Walsh v Shanahan & Ors

An account of profits for misuse of confidential information is an equitable and discretionary remedy. A successful claimant has no right to elect it instead of damages. The court must identify the just and proportionate response to the particular wrong.

Where the misused information consists of replaceable professional work, damages may reflect its market value or the reasonable cost of obtaining equivalent work. An account of all profits from a venture may be disproportionate where the defendant independently assumed the venture’s investment and risk.

A fiduciary’s duty of loyalty ordinarily ends with the agency or retainer. The former fiduciary nevertheless remains bound to preserve confidential information acquired during that relationship.

The appellant had retained Allied Business & Financial Consultants Ltd to arrange his proposed purchase of a property. After he withdrew, Allied’s directors and their joint-venture company used, without consent, a valuation report and solicitors’ work commissioned and paid for by him. They then acquired and developed the property themselves.

The High Court, in [2012] EWHC 462 (Ch), held that the agency and associated fiduciary duties had ended when the appellant withdrew. It found an admitted breach of confidence, but awarded £16,965 in damages rather than an account of the profits from the development.

The appellant challenged the finding that the agency had ended and contended that an account of profits was either available as of right or was the appropriate discretionary remedy.

1. Appeal dismissed. Lord Justice Rimer held that the trial judge was entitled to find that the agency ended when the appellant abandoned the proposed purchase. Lady Justice Hallett and Lord Justice Laws agreed.

2. The offshore company and settlement had been created solely for the proposed acquisition. After withdrawal, the appellant gave no further instructions and no terms were agreed for a continuing retainer. The parties’ prolonged mutual inactivity supported the finding that no agency continued. The former agents therefore owed no continuing fiduciary duty of loyalty, although their duty to preserve confidential information survived.

3. An account of profits for breach of confidence is discretionary. The claimant has no right to elect that remedy merely because the defendant made a profit. The court must select the remedy which is the just and proportionate response to the wrong. This approach was consistent with Seager v Copydex Ltd (No 1), Attorney-General v Blake and Vercoe v Rutland Fund Management Ltd.

4. The respondents misused only the benefit of solicitors’ work and a valuation report which they could have commissioned independently. The acquisition opportunity itself was not the appellant’s confidential information. The appellant had abandoned that opportunity, while the respondents and their associates supplied the investment and assumed the development risk. An account of the venture’s profits would therefore have been manifestly disproportionate.

5. Damages based on the reasonable value of the misused information were appropriate. For professional information involving no special or inventive feature, that value may be the fee required to obtain equivalent work. The award of the professional fees and the payment made to Allied was consequently within the trial judge’s discretion.

6. The appellant could not impeach the decision by advancing for the first time on appeal a contention that urgent timing made the appropriated work indispensable. The point had not been put to the trial judge, who had therefore made no relevant factual findings. In any event, urgency might have affected the valuation of the information rather than justified an account of all profits.

• Court of Appeal (Civil Division): By [2013] EWCA Civ 411, dismissed the appeal against the refusal of an account of profits. The separate appeal concerning part of the costs order was adjourned.
• High Court, Chancery Division: By [2012] EWHC 462 (Ch), dismissed the fiduciary-duty claim and refused an account of profits, but awarded £16,965 damages, with interest, for breach of confidence.