Primary Group (UK) Limited & Others v Royal Bank of Scotland Plc & Another [2014] EWHC 1082 (Ch)

Primary Group Limited (Primary) entered into a loan facility (“the Agreement”) with the Royal Bank  of Scotland (RBS) in 2006. During initial discussions Primary expressed concern about potential  conflicts arising from RBS’s relationship with Direct Line Insurance Group plc (Direct Line). At  the relevant time Direct Line was a subsidiary of RBS and a direct competitor of GBI (Holdings)  Limited (trading as Swiftcover), one of Primary’s subsidiaries. Primary contend that RBS gave them  various assurances that all information provided to RBS would be kept confidential and not passed on to Direct Line. Additionally the Agreement imposed confidentiality obligations on RBS  restricting how information provided to it by Primary could be used.

Primary defaulted on its obligations under the Agreement. RBS consequently instructed KPMG to  conduct an independent business review of Primary, known as the “Medway Reports”. RBS also  consulted with Direct Line, which involved disclosing parts of the Medway Reports to Direct Line  without first obtaining the permission of Primary.

Primary brought a claim against RBS for breach of a contractual obligation of confidence and  against Direct Line for breach of an equitable obligation of confidence. RBS denied committing any  breach of its contractual obligations and, in the alternative, argued that any such breach gave  rise only to nominal damages.

Mr Justice Arnold readily found that RBS had given Primary assurances of confidentially. He noted  that terms may be incorporated into a contract through written and oral agreements, and also  through conduct. In addition, he considered that it is “common ground that  a banker owes his  customer a duty of confidentiality”. Further he thought that, viewed as whole, the Medway Reports contained information which was confidential to Primary. Consequently he held that RBS was in  breach of its contractual obligations.

Mr Justice Arnold went on to consider the amount of damages sought by Primary. He found that only nominal damages were owed by RBS to Primary. This was  partly  due to the fact that Direct Line only used the Medway Reports in order to provide RBS with  an insurance industry perspective on Primary, which otherwise RBS would have had to pay a third  party for. In addition, Mr Justice Arnold took into account the strong negotiating position of RBS at the time any negotiations varying the confidentiality of the Medway Reports would have taken  place, since Primary had breached the Agreement. Consequently Mr Justice Arnold ordered an award of  GBP 5,000 to be paid to Primary, being the value of the time Direct Line spent on the project and  the amount RBS should have paid an independent  third party.

The claimants contended that a reasonable person in  the position of Direct Line should have  realised that RBS was not entitled to disclose the Medway Reports or, at  the very least, should  have made enquiries of Primary before reading these reports and using the confidential information.  On a subjective test Mr Justice Arnold found that Direct Line thought RBS had the right to disclose  the Medway Reports; on an objective test he found that Direct Line was entitled to assume RBS would  comply with its duty of confidentiality. He therefore did not find Direct Line in breach of its  equitable duty of confidentiality.

The full text of the Judgment can be found here:  http://www.bailii.org/ew/cases/EWHC/Ch/2014/1082.html