23 January 2015 by Matthew Miller

Just between the two of us… or is it?

Before entering into any new commercial relationship, every business should consider whether it will be safe to share its confidential information with the other party or parties involved. Often, negotiations cannot properly proceed unless and until the parties in question reveal important commercially sensitive data to each other. One way in which businesses look to protect their position is by first entering into a Non-Disclosure Agreement (also known as an ‘NDA’ or Confidentiality Agreement). However, a recent case in the High Court has underlined that, even in the absence of such a Non-Disclosure Agreement, the misuse of another party’s confidential information can have very serious ramifications.

Under common law, any person who receives information, in circumstances where it is reasonable to assume that the information was intended to be kept confidential, is under a duty to keep that information confidential. This includes a duty not to misuse the information or use it for unauthorised purposes.

In the recent case of CF Partners (UK) LLP v Barclays Bank PLC (2014), the claimant was proposing a takeover of a company and had instructed Barclays in relation to the transaction. In the course of their discussions the claimant disclosed confidential information about the target company to Barclays. Although there was no formal Non-Disclosure Agreement in place between the parties, when the acquisition did not ultimately go ahead, Barclays stepped in and bought the target company before selling it on for a sizeable profit.

The claimant sued Barclays on the basis that the bank had misused the claimant’s confidential information in purchasing the target company. The High Court agreed and held that Barclays was liable to pay the claimant €10 million in damages. This case is a salutary and very clear reminder of the potential risks of misusing a third party’s confidential information.

Where possible, the safe approach is always to enter into a formal Non-Disclosure Agreement.  This gives the parties much more certainty as to how they can (and cannot) use each other’s confidential information, and reduces the risks of potentially very expensive litigation further down the line.

For more information on Non-Disclosure Agreements and commercial contracts generally, please contact Tim Lucas – 020 7288 4753, timothylucas@boltburdon.co.uk or Matthew Miller – 020 7288 4739, matthewmiller@boltburdon.co.uk

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