What constitutes misuse of confidential information?
Watchstone Group has lost a confidential information claim against PriceWaterhouseCoopers in the High Court (Watchstone Group PLC v PricewaterhouseCoopers LLP & Anor). The claim arose from the May 2015 sale by Watchstone (formerly Quindell) of its legal services arm to Australian law firm Slater & Gordon (S&G).
As part of the transaction, S&G paid around £645 million upfront to Watchstone. However, the deal proved “financially catastrophic” (in the judge’s words) for S&G, leading to extensive litigation between the parties, which was settled in October 2019.
During that litigation Watchstone discovered that a meeting had taken place on 15 January 2015 between Mr Gareth Davies of Greenhill & Co, which was advising S&G, and Mr Ian Green of PwC, which was carrying out work for Quindell (as it was called at the time).
Watchstone therefore brought a claim against PwC, alleging that there was misuse of confidential information at the 15 January meeting, which had an impact on the purchase price of the transaction. It sought up to £63 million in damages.
The judge, Mr Justice Jacobs, said the case turned on the resolution of a few factual issues. His approach was to consider the objective evidence and in particular documentary evidence, as well as the “inherent probabilities” and to test the accounts of the witnesses against those matters.
Email evidence rejected
The main issue the judge had to resolve was what exactly was said at the 15 January meeting. Following the meeting, Mr Davies sent an account of it by email to his colleagues and Watchstone relied on this (Mr Davies was not called to give evidence). Mr Green provided a witness statement and was cross-examined in court for over a day. Describing Mr Green as “a responsible and honest former accountant who gave clear evidence”, the judge said he saw no reason to prefer the evidence of Mr Davies:
“Mr Davies’ conduct on this occasion gives rise to serious question-marks as to his integrity and whether he conducts himself with propriety, and there is evidence that Mr Davies was prone to exaggeration and considered himself to be a maverick. The email itself is in my view unreliable as a record of the meeting that has taken place.”
Watchstone had therefore failed to prove that any of the information in the email was imparted by Mr Green to Mr Davies. Moreover, there was no basis on which to conclude that any points in the email were made by Mr Davies at the meeting. The claim for breach of confidence failed.
For completeness, the judge said the claim also failed on causation grounds. Watchstone failed to prove that any of the information in the email was passed by Mr Davies on to S&G, that it was recognised as important by the relevant people at the time, that it had any impact on the negotiations that took place leading up to the transaction, or that there was ever a realistic chance of a higher offer.
Importance of witness evidence
This was a complex dispute, heard over 10 days in early 2023. In trying to reconstruct and interpret events that happened eight years before the hearing, Jacobs J had to make various judgements about what evidence could be relied on, and what was or was not inherently probable.
It is noteworthy that he preferred evidence given in person to that in the email following the meeting. Watchstone and its lawyers decided not to call Mr Davies to give his account of that meeting, and that decision may have cost them success in this case.
The decision is a reminder claims of alleged misuse of confidential information depend fundamentally on whether confidential information was indeed disclosed. That may not always be easy to prove.