UK & Europe
Court considers clause in a Non-Disclosure Agreement
The parties to this dispute are both companies which structure insured financing deals (where the financing company limits its risk of loss through a (re)insurance policy). A reinsurer with whom the claimant did business put the claimant in touch with the defendant as a potential funder for a certain transaction. The claimant then entered into a Non-Disclosure Agreement ("NDA") with the defendant and subsequently sent it a "Concept Summary", which included a provision that the information contained in it should be treated as confidential information. The claimant now alleges that the defendant is planning to use the confidential material contained in the Concept Summary for its own purposes (ie sharing it with reinsurers), and in breach of the NDA. The claimant sought an interim injunction from the English court.
Butcher J considered the following issues raised in this case:
1) Did the application for an injunction contravene section 12 of the Human Rights Act 1998, which applies if the grant of relief by the court "might affect the exercise of the Convention right to freedom of expression"? It was submitted that section 12 applies because the claimant was seeking to prevent publication by the defendant of confidential information (and publication in this context was said to mean communication to some person other than the claimant). This was a novel argument and the judge accepted that section 12 can apply in a commercial context.
However, he rejected the argument that the defendant's freedom of expression was involved here: "where the communication is one that is made only for the purposes of furthering the financial interests of the communicator, the communication is made only to a very limited range of other individuals whose interest in it is simply to further their financial interests, and where there is no question of the information which is imparted being of a journalistic, literary or artistic nature I consider that it will not, some extraordinary feature apart, involve the right to freedom of expression".
2) What was the effect of the following clause in the NDA: "Clause 7: Remedies. The parties agree that any breach or threatened breach of this Agreement by a Recipient would cause not only financial harm, but irreparable harm to the Discloser; that money damages will not provide an adequate remedy. In the event of a breach or threatened breach of this Agreement by a Recipient, the Discloser shall, in addition to any other rights and remedies it may have, be entitled to an injunction (without the necessity of posting any bond or surety) restraining the Recipient from disclosing or using, in whole or in part, any Confidential Information."?
Butcher reviewed caselaw from other jurisdictions before concluding as follows:
(a) The clause did not have any significant relevance to the issue of what has to be established as to the likelihood of a breach occurring for the purpose of the grant of an interim injunction (ie whether it has to be established that (i) there is a serious issue to be tried as to whether there may be a breach, or (ii) that a breach is more likely than not to occur); and
(b) It is not determinative that the parties have agreed that damages would not be an adequate remedy (although this may provide some evidence that they would not be). It is for the court to ultimately decide, though;
(c) It is also not binding that the clause provides that the Discloser "shall be entitled to an injunction". Again, that is an issue for the court to decide, although it is a factor which the court can take into account.
On the facts, the judge decided that the interim injunction should be granted.