Summary of Court of Appeal Opinion
Factual and Procedural Background
Company A and Company B (the Appellants) acquired a wealth- and fund-management business from Company C under a Share Purchase Agreement dated 12 June 2021. The sale excluded a retained Model Portfolio Service ("MPS") which remained with Company C and was operated within Company D. Following the sale, Company B (formerly part of Company C's group) provided investment management services to Company D under an Outsourced Management Agreement ("OMA") by which Company B would research, onboard and recommend investments for the MPS; Company D retained final investment decision-making. The OMA contained an express confidentiality clause and a duty to act in good faith.
From about June 2022 the performance of a series of funds ("Fund Series A") declined and there were significant redemptions. Company A/B sued Company C/D and individual defendants alleging repudiatory breaches of the Share Purchase Agreement and conspiracy. Company C/D counterclaimed. Company C/D applied to amend their Defence and Counterclaim to add claims alleging breach of confidence and copyright arising from Company B's alleged creation of a competing MPS (the "Titan MPS"). The Commercial Court judge (Judge Bryan) allowed the amendment. The Appellants appealed that case-management decision to the Court of Appeal. The Court of Appeal heard the appeal and gave judgment allowing the appeal.
Legal Issues Presented
- Whether the judge below was wrong to permit the respondents to amend the Defence and Counterclaim to add a breach of confidence claim against the appellants.
- Whether the proposed counterclaim was coherent and sufficiently particularised to give the appellants a fair opportunity to know and meet the case against them.
Arguments of the Parties
Appellants' Arguments
- The pleaded amendment was incoherent and self-contradictory because it relied on communications said to have been made by Company C/D to Company B when, on the pleaded examples, the relevant emails were sent by Company B to third parties.
- The definition of the confidential information ("Tavistock MPS Information") was overly broad and left the appellants unable to know what information they were alleged to have misused.
- There was no contractual obligation of exclusivity in the OMA preventing Company B from developing its own MPS, and the pleaded case did not properly plead any alternative equitable duty.
- Tavistock should have particularised its case before seeking disclosure; it was incumbent on the pleader to show a real prospect of success before imposing disclosure burdens on the appellants.
Respondents' Arguments
- The OMA and its confidentiality clause and the parties' duty of good faith supported a breach of confidence claim: Company B owed Company D a duty such that information generated or accessed by Company B in performance of the OMA was confidential to Company D.
- The pleaded examples (the "Investment Emails" and similarities in factsheets) supported an inference that Company B had used Company D's confidential information in creating the rival MPS; further particularisation could come after disclosure.
- The pleading was deliberately broad because further details were currently within the appellants' knowledge; the court should allow amendment and let disclosure inform any later narrowing.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| CNM Estates (Tolworth Tower) Ltd v Carvill-Biggs [2023] EWCA Civ 480, [2023] 1 WLR 4335 |
Amendment requires the claim as amended to have a real prospect of success; generally the court should not consider strength or weakness of a non-late amendment beyond that point. |
The court applied the "real prospect" threshold as a necessary condition for amendment but emphasised that implausible or incoherent facts can justify refusal. |
| Elite Property Holdings Ltd v Barclays Bank Plc [2019] EWCA Civ 204 |
The court may refuse amendment if pleaded facts are implausible, self-contradictory or not supported by contemporaneous documents; importance of coherence and particularisation. |
Relied on for the proposition that coherence and particularity are prerequisites for allowing a breach of confidence amendment; used to support striking down the amendment. |
| Kawasaki Kisen Kaisha Ltd v James Kemball Ltd [2021] EWCA Civ 33, [2021] 3 All ER 978 |
Similar principle: court entitled to refuse amendments that are implausible or unsupported; focus on coherence of the proposed pleading. |
Applied to justify scrutinising the pleaded amendment's coherence; the Court of Appeal concluded the pleading failed that test. |
| Celgard LLC v Shenzhen Senior Technology Material Co Ltd [2020] EWCA Civ 1293, [2021] FSR 1 |
Importance of particularity in breach of confidence and trade secret claims; lesser particularity may be acceptable early on but depends on circumstances. |
Used to explain the balance between guarding against broad, unparticularised claims and not strangling viable claims; the court found the amendment insufficiently particularised. |
| Ocular Sciences Ltd v Aspect Vision Care Ltd [1997] RPC 289 |
High importance of full and proper particulars in breach of confidence actions to prevent harassment and to enable the defendant to know what to meet. |
Quoted to underline that failure to particularise may render a breach of confidence pleading abusive; influenced the conclusion that the amendment was an abuse. |
| John Zink Co. Ltd. v. Wilkinson [1973] RPC 717; John Zink Co. Ltd. v. Lloyds Bank Ltd [1975] RPC 385 |
Examples where broad breach of confidence claims were treated as potentially oppressive and required particulars. |
Referred to as authority for the risk of using unparticularised breach of confidence pleadings to harass competitors; supported the court's caution. |
| CMI-Centers for Medical Innovation GmbH v Phytopharm plc [1999] FSR 235 |
Even at interlocutory stages the defendant must be told precisely what information is relied on; precision is required early on. |
Invoked to support the need for clear identification of confidential information at the pleading stage; the court held the amendment fell short. |
Court's Reasoning and Analysis
The Court of Appeal analysed the proposed amendment by focusing on (i) identification of the confidential information alleged to have been misused, and (ii) whether the pleaded facts coherently supported an inference of misuse.
First, the court examined the OMA's confidentiality clause and the definition of "Confidential Information" and concluded that, as drafted, the clause plainly limits Company B's express contractual confidentiality obligation to information disclosed by Company D to Company B. Thus the pleaded case premised on Company D having "communicated information necessary to implement the MPS to Company B" required clear examples of such communications.
Second, the court assessed the pleaded examples. The amendment relied principally on "Investment Information" exemplified by certain "Investment Emails". On inspection those emails — as pleaded and by reference to their text — were emails sent by Company B to third-party providers arranging onboarding, copied to Company D. They were therefore not instances of confidential information being communicated by Company D to Company B. That made paragraph 153E internally inconsistent and the overall pleading self-contradictory.
Third, the court found the definition of the alleged "Tavistock MPS Information" to be overly broad and undefined (described as "each part of the MPS"). That breadth left the appellants unable to know what specific information they were alleged to have misused. Although some components (for example, detailed portfolio composition) could be confidential and valuable, the pleading did not limit itself to such elements.
Fourth, the court evaluated the inferences relied on: (a) the onboarding of the same investments for both firms (demonstrated and done openly); (b) similarities between publicly available factsheets (which supported a separate copyright claim but did not by themselves show misuse of confidential information); and (c) similarities in underlying investments. The court observed that the empirical examples provided were limited, explicable or contradicted the inference of copying. The limited Annex comparisons did not support a reliable inference that Company B had effectively replicated Company D's portfolios using confidential information.
Fifth, the court considered the respondents' witness evidence (witness evidence asserting that investment work was confidential and valuable). While that evidence explained why such material would generally be confidential, it did not establish that Company D had transmitted confidential information to Company B or that the pleaded similarities required an inference of misuse.
Applying the authorities on amendment, particularity and breach of confidence, the court concluded that the pleaded counterclaim was incoherent, self-contradictory and insufficiently particularised to give the appellants a fair opportunity to know and meet the case, and therefore the Commercial Court judge had erred in allowing the amendment.
Holding and Implications
APPEAL ALLOWED — AMENDMENT DISALLOWED
Holding: The Court of Appeal allowed the appeal and concluded that the judge below should not have permitted the respondents to amend their Defence and Counterclaim to add the breach of confidence claim because the proposed pleading was incoherent, self-contradictory and insufficiently particularised.
Implications: The direct effect is that the attempted amendment adding the breach of confidence claim is not permitted by this court. The separate copyright counterclaim (as allowed below and not challenged on this appeal) remains to proceed to trial. The court noted that if the respondents can formulate a more focused and properly particularised claim (for example after more detailed comparison of publicly available factsheets and disclosure), they may apply to the Commercial Court for permission to amend; the present judgment does not prejudge any such future application. The decision does not purport to establish new legal principles beyond application of established authorities on coherence, particularity and the real-prospect threshold for amendment.