Full Court of the Federal Court of Australia confirms claim of s 183(1) Corporations Act ‘improper use of information’ does not require misused employer information to be ‘confidential’

1. Disputes often arise in relation to a current/former director, employee or officer use of company information for the benefit of a competing business. We commonly encounter such cases where the allegedly ‘taken’ information includes customer or supplier lists, with the parties then in dispute about whether that information is ‘confidential’ and therefore protected by contract or equity.
2. In addition to protections afforded by employment contracts and equity, the Corporations Act 2001 (Cth) imposes a statutory obligation on current or former employees, directors or other officers of a corporation not to improperly use information to:
   1. gain an advantage for themselves or someone else; or

   2. cause detriment to the corporation

       

3. In a recent decision, the Full Court importantly clarified that it is not necessary to prove information is ‘confidential’ for a breach of duty claim under s 183(1) of the Act to succeed.
4. Instead, a claim for breach of the s 183(1) duty focuses on how the information was acquired (i.e. was it by reason of a person’s position as a director or employee) and whether that information was improperly used.
5. The decision resolves an argument identified by Justice Derrington in Smart EV Solutions Pty Ltd v Guy [2023] FCA 1580 at [71] as the proper interpretation of the previous authority - Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 2 at [44] – [46]: that for a claim under s183(1) of the Act to succeed the relevant information must be confidential.

Takeaway: breach of the statutory duty not improperly use company information can occur even if the information is not confidential. 

Summary

1. New Aim Pty Ltd v Leung [2026] FCAFC 49 is an appeal decision concerning allegations of misuse of information by a former employee and the scope of directors’ and officers’ duties under s 183 of the Act. 
2. The employee in question was the Chief Commercial Officer of an online retailer, the Applicant in the proceedings - New Aim. The CCO provided contact details of 17 Chinese suppliers to a competing business, Broer, for its benefit and to advance his own interests as an actual or potential employee of Broer. At first instance the trial judge dismissed New Aim’s claims on the basis the information was not ‘confidential’ in nature.
3. Two of the grounds on appeal related to: 
   1. whether the identity and contact details of the 17 suppliers constituted “confidential information” in equity and under the employment contract; and 
   2. whether s 183(1) of the Act requires that the information be confidential in the equitable sense. 

Was the information confidential?

1. The Full Court held that:
   1. the list of 17 current, ‘reliable suppliers’ was confidential. It accepted that the list was commercially valuable, difficult and time‑consuming to recreate, and the information was treated as confidential within New Aim’s business. 
   2. The CCO obtained the information because of his senior role, knew it was treated as sensitive, and disclosed it in a way that gave a competitor a significant commercial advantage. 
2. Accordingly, the Court found that New Aim succeeded in its claims for breach of confidence and breach of contract setting aside the trial judge’s decision.

Does s 183(1) of the Act require the information to be confidential?

1. As to s 183(1), the Court rejected the argument “information” that section is confined to what equity would protect as confidential. 
2. Instead, the Court found that s 183(1) is concerned with information obtained because of a corporate position and whether its use is “improper” judged objectively against the standards expected of a person in that role. 
3. The Court found that:
   1. the COO used knowledge acquired through his employment at New Aim as to which suppliers were likely to be reliable and therefore suitable; 
   2. the COO disclosed them to Broer so that it could shortcut the process of finding reliable suppliers and commence trading quickly; and
   3. the use of the information was more than the application of general skill or experience.
4. Therefore, the Court found that the CCO had improperly used the information obtained in his capacity as a former employee in contravention of s 183(1) of the Act. 

Outcome and takeaways

1. Directors, other officers and employees need to be aware that the improper use of company information can result in an actionable claim in broad circumstances, even where information is not confidential. 
2. This poses obvious risks for the person taking information where they may erroneously believe they are not ‘doing anything wrong’ because the information is not confidential. 
3. It also poses risk for the recipient. There is a particular risk when recruiting from a competitor. Even where an employer unwittingly or innocently receives company information taken by a former employee or officer of a competitor, they may be compelled to provide access to and inspection of their IT systems, databases and networks to search for information which may have been taken and improperly used by the recruit.  

Recommendations and guidance 

1. Unauthorised taking of company information for use with or by a competitor will usually constitute ‘improper use of information’ in breach of s 183(1) Corporations Act.
2. Audits should be undertaken on departing and former employee access to and use of company information where they plan to or have moved to a competitor.
3. Businesses should consider whether they have appropriate record keeping and IT capabilities (including software) to enable such audits to be quickly and efficiently undertaken to identify company information that may have been taken and misused.
4. Jackson McDonald’s dispute resolution team has extensive experience advising clients in relation to matters involving allegations of the alleged or actual misuse of company information by current or former employees, including valuable IP, commercial data (such as client lists) and software. 
5. Acting quickly to identify and secure evidence that proves that information has been taken and potential misuse is a critical first step. It may be necessary to engage experts in forensic data retrieval and analysis to secure and preserve evidence necessary to take Court action to secure injunctions and seek damages, including to prevent further or ongoing misuse of company information. 
6. Please contact Marcus Pullen, Partner, or Jordan Hurley, Jordan Hurley, in the Disputes team at Jackson McDonald if you have concerns that confidential information may have been taken by a current or former employee and would like to obtain advice.

Disclaimer: Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not act in reliance on the information provided in this without first obtaining legal advice.

This article was written by Jordan Hurley, Senior Associate Disputes.