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Damages Awarded for Customer Database Misuse

In a rare breach of confidentiality case, a company whose business was severely hit when its customer database was leaked by a disaffected former employee to a trade rival – which used the information in well-targeted mailshots to woo new clients – has been awarded a six-figure sum in compensation by the High Court.

The database had made its way into the hands of a former senior employee who later went to work for a larger rival of the company. The information was copied to the rival’s head of marketing, who used it to mailshot more than 19,000 of the company’s customers. The mailshots were timed to coincide with the company’s announcement of a price increase and encouraged customers to switch providers.

The rival admitted that it had breached the company’s confidentiality and took swift steps to remedy the situation, including the summary dismissal of two senior employees who had been involved in the database’s misuse. The company put its loss as a result of the breach at up to £8.1 million. However, the rival pleaded that the company’s loss amounted to less than £225,000.

The Court preferred the rival’s expert accountancy evidence on a number of issues but awarded the company over £140,000 to reflect the damage the mailshots caused to its customer base The Court also awarded almost £70,000 in respect of price reductions that the company was constrained to introduce to retain its customers, as well as more than £60,000 to reflect management time and professional costs incurred in dealing with the matter. Interest was added to the awards; however they were discounted to take account of accelerated receipt.

Noting the substantial investment that the company had made in compiling customer information which formed an integral part of its business intelligence, the Court also found that the rival had breached its database rights. However, the Court declined to grant the company additional compensation on that ground, on the basis that the other awards adequately compensated it for its loss.