Lexis Nexis Interview: Trade secrets, breach of confidence and conspiracy

Adham Harker of Brett Wilson LLP is interviewed about the decision in Salt Ship Design AS v Prysmian Powerlink SRL [2021] EWHC 2633 (Comm).

Introduction

The High Court has upheld a claim for breach of confidence and unlawful means conspiracy in this case which involved a design document being misused by a third party, after it was received under a non-disclosure agreement. Among other things, the court was asked to decide whether the Trade Secret (Enforcement, etc) Regulations 2018 (the Trade Secrets Regulations) applied. Mr Justice Jacobs held that they did apply, and so in due course Salt could apply for a publicity order under Regulation 18.

What are the practical implications of this case?

There are two areas of importance in this judgment: the use of an additional cause of action purely for the purpose of reinforcing a plea to exemplary damages, and the applicability of the Trade Secrets Regulations, SI 2018/597.

As the claim in breach of confidence succeeded, Mr Justice Jacobs noted that the unlawful means conspiracy claim added nothing in and of itself. Salt relied on it as part of its claim for exemplary damages, and to combat Prysmian’s defence that breach of confidence alone cannot give rise to exemplary damages.

It should be noted that it is on the basis of the ‘wilful’ component of the conspiracy tort that Jacobs J founded his view that exemplary damages are ‘potentially’ available, despite ultimately adjourning that question to the subsequent quantum trial. It is therefore important that even where a cause of action adds little, if exemplary damages are sought, a tort with a ‘wilful’ component must also be pleaded. A cost balancing exercise should take place, weighing the cost of advancing the additional cause of action against the expected return in exemplary damages.

On the applicability of the Trade Secrets Regulations, Jacobs J referred to his earlier findings of fact (without much specificity) and so it appears that a holistic approach may be taken, taking account of the conduct of the person or company alleged to be liable.

The question particularly relevant in this case was the state of knowledge of Prysmian. Given the finding that it actively encouraged the use of Salt’s design document by Vard, it is unsurprising that the Trade Secrets Regulations were found to apply.

It is unclear in this case whether Salt had evidence of Prysmian’s knowledge (which founded its case on the Trade Secrets Regulations) pre-action, or it was only found at the disclosure stage. Litigators will need to weigh up the likelihood of obtaining this type of evidence when advising on applicability.

What was the background?

Prysmian sought tenders to design a cable laying vessel (CLV) used to lay cables on or under the seabed. Salt and a third company, Vard Group’s design company, tendered for the design work.

Salt was successful, and entered into a design contract with Prysmian that included various obligations of confidence. Specific regard was given to the eventuality of a shipbuilder being selected that also had a design capability. After extensive initial design work had been completed, Prysmian (under various confidentiality agreements) distributed Salt’s design to shipbuilders so they could tender for the manufacture. One of the shipbuilders was Vard Group’s manufacturing company.

In asking for ‘best and final’ re-tenders, Prysmian explained the importance of price. Vard’s final bid was based on a design of its own (not Salt’s as had been requested, and not the design it had submitted under the design tender). It had used Salt’s design document (that it had due to the manufacture tender) to prepare a redesign to Salt’s specifications that it said would make manufacture cheaper without compromising the technical specifications and capabilities.

Prysmian accepted Vard’s tender offer, and cut out Salt as the designer. Salt issued proceedings for breach of contract, breach of confidence, and unlawful means conspiracy.

What did the court decide?

Breach of contract as to exclusivity

The breach of contract claim for ‘vanilla’ damages failed. Jacobs J held that under the design contract there was a specific end-date after which the project had failed to materialise, and as that date had passed, the only contractual remedies due to Salt were those concerned specifically with failure to materialise.

Breach of confidence

Jacobs J considered the breach of confidence in some detail, both equitable and contractual under the design agreement. Ultimately he decided that the designs produced by Salt were in principle protected under an obligation of confidence, relying heavily on Arnold J’s decision in Force India v Aerolab SRL [2013] EWCA Civ 780.

Conspiracy

On the basis of excellent documentary evidence that Prysmian had encouraged Vard’s use of Salt’s design, the court found in Salt’s favour on unlawful means conspiracy.

Applicability of the Trade Secrets Regulations

Jacobs J did not take a detailed approach to the application of the Trade Secrets Regulations, and noted at para [472] of the judgment that the parties did not make detailed submissions on the point either. He decided that the Trade Secrets Regulations did apply, and in due course it would be open to Salt to seek an order publicising the judgment (at Prysmian’s expense).

This interview was first published on Lexis®PSL on 26 January 2022 and can be found here (subscription required).

Click here to find out how Brett Wilson LLP can assist you if you wish to bring, or are facing, a claim for breach of confidence.