Court Of Appeal Overturns Order Permitting Use Of Covert Recordings To Support Claims In Civil Litigation Before Breach Of Confidence Claim Determined

A recent Court of Appeal decision illustrates the court's approach to the protection of confidential information, emphasising that the question of a party's entitlement to use material obtained in breach of confidence must be determined before that party can rely on the material in support of separate claims, not at the same time or afterwards: DSM SFG Group Holdings Ltd v Kelly [2019] EWCA Civ 2256.

The court overturned a High Court decision which would have released the defendant from undertakings not to use covertly recorded material except for the purpose of defending the breach of confidence claim against him, in return for less stringent undertakings permitting the use of the material in order to bring claims against the claimants and third parties. In the Court of Appeal's view, allowing the use of the material in this way, before the defendant's right to do so was established, would be inequitable and had the potential for injustice.

The decision will be welcome to parties seeking to prevent unauthorised use of their confidential material. It suggests that, pending determination of whether an injunction should be granted, the defendant will not be permitted to use the material except in order to defend the proceedings.

Hussein Mithani, an associate in our disputes team, considers the decision further below.

Background

Mr Kelly, the defendant, sold his interest in various businesses to the claimants for approximately £23 million. However, he became concerned that there was something wrong with the sale and planted recording devices in the claimants' in-house solicitor's office. He managed to record 40 hours of confidential conversations, many of which were privileged.

The claimants subsequently discovered the recording devices, sought injunctive relief, and brought a claim for harassment and breach of confidence. Mr Kelly gave undertakings in February 2019 in relation to these recordings, including that: (i) he would not make any use of the recordings (except for the purpose of defending the present claim) until trial; and (ii) he would retain solicitors and counsel to defend the claim who were not instructed by him on any other matter which concerned the claimants.

In May 2019 Mr Kelly applied to be released from the undertakings, in return for new undertakings which would also allow him to use the information in the recordings to support broader claims in relation to the sale of the business in 2017.

Shortly after this application...