Murray v Yorkshire Fund Managers Ltd

Where confidential information is created solely to facilitate a loose commercial project, its protection depends upon the relationship in which it arose. A participant who has no contractual, fiduciary, partnership or other special right to require the project to continue cannot prevent the remaining participants from proceeding without him and using the information for that purpose.

A recipient given information only to assess a proposed investment must not disclose it to strangers or use it for an unrelated purpose. However, the spring-board principle does not assist an excluded participant once the information has ceased to be confidential as against those entitled to continue the project.

Mr Murray brought proceedings for breach of confidence after Michael Hartley replaced him as the proposed managing director of a management buyout. The team had prepared a business plan and disclosed it to Yorkshire Fund Managers Ltd for the limited purpose of deciding whether it would provide venture capital.

The trial judge held that the plan and associated commercial information were confidential, that Mr Murray was a co-owner of them, and that Mr Hartley had breached confidence by using them to secure Mr Murray’s replacement. Judgment was entered against Mr Hartley, with damages to be assessed. The claim against Yorkshire Fund Managers Ltd was dismissed because it had made no use of the information.

Mr Hartley appealed. The parties agreed that the appeal should first determine whether the admitted or found facts disclosed a breach of confidence in law.

1. Appeal allowed unanimously. Lord Justice Nourse, with whom Lord Justice Schiemann and Sir John Vinelott agreed, held that Mr Murray had no cause of action against Mr Hartley. The action against Mr Hartley was dismissed.

2. The conventional elements of breach of confidence stated in Coco v. A.N. Clark (Engineers) Ltd. [1969] RPC 41 were engaged. The information was confidential and was imparted for the confined purpose of deciding whether Yorkshire Fund Managers would invest. Mr Hartley could not disclose it to a third party. The other members of the project team were not third parties for that purpose: they were co-owners and already knew the information.

3. Mr Hartley’s approach to the team was initially a use outside the permitted investment-assessment purpose. But the remaining team members were free to exclude Mr Murray and proceed with others. There was no contract, fiduciary relationship, partnership, or other special relationship giving Mr Murray a right to insist on continued participation or to control the team’s use of the information.

4. The information was an adjunct of a project relationship that Mr Murray could not compel to continue. Once the relationship was dissolved by his exclusion, the information ceased to be confidential as against the members entitled to continue the project. Mr Murray could therefore not restrain their agreed use of it through Mr Hartley.

5. The reasoning in Heyl-Dia v. Edmunds (1899) 81 LT 579 supported, but did not solely determine, that conclusion. The court also held that the spring-board principle in Seager v. Copydex Ltd. [1967] 1 WLR 923 could not apply after the information had ceased to be confidential.

6. Lord Justice Schiemann additionally rejected any implication of equitable obligations of uncertain extent into an uncontracted management-buyout arrangement. The damage alleged flowed from the team’s lawful decision to remove Mr Murray, rather than from a legally actionable use by Mr Hartley.

• Court of Appeal (Civil Division): Allowed Mr Hartley’s appeal and dismissed the action against him.
• High Court, Queen’s Bench Division, Manchester District Registry, Mercantile List (Judge Kershaw QC): Entered judgment against Mr Hartley for damages to be assessed. Dismissed the action against Yorkshire Fund Managers Ltd on the ground that it had made no use of the confidential information.