When teamwork breaks down

Roger Pearson looks at what rights of protection an individual has over the confidentiality of work that was carried out as part of a team

A Court of Appeal ruling by Lords Justices Nourse and Schiemann and Sir John Vinelot on 11 December has focused attention on an obscure aspect of the application of the law of protection of confidential information.

Laura Masterson of Eversheds, who represented the successful appellant, says that there are significant implications for individuals who want to protect work they have carried out as part of a team.

The case Murray v Yorkshire Fund Managers and anor centred on plans for the management buyout of a company called Servicescope. A management buyout team, which incorporated three former directors/managers of the company was put together. Other members of the team included a potential finance director and a potential managing director, Drummond Murray.

Yorkshire Fund Managers (YFM) was approached for finance but, in the negotiations that followed, Drummond Murray was dropped from the buyout team. YFM's Michael Hartley, who was in charge of reviewing the investment potential of the scheme, replaced him.

The business plan was then amended with input from Hartley and money was advanced to enable the proposed buyout to take place. The question of confidentiality was raised by Murray, who took YFM and Hartley to court claiming they were not entitled to make use of his input regarding highly confidential information that he and members of the original team had helped collate in preparing the initial business plan.

The case originally went to the Mercantile Court in Manchester in September 1995. Judge Kershaw QC held that YFM was not liable. He did, however, take the view that Hartley had acted outside the course of his employment for YFM when he offered himself as a member of the buyout team, and had been in breach of Murray's confidential information.

An account of profits was ordered and Murray was subsequently awarded £131,038. That decision was overturned by the Court of Appeal, which ruled there had been no breach.

Management buyout proposals and the assembly of teams have become fairly commonplace in recent times and situations like this, in which one member of the team who has been heavily involved in preparing sensitive and confidential information for business plans is dropped, are not out of the ordinary.

This case is, however, the first of its kind to focus on the rights of individuals to protect the input they have made. The decision of the appeal judges has left no doubt that there are no automatic rights of protection under the laws of confidentiality in such situations.

Masterson says the underlying message is that if people want to protect the confidentiality of their work they need to take steps in advance, otherwise their work will be regarded by the courts as part of a team effort in which individuals do not have rights of protection.

'If anyone wants to protect information afforded by them or co-owned by the team as a whole, it is essential that they ensure protection by regularising their rights and obligations by contract,' says Masterton.