To enquire, or not to enquire, that is the question
The recent case of Travel Counsellors Ltd v Trailfinders Ltd  EWCA Civ 38 looked at whether recipients of information have an obligation to make enquiries as to whether the information is confidential.
The case related to a company who hired former employees of a competing company that brought and provided sensitive client information with them from the competing company. The company did not make any enquiries into whether the information was sensitive and proceeded to use the information for its own benefit. The competing company brought a claim against the company as well as the former employees. The former employees were all held to have breached their duties to the competing company as it was found they had all, prior to leaving their employment, made copies of and kept entries of confidential information. The company was separately held to have breached its duty of confidentiality as it had not made enquiries into the nature of the information the former employees provided.
The company argued that such an obligation of confidentiality would only have arisen if it had known that the information was indeed confidential. Whether a reasonable person in its position would have made enquiries was irrelevant and not sufficient for such an obligation to arise. It lost the case in the first instance but appealed the decision on the following grounds:
- The judge had applied the wrong legal test when establishing that the company owed a duty of confidentiality to the competing company.
- The judge’s view on whether the company and its directors ought to have inferred that the information was confidential.
- The fact the company was held to have breached its duty of confidentiality despite the fact the company had not misused the sensitive information.
The Court of Appeal dismissed the appeal on the grounds that if a reasonable person in the company’s position was to come across the information the company had been given, it is likely that the reasonable person would make enquiries into whether the information was confidential. If a reasonable person were to make such enquiries and the company did not do so, then an obligation of confidentiality arises.
The Court admitted that recipients of sensitive information may therefore have a greater burden to make necessary enquiries into whether the information received was of a confidential nature but it would depend greatly on the facts surrounding the circumstances.
What does this mean?
This might be considered a surprising decision and the Court of Appeal acknowledged that whether an obligation arises depends largely on the context and facts of the case.
The objective test established by the case is that a duty of confidentiality arises when the recipient comes across information which a reasonable person in the same position would have made enquiries as to whether the information was confidential, and the recipient fails to do so (depending on the facts surrounding the situation).
It is therefore advisable to treat business information with caution – particularly if the information is of a nature that sparks reason to believe it may be sensitive, especially if there is any uncertainty as to the provenance of the information and/or whether the party disclosing it should really be doing so.