Confidentiality agreements are an important part of commercial life.  They specify and limit the information to be treated as confidential between the parties, and define the extent and duration of the parties’ obligations under the agreement. However, recent case law suggests that the story may not end there.

CF Partners (UK) LLP v Barclays

In CF Partners (UK) LLP v Barclays, CFP approached Barclays with a view to obtaining debt financing and potentially M&A advice in relation to a target, Tricorona. CFP believed Tricorona to be undervalued in the market, and provided the information on which this conclusion was reached. CFP was unaware (and Barclays did not tell it) that Barclays had previously looked at acquiring Tricorona itself. To cut a long story short, CFP did not buy Tricorona, but Barclays subsequently did. 

What is confidential information?

Information must be clear and identifiable. In order to be confidential it must be inaccessible: that is to say, it cannot be common knowledge, generally accessible or in the public domain. However, it is not necessary for a claimant to show that no one else knew of or had access to the information. It is (as ever) a question of degree.

The information must also have the necessary quality of confidence attached. This will not attach to trivial or useless information.  However, the measure is not the commercial value of the information, but whether keeping it confidential is of ‘substantial concern’ to your counterparty. Parties should bear in mind that this threshold is a low one.

It is also worth remembering that pieces of information which may not be confidential individually may have a special composite value in combination with other such pieces of information. 

Equitable duty of confidence

CFP argued, and the court agreed, that Barclays was in breach of its equitable duty of confidence.  

The law imposes a duty of confidence whenever a person receives information which he knows or ought to know is fairly or reasonably to be regarded as confidential.  If you come into possession of information which might arguably be confidential to another party, you should not use that information for any purpose other than the one for which it was provided to you.  The fact that there is no confidentiality agreement in place is no defence to misusing the information. 

Potential claimants must also be able to prove actual misuse. Influencing someone or causing them to change their outlook is not sufficient: the recipient must act on the confidential information provided. In this case, the court was satisfied that the more detailed market analysis and information that CFP provided to Barclays caused the bank to revisit its earlier position and acquire Tricorona.

Contractual duty of confidence

What happens where there is a confidentiality agreement in place?  The UK courts are usually reluctant to interfere with the parties’ intentions as recorded in a binding contract. They will not therefore usually superimpose additional equitable obligations to those set out in the contract.

That said, if the use of the confidential information would 'excite and offend a reasonable man’s conscience', equity will trump contract and the courts will intervene.  Parties should remember that the scope and content of their equitable obligations are 'informed by but neither exclusively nor conclusively defined by' any contract.  There is no point in trying to hide behind the letter of a confidentiality agreement if a proposed action would go against the spirit of it.

Damages for breach of duty

The courts will seek to establish the sum of money which the claimant might reasonably have demanded from the defendant as a quid pro quo for releasing them from the relevant contractual or equitable obligation. CFP was awarded €10 million in damages as a result of Barclays using the confidential information for its own benefit, rather than the purpose for which the information was provided. Misuse of confidential information can therefore prove something of a false economy, whether or not there is a confidentiality agreement in play.