Primary Group (UK) Limited & Others v Royal Bank of Scotland Plc & Another [2014] EWHC 1082 (Ch)
Primary Group Limited (Primary) entered into a loan facility ("the Agreement") with the Royal Bank of Scotland (RBS) in 2006. During initial discussions Primary expressed concern about potential conflicts arising from RBS's relationship with Direct Line Insurance Group plc (Direct Line). At the relevant time Direct Line was a subsidiary of RBS and a direct competitor of GBI (Holdings) Limited (trading as Swiftcover), one of Primary's subsidiaries. Primary contend that RBS gave them various assurances that all information provided to RBS would be kept confidential and not passed on to Direct Line. Additionally the Agreement imposed confidentiality obligations on RBS restricting how information provided to it by Primary could be used.
Primary defaulted on its obligations under the Agreement. RBS consequently instructed KPMG to conduct an independent business review of Primary, known as the "Medway Reports". RBS also consulted with Direct Line, which involved disclosing parts of the Medway Reports to Direct Line without first obtaining the permission of Primary.
Primary brought a claim against RBS for breach of a contractual obligation of confidence and against Direct Line for breach of an equitable obligation of confidence. RBS denied committing any breach of its contractual obligations and, in the alternative, argued that any such breach gave rise only to nominal damages.
Mr Justice Arnold readily found that RBS had given Primary assurances of confidentially. He noted that terms may be incorporated into a contract through written and oral agreements, and also through conduct. In addition, he considered that it is "common ground that a banker owes his customer a duty of confidentiality". Further he thought that, viewed as whole, the Medway Reports contained information which was confidential to Primary. Consequently he held that RBS was in breach of its contractual obligations.
Mr Justice Arnold went on to consider the amount of damages sought by Primary. He found that only nominal damages were owed by RBS to Primary. This was partly due to the fact that Direct Line only used the Medway Reports in order to provide RBS with an insurance industry perspective on Primary, which otherwise RBS would have had to pay a third party for. In addition, Mr Justice Arnold took into account the strong negotiating position of RBS at the time any negotiations varying the confidentiality of the Medway Reports would have taken place, since Primary had breached the Agreement. Consequently Mr Justice Arnold ordered an award of GBP 5,000 to be paid to Primary, being the value of the time Direct Line spent on the project and the amount RBS should have paid an independent third party.
The claimants contended that a reasonable person in the position of Direct Line should have realised that RBS was not entitled to disclose the Medway Reports or, at the very least, should have made enquiries of Primary before reading these reports and using the confidential information. On a subjective test Mr Justice Arnold found that Direct Line thought RBS had the right to disclose the Medway Reports; on an objective test he found that Direct Line was entitled to assume RBS would comply with its duty of confidentiality. He therefore did not find Direct Line in breach of its equitable duty of confidentiality.
The full text of the Judgment can be found here: http://www.bailii.org/ew/cases/EWHC/Ch/2014/1082.html
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