Court recently considers breach of confidence claim in light of Trade Secrets Regulations

The interplay between the equitable doctrine of breach of confidence and statutory protection for trade secrets has been examined in the recent case of Kieran Corrigan & Co Ltd v OneE Group Limited & others – April 2023.

The claimant provided a specialist tax advisory service and put together a complex confidential tax structure, derived from publically available tax legislation, which required significant time, skill and effort to create.

Although an NDA had been entered into by the claimant, it was not entered into by the first defendant company. It was instead entered into by a group company which subsequently entered voluntary liquidation.

The defendants (which comprised OneE Group Ltd and three directors) were alleged to have misused the information provided by the claimant to promote a tax structure of their own, resulting in claims for breach of confidence, procuring a breach of contract and unlawful means conspiracy.

While the alleged breach occurred in late 2014, the claim was not brought until 2020, some time after the acts complained of. This in turn raised a number of limitation points which were considered in the judgment of Jonathan Hiliard KC. In his judgment, he made a number of interesting observations in connection with breach of confidence cases.

1. Although breach of confidence cases have historically been based on equitable relief, since 9 June 2018 there has also been statutory protection for trade secrets through the Trade Secrets (Enforcement, etc.) Regulations (the “2018 Regulations”).

As part of the test for determining a trade secret, the 2018 Regulations explain that a trade secret involves:

“information which is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among, or readily accessible to, persons within the circles that normally deal with the kind of information in question…..”

While in this case, the judge was willing to find that the tax structure was a trade secret and that there had been misuse by the defendants, he concluded that the statutory test set out in the 2018 Regulations was only a useful guide when considering whether information is confidential. He also concluded that the doctrine of breach of confidence extends beyond circumstances where the information amounts to a trade secret under the 2018 Regulations and so the test for breach of confidence is not limited to the test provided for in the 2018 Regulations. This case has confirmed that instead, it is necessary to refer to existing case law to determine the position insofar as it applies to an equitable claim for breach of confidential information.

2. The position of limitation periods as applied to breach of confidence cases has been the subject of some debate and in this case, the judge was asked to consider what the relevant limitation periods were for bringing a claim under the 2018 Regulations and under the equitable doctrine for breach of confidence.

Under s.36 Limitation Act 1980, amongst other species of claim, the following time limits apply:

1. Six years for claims in tort from when the cause of action accrues
2. Six years for contractual claims from when the cause of action accrues

The 2018 Regulations provide that s.36 of the Limitation Act 1980 does not apply and instead the limitation period is six years beginning “with the later of (a) the day on which the unlawful acquisition, use or disclosure that is the subject of the claim ceases, and (b) the date of knowledge of the trade secret holder”. While this potentially widens the window for bringing claims for misuse of trade secrets in appropriate cases, the judge was being asked to consider the position in connection with breaches of confidence occurring before the 2018 Regulations came into force.

In his judgment, he concluded that the limitation period prescribed by the 2018 Regulations could not apply to pre 9 June 2018 breaches of confidence. Instead, the position regarding limitation for pre-June 2018 breaches of confidence was to be assessed in line with relevant case law dealing with claims for breach of confidence.

Having considered relevant cases, the judge concluded that outside of the context of a contract, breach of confidence is treated as having an equitable, rather than a tortious basis and that the duty of confidence can arise in equity independently of contractual arrangements.

Since the claim did not involve a claim based on a breach of the NDA, there was no analogous breach of contract claim available on the facts and so the six year limitation period provided for in the Limitation Act could not apply.

The position could have been different if the defendant company had been a party to the NDA. In those circumstances, the equitable breach of confidence claim would have been the equitable analogue of a comparable common law breach of contract claim. As a consequence, the relevant six year limitation period would have prevailed and would have applied to the equitable claim, even where the breach of contract claim may not have been available on the facts.

3. An additional point that the court was asked to determine was whether the individual directors could be jointly liable for breach of confidence. In this instance, the judge had no hesitation in confirming that a defendant who is jointly liable for assisting or procuring the wrongful act of the primary actor (in this case OneE Group Ltd) is liable, not for the act of assistance but for the primary actor’s wrongful act and the limitation period for such a claim would be the same as the claim against the primary actor.

This case represents a helpful analysis of how, in the right cases, the 2018 Regulations can be used side by side with the equitable doctrine of breach of confidence to protect a claimant’s confidential information, especially their trade secrets, what time frames apply to claims being brought and what the breadth of those claims may be.