The misuse of information obtained through an ex-employee’s position: a broader cause of action for businesses

The Full Court of the Federal Court has held that s 183(1) of the Corporations Act 2001 (Cth) provides a standalone cause of action against employees who misuse information obtained through their positions, even where that information does not meet the strict requirements for protection in equity. This significantly expands the remedies available to businesses when departing employees share commercially sensitive information with competitors.

The decision is also a reminder for businesses of the importance of robust confidentiality protections, clear contractual terms, and thorough exit procedures for employees with access to valuable commercial intelligence.

What happened? Former CCO shares supplier details with competitors

New Aim (the appellant) is a large Australian online retailer sourcing products from suppliers in China. The first respondent, Mr Leung, worked for New Aim for approximately 12 years, including as Head of the Buyer Team (responsible for sourcing products from Chinese suppliers) and later as Chief Commercial Officer (CCO), before departing in January 2021.

Shortly before leaving New Aim, Mr Leung introduced Mr Dai (the director of Sun Yee, an existing competitor) to his friend Mr Chen. Mr Chen and Mr Dai then founded a new online retailer, Broers, in January 2021.

Before leaving New Aim, Mr Leung assisted Mr Chen in ‘various ways’ in setting up Broers, including  suggestions of products to sell online.

In January 2021, after departing New Aim, Mr Leung posted a WeChat ‘Moment’ stating, ‘I am determined to do better and work harder than before, and totally destroy what I built in the past 12 years’.

Between January and July 2021, Mr Leung disclosed to Broers the names and contact details of individuals associated with 17 suppliers to New Aim, typically by sharing WeChat contact details stored on his personal phone (New Aim had not provided Mr Leung with a corporate mobile phone).

Broers dealt with those 17 New Aim suppliers to obtain products (including products identical to those sourced by New Aim). Sun Yee, New Aim’s existing competitor, also allegedly benefited by purchasing and on-selling products sourced from the 17 suppliers via Broers.

New Aim commences litigation

(Injunctive relief given initially) New Aim commenced proceedings in the Federal Court on 23 September 2021, alleging breach of confidence, breach of contract, and contravention of s 183(1) of the Corporations Act, arising from Mr Leung’s disclosure of New Aim’s supplier contact details via WeChat. At this time, New Aim did not know the precise extent of the supplier information disclosed by Mr Leung, so their pleading identified the relevant confidential information broadly, by reference to the identity and contact details of all suppliers to New Aim as at January 2021.

On 26 October 2021, the Court granted an interlocutory injunction preventing Broers and Sun Yee from using the identity or contact details of New Aim suppliers as at January 2021, including by procuring or selling products from those suppliers that were the same or substantially similar to products in the New Aim product range at that time.[1]

(First trial dismisses New Aim’s claims)  The first trial was heard by a single judge, Justice McElwaine, in June 2022, who dismissed the claims.[2] Justice McElwaine held (among other things) that:

1. the breach of confidence claim failed because the WeChat information he shared — that is, the names or aliases of a representative of a supplier to New Aim, together with their WeChat contact details — did not have the necessary quality of confidence
2. the breach of contract claims relevantly failed because the clauses that provided for an obligation of confidence in relation to ‘confidential information’ (but did not define that term) did not extend to the WeChat information and
3. there was no contravention of s 183(1) of the Corporations Act — which states that a person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to gain an advantage for themselves or someone else, or cause detriment to the corporation — was established because the information was not confidential and Mr Leung’s use of the information was not improper.

(New Aim’s first appeal allowed and orders new trial) On appeal, the Full Court allowed the appeal and remitted the matter for retrial.[3] The Full Court found the principal error to be that the first trial judge had focused on the location and storage of the information rather than its nature and content (the identity and contact details of suppliers to New Aim).[4]

The Full Court’s order for a retrial had the effect of granting a ‘new trial’, which meant that existing issues could be abandoned, and new ones raised.

(Retrial: Second trial judge also dismisses New Aim’s claims) On retrial, Justice Neskovcin also dismissed New Aim’s claims.[5] Her Honour:

1. dismissed the claim for breach of confidence on the basis that the information concerning all suppliers as at January 2021 did not have the necessary quality of confidence
2. dismissed the various contract claims, including because the information concerning all suppliers as at January 2021 was not confidential and
3. dismissed New Aim’s claim under s 183(1) of the Corporations Act on the basis that Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 2 (Futuretronics) stood for the proposition that ‘the obligation in respect of confidential information under s 183(1) of the Corporations Act aligns with the equitable obligation and there can be no improper use of information, within the meaning of s 183, if there has been no improper use of information under the general rules of equity’.

(The second appeal)  New Aim then appealed to the Full Court for a second time. Relevantly, New Aim argued:

• (breach of confidence — ground 1) the confidential information was the identity and contact details of the 17 specific suppliers to New Aim, whose details had been disclosed by Mr Leung via WeChat, as distinct from all suppliers as at January 2021 (i.e. a narrower case than originally pleaded).
• (breach of confidence — ground 2)  the information concerning the 17 suppliers possessed the necessary quality of confidence and was received in circumstances importing an obligation of confidence
• (breach of contract)  the contractual confidentiality clause (cl 33 of Mr Leung’s employment contract, which did not define ‘confidential information’) extended to the information concerning the 17 suppliers
• (breach of s 183(1) of the Corporations Act)  the primary judge erred in holding that the s 183(1) claim necessarily rose or fell with the equitable claim for breach of confidence, and in particular whether ‘information’ in s 183(1) is limited to information that equity would protect.

The Full Court’s (second) decision (New Aim’s appeal allowed; remitted again to the primary judge)

The Full Court allowed the appeal on all substantive grounds, and the proceeding was remitted to the primary judge for further hearing.

Breach of confidence

While New Aim’s pleadings alleged that the details of all of its suppliers at January 2021 constituted confidential information, the Full Court found:

• that the case as conducted at trial — from oral opening submissions onwards — was confined to the 17 specific suppliers in respect of which misuse was alleged and relief was sought
• that the respondents had also addressed that narrower case, and thus there was no element of unfair surprise and
• held that Justice Neskovcin erred in failing to proceed to consider whether the information concerning those 17 specific suppliers had the necessary quality of confidence.

They therefore allowed New Aim’s appeal and, turning to the question themselves, found that the information about the 17 specific suppliers was confidential.[6]

The Full Court identified the following factors in support of confidentiality:[7]

• Mr Leung held a high level of seniority at New Aim, entitling him to greater access to confidential information than others in the business. His employment contract expressly stated that he would ‘become acquainted with or obtain access to confidential information relating to the business and affairs of New Aim’.
• The identity and contact details of current and reliable suppliers (specifically, the 17 suppliers identified in the narrower case) was commercially valuable (a necessity for a successful e-commerce business). This was common ground.
• The process for identifying reliable Chinese suppliers suitable for the Australian market required substantial effort and could take several months. This was also common ground.
• New Aim employed white-labelling of products and allocated its own SKUs to prevent disclosure of supplier details, which were strong indicators that New Aim guarded the identity of its suppliers and regarded them as confidential information.
• Mr Leung was aware of password controls restricting access to the New Aim Purchasing System, which contained supplier information. He had also discussed with New Aim’s then-Chief Information Officer the sensitivity of that information and the desirability of restricting access. During those discussions, Mr Leung expressed his own concern that employees could take commercially sensitive information, such as supplier details, to a competitor after resigning. There was no dispute that the details of all of New Aim’s suppliers at January 2021 was not generally known or available.
• Industry experts agreed that businesses treated supplier information as confidential.
• The information is appropriately characterised as specific information not part of Mr Leung’s general know-how.  Importantly, the identity and contact details of the 17 suppliers were not contained in Mr Leung’s memory but were recorded in written formin his WeChat contact list. Quoting Printers and Finishers Ltd v Holloway [1965] 1 WLR 1, the Full Court observed that this was ‘not what an ordinary person of average intelligence and honesty would regard as knowledge “not readily separable from his general knowledge”.’

The Court concluded that all elements of the equitable action for breach of confidence were satisfied: the information was precisely identified, had the necessary quality of confidence, and was received in circumstances importing an obligation of confidence.

Breach of contract

The Full Court found that, objectively construed, the parties intended that the expression ‘confidential information’ (which was not defined in the employment contract) would capture information which, in the employment and commercial context known to them, was to be treated as confidential.

They found that on the facts of the case, the confidentiality clause did not operate in any materially different way from the equitable obligation of confidence. Therefore, the Full Court held the contractual obligation was also breached for the same reasons that Mr Leung had breached his equitable obligation of confidence.

Section 183(1) Corporations Act

The Full Court also allowed New Aim’s appeal against Justice Neskovcin’s ruling regarding s 183(1) of the Corporations Act.

Justice Neskovcin had held, relying on Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 2, that there could be no improper use of information under s 183 if the information could not be regarded as confidential in equity. The Full Court rejected this narrow construction.

The Court held that:[8]

• Section 183(1), according to its text, does not require that the information be ‘confidential information’ of the kind protectable in equity. The section could apply to information protected by an agreement between the corporation and its employee, director or officer, even where such information is not protected in equity. The central issue raised in s 183(1), the Court stated, ‘is how the information was acquired: whether the information was acquired becauseof the person’s position’ [original emphasis].
• Section 183(1) is not a statutory enactment of an equitable cause of action for breach of confidence.
• Section 183(1) is influenced by fiduciary law rather than the equitable doctrine of confidence. Section 183(1) addresses improper use of information and s 182(1) addresses improper use of position. These sections derive from the fiduciary duty to account for benefits obtained by reason of a fiduciary position.
• To the extent Futuretronics adopted the view that ‘information’ in s 183(1) is limited to information which equity would protect by injunction to restrain a breach of confidence, ‘that is too narrow a view having regard to the text, context and purpose of the provision.’ The decision in Futuretronics should be understood as deciding that s 183(1) did not apply because the ex-employee did not improperly use the information he obtained because of his position, not because the information lacked a particular quality.

Applying these principles, the Full Court held that Mr Leung contravened s 183(1). The test for ‘impropriety’ is objective: whether the person’s behaviour breached the standards of conduct that would be expected of a person in that position by reasonable persons with knowledge of the duties, powers, and authority of the position and the circumstances of the case.

The Court found that the relevant information (being the identity and contact details of individuals associated with the 17 suppliers) was obtained because of Mr Leung’s position as an employee of New Aim. Further, Mr Leung improperly used the information to gain an advantage for Broers and for himself. The improper use was established based on the following findings:

• Mr Leung knew that supplier information was commercially valuable to New Aim and likely to be valuable to other participants in the industry
• Mr Leung must have known that knowledge of the identity and contact details of individuals associated with the 17 suppliers would enable a competitor to source products from the suppliers quickly, without undertaking extensive quality control measures
• Mr Leung knew that New Aim had taken various steps to protect supplier information and keep it secret, including through white-labelling and access controls and
• a reasonable departing CCO in Mr Leung’s position, having the employment history and experience of Mr Leung, would have regarded the identity and contact details of individuals associated with the 17 suppliers as confidential and commercially valuable.

Practical takeaways for all businesses

Regardless of the outcome of any further proceedings, this case provides a reminder for businesses to consider the confidentiality of supplier relationships and contact details.

Review and strengthen confidentiality protections for supply chain information. The decision confirms that the identity and contact details of reliable suppliers can constitute confidential information, particularly where the business has invested substantial effort in identifying them. Businesses should:

• expressly identify supplier information (and other key commercial intelligence) within confidentiality clauses in contracts
• ensure that they have technical controls over how such information is stored and communicated, for example, consider providing company-issued devices and
• restrict access to supply chain data on a need-to-know basis.

Identify high-risk roles and add additional protections. The decision underscores that the more an employee has access to key confidential commercial intelligence, the higher the risk to your business. Businesses should identify employees in sensitive roles, such as those with access to supplier relationships, customer lists, pricing strategies, or proprietary systems, and implement safeguards such as enhanced contractual protections and restricting access to commercially valuable information on a need-to-know basis.

Strengthen exit procedures. Exit processes for all employees, especially senior employees, should address the potential loss of confidential information. This could include express acknowledgements of ongoing confidentiality obligations, return of company-issued devices and access credentials, and confirmation that any confidential information stored on personal devices (including messaging applications such as WeChat) has been deleted. Detailed exit checklists can provide valuable evidence in any later dispute.

Document operational practices demonstrating confidentiality. The Court treated New Aim’s practices of white-labelling products and allocating its own SKUs as ‘strong indicators’ that supplier information was guarded as confidential. Businesses relying on supplier relationships should document and formalise such practices as evidence of a confidentiality regime.

Consider s 183(1) of the Corporations Act as an additional remedy. Where a departing employee misuses information obtained because of their position, a claim under s 183(1) may be available, even in circumstances where that information is not otherwise protected by an equitable obligation of confidence.

A High Court appeal?

Mr Leung has now filed an application for special leave to appeal to the High Court, arguing that the Full Court erred by holding that ‘information’ in s 183(1) is not limited to information that would be treated as confidential in equity, and wrongly departed from the Full Court ruling in Futuretronics.

He is also arguing that the Full Court erred in finding that Justice Neskovcin erred in failing to decide the narrower case relating to the 17 specific suppliers, when that that case was not explicitly included in the written pleadings.

We will be watching to see if the High Court agrees to consider this decision.

Featured image from Pixabay.

[1] New Aim Pty Ltd v Leung [2021] FCA 1329 (Moshinsky J).

[2] New Aim Pty Ltd v Leung [2022] FCA 722 (McElwaine J).

[3] New Aim Pty Ltd v Leung [2023] FCAFC 67 (Kenny, Moshinsky, Banks-Smith, Thawley and Cheeseman JJ).

[4] New Aim Pty Ltd v Leung [2023] FCAFC 67 at [51].

[5] New Aim Pty Ltd v Leung (No 4) [2025] FCA 747 (Neskovcin J).

[6] New Aim Pty Ltd v Leung [2026] FCAFC 49 at [64]-[77].

[7] New Aim Pty Ltd v Leung [2026] FCAFC 49 at [82]-[122].

[8] New Aim Pty Ltd v Leung [2026] FCAFC 49 at [125]-[162].