Former employees found liable for stealing files to launch rival business
Two former senior employees of a glass-reinforced plastic manufacturer have been found liable for breach of confidence, breach of contract, breach of fiduciary duty and unlawful means conspiracy.
A High Court judge, Recorder Douglas Campbell KC, ruled one of the men secretly copied more than 11,500 confidential business documents on to a portable hard drive during his notice period, in order to set up a competing company.
Scunthorpe-based EMJ Plastics, which designs and makes permanent formwork panels used in bridge construction, brought proceedings against its former operations manager Ian Baggaley, former production manager Mark Johnson, and their new venture – Mekina Industries.
Mekina Industries is a joint venture in which Baggaley and Johnson each hold a 25 per cent stake. Composite-materials group, Dura Group, holds a 50 per cent stake, having invested £200,000 and provided business support.
Baggaley had run EMJ’s day-to-day operations for nearly a decade and worked out of the company’s Filey and later Scunthorpe factories.
The court found he had copied 11,579 files from EMJ’s systems to a Toshiba drive during his notice period, intending to exploit that material in a business competing directly with his employer.
Baggaley had claimed the copying was authorised by a company director, Brendan O’Neill, as part of a plan to safeguard EMJ’s data during an alleged internal power struggle.
The court rejected this. It found O’Neill to be a credible witness whose evidence was supported by documents, while Baggaley’s version was contradicted by the timing of the copying, the absence of a documentary trail, and his concession that if he had not handed the drive to O’Neill, then he must have copied it for his own use.
The judgment also found Johnson received a copy of EMJ’s internal “Hot List” – a highly sensitive sales-prospect document – from EMJ’s business development manager in December 2022, via an email in which the sender wrote that Johnson should have “no idea where this came from”.
Johnson’s subsequent claim that he passed the Hot List to Baggaley in August 2023 only to ensure Mekina did not contact the same customers was dismissed as making no commercial sense for a business that actively needed clients.
The court further found that Mekina’s CAD drawings for two bridge projects had been created by copying underlying EMJ files taken from the Toshiba drive, with layer names embedded in the native CAD files matching EMJ’s own naming conventions.
One-page structural calculation summary sheets used by Mekina were also found to have been copied from EMJ’s equivalents.
On breach of fiduciary duty, the court found that Baggaley’s seniority – as the person in charge of factory operations, reporting directly to the board – placed him under a duty to report his own wrongdoing to the company, which he failed to do.
On unlawful means conspiracy, the court found that all three necessary elements – combination, intention to injure, and unlawful acts – had been established.
It concluded that despite absence of specific evidence of individual lost contracts, it was more likely than not that EMJ had suffered loss and damage as a result.
In his judgement, Recorder Douglas Campbell KC said: “By copying over 11 000 EMJ files to the Toshiba drive for use in a business competing with EMJ while still employed by EMJ, Mr Baggaley acted both in breach of confidence and in breach of contract.
“He was also in breach of his implied duty of good faith and fidelity. His failure to return such material was a further breach of contract.
“Mr Baggaley thereby breached clauses 16, 18, and 23 of his contract and Section B of the Safeguards section of the handbook.
“Mr Baggaley’s subsequent use of the material on the Toshiba drive to create Mekina’s CAD drawing, Mekina’s calc sheet, and Mekina’s business plan, and the subsequent use of such Mekina materials which incorporated the claimant’s confidential information were also breaches of clauses 16 and 18 of his contract and Section B, and breaches of confidence.
“I doubt that this trial has uncovered the full extent of such misuse.”
Turning to Johnson’s involvement, Campbell added: “I have rejected the claimant’s case that Mr Johnson removed any material from EMJ when employed.
“Nor is there any suggestion he was involved in the original copying of the Toshiba drive. Hence Mr Johnson was not in breach of his contract or his Settlement Agreement as a result of either of these.
“The claim for breaches of the duties of good faith and fidelity were restricted to the time period when he was working at EMJ, so these claims fall away too.
“Mr Johnson’s use of the Hot List for Mekina’s internal purposes (ie for the business plan shown to Dura, and for Mr Baggaley’s use in August 2023) was a breach of contract and breach of confidence.
“Specifically, it was a breach of clauses 15 and 17 of his contract, Section B of the Safeguards section of the handbook, and clause 8.1 of his Settlement Agreement.”
Dura Group itself was found to have had no knowledge of the wrongdoing. Damages and relief have yet to be determined.
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