rhyme or reason for Karen Yap to be accorded any special privileges.
Interestingly, the CA also made a finding (one may say obiter) that it would be unfair for one party to face the full brunt of in-person cross-examination, whereas the other sits from behind the comfort of a computer screen:
[41] The Defendant cannot have a trial conducted according to her own convenience and in her preferred mode via Zoom when the Plaintiff’s witnesses could all make arrangements, whether they were based in Malaysia or otherwise, to be physically present at the trial to give evidence and be cross-examined.
An interesting question arises as to whether the “hybrid” model of trial is unfair to one party (i.e., the one attending in-person). The CA was quick to point out (paras. 33-36) that the decision would ultimately lie with the presiding Judge. However, this does give one fodder for thought (and potentially, for leave to appeal).
Was there a breach of confidential information, as alleged?
The CA then undertook an analysis of whether there was a breach of confidentiality. The preponderance of evidence led the CA to conclude that Karen Yap had done so:
[68] A spike in the activities of copying Confidential Information especially in the months, days and hours before Karen Yap left the Plaintiff and some in the middle of the night, can only speak of a clandestine and carefully concealed conduct designed to escape detection if possible. She underestimated the fact that technology has been developed to trace one’s digital footprints and that nothing is ever lost forever in cyberspace. Companies run a real risk of and are vulnerable to theft of confidential information that can have damaging consequences for their business for ultimately someone senior in the companies would have to be entrusted with such confidential information to protect its integrity and to prevent unlawful access and copying of it to the detriment of the companies. The tough question has always been who would guard the guardians and watch the watchmen and gatekeepers
There is an interesting discussion as to the categories of evidence that would be classified as confidential information (para. 55).
Whether the quantum awarded as damages was reasonable
Binary called PWC as its expert witness on the valuation of the confidential information. They produced a valuation of USD10.1m.
The CA noted that even if expert evidence is tendered to the Court, it requires curial scrutiny:
[84] Generally, in such a circumstance where there is no evidence from the defendant to refute or rebut the plaintiff’s evidence, then the plaintiff’s evidence shall be accepted as true unless it is inherently incredible or fanciful or that there is clear inconsistencies or contradictions that the plaintiff witnesses could not explain satisfactorily as may be evident when they were being cross-examined by the defendant’s counsel. In other words, unless the plaintiff’s evidence has been seriously called into question or demolished under cross-examined, it would be taken to be true.
The Court then undertook an analysis of the valuation method utilised (paras. 110-164). The Court held that the conduct of Karen Yap, though reprehensible, would not automatically entitle Binary to damages of USD10.1m. The Court stated that it would be incumbent upon the parties to undertake a post-judgment assessment exercise to determine the extent of the damages.
Findings of the CA
The CA then concluded by dismissing Karen Yap’s appeal on liability. However, on quantum, the CA remitted the matter to the High Court for an assessment of damages.
The CA noted that the HC had not undertaken an analysis of the expert’s report. This, the CA held, merited intervention:
[165] The Grounds of Judgment (“GOJ”) with respect to why the Court had agreed with the Plaintiff’s expert in PW3 is just a few short paragraphs stating that the said expert had arrived at the sum of USD 10.1million. With respect we do not see the analysis by the learned JC of the expert opinion given.
[166] The Court must apply its mind to the opinion as expressed by the Plaintiff’s expert, having regard to the Defendant’s counsel’s cross examination of the Plaintiff’s expert and to evaluate if the assessment makes sense, is reliable and fair and not speculative, uncertain and hypothetical.
[168] A proper order for this Court to make is to remit the matter of assessment of damages to the trial Court for that to be properly assessed. In the interest of justice and to prevent a miscarriage of justice, both parties are at liberty to call further witnesses and to put in their further expert reports as they may be minded to, subject always to further directions that the High Court may give.
Key takeaways
It is to be noted that the Karen Yap v Binary decision does not merely deal with the matters outlined above. There is a scintillating discussion of the law and a very thorough and detailed analysis of “Wrotham Park damages” (i.e., damages are awarded based upon a “hypothetical bargain”).
The decision in Karen Yap v Binary is a boon for employers. One needs to ensure that one’s employment agreement is water-tight and contains the necessary clauses for the protection of confidential information.
The decision also underscores the importance of good conduct and rather frankly, gentlemanly conduct. It is a stark warning to employees that attempt to abscond with confidential and proprietary information.
Interestingly (and to blow my own trumpet a little), we also acted for the subsidiary of a public-listed company that had a similar situation befall them.
We successfully acted for the company and secured a final Judgment of ~RM15.2 million against 3 staff members who had made-off with confidential information. They are now subject to bankruptcy proceedings and the protracted, arduous litigation left them much worse for wear, one imagines.
GAVIN JAYAPAL
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