The High Court has decided that a bank breached its equitable duty of confidence by misusing confidential information supplied by a corporate customer. The customer had provided information to the bank in support of a loan application to finance the proposed acquisition of a target company. They disclosed to the bank that it thought the target company was undervalued and shared technical information about the untapped value in the company, and how it could be extracted to make a profit.

When negotiations between the customer and the target failed, the bank bought the target company itself and then sold it for a substantial profit. The customer, the claimant in the action, argued that the bank had misused the information, which the customer had provided in confidence, to take advantage of the purchasing opportunity.

The Court found in favour of the customer on the basis that some of the information received by the bank had the necessary quality of confidence, and that the bank had breached its duty of confidentiality by using the information to take unfair advantage, without first obtaining the customer’s consent. (There was no confidentiality agreement between the customer and the bank.)

The bank was ordered to pay what is known as “Wrotham Park” damages. The principle behind this award is that a claimant can recover such sum as the defendant would have paid, had the defendant, before breaching the contract, negotiated a release of its confidentiality obligations from the claimant. It requires the Court to imagine a hypothetical and perhaps highly unrealistic negotiation before the breach had taken place, and then ask what would have been agreed as the claimant’s price for permitting the use of the confidential information for some other purpose than originally intended. On the facts of this case, the judge was of the opinion that using a broad brush approach, the facts merited a €10 million award.

The case highlights the ability of a disclosing party to rely on an equitable duty of confidence in the absence of a written confidentiality agreement. Parties receiving information should be aware that duties of confidentiality can arise even when there is no contract in place and should handle such information accordingly. The case is also an example of how Wrotham Park damages may be used to strip a defendant of any gains made from the unauthorised use of confidential information.

Case: CF Partners (UK) LLP v Barclays Bank Plc and another [2014] EWHC (Ch) 3049