The Court of Appeal in Dorchester Project Management Ltd v BNP Paribas Real Estate Advisory Property Management UK Ltd [2013] EWCA Civ 176 has looked at the protection afforded by an agreement entered into between two parties dealing with the disclosure of confidential information.

In this case, the claimant (D) was interested in purchasing a development site, in respect of which it had detailed knowledge by virtue of its long-standing involvement with the site. The opportunity to purchase the site was not a secret and the defendant (B) was introduced to that opportunity by D. At that time B was made aware that D would not disclose what it considered to be confidential information of a commercially sensitive nature about the site without a non-disclosure agreement being signed by B.

The agreement to enter into a non-disclosure and a non-circumvention agreement was made in the context of the intended introduction by B of its contact / client - a third party funder. It was clear to B that B had to enter into such an agreement specifically before releasing any information to that third party.

B entered into a non-disclosure and non-circumvention deed with D (the 'Deed'), which provided for B to disclose confidential information from D to potential third party funders. This was subject to B procuring that such third parties were bound by similar obligations of non-disclosure and non-circumvention. The Deed also provided that B would be responsible for any unauthorised disclosure of confidential information, whether by it or any receiving party.

B subsequently disclosed confidential information to a third party funder (T), to whom (at B's request) D also disclosed confidential information direct. D did so as a result of a mistaken belief that B had entered into a 'back-to-back' agreement with T.

T then proceeded to make a successful bid to the sellers to acquire the development site. Until that happened D had been the preferred bidder.

The High Court was asked to consider a number of questions, which included:

  1. whether the effect of the Deed was that if B proposed to disclose confidential information to a receiving party it was bound to procure that the receiving party would enter into a back-to-back agreement with it which imposed on it obligations of non-circumvention as well as obligations of non-disclosure of the confidential, information; and
  2. whether the back-to-back agreement would apply to confidential information supplied to the receiving party by D direct, in addition to that supplied by B?

The judge in the High Court concluded that the Deed was badly drafted and should therefore be given a business-like and not an over-literal interpretation. It was held that the non-circumvention obligation only arose if B or B and the receiving party were involved in the non-circumvention. It did not arise if the receiving party was solely responsible for the circumvention.

The obligation to obtain a back-to-back agreement was only to prohibit circumvention if B was acting as principal or agent and, in any event, the obligation was to obtain a back-to-back agreement in favour of B, not D. B was required to ensure the receiving party signed a back-to-back agreement, but B would only be responsible for disclosure by the receiving party if the confidential information was passed to the receiving party by B - not if it was sent direct from D.

D appealed and the Court of Appeal allowed the appeal. Lady Justice Arden concluded that D and B clearly intended that D would be protected against the risks of both unauthorised disclosure and circumvention. The Deed required B to obtain a back-to-back agreement from the receiving party before it passed information to it - containing obligations of both non-disclosure and non-circumvention. Once confidential information was disclosed by D, the back-to-back agreement was to apply to information supplied to the receiving party by D, as well as to that supplied by B.

It is important that any obligation on a recipient of confidential information to enter into a back-to-back agreement is clearly set out in the confidentiality agreement itself - to ensure the protection afforded by that agreement is not lost if the recipient passes the information on (and to ensure a claim can be made if a breach does occur).