In the case of CF Partners (UK) LLP v Barclays Bank PLC (September 2014) Barclays were found to have breached a duty of confidence by misusing confidential information provided to it by the claimant. The claimant provided information to Barclays in relation to a proposed acquisition. When the claimant’s negotiations with the target broke down, Barclays stepped in and bought the target which it later sold at a substantial profit. The claimant was awarded £10million in compensation.
The judgment in this case raises a number of interesting points:
There was no binding confidentiality agreement in place: In this case there was no binding contractual obligation on the defendants to keep information supplied confidential. However the Court referred to the equitable duty of confidence that exists when one party receives information that he knows or ought to know is fairly and reasonably to be treated as confidential.The equitable duty of confidence is outside of any contractual relationship and even if the parties do agree a contractual relationship this does not define the scope, duration and terms of the equitable duty.
What is confidential information? Barclays argued thatthe business proposition put to it by the claimant was based on publically available information and therefore was not confidential. The Court found however that this was not the case. The package of information represented a significant degree of skill in its compilation which had also been a time consuming exercise. The claimant had also gathered third party expressions of interest from reputable sources. As a result parties do need to be aware of the breadth of information that may be classed as confidential. The more time and effort taken in compiling and presenting the information in a robust, reliable and logical form the more willing a court will be to treat that information as confidential.
How will damages be assessed? In this case the substantial award of damages was based on a hypothetical negotiation. The Court started with the basic principle that damages are to compensate for the value of the information taken and stated that this could only be determined by looking at what would be paid by a willing buyer to the seller. Effectively Barclays was stripped of profits made on the transaction.
Recipients of information from third parties must take care. Even if they do not have a contractual obligation to keep the information confidential it may be subject to an equitable duty of confidence, the breach of which may lead to a significant claim for damages. The recipient must consider if it knows or believes the information to be confidential and it must also take into account how the information has been compiled and the likely investment in that exercise.