By Nick Gabay, Partner. Contact Thomson Snell and Passmore 01892 510000.
The recent decision in Dorchester Project Management Ltd v BNP Paribas Real Estate Advisory & Property Management UK Ltd (2013) has placed a spotlight on the importance of clarity and accuracy in drafting a confidentiality agreement, and in particular, the use of the information by authorised recipients.
Dorchester wanted a confidentiality agreement before disclosing sensitive information to BNP about a potential development site in London. BNP then passed the information to their funder, IKEA Ltd. BNP were required to enter into a back-to-back confidentiality agreement with IKEA to prevent misuse of the information by IKEA.
There was ambiguity in the terms regarding the information passing to IKEA, and it was unclear whether the protection applied to information transferred directly from Dorchester to IKEA, or indirectly through BNP.
In the absence of a comprehensive clause, the Court of Appeal looked at the intention of the parties in creating the agreement. The purpose was ultimately to protect Dorchester from unlawful disclosure and to prevent third parties from evading the protection afforded by the agreement.
The Court decided that common sense would not place the burden of enforcement on Dorchester, and that BNP should be liable for the unauthorised actions of IKEA.
This decision indicates the willingness of the court to protect the disclosing party by looking at the commercial intention of the agreement. However, it makes good commercial sense to draft the agreement comprehensively and carefully in the first instance, clearly addressing how the information is to be used by third parties, to avoid the costs and risks of future litigation.