By Madeeha Husain Anthony, Trainee Solicitor, and Chris Tang
One of Europe's largest hedge fund managers, Brevan Howard Asset Management LLP (BHAM), was granted an interim injunction against international news agency Reuters which threatened to publish highly confidential information that had been provided by BHAM to potential investors.
BHAM had provided 36 potential investors with a pack of seven electronic documents, five of which contained highly confidential and commercially sensitive information. In order to protect their confidentiality, BHAM labelled the first page of the document pack with headers reading "Private and Confidential" and "Not for Distribution" along with a comprehensive disclaimer on the front page prohibiting the use of that information. BHAM also protected these documents using passwords unique to each investor.
Reuters obtained information from the Third Defendant, an anonymous source (identified as "Person or Persons Unknown" in the judgment). The judge found that the information provided by the Third Defendant probably derived from BHAM's five confidential documents on the evidence presented. Reuters and the Second Defendant, Reuters journalist Ms Maiya Keidan, had threatened to publish this information and requested comments from BHAM. Subsequently, BHAM issued proceedings in the High Court and applied for an injunction to restrain publication of the confidential information on the basis of breach of confidence.
Mr Justice Popplewell considered five points critical to the breach of confidence claim: (i) whether the information had the necessary quality of confidence; (ii) whether it was received by Reuters in circumstances which gave rise to a duty of confidence; (iii) whether there was a threat that Reuters would use the information to the detriment of BHAM; (iv) whether it was in the public interest that the duty of confidence should be breached; and (v) whether damages would be an adequate remedy.
Quality of confidence
The judge found that the information had the necessary quality of confidence due to the measures taken by BHAM (e.g. the use of password protection) to maintain its confidentiality.
Duty of confidence
Reuters argued that the document received from its source was not one of the five confidential documents sent to the investors by BHAM and therefore such information was not obtained in breach of confidence. The judge rejected this argument because, given Ms Keidan's experience as a financial journalist, it was likely that she was aware that the information provided by Reuters' source was confidential and should not be disclosed publicly. A duty of confidence had therefore arisen since the date Ms Keidan and Reuters were informed of the confidential nature of the information they wanted to publish.
Threatened use and detriment
Reuters argued that because it did not have the actual documents themselves in its possession, but only wished to publish information it already had, it had not threatened to use BHAM's confidential documents. The judge rejected this argument since it was more likely than not that the information which Reuters proposed to publish derived from BHAM's five confidential documents. Although detriment is not a necessary requirement for a breach of confidence action, the judge highlighted that it was clear from the content of the information that its publication would likely be damaging to BHAM.
Public interest defence
Reuters argued that publication of BHAM's information would be in the public interest, especially since hedge funds have recently been criticised in the media for a lack of transparency. The identity of the investors was also important as these included institutional investors who invested in BHAM's assets on behalf of pension plan holders and public employees. Although BHAM was not obliged to disclose information to the individuals who ultimately benefit from the investments, Reuters argued that there was a public interest in doing so because individuals would be more informed about where their money was going and would be able to hold their institutional investors accountable.
Popplewell J rejected this argument and held that the public interest in maintaining confidentiality took precedence. This was especially important in the context of disclosure of material to potential investors because such material is relevant to their decision to invest. If there was a risk that highly confidential and commercially sensitive information might be published in breach of confidence, there would consequently be no incentive to make full disclosure to potential investors and this could be very damaging to business. Ultimately, investors would be less informed when making investments.
Furthermore, the public interest in maintaining confidentiality was more significant in these circumstances which involved a market leader and an investment millions of dollars. The evidence also did not suggest that publication was required to correct a false impression given by BHAM, or disclose any illegal or immoral activities carried out by BHAM.
The case highlights the difficult balance that must be struck between the public interest in preserving confidential relationships and the public interest in receiving potentially important information about economic and financial matters.
Whilst the operations of hedge fund managers (whose decisions can impact on the global financial system) were a matter of public interest, in this case it was outweighed by the public interest in preserving confidential relationships where that relationship is necessary for business to function properly.
Publication of confidential information may nevertheless be justified on the basis of public interest if it reveals illegal, immoral or iniquitous activities. However, as emphasised by the judge in this case, it would take rare and unusual circumstances for publication to be allowed where no iniquity is present.