It may be tempting to think it safe to go ahead and breach a confidentiality agreement if it would not lead to the other party suffering any financial loss and the likelihood of their getting an injunction is slim.
However, a recent case heard by the Privy Council suggests damages may be available even though no actual financial loss has been suffered. Instead, damages may be awarded on the so-called ‘Wrotham Park’ basis.
What is the essence of ‘Wrotham Park’ damages?
- Damages are assessed based on the sum of money that might reasonably have been demanded by the innocent party in return for acquiescing to that breach.
- The approach requires a hypothetical negotiation between the parties to reach agreement on the price for ‘buying out’ such rights.
- Each party is to make reasonable use of their respective bargaining positions, but without seeking a ransom.
As such, while the actual sum for such damages may be difficult to guess at the outset, it could well be a significant amount.
The impact of this decision may come as a welcome comfort to those considering using confidentiality agreements to protect their valuable and confidential business data and information in all types of commercial negotiations, including also in the context of corporate sales and acquisitions (asset or share sale/purchase), new partnering deals, and in many other circumstances.
