On 19 January 2021 the Court of Appeal handed down an important decision in Travel Counsellors Limited v Trailfinders Limited [2021] EWCA Civ 38, clarifying the circumstances in which a recipient of confidential information will be subject to an equitable obligation of confidence. It held that a recipient will “know or have notice” that information was disclosed to it in breach of confidence when the reasonable person in the position of the recipient would make enquiries, but the recipient abstains from doing so. Whether the reasonable recipient would make enquiries, and if so what enquiries they would make, are context- and fact-dependent questions.
Gavin Mansfield KC and Alexander Robson appeared for Trailfinders Limited, the successful Respondent to the appeal, instructed by Lewis Silkin LLP.
Background
Travel Counsellors Limited (“TCL”) appealed from the judgment of HHJ Hacon in which he held that:
- Former sales consultants at Trailfinders Limited (“Trailfinders”) breached implied terms in their contracts of employment and equitable obligations of confidence when they took confidential client information belonging to Trailfinders to their new roles at TCL (which operates as a franchise); and
- TCL was in breach of an equitable duty of confidence when it misused that confidential information, which was provided to it by the sales consultants.
The Appeal
TCL’s most significant ground of appeal was that the judge applied the wrong legal test in holding that TCL owed an equitable obligation of confidence to Trailfinders in respect of the confidential information received by it from the sales consultants.
It is now established that the test is objective: a recipient will only be subject to an equitable obligation of confidence when they know or have notice that the information was confidential, assessed objectively by reference to the reasonable person in the position of the recipient: Matalia v Warwickshire County Council [2017] EWCA Civ 991 and Lewison LJ’s judgment in the recent Court of Appeal case of The Racing Partnership Ltd v Sports Information Services Ltd. [2020] EWCA Civ 1300.
TCL had submitted, unsuccessfully, at trial that the test should be subjective: a recipient must know that the information received is confidential (or at least have blind eye knowledge). On appeal, TCL accepted the objective test, but argued that what a reasonable person ought to know does not include what they would have learned if they had made reasonable enquiries.
Arnold LJ (giving the only judgment) rejected that submission, citing his judgment at first instance in Primary Group (UK) Ltd v Royal Bank of Scotland plc [2014] EWHC 1082 (Ch) (cited with approval in Matalia and The Racing Partnership). Primary Group stated and The Racing Partnership implied that the court will consider the enquiries that the reasonable person in the position of the recipient would have made.
Arnold LJ rejected TCL’s further submissions that:
- It was not enough that the reasonable recipient would have been aware that “at least part of” the information received was likely to be confidential, as found by HHJ Hacon. Arnold LJ held that a recipient does not need to be on notice that all the information is likely to be confidential, though the obligation of confidence will be limited to the information that is in fact confidential.
- It was not sufficient that the reasonable recipient would have been aware that at least part of the information received was “likely” to be confidential. Arnold LJ held that if the reasonable recipient was aware that some of the information was “likely” to be confidential, then they would make enquiries, which TCL did not do.
Case commentary by Bláthnaid Breslin (pupil at Littleton Chambers).
