Walsh v Shanahan & Ors

The Court of Appeal dismissed Mr Walsh's appeal against His Honour Judge Pelling QC. The court held that Allied's agency and any fiduciary duties it owed to Mr Walsh ended when Mr Walsh withdrew from the proposed purchase on 17 May 1999. A continuing duty to preserve the confidentiality of information survived, but misuse of confidential information after termination of the agency gave rise to a remedy in breach of confidence rather than a claim in breach of fiduciary duty. The grant of an account of profits is an equitable, discretionary remedy; on the facts the judge was entitled to refuse an account and to award damages assessed by reference to the reasonable price of acquiring the legal work and valuation report that had been misused (following the Seager approach).

Background and parties. The appellant, Matthew Walsh, sued the respondents (Messrs Shanahan and Leonard and SLH Properties Limited) for a declaration of breach of fiduciary duty and for an account of profits arising from the respondents' acquisition and development of a commercial property which Mr Walsh had earlier sought to purchase through Allied Business & Financial Consultants Ltd. He also sought an account of profits derived from the respondents' use of confidential materials prepared when Allied acted for him. Judge Pelling dismissed the fiduciary claim and refused an account of profits but awarded damages for breach of confidence in respect of professional work taken from Jacobsens and a valuation by M&G. The judge ordered substantial costs against Mr Walsh. He appealed to the Court of Appeal.

Nature of the claim and relief sought. Mr Walsh sought (i) a declaration that the respondents had been in breach of fiduciary duty, (ii) an account of profits made by the respondents in consequence of the alleged breach of confidence, and (iii) damages by way of alternative relief.

Issues framed. The court considered (i) whether Allied's agency (and any fiduciary duties) continued after Mr Walsh withdrew from the purchase on 17 May 1999, (ii) whether the respondents' subsequent use of confidential information gave rise to liability in fiduciary law entitling Mr Walsh to an account of profits, and (iii) if not, whether an account of profits was nonetheless the appropriate equitable remedy for breach of confidence or whether damages were the just response.

Reasoning and decision. The Court of Appeal accepted the judge's primary factual finding that Allied's retainer in relation to the purchase terminated on 17 May 1999 and that no separate continuing agency in relation to the Isle of Man entities was established. As a result, the strict fiduciary "no profit" duty did not continue. The respondents remained subject to a duty of confidence and were liable for misuse of confidential materials; but the grant of an account of profits for such misuse is discretionary. Applying established authorities (including Seager and Blake), the judge was entitled to conclude that the appropriate remedy was damages assessed by reference to the notional price of acquiring the solicitor's and valuer's work rather than stripping the respondents of the profits of the property venture. The Court of Appeal dismissed the appeal.

Wider implications. The court emphasised that an account of profits is not automatic in breach of confidence cases: it is an equitable remedy exercised by reference to the justice of the case and available alternatives such as Wrotham Park/Seager-type valuation may be appropriate where the confidential material is essentially professional work that could have been procured by the wrongdoer.

Appeal dismissed. The Court of Appeal upheld Judge Pelling's findings that Allied's agency (and any fiduciary duties) ended on 17 May 1999, that a continuing duty of confidentiality nonetheless survived, and that the award of an account of profits is an equitable, discretionary remedy. On the facts the judge was entitled to refuse an account of profits and to award damages assessed by reference to the reasonable price of the misused professional work.

Appeal from the High Court of Justice, Chancery Division (His Honour Judge Pelling QC) [2012] EWHC 462 (Ch) to the Court of Appeal [2013] EWCA Civ 411.