FORCE INDIA FORMULA ONE TEAM LIMITED v AEROLAB SRL (an Italian company)

Acceptance of a repudiatory breach requires a communication which, viewed as a whole, clearly and unequivocally conveys that the aggrieved party is treating the contract as ended. The doctrine depends on informed election and communication, not reliance.

An express confidentiality covenant negotiated between commercial parties must be construed from its language. Information traceable to a confidential source does not lose protection merely because an employee remembers it. Where a contractual obligation is qualified by exceptions, the party relying on an exception ordinarily bears the burden of establishing it.

Compensation for misuse of confidential information may reflect the cost of obtaining an equivalent benefit from a legitimate alternative source. The assessment must remain proportionate to the benefit obtained and the actual extent of misuse.

Force India engaged Aerolab to provide aerodynamic development services for a Formula One racing car. Force India later fell substantially behind with its monthly payments. Aerolab began work for a rival project, and its personnel used some of Force India’s confidential CAD files in preparing a new wind-tunnel model.

Arnold J held that Aerolab had accepted Force India’s repudiatory breach on 3 August 2009, found limited misuse of confidential information and awarded €25,000. That award was exceeded by the contractual fees owed to Aerolab. The decision was reported at [2012] EWHC 616 (Ch) and [2012] RPC 29.

Force India appealed on contractual, copying and quantum issues. The central questions were when the contract ended, the scope of the express confidentiality obligations, whether the judge’s factual assessment of copying could be disturbed, and whether the compensation adopted a permissible measure.

1. The appeal was dismissed. Although the judge had erred in parts of his contractual reasoning and had understated some use of Force India’s information, those errors did not affect his order. An appeal lies against the order, rather than merely against the reasons for it.

2. Acceptance of a repudiatory breach is an election requiring informed choice and a clear and unequivocal communication that the contract is being treated as ended. Reliance by the defaulting party is unnecessary. Communications and conduct must be assessed as a whole. Disabling Force India’s server access on 3 August, while announcing a temporary shutdown and invoicing for the whole month, was equivocal and did not terminate the contract. The communication on 19 August that no further work would be performed, Force India’s property would be returned and Aerolab would work for another customer was sufficient. The contract ended on that date.

3. The express confidentiality provisions had to be construed from their language and commercial context. They were negotiated between parties of equal bargaining power and contained carefully framed exceptions. Aerolab bore the burden of establishing any exception on which it relied. Employment cases concerning implied duties did not determine the scope of this express commercial covenant. Information traceable to a particular confidential source did not cease to be confidential merely because it was memorable. Use of the protected information for another customer breached the exclusive-use obligation.

4. The judge’s finding that there had been opportunistic copying rather than systematic copying understated some involvement by the aerodynamicists. Nevertheless, the Court of Appeal could not disturb his central factual finding that Aerolab had not copied the car’s aerodynamic system. The trial followed extensive disclosure, evidence and cross-examination. A provisional inference against a person entrusted with secret information therefore had little independent role.

5. The judge permissibly valued the misuse by reference to Aerolab’s saved time and the cost of obtaining equivalent design work from consultants. Legitimate alternatives may be considered in a hypothetical negotiation, although the wrong itself cannot simply be assumed away. The €25,000 award was supported by the limited evidence, was close to Aerolab’s profit from the relevant work, and was proportionate and dissuasive.

6. Sir Stanley Burnton added that Mr Chosse’s opinion was expert evidence and should not have been admitted without permission under Civil Procedure Rules 1998 Part 35. Its informal introduction through another witness’s statement bypassed safeguards concerning instructions, independence, form and cross-examination. Lewison and Briggs LJJ agreed that the appeal should be dismissed.

1. Court of Appeal (Civil Division): The court dismissed Force India’s appeal in [2013] EWCA Civ 780. It varied aspects of the judge’s reasoning, including the termination date, but left his order and €25,000 award undisturbed.

2. High Court, Chancery Division: Arnold J held that Aerolab was entitled to work for Team Lotus after accepting Force India’s repudiatory breach, but found limited misuse of confidential CAD material and awarded €25,000. His judgment was reported at [2012] EWHC 616 (Ch) and [2012] RPC 29.