The English High Court has handed down its judgment in Saab v Dangate Consulting Ltd and others,1 finding that the Defendants, private investigators appointed to conduct an internal investigation at a bank, had breached their confidentiality obligations by disclosing material from their investigation to regulators. The Defendants had asserted a public interest defence, alleging they had come across evidence of criminality, and that the disclosures had been compelled by law, but the Court rejected these arguments. The decision provides a reminder of the various factors the Court will take into account in deciding whether a public interest defence should succeed against a claim for breach of confidence, and is timely given the increasing tension between businesses' duties to make disclosures to regulators and law enforcement authorities, and their obligations to safeguard certain categories of information pursuant to (for example) confidentiality and personal data obligations. This alert examines the key features of the Court's judgment.

Background

In July 2014, the US Financial Crimes Enforcement Network ("FinCen"), a US regulator, issued a Notice of Finding in respect of FBME (the "Bank") expressing concerns that the Bank may have been used to facilitate money laundering in Cyprus and Tanzania. Subsequently, the Central Bank of Cyprus ("CBC"), the regulator of the Bank's Cyprus branch, assumed the administration of the Cyprus branch. The owners of the Bank then engaged the Defendants, former police detectives specialising in corporate investigations, to investigate, although there was some subsequent disagreement regarding the scope and purpose of the investigation. Due to this disagreement and allegations regarding the Defendants' unpaid fees, the investigation was effectively brought to an end in November 2014.

Notwithstanding strict confidentiality obligations surviving the termination of their retainer, the Defendants then provided materials from the investigation to several parties, including the CBC, FinCEN and other law enforcement agencies. Materially, the Defendants argued that they made the disclosures because they had come to the conclusion that the extent of the criminality being conducted through the Bank was so serious that it represented a threat, not only to the banking system, but to the safety and welfare of other people. They also argued that they had been acting under legal compulsion to assist the CBC after it had sent them a letter in April 2015 requesting information and documents.

Public interest defence

After considering the relevant legal authorities, the Court made the following observations in relation to the public interest defence.

  1. The policy underpinning the public interest defence is the so-called "defence of iniquity": a party cannot be entitled to make someone a "confidant of a crime or a fraud". A person must be able to disclose such information in order to maintain "the laws of the society".
  2. Accordingly, a balancing exercise is required to determine whether a breach of confidence may be justified by the public interest defence, as the protection of confidentiality is itself also a matter of public interest.
  3. In conducting the balancing exercise, it is necessary to consider the nature and extent of the duty of confidentiality, which will differ from case to case. Here, the parties had agreed strict confidentiality obligations under the Defendants' retainer, and the Defendants had therefore been bound by express duties under contract as well as general duties of confidence under the common law. In the circumstances, this means that "some greater weight should be given to that obligation of confidentiality", because where there are express contractual confidentiality obligations two distinct public policies are invoked: upholding freedom of contract as well as confidentiality.
  4. The Court found that the Defendants did not adequately assert a public interest defence covering the entirety of their disclosures, as they had not been selective but had merely supplied a "document dump" of materials. The Court stated that, had the Defendants selected and taken advice on the materials to disclose, there was "a real possibility that some part of the disclosure" could be justified pursuant to the public interest defence.
  5. Moreover, the Defendants needed to demonstrate that there was a "pressing need [for the public] to know" what was disclosed, and the disclosure "must have a focus, and a utility". Here, the public already knew the substance of the issues that the Defendants disclosed as that information had already been set out in the FinCEN Notice. All the Defendants did was add "granularity not substance" to what was already in the public domain. That the Bank was already in administration was another factor in determining that the public interest defence would fail, as there was no utility in disclosing information in such circumstances.
  6. Another important hurdle to overcome in order to raise a successful public interest defence is that there must be some evidence to justify the disclosure. Referring to Lord Goff's judgment in Attorney General v Guardian Newspapers (No 2)2, "…a mere allegation of iniquity is not of itself sufficient to justify disclosure in the public interest": the allegation needs to be a "credible allegation, from an apparently reliable source". In this regard, the Court also stated that it is insufficient to rely on an honestly held but unreasonable belief that disclosure is justified in the public interest. On the facts, in respect of most of the material, the conclusions of criminality reached by the Defendants were found to have been "premature and speculative", especially given that the investigation had never been completed.

Compulsion of law In relation to the separate defence of compulsion of law, the Defendants needed to show that they were under a legal duty to disclose information. The Court found that the CBC had not in fact sought to compel the Defendants' disclosures, given the language that it had used in its letter to the Defendants. The letter had stated that the CBC "requests that you forthwith provide" (emphasis added) documents and information, and had indicated that failure to do so "may" lead to an administrative fine and commission of an offence in Cyprus. The Court took this language at face value and considered that they were requests, not demands supported by legal authority. As such, the Defendants had not been acting under compulsion of law.

Further thoughts This case provides useful guidance on the balance between the public interest defence and obligations of confidentiality. The availability of the public interest defence is more limited than might be expected, especially where strict contractual obligations of confidentiality are owed. This decision is helpful in outlining some factors which a party may wish to consider prior to making a disclosure of confidential information it considers to be in the public interest, and demonstrates that there are certain steps a party may take to seek to ensure that a disclosure would be covered by the public interest defence, such as carefully delineating the scope of the disclosure and evaluating the sufficiency of the reasons and evidence to justify the disclosure in the public interest.