Court of Appeal considers director’s personal liability for breach of confidence
In Kieran Corrigan & Co Ltd v Timol [2024] EWCA Civ 1233 the Court of Appeal upheld the High Court’s decision that the Respondent director was not personally liable for a breach of confidence.
The claim concerned alleged misuse of the claimant’s confidential information by a company where the Respondent was a director. The Respondent had received the confidential information and later approved a marketing strategy that, unknown to him, was based upon it. The Appellant argued that strict liability for breach of confidence should apply to the director in these circumstances and could not be avoided because the Respondent did not know that others were misusing the information. The Court of Appeal rejected this; the Respondent was not liable as he had not used the information he had been given, which is one of the requirements for breach of confidence.
However, the Court of Appeal ordered a retrial on the grounds that there had been material non-disclosure in the first instance proceedings which constituted a serious procedural irregularity.
Background and High Court decision
The Appellant, Kieran Corrigan & Co Limited (KCL), is a provider of tax and accountancy advice. The Respondent was one of the directors and a minority shareholder of OneE Group Limited, a company that marketed tax planning products.
During 2012 to 2013, KCL and a tax barrister devised a corporation tax structure that involved enhanced tax allowances in relation to research and development expenses. A non-disclosure agreement was signed between OneE Group and KCL to enable confidential discussions regarding the structure and a potential joint venture. At a subsequent meeting in 2014 between KCL, the Respondent and two advisors from OneE Group, details of the proposed tax-saving structure were shared.
The joint venture did not come to fruition. However, the two advisors from OneE Group devised a similar tax structure which the High Court found was based on KCL’s confidential information, in breach of their duty of confidence. The tax structure was marketed by OneE Group and the Respondent approved the marketing as a director. However, the High Court found that on the facts, the Respondent’s role was only to approve and launch a marketing campaign for the structure and he had no technical understanding of how the structure worked nor that it had been developed by the advisors using the confidential information shared by KCL. A breach of confidence claim requires an unauthorised use of confidential information. The judge concluded that the Respondent had not used or been involved in the unauthorised use of KCL’s confidential information, therefore he could not be personally liable for breach of confidence.
Court of Appeal decision
The Appellant argued that the Respondent director had primary liability for breach of confidence on the basis that once he had received the confidential information and allowed that information to be misused through his approval, a strict liability was imposed regardless of his awareness of the misuse.
The Court of Appeal agreed with the Appellant that earlier authorities make clear that both receipt and use of confidential information by a defendant is required to establish primary liability for breach of confidence. Further, if a defendant is using that confidential information, they do not need to appreciate that what they are doing is wrong. However, the Court of Appeal found that although the Respondent had personally received the confidential information, he was not personally liable for breach of confidence because when he authorised the structure, he was not using the information he had been given to develop the tax structure. Instead, he unwittingly signed off the use by OneE Group of confidential information that had been used by its advisors to develop the new tax structure.
Alternatively, the Appellant argued for a re-trial on the basis of fresh evidence which was discovered during the quantum phase of proceedings. The evidence suggested that the Respondent knew more about the structure than alleged at trial and included emails showing he knew about the complaint that confidential information was used. The Respondent accepted that the documents should have been disclosed but disagreed that he deliberately withheld them. The Court of Appeal found that despite the documents not being decisive in and of themselves, they would have changed the course and approach of the trial. For this reason, a re-trial and the admission of these new documents was ordered, focusing on the Respondent’s liability for breach of confidence.
Key Takeaways
The judgment provides helpful clarification of the circumstances in which a director may be found personally liable for breach of confidence. A director must have been involved in both the receipt and use of the confidential information, i.e. they must have some involvement in the breach of confidence.
The judgment also provides litigants with an important reminder to ensure that they take a robust and careful approach to their disclosure obligations. In this case, despite winning the appeal on one issue, the disclosure oversights have led to a costly re-trial.
With thanks to Melissa Diaz for her assistance in preparing this post.