In The Racing Partnership & Ors v Sports Information Services & Ors [2019] EWHC 1156 (Ch) the High Court (Zacaroli J) determined a dispute relating to the (alleged) misuse of the Claimants’ live betting and horseracing data collated at racecourses.   The facts were not in the employment sphere, but the decision raises a number of interesting issues that will impact upon employee competition cases involving confidential information.

The facts in brief

The claim, in essence, was that the Defendant, having lost the right to collect and distribute data from various race courses on 1 January 2017, continued to do so in ways which involved infringing (amongst other things) the Claimants' confidence. The overarching claim was that the Defendant conspired with others to injure the Claimants by unlawful means.  

For reasons that are specific to the way in which betting on horse racing occurs, there is a commercial value in being able to collate and distribute certain data relating to races in real time to off-course bookmakers. For that reason, the Claimants (and the Defendant until 1 January 2017) are (and were) willing to pay substantial sums to the owners of racecourses to be allowed the exclusive right to collate and distribute such information to off-course bookmakers. The value in the information is short-lived: its value lasts for a matter of minutes only, most of which does not extend beyond the start of the race.

The interesting areas

In determining that the Defendant had breached the Claimants’ confidence, the Court applied the classic three stage test from Coco v Clark [1969] RPC 41: (i) the information had the necessary quality of confidence; (ii) the information was imparted in circumstances importing an obligation of confidence; and (iii) there was an unauthorised use by the Defendant to the detriment of Claimants.

There are three particularly interesting aspects to the decision in the context of employee competition cases:

  1. The importance of commercial value to establishing the necessary quality of confidence;
  2. The objective test applied to determining whether the information was imparted in circumstances importing an obligation of confidence; and
  3. The different knowledge test applied to the claim in unlawful means conspiracy.

1. Commercial Value

A horserace is a public event: members of the public are invited to attend, and information relating to events on-course is put into the public domain almost instantaneously, including by way of TV coverage.  At first blush, it therefore seems surprising that the data relied upon by the Claimants was confidential. 

In finding that the information did have the necessary quality of confidence, the Court focused on the short period of time prior to the start of the race when off-course bookmakers needed the information.  The Defendant argued that the fact that: (i) the information was visible to everyone (potentially thousands) on the racecourse, meant that it did not have the necessary quality of confidence; and (ii) some racecourses did not restrict the use of the information by those attending a race (although others did) meant that there was no “general obligation of confidence”. 

However, the Court found that the information “is not confidential because it is of an inherently confidential nature, but because there is a substantial commercial value in the information, provided it is disseminated to off-course bookmakers as soon as possible, and [one of the Claimants] has the ability to, and does in fact, control its dissemination via exclusive channels so as to exploit that value.”  Further, the fact that commercial parties were prepared to pay substantial sums for the benefit of an exclusive right to use the data “is a strong indication of its confidential nature”.

This focus on commercial value rather than an inherent quality of confidence is an interesting extension into the purely commercial sphere of the sorts of commercial considerations that led the House of Lords in Douglas v Hello! (No. 3) [2008] 1 AC 1 to find that OK! magazine could found a claim in breach of confidence against Hello! magazine in respect of photographs of a wedding (which, absent their significant commercial value, would not have had the necessary quality of confidence).  Some commentators had suggested that such cases would likely be limited to cases arising in the ‘privacy’ sphere, but Racing Partnerships shows that the such considerations can help a party to establish a claim for confidence in situations far removed from the privacy sphere. 

Many employees in a variety of different workplaces will routinely handle information of significant commercial value where it is not immediately obvious that the relevant information is of an “inherently confidential nature”: this case is likely to become a useful weapon in the armoury of employers seeking to deal with the consequences of rogue employees misusing such information.  The Court in Racing Partnerships did not refer to the relatively new Trade Secrets (Enforcement, etc) Regulations 2018, which, in defining a ‘trade secret’, emphasise the question of whether information “has commercial value because it is secret”: that is a further weapon which should not be overlooked in these circumstances.

2. The objective test

The Court found that the Defendant had sought, and obtained, assurances from the company providing the information that it had the right to collect the data and provide it to the Defendant, and that the relevant individuals at the Defendant honestly believed those assurances to be true.  Importantly, the Court concluded that the Defendant “neither actually knew that, nor turned a blind eye to whether, the [company providing the information] was unable lawfully to provide the information.”

However, the Court found that a reasonable person  in the situation of the Defendant would have appreciated that the relevant company acquired the information in circumstances imposing obligations of confidence, which would be breached by providing that information to the Defendant.  Accordingly, the information had been imparted to the Defendant in circumstances importing an obligation of confidence.

The parties before the Court had agreed that the Court should apply an objective test to this question (in Vestergaard Frandsen A/S v Bestnet Europe Ltd [2013] UKSC 31 the Supreme Court confirmed that the question was whether the recipient “knew or ought to have appreciated” that the information was confidential: subsequently, in Primary Group (UK) Ltd v Royal Bank of Scotland Plc [2014] EWHC 1082 (Ch), at [223], Arnold J held that “ought to have appreciated” meant a truly objective test (rather than applying only to Nelsonian, blind-eye knowledge), and Arnold J’s analysis was cited with approval - although in a different context - by David Richards LJ in Matalia v Warwickshire County Council [2017] ECC 25 at [46]).

For my own part, I consider that this leaves the equitable duty of confidence in a curious place.  The Supreme Court in Vestergaard also confirmed that: (i) “an action in breach of confidence is ultimately based on conscience” (and continued that “in order for the conscience of the recipient to be affected, she must have agreed, or must know, that the information is confidential”: that contradicts the “ought to have appreciated” objective test the Court approved in the same paragraph); and (ii) a defendant can be liable for breach of confidence even if they do not know that they have in fact (mis)used the information at all, because they have done so unconsciously.

The effect of applying an objective standard to the second limb of the Coco v Clark test is that an individual can be liable in an action based on their own conscious in circumstances where they: (i) honestly (and without turning a blind eye) believe that the information is not confidential; and (ii) do not even know that they have (mis-)used the information.  However, that is now unquestionably the law unless it is reconsidered by the higher courts. 

3. Knowledge of unlawful means

Interestingly, the Court reached the opposite conclusion in respect of the tort of unlawful means conspiracy (disagreeing with the recent analysis of the law in Stobart Group v Tinkler [2019] EWHC 258 (Comm)), holding that for liability in the tort of unlawful means conspiracy a person must know or turn a blind eye to whether the claimant's rights of confidence were infringedZacaroli J considered that it was not an “odd inconsistency” for liability of breach of confidence to depend on an objective test, but liability for conspiracy to depend on actual or blind-eye knowledge because “the inconsistency is fully explained, in my view, by the fact that liability for breach of confidence also depends upon the defendant having made unauthorised use of the information, whereas liability for conspiracy can be established against a person without that person having done more than enter into an agreement with the requisite intention.”

The issue with that analysis is that, as I have said above, it is possible for a defendant to be liable in a breach of confidence claim without even knowing that they have used the information at all. 

It is not uncommon in the employee competition sphere for employees to seek to argue that they honestly did not believe certain information to be confidential at all (perhaps relying on the assurance of their ‘recruiting sergeant’ boss), or honestly did not believe that it was sufficiently confidential to amount to a trade secret which they were prevented from using following the termination of their employment.  Whilst such assertions (if believed) may assist in defending unlawful means conspiracy claims, Racing Partnership is a helpful authority for employers seeking to bat away such assertions in respect of claims for breach of the equitable duty of confidence.