Navigating Breach of Confidence | Intent and Liability in Commercial Law
Traditionally, the law has focused on breach of confidence as being solely within commercial pre-defined relationships. However, it now also considers the intrusion into private life of individuals by the exposure of private information.
In this article, we focus on commercial transactions which, by virtue of their nature, require that confidential information, such as trade secrets, business strategies and proprietary details disclosed to another party, are protected against misuse or disclosure without authorisation of the owner of such confidential information.
Stuart Southall of KANGS comments upon breach of confidence generally.
Breach of Confidence
A duty of confidence arises where a recipient receives confidential information that is to be kept secret and where it would be unfair if that recipient disclosed it to others.
Breach of confidence arises where the confidential information is disseminated to others. In Seager v Copydex Ltd (No1)[1967] Lord Denning stated:
‘a person who has received information in confidence cannot take unfair advantage of it, and must not make use of it to the prejudice of the person who gave the information, without obtaining their consent. Equity acts on the recipient’s conscience to prevent them making an unauthorised use or disclosure of the information’.
The law governing breach of confidence is extremely complex and continues to develop to reflect changes in society, technology and business practice. An important element in determining whether a confidence has been breached is that of the defendant’s intent at the time of the event and whether there must be present an intention to misuse the information or whether mere possession of knowledge is sufficient to establish liability.
The recent Court of Appeal decision in Kieran Corrigan & Co Ltd v Timol [2024] EWCA Civ 1233 provides useful clarification on this issue.
What Elements are Required to Establish a Breach of Confidence?
In the case of Coco v AN Clark (Engineers) Limited 1968 it was established that the claimant must establish three key elements:
- The information itself must be confidential i.e.
- it must have a degree of secrecy and
- is not in the public domain or public knowledge.
- The information must have an obligation of confidence.
- This would include examples such as employer-employee relationships, contractual arrangements and circumstances where a reasonable person would recognise the need for confidentiality.
- This would include examples such as employer-employee relationships, contractual arrangements and circumstances where a reasonable person would recognise the need for confidentiality.
- There must be an unauthorised or misuse of that information.
- It must be proven that the defendant misused the information to their advantage or disclosed it without permission.
The Importance of the Intent of the Defendant
Established Case Law
The required intent for liability for breach of confidence has long been an issue and has been debated at length over the years.
In Seager v Copydex Ltd [1967] 1 WLR 923 the Court held that liability for breach of confidence does not require deliberate misuse; it is enough that a defendant takes unfair advantage of confidential information.
In Vestergaard Frandsen v Bestnet Europe [2013] UKSC 31 the Supreme Court held that a defendant cannot be liable if they were unaware that they were using confidential information.
Current Case in Focus: Kieran Corrigan & Co Ltd v Timol
The Background
In this extremely complex and detailed dispute, Kieran Corrigan & Co Ltd, an Irish company that provides accountancy and tax advice, commenced proceedings against a number of defendants, including Bashir Timol, for breach of confidence in respect of confidential material which had been shared, despite a Non-Disclosure Agreement having been signed.
The confidential information had been developed without consent in the pursuit of financial gain.
The Hearing
The Judge found several parties liable in respect of the allegations. However, he found that Bashir Timol, a director of a company that was also a defendant, was not liable for breach of confidence. He found that although Timol had received the confidential information at the outset, he had not been personally involved in the complained of activity that was based upon the confidential material. His decision making was only concerned with its commercial viability without reference to the confidential information itself. Additionally, he was unaware that the others had used the confidential information in the design of the structure which he was engaged in marketing.
The Appeal
Kieran Corrigan & Co Ltd appealed the decision in respect of Timol.
The Court of Appeal upheld the decision of the High Court and, in so doing, reinforced the principle that a defendant must have a sufficient level of knowledge or involvement to be liable for breach of confidence.
Principal Points of Note
Primarily, the case of Kieran Corrigan & Co Ltd v Timol confirmed that:
- liability for breach of confidence depends on the defendant’s understanding and use of confidential information,
- a breach of confidence claim is not one where the concept of strict liability applies. A claimant must establish the three elements of liability set out above.
Business Implications in Practice
The protection of confidential information has always been of extreme importance to both individuals and companies. Case Law is awash with reported cases on disputes that have arisen and as indicated by the historical cases shown above, the law continues to adapt in accordance with changes in technology.
Procedures can be adopted in order to minimise risk such as:
- utilisation of non-disclosure agreements
- management of release of confidential information
- education of both company officers and staff upon the handling of sensitive information,
- where appropriate, proper registration of patents and trademarks.
How Can We Assist?
Our skilled solicitors have a wealth of experience of all facets of information protection as well as extensive expertise in Alternative Dispute Resolution (ADR), Intellectual Property disputes and commercial disputes, regardless of their complexity or nature.
If we can be of assistance, the team at KANGS would be delighted to assist you, simply contact us using the details below:
Tel: 0333 370 4333
Email: info@kangssolicitors.co.uk
We provide initial no obligation discussion at our three offices in London, Birmingham, and Manchester. Alternatively, discussions can be held through live conferencing or telephone.
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