The High Court recently granted a hedge fund an interim non-disclosure order to restrain the publication of confidential information which had been provided to potential investors and subsequently leaked to the press: Brevan Howard Asset Management LLP v (1) Reuters Limited, (2) Maiya Keidan, and (3) Person or Persons Unknown (who has/have leaked confidential investment documents belonging to the Claimant) 2017 EWHC 644 (QB).
The court accepted that there was a public interest in publication of the information as hedge funds, their effect on the economy and the identity of their investors are matters of public interest. However, that interest was outweighed by the competing public interest in favour of maintaining confidentiality.
This is a helpful decision for financial services firms or others who disseminate confidential and/or proprietary information for the purposes of seeking investment. The court recognised a strong public interest in ensuring that investors are able to receive full and frank disclosure of key investment information, which may allow such information to be shared with increased confidence in similar circumstances.
In any event, as a practical matter, security measures (eg encryption and passwords) and supporting confidentiality agreements should be put in place when sharing confidential information to minimise the risk of onward dissemination, and the documents should make clear on their face that they contain confidential information so that any recipient (intended or not) will be on notice of their confidential nature.
Alan Watts, Neil Blake and Rebecca Murtha in our disputes team consider the decision further below.
The applicant is a hedge fund manager. It provided highly sensitive and confidential information to 36 potential professional and/or institutional investors in order to allow for investment opportunities to be fully and fairly evaluated. Some of the information was leaked to the first respondent, Reuters, who wished to publish the information.
The applicant applied for and was granted an ex parte order to seal the court file, and commenced proceedings for breach of confidence against Reuters, Maiya Keidan (a financial journalist), and persons unknown presumed to have leaked the information. The applicant then applied for an interim non-disclosure order restraining publication of the information pending judgment at trial. The application was heard in private.
The High Court (Popplewell J) delivered a private judgment on 23 March 2017 granting the interim non-disclosure order. An abbreviated judgment edited to preserve confidentiality was released to the public on 28 March 2017.
Section 12 of the Human Rights Act 1998 applies in circumstances in which a court is considering whether to grant relief which might affect the exercise of the right to freedom of expression (protected by Article 10 of the European Convention on Human Rights). This provides that, in order to restrain publication before trial, an applicant must demonstrate that it is likely to establish at trial that publication should not be allowed. Where the material is journalistic in nature, the court must have regard inter alia to the extent to which it is or would be in the public interest for the material to be published. Popplewell J noted that this means an applicant will have to demonstrate a higher degree of likelihood of success on the merits than with other interim injunctions (being "more likely than not"' to obtain a final order). Any relief which restricts the right to freedom of expression must also be necessary and proportionate in the circumstances.
The applicant sought to demonstrate the relevant ingredients of an action for breach of confidence, namely that (a) the information had the necessary quality of confidence; (b) receipt of the information gave rise to a duty of confidence; and (c) unauthorised use of the information would cause detriment to the applicant.
With respect to (a), the court found that the material comprised sensitive commercial information collated for the purpose of making candid and responsible disclosure to a limited number of potential investors. The applicant took great care to preserve the confidentiality of the information (including that it was provided in unique password-protected form to potential investors, marked as private and confidential, and accompanied by a disclaimer requiring it to be treated as such).
With respect to (b), the court found that the respondents would have been aware that the information they had been provided by their source(s) was not published elsewhere and that it was likely to have emanated from the applicant. In any event, the respondents had been put on notice that the information was confidential, and were therefore subject to a duty of confidence.
With respect to (c), the court rejected the argument that the respondents did not seek to publish the actual documents provided to the potential investors, but rather information derived from them. It also found that disclosure of the confidential information would be valuable to the applicant's competitors and damage the applicant's business to its detriment.
The respondents argued that, even if the cause of action could be established, publication of the information would be in the public interest such that the breach of the applicant's confidentiality rights would be justified. The court agreed that hedge funds, their effect on the economy and the identity of their investors (who are in some cases pension funds or public employees) are matters of public interest. However, the court pointed out, it is not enough to establish that there is public interest in publication. There must also be a public interest in breaching the confidence attached to such information in the circumstances.
In this case, the court said, there is a competing public interest in ensuring that hedge funds and investment managers are able to give full and frank disclosure of material relevant to a potential investor's decision to invest without fear that that information may end up in the public domain. Allowing the publication of the information could result in investment companies being less candid in their disclosure and, consequently, investors may have less information upon which to base their decisions. The interest in protecting confidentiality was made stronger by the fact that the applicant is a leader in the marketplace and the investments in issue are in the tens of millions of dollars.
The court therefore held that the public interest in maintaining confidentiality outweighed the public interest in disclosing the applicant's confidential information.