Mulsanne Insurance Company Limited v Marshmallow Financial Services Limited

Confidential information may be misused indirectly where it is incorporated into a system and that system is operated for an unauthorised purpose. The output need not itself be confidential. However, information must be sufficiently specific, substantial and confidential, and the alleged misuse must be properly particularised.

A contractual audit right is construed in its contractual context and does not ordinarily authorise a roving investigation into a party’s wider business. On termination, an agent must deliver up records acquired for the principal’s business, but is not generally required to create new arrangements with independent third-party service providers unless the contract clearly or necessarily requires it.

Mulsanne, an insurer, sued its former broker, Marshmallow Financial Services Limited, and the related insurer Marshmallow Insurance Limited. The claims concerned misuse of confidential information supplied during a motor-insurance venture, alleged breaches of the parties’ Terms of Business Agreement following termination, and passing off.

The trial concerned liability only. Mulsanne alleged that information from its rating models and underwriting rules had been used directly, as a springboard for the defendants’ new insurance business, or in preparations for reinsurance and regulatory approval. It also sought records and assistance necessary to service policies after termination.

The central issues were whether the information was confidential, whether it had been misused, the proper construction and date of termination of the TOBA, the scope of post-termination obligations, and whether renewal communications misrepresented the identity of the underwriter.

1. Confidential information. The court applied the three elements stated in Coco v AN Clark (Engineers) Ltd: the information must possess the necessary quality of confidence, be imparted in circumstances importing confidence, and be unauthorisedly used to the claimant’s detriment. Some tables, including the claims and convictions table, vehicle segmentation file and revised postcode file, were confidential. Other material was too vague, trivial, readily derivable from industry knowledge, or contributed by Marshmallow.
2. Indirect use. Running the existing ratings engine to generate quotations for a reinsurance questionnaire was a use of confidential material, even though the quotations themselves were not confidential. Similar analysis supporting the preparation of vehicle-modification and voluntary-excess tables also amounted to misuse, although the practical benefit might be insignificant. Several direct-copying and other springboard allegations failed for lack of confidentiality, proof, pleading or material use.
3. Pleading. The court applied the principles in Shenzhen Senior Technology Material Co Ltd v Celgard LLC. Confidential information and the alleged misuse must be identified with sufficient particularity. Unpleaded claims concerning fraud-model inputs and wider business information could not be pursued.
4. Termination. Clause 19.2.7 of the TOBA covered an intended transfer of a major proportion of the business through renewals into another insurer. Mulsanne validly terminated the TOBA on 2 February 2021. The proposed audit was outside clause 16.8, which concerned auditing transactions and compliance under the agreement, rather than a general investigation into the defendants’ business.
5. Post-termination obligations. Marshmallow breached the TOBA by delaying delivery of credit-check, identity-check and no-claims-discount records, by withholding open-banking data held for the agency business, and technically by delaying delivery of the last four credit-card digits. It was not obliged to provide add-on business records, premium-finance records, full card details held by independent processors, or unspecified assistance to establish new relationships with third parties. No sufficiently clear or necessary implied term required such positive facilitation.
6. Passing off. The claim failed. The renewal notices clearly identified the change of underwriter to Marshmallow Insurance. References to renewal, the same company group and retention of the policy number did not override that disclosure.

First-instance liability judgment after a trial in the High Court. Earlier interlocutory procedural decisions are described in the judgment, including decisions on disclosure, amendment and trial management.