Biggart Baillie Solicitors

Breach of confidentiality is one of those tricky areas which can be harder to prove than you might think.

In order to call upon the protection of the law, three things need to be present:

1. the information must genuinely be confidential in nature – it cannot be in the public domain already;
   
2. the confidential information must  be disclosed in circumstances where it is clear that there is a obligation of confidence; and
3. the recipient of the information must be shown to have disclosed it.

Every case will turn on its own facts but these three factors must be present and you must be able to prove them. Suspicion will never be enough.

Assuming you can establish that there has been a breach of confidentiality, what can you expect from the court?  If an injunction or interdict still has some value, that ought to be the first remedy you consider.  But what if it’s now too late?  How are damages to be worked out?

In a recent case called Vercoe & Ors v Rutland Fund Management Ltd & Ors [2010] EWHC 424 (Ch) some helpful guidance is given. In that case one party approached another with information about a potential acquisition target.  A confidentiality agreement was entered into. The party who had received the confidential information then proceeded to do a deal which did indeed result in a successful acquisition, but this was done without the other party and in clear breach of the confidentiality agreement.

The Judge held that there had been a breach of confidence.  When looking at the remedy that the court would provide, the Judge decided that it was likely that, if there had been no breach, the deal would have gone ahead and the party who had provided the information would have received an equity allocation in the acquisition

Accordingly, damages were calculated on the basis of what a reasonable price might have been for the recipient of the secret – or confidential information – to have been released from their obligation of confidence.  In this assessment the court proceeded on the basis that there had been, in effect, a breach of contract.

This might look like a novel way of going about things but it illustrates just how varied factual situations can be and why the remedies that the court provides may not be predictable.

Now the question this poses is how do you do a valuation on a secret?

If you require further information on the issues raised by this article, please contact Brent Haywood, Partner, at bhaywood@biggartbaillie.co.uk on 0131 226 5541.