Sale of land – Confidential information – Disclosure – Respondent seeking finance for development – Appellant identifying potential funder– Parties entering into agreement regarding non-disclosure of confidential information – Deed requiring respondent to obtain back-to-back deed with third party funder – Parties supplying information to third party on basis that deed binding – Third party making successful sole bid – Appellant bringing proceedings for breach of deed – Court determining as preliminary issue that respondent not required to obtain non-disclosure deed from third party – Judge deciding disclosure by appellant to third party not covered by back-to-back agreement – Whether judge erring in law – appeal allowed. The appellant had detailed knowledge of an opportunity to develop a commercial site which it communicated to the respondent. The parties entered into a written agreement, called a non-disclosure and non-circumvention deed (“the deed”) to enable the appellant to disclose to the respondent commercially sensitive confidential information to pass on to a third party potential funder (IKEA). By cl 4.1 of the deed, the respondent was prohibited from circumventing the appellant by seeking to make contact in any way with any third party unless as previously agreed for the purposes of, inter alia, collating information and matters essential for the purposes of progressing the opportunity to purchase the site. Under cl 4.2 of the deed, the parties agreed to keep secret all confidential information which might come to each of their knowledge, and by cl 4.2.1, the respondent was permitted to disclose such confidential information to any third party but was obliged to procure that those third parties were bound by similar obligations of non-disclosure and non-circumvention contained within the deed by way of a back-to-back agreement and was responsible for any unauthorised disclosure. Following the making of the deed, the appellant disclosed to IKEA, either directly or via the respondent, information which, the appellant claimed, was confidential information under the terms of the deed. The appellant subsequently brought proceedings claiming that the respondent had, unknown to the appellant, passed that information to IKEA without taking a back-to-back agreement, which had led to IKEA making a successful bid to acquire the site itself, without the consent of the appellant. The court made an order for the determination of preliminary issues. The judge held that the respondent was not responsible for the wrongful disclosure by IKEA of confidential information obtained directly from the appellant or for the consequences of circumvention by IKEA acting alone. Accordingly, the respondent prima facie had no liability for the loss which the appellant alleged it had suffered as a result of IKEA circumventing the appellant and approaching the seller directly. The appellant appealed. Held: The appeal was allowed. (1) The primary aim of the court in contractual interpretation was to ascertain the meaning of an agreement which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. The background included evidence as to what objectively was the aim of the transaction and enabled the court to choose between meanings and to conclude that the parties were using a term in a particular sense or had chosen the wrong words to convey their meaning. (2) In the present case, considering the circumstances of the execution of the deed and the terms of its recitals, the background clearly showed that the parties intended that the appellant should be protected against the risks of both unauthorised disclosure and circumvention. They had also been alive to the risk that circumvention might occur because of the acts of IKEA. Moreover, the parties contemplated that the respondent would perform the role of introducing a funder, not that of a bidder, and so it would be an obvious step for the parties to take to agree to ensure that IKEA, as the receiving party, would be bound by the non-circumvention provision in clause 4.1. Once the obligation of non-circumvention was imposed on the receiving party in favour of the respondent, the words “introduced to each other” could be read without any difficulty as applying to the introduction of the seller by the respondent to IKEA. There was no requirement in clause 4.1 for the name of the seller to be itself confidential information. (3) The judge had been right to have in mind a businesslike meaning for the provisions of the deed, but that did not entitle him to disregard those provisions. Words could only be disregarded in the rare event that it was not possible to ascribe any sensible meaning to them. In addition, the judge had to interpret the deed keeping in mind the objective aim of the transaction, not what he might independently consider unusual or onerous. On that basis, it was clear that the back-to-back agreement, which clause 4.2.1 required the respondent to obtain from the receiving party before it passed confidential information to it, had to contain obligations of both non-disclosure and non-circumvention. (4) The parties had every reason to seek to protect the appellant from the identified risk of non-circumvention by a party other than the respondent. That party would be in a relationship with the respondent and thus in practice the respondent was better placed than the appellant to ensure its protection against circumvention. The responsibility provision would have been differently worded if the parties had intended to exclude the respondent’s liability for not obtaining a back-to-back agreement when it should have done so. The responsibility provision removed the possibility of a defence based on the fact that the respondent had done all that it needed to do by taking the back-to-back agreement, and provided the incentive to the respondent to enforce it. Clause 4.2 placed limits on confidential information. It could be ascertained at trial whether the respondent or the appellant gave IKEA confidential information for the purposes of the deed. Martin Hutchings QC (instructed by IBB Solicitors, of Uxbridge) appeared for the appellant; Jamie Smith (instructed by Mayer Brown International LLP) appeared for the respondent. Eileen O’Grady, barrister
Dorchester Project Management Ltd v BNP Paribas Real Estate Advisory & Property Management UK Ltd
Sale of land – Confidential information – Disclosure – Respondent seeking finance for development – Appellant identifying potential funder– Parties entering into agreement regarding non-disclosure of confidential information – Deed requiring respondent to obtain back-to-back deed with third party funder – Parties supplying information to third party on basis that deed binding – Third party making successful sole bid – Appellant bringing proceedings for breach of deed – Court determining as preliminary issue that respondent not required to obtain non-disclosure deed from third party – Judge deciding disclosure by appellant to third party not covered by back-to-back agreement – Whether judge erring in law – appeal allowed. The appellant had detailed knowledge of an opportunity to develop a commercial site which it communicated to the respondent. The parties entered into a written agreement, called a non-disclosure and non-circumvention deed (“the deed”) to enable the appellant to disclose to the respondent commercially sensitive confidential information to pass on to a third party potential funder (IKEA). By cl 4.1 of the deed, the respondent was prohibited from circumventing the appellant by seeking to make contact in any way with any third party unless as previously agreed for the purposes of, inter alia, collating information and matters essential for the purposes of progressing the opportunity to purchase the site. Under cl 4.2 of the deed, the parties agreed to keep secret all confidential information which might come to each of their knowledge, and by cl 4.2.1, the respondent was permitted to disclose such confidential information to any third party but was obliged to procure that those third parties were bound by similar obligations of non-disclosure and non-circumvention contained within the deed by way of a back-to-back agreement and was responsible for any unauthorised disclosure. Following the making of the deed, the appellant disclosed to IKEA, either directly or via the respondent, information which, the appellant claimed, was confidential information under the terms of the deed. The appellant subsequently brought proceedings claiming that the respondent had, unknown to the appellant, passed that information to IKEA without taking a back-to-back agreement, which had led to IKEA making a successful bid to acquire the site itself, without the consent of the appellant. The court made an order for the determination of preliminary issues. The judge held that the respondent was not responsible for the wrongful disclosure by IKEA of confidential information obtained directly from the appellant or for the consequences of circumvention by IKEA acting alone. Accordingly, the respondent prima facie had no liability for the loss which the appellant alleged it had suffered as a result of IKEA circumventing the appellant and approaching the seller directly. The appellant appealed. Held: The appeal was allowed. (1) The primary aim of the court in contractual interpretation was to ascertain the meaning of an agreement which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. The background included evidence as to what objectively was the aim of the transaction and enabled the court to choose between meanings and to conclude that the parties were using a term in a particular sense or had chosen the wrong words to convey their meaning. (2) In the present case, considering the circumstances of the execution of the deed and the terms of its recitals, the background clearly showed that the parties intended that the appellant should be protected against the risks of both unauthorised disclosure and circumvention. They had also been alive to the risk that circumvention might occur because of the acts of IKEA. Moreover, the parties contemplated that the respondent would perform the role of introducing a funder, not that of a bidder, and so it would be an obvious step for the parties to take to agree to ensure that IKEA, as the receiving party, would be bound by the non-circumvention provision in clause 4.1. Once the obligation of non-circumvention was imposed on the receiving party in favour of the respondent, the words “introduced to each other” could be read without any difficulty as applying to the introduction of the seller by the respondent to IKEA. There was no requirement in clause 4.1 for the name of the seller to be itself confidential information. (3) The judge had been right to have in mind a businesslike meaning for the provisions of the deed, but that did not entitle him to disregard those provisions. Words could only be disregarded in the rare event that it was not possible to ascribe any sensible meaning to them. In addition, the judge had to interpret the deed keeping in mind the objective aim of the transaction, not what he might independently consider unusual or onerous. On that basis, it was clear that the back-to-back agreement, which clause 4.2.1 required the respondent to obtain from the receiving party before it passed confidential information to it, had to contain obligations of both non-disclosure and non-circumvention. (4) The parties had every reason to seek to protect the appellant from the identified risk of non-circumvention by a party other than the respondent. That party would be in a relationship with the respondent and thus in practice the respondent was better placed than the appellant to ensure its protection against circumvention. The responsibility provision would have been differently worded if the parties had intended to exclude the respondent’s liability for not obtaining a back-to-back agreement when it should have done so. The responsibility provision removed the possibility of a defence based on the fact that the respondent had done all that it needed to do by taking the back-to-back agreement, and provided the incentive to the respondent to enforce it. Clause 4.2 placed limits on confidential information. It could be ascertained at trial whether the respondent or the appellant gave IKEA confidential information for the purposes of the deed. Martin Hutchings QC (instructed by IBB Solicitors, of Uxbridge) appeared for the appellant; Jamie Smith (instructed by Mayer Brown International LLP) appeared for the respondent. Eileen O’Grady, barrister
