United Pan-Europe Communications N.V v Deutsche Bank AG

A seriously arguable claim of misuse of confidential information or breach of fiduciary loyalty may support proprietary relief. The information need not concern the particular asset acquired, and the breach need not be central to the acquisition. Where the fiduciary relationship covers the relevant transaction, no additional requirement exists that the profit was obtained by virtue of the fiduciary position. The purpose of an account or constructive trust is to prevent the fiduciary retaining the profit, rather than to compensate for loss. On an interim injunction application, the court should consider the American Cyanamid principles, including adequacy of damages, relative strength, delay and preservation of the position pending trial.

United Pan-Europe Communications N.V brought proceedings against Deutsche Bank AG, alleging misuse of confidential information and breach of a fiduciary duty of loyalty arising from their banking relationship. Deutsche Bank had acquired TeleColumbus GmbH, an acquisition in which United Pan-Europe claimed an interest.

Park J and Neuberger J had continued an interim injunction. On 19 April 2000 Jacob J discharged it, holding that there was no serious issue to be tried concerning breach of confidence, fiduciary duty or a proprietary remedy. He nevertheless considered the remaining American Cyanamid factors. United Pan-Europe appealed on the first three issues and Deutsche Bank cross-appealed on damages, preservation of the position and delay. The central issue was whether the injunction should be restored pending trial.

The appeal was allowed unanimously. Morritt LJ delivered the judgment, with Ward LJ and Charles J agreeing. The orders of Jacob J were set aside and an injunction was granted, subject to further argument as to its form.

1. Confidential information. The pleaded documents adequately identified the information relied upon. It was seriously arguable that the information was confidential and relevant to Deutsche Bank’s decision to enter the German cable market and acquire TeleColumbus. Its usefulness was not confined to predicting the amount of United Pan-Europe’s bid. Given the alleged fiduciary duty, the onus was on Deutsche Bank to prove that it had not used the confidential information.
2. Fiduciary duty. The applicable principles were those stated in Bristol and West Building Society v Mothew [1998] Ch. 1. A person may be fiduciary in relation to some activities but not others. The scope of the duty depends on the character of the relevant undertaking and the parties’ actual course of dealing. That issue was fact-sensitive and could not be resolved at the interlocutory stage.
3. Proprietary remedy. Relevance of the confidential information was sufficient to make a constructive trust seriously arguable; the breach did not have to be central to the acquisition. Nor was it necessary to show that the profit was obtained by virtue of the fiduciary’s position. Equity seeks to prevent retention of profit, not to compensate the beneficiary. Whether relief should be proprietary or pecuniary depended on all the circumstances. A joint bid did not itself preclude proprietary relief.
4. Interim injunction. Equitable compensation would not adequately reflect the benefits United Pan-Europe might obtain from integrating the business. Deutsche Bank’s loss from delay was more capable of assessment and United Pan-Europe appeared able to meet a cross-undertaking in damages. Neither party’s case was demonstrably stronger. The shares should remain in place pending the speedy trial, and the alleged delay did not prejudice Deutsche Bank or defeat the claim.

United Pan-Europe received the costs at first instance and on appeal. Leave to appeal to the House of Lords was refused.

• High Court of Justice, Chancery Division: Jacob J, on 19 April 2000, discharged the interim injunction after finding no serious issue to be tried on breach of confidence, fiduciary duty or proprietary relief, while addressing the remaining American Cyanamid factors.
• Court of Appeal (Civil Division): The appeal was allowed, the relevant orders were set aside and an injunction was granted subject to further argument as to its form.