The High Court in the case of Weiss Technik UK Ltd and other companies v Davies and others has clarified the law on whether proof of loss or damage is required to establish a claim in equitable breach of confidence.
Weiss Technik UK Ltd and other companies v Davies and others [2022] EWHC 2773 (Ch)
Case background
The German multinational technology and engineering group Weiss Technik sued its former employees for obtaining confidential information, including software, passwords, and a customer database. The information was made available to a new competing business set up by the former employees, which were also sued in the same proceedings.
The High Court’s ruling
The High Court considered both the contractual duty of confidentiality imposed by the confidentiality clauses in the Defendants’ employment contracts and the equitable duty of confidentiality.
In respect of the equitable duty of confidentiality, the High Court cited the case authority of Coco v AN Clark (Engineers) [1968] FSR 415, in which Megarry J set out the three elements required to establish a claim in breach of confidence:
- The information itself must have the necessary quality of confidence about it;
- That information must have been imparted in circumstances importing an obligation of confidence; and
- There must be an unauthorised use of that information to the detriment of the party communicating it.
The High Court considered the third element: whether the use of confidential information must give rise to detriment, and that the existing case authorities were not entirely clear on this point. Two case authorities were further considered: Tchenguiz v Imerman [2010] EWCA Civ 908 and AG v Observer (the Spycatcher case) [1990] 1 AC 109. The High Court concluded that (at paragraph 123):
“… if the defendants have deliberately and surreptitiously obtained, copied and stored the claimants’ confidential information for the purposes of a competing business, in circumstances where the defendants knew or should have known the information to be confidential, that is sufficient to establish a breach of confidence as an equitable claim. It is not necessary to show that the defendants have specifically used the material in their business, or that the claimants have suffered loss and damage as a result.”
Therefore, victims of a breach of confidence do not need to prove that they have suffered loss or damage. The mere obtaining, copying, and storing of confidential information is sufficient to give rise to a claim.
Comment
The High Court’s clarification of the position on the requirement of detriment is favourable to potential claimants in a breach of confidence action, in that they no longer have to incur significant expenses to undertake a highly factual inquiry into loss caused by unauthorised use of confidential information. Loss is often difficult to prove, especially where the information has been disclosed to a third party but substantial uses have not been made of the information.
The High Court’s decision has considerably widened the scope of the equitable doctrine of breach of confidence which may likely prove useful to potential claimants to make parallel claims relying on both contractual and equitable duties of confidence.
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