Showpo v Black Swallow – Why employees have duties under Corporations Act

A recent SMH article explored a situation where Showpo is suing a former employee and another company, Black Swallow, for misuse of company information.

The former employee is alleged to have stolen Showpo’s entire customer database and passed it onto her new employer, Black Swallow, who then used it to market itself as an ‘affiliate’ of Showpo.

Whilst it is common knowledge that directors have duties to corporations under the Corporation Act (Corps Act), what is less well known is that employees have duties to corporations under the Corps Act too.

Specifically, sections 182 and 183 of the Corps Act contain duties in relation to misuse of position and confidential information .

“Gaining an advantage”

Section 182(1) of the Corps Act:

A director, secretary, other officer or employee of a corporation must not improperly use their position to:

a.      Gain an advantage for themselves or someone else; or

b.     Cause detriment to the corporation.

“Confidential information”

Section 183(1) of the Corps Act:

A person who obtains information because they are or have been a director other officer or employee of a corporation must not improperly use the information to:

a.      Gain an advantage for themselves or someone else; or

b.     Cause detriment to the corporation.

In the Showpo case, on the facts outlined, the employee in question has potentially breached both sections because, if the conduct is proven, they have used their position to ‘steal’ confidential information and then to gain an advantage for themselves and a third party.

The same sections also impose a duty on anyone else involved in a breach, even if they are not an officer or employee of the corporation. In this case, Black Swallow may also be found to have breached duties to Showpo.

Penalties

Sections 182 and 183 are civil penalty provisions, that is, a breach of these sections gives rise to civil liabilities under the Corps Act.

Criminal sanctions are also possible in some cases.