Travel Counsellors Ltd v Trailfinders Ltd

The Court of Appeal confirmed that an equitable obligation of confidence arises where a recipient, objectively assessed as a reasonable person standing in the recipient's position, is on notice that the information (or some of it) may be confidential to another and the recipient fails to make inquiries which that reasonable person would make; failure to make such inquiries can convert suspicion into notice and give rise to an obligation limited to the confidential material received.

The appellant, Travel Counsellors Ltd (TCL), appealed a High Court decision holding it liable in equity for breach of confidence in respect of customer information brought to TCL by former employees of the respondent, Trailfinders Ltd. The IPEC trial judge found that the ex-employees had copied client data from Trailfinders and that TCL, which encouraged recruits to bring customer contact lists, knew or ought to have known that at least part of the information was confidential and therefore received it subject to an equitable obligation of confidence. The appeal challenged the legal test for notice, the judge's findings on what TCL ought to have understood about the material, and whether TCL had been shown to have misused confidential information. The Court of Appeal dismissed the appeal, upholding the IPEC judge's legal approach and factual conclusions, and remitted remaining issues of quantum and the precise extent of use to the inquiry on damages.

1. Disposition: The Court of Appeal dismissed TCL's appeal and upheld the IPEC judge's finding that TCL received certain customer information subject to an equitable obligation of confidence and was in breach of that obligation by using the information for business purposes.
2. Legal test for notice: The court adopted the objective test that a recipient will be under an equitable obligation of confidence where a reasonable person in the recipient's position knows or has notice that the information, or some of it, may be confidential to another; that objective standard includes whether a reasonable person would make inquiries and, if the recipient refrains from such inquiries, notice may be imputed. This approach follows and applies the principles set out in Primary Group (UK) Ltd v Royal Bank of Scotland plc [2014] EWHC 1082 (Ch) and was treated as consistent with the authorities referred to in argument.
3. Scope of obligation: The obligation need not extend to all information received; notice that at least part of the material is likely confidential suffices to impose an obligation limited to the confidential material actually received.
4. Application to facts: The judge's factual findings — including that TCL solicited recruits to bring customer contact lists, that large volumes of client data were supplied (the List), that TCL took no steps to enquire as to the source of that data and that TCL used the information in its systems and for marketing — supported the conclusion that TCL knew or ought to have known that at least some of the information was likely copied from Trailfinders and confidential. The Court of Appeal found no legal error in the judge's reasoning and rejected TCL's submission that only actual or 'blind-eye' knowledge could suffice.
5. Misuse and remedy: The appellant conceded that TCL had stored the information in its system and used it to send marketing emails; the Court accepted that the extent of use and the assessment of loss or damages should be determined at the inquiry stage, not on this appeal. Questions concerning whether contractual use by an ex-employee alone or also by the company constituted the company's use were remitted to the damages inquiry.
6. Other authorities: The court considered related authorities (including Matalia v Warwickshire County Council [2017] EWCA Civ 991, Volkswagen AG v Garcia [2013] EWHC 1832 (Ch), Vestergaard Frandsen A/S v Bestnet Europe Ltd [2013] UKSC 31 and The Racing Partnership Ltd v Done Brothers (Cash Betting) Ltd [2020] EWCA Civ 1300) and explained their relevance principally on the question of what enquiries a reasonable recipient would make and on accessory liability where actual knowledge may be required.
7. Orders: Appeal dismissed. The ancillary matters as to quantum and the precise extent of TCL's use were left for the damages inquiry before the trial judge.

• Court of Appeal (Civil Division): Appeal heard 13 January 2021; judgment handed down 19 January 2021; appeal dismissed, affirming the IPEC decision.
• High Court (IPEC): His Honour Judge Hacon, judgment 12 March 2020, [2020] EWHC 591 (IPEC) (decision under appeal).