- Bookmark
- Share
- CaseIQ
Vestergaard Frandsen A/S & Ors v Bestnet Europe Ltd & Ors
Factual and Procedural Background
Company A develops and markets long-lasting insecticidal bed nets (“LLINs”) produced by incorporating insecticide into molten polyethylene before extrusion. The relevant know-how was stored in an internal “Fence” database and treated as a trade secret.
The Defendant was employed by Company A from 2000 until June 2004 in sales-related roles subject to a contractual confidentiality clause. A chemical engineer (“Engineer”) and an external consultant biologist (“Consultant”) also worked for Company A; both were bound by confidentiality obligations. In early 2004 the Defendant and the Engineer decided to establish a competing LLIN business. The Consultant agreed to assist and began developing a polyethylene-based LLIN later branded “Netprotect.”
A Danish vehicle (“Company B”) was incorporated in August 2004 to commercialise Netprotect, followed in October 2005 by an English successor (“Company C”) after Company A commenced Danish proceedings. The Defendant became sole director of both entities. In 2007 Company A issued High Court proceedings in England against Company C, the Defendant, the Engineer and an associated service company alleging misuse of the trade secrets contained in the Fence database.
After a 16-day trial Arnold J held the Consultant and Engineer liable and, in a second judgment, also held the Defendant liable for breach of confidence. The Court of Appeal reversed the finding against the Defendant. Company A (as Appellant) appealed to the Supreme Court.
Legal Issues Presented
- Whether the Defendant was liable for misuse of Company A’s trade secrets under the express or implied terms of her employment contract.
- Whether the Defendant was liable in equity on the basis of a common design to misuse confidential information.
- Whether the Defendant’s alleged “blind-eye” knowledge or risk-taking justified secondary liability for the Consultant’s misuse of the trade secrets.
Arguments of the Parties
Appellant's Arguments (Company A)
- The employment contract, expressly or by necessary implication, imposed post-termination liability on the Defendant for assisting any misuse of Company A’s trade secrets.
- The Defendant participated in a common design with the Consultant and Engineer to develop and market Netprotect, thereby engaging joint liability for the underlying misuse.
- Even if unaware of the precise secrets, the Defendant acted with “blind-eye” knowledge or reckless indifference sufficient to fix her with equitable liability.
Defendant's Arguments
- She never possessed, received, or accessed the relevant confidential information and was unaware that it was being used to create Netprotect.
- Without actual or constructive knowledge of the secrets she could not be liable under contractual, common-design, or equitable principles.
- No term could properly be implied imposing strict liability without fault, and imposing such liability would be commercially unreasonable.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Seager v Copydex Ltd [1967] 1 WLR 923 | A recipient who unconsciously uses confidential information can still be liable. | Distinguished; the Defendant never received the secrets, so unconscious use was irrelevant. |
| Coco v A N Clark (Engineers) Ltd [1969] RPC 41 | Breach of confidence is rooted in equitable conscience. | Supported the need for knowledge (actual or blind-eye) before conscience is impacted. |
| Attorney-General v Guardian Newspapers (No 2) [1990] 1 AC 109 | Disclosure in circumstances importing an obligation of confidence engages equity. | Cited to confirm that the defendant must know or ought to know the material is confidential. |
| Royal Brunei Airlines v Tan [1995] 2 AC 378 | “Blind-eye” knowledge and dishonest assistance standards. | Used to test whether the Defendant’s conduct met the dishonesty threshold; it did not. |
| Unilever Plc v Gillette (UK) Ltd [1989] RPC 583 | Secondary liability in patent infringement is strict. | Held inapplicable because patent infringement is strict liability, unlike breach of confidence which requires knowledge. |
| Lancashire Fires Ltd v S A Lyons & Co Ltd [1996] FSR 629 | Injunction granted against participant unaware of confidential source. | Distinguished; an injunction might lie, but financial liability without knowledge was inappropriate. |
Court's Reasoning and Analysis
The Supreme Court emphasised two “crucial facts”: (1) the Defendant never acquired the trade secrets; and (2) she remained unaware that the Consultant was using them until, at the earliest, during the litigation. Liability for breach of confidence turns on conscience; without knowledge of the information’s confidential character or its misuse, a defendant’s conscience is not engaged.
Contractual claim: The express confidentiality clause applied only to information the Defendant herself obtained in the course of her employment. The misused information originated with the Consultant, so the clause did not apply. Implied terms imposing strict post-termination liability were rejected as inconsistent with the express wording and commercially unreasonable.
Common design: Joint liability requires each participant to share the elements that make the conduct wrongful. Because the Defendant neither possessed nor knew of the secrets, she lacked the requisite mental element and could not be a co-conspirator.
Blind-eye/recklessness argument: The Court found no evidential basis for dishonesty of the type described in Royal Brunei. Taking commercial risks or failing to inquire was insufficient absent proof of dishonest assistance.
The Court distinguished patent cases, noting that breach of confidence is fault-based, not a strict-liability tort. Precedents suggesting liability without knowledge (e.g., Seager) were limited to recipients who actually had the information.
Holding and Implications
APPEAL DISMISSED.
The Supreme Court affirmed the Court of Appeal, ruling that the Defendant bears no liability for misuse of Company A’s trade secrets. The decision clarifies that equitable breach-of-confidence claims require actual, constructive, or dishonest “blind-eye” knowledge of both the information and its misuse. Contractual silence or ordinary participation in a business is insufficient to impose strict liability. The judgment preserves protection for trade secrets while preventing oppressive liability on former employees who neither receive nor knowingly exploit confidential material.
Alert