Kieran Corrigan & Company Ltd v Bashir Timol

Hearing date: 5 June 2024

Further written submissions received on 13 June 2024

Approved Judgment

This judgment was handed down remotely at 10.30am on Friday 18 October 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

This appeal raises the issue of whether a director can be personally liable for breach of confidence if he approves the marketing by his company of a tax planning structure which, unknown to him, has been developed by others at his company using confidential information which they originally obtained jointly from a third party.

In the instant case, the judge found that the director was not liable, because although he had received the confidential information at the outset, he had not been personally involved in the development of the tax planning structure and when he gave the go-ahead for it to be marketed, he concerned himself only with its commercial viability and not its technical features. He thus made his decision without reference to the confidential information and without being aware that the others had used it in the design of the structure.

The appellant company, which is owner of the confidential information, contends that once confidential information is received by a person in confidence, if that person subsequently authorises acts that involve the misuse of that information by others, liability is strict and cannot be avoided because the defendant does not know that the others were misusing the information.

Alternatively, the appellant contends that this Court should set aside the judge's factual findings and order a retrial on the basis that it has now discovered that the director did not disclose a number of documents that show that he was familiar with the technical details of the tax planning scheme, and had been put on inquiry that it had been developed using the appellant's confidential information before he approved the marketing of the scheme.

Background

The Appellant, Kieran Corrigan & Co Limited (“KCL”) appeals against the decision of Jonathan Hilliard KC (sitting as a Deputy High Court Judge) (the “Judge”) to dismiss claims for breach of confidence against the Respondent (“Mr. Timol”). The claims related to the alleged misuse by a company of which Mr. Timol was a director, of confidential information concerning a tax planning structure that KCL had devised.

The Judge's judgment contains an extensive narrative and analysis of the evidence and the law relating to the particular taxation provisions in issue. For the purposes of the appeal, a much more abbreviated summary will suffice.

KCL is an Irish company that provides accountancy and tax advice. Its principal is Kieran Corrigan (“Mr. Corrigan”). During 2012–2013, and in conjunction with an English tax barrister, Michael Sherry (“Mr. Sherry”), KCL devised a proposal for a tax saving structure using a UK limited liability partnership (“LLP”) which would allow corporate investors in the LLP who would not normally involve themselves in research and development (“R&D”), to obtain enhanced corporation tax allowances from qualifying payments made by the LLP to sub-contractors engaged in R&D.

When KCL's proposal was sufficiently developed, it began to consider how to market it. At that stage Mr. Sherry suggested to Mr. Corrigan that he should talk to two tax advisers — Dominic Slattery (“Mr. Slattery”) and Timothy Johnson (“Mr. Johnson”) – whom Mr. Sherry had previously worked with. At the time they were working for companies in the group headed by an English company, OneE Group Limited, which was also engaged in developing and marketing tax-planning products. 1

Mr. Timol was one of the directors and a minority shareholder of OneE Group Limited. Together with the other main shareholder, from about 2007 he had also been a minority shareholder in a pharmaceutical research company called Nemaura Pharma Limited (“Nemaura”). KCL's proposal was thought by Mr. Sherry to be particularly suitable for use by companies in the pharmaceutical industry, and Mr. Sherry's suggestion that Mr. Corrigan should talk to OneE Group was made in the knowledge of the link between the owners of OneE Group and Nemaura.

Mr. Corrigan had a preliminary meeting with Mr. Slattery in December 2013 and a further meeting was arranged for the early 2014. Prior to that further meeting, Mr. Corrigan and Mr. Slattery signed a Non-Disclosure Agreement (“NDA”) on behalf of KCL and OneE Group which required each party to keep confidential any confidential information that had been, or might be, disclosed by the other party concerning the development of future tax products.

On 4 February 2014 Mr. Corrigan met Mr. Slattery, Mr. Johnson and Mr. Timol. At that meeting, Mr. Corrigan provided the OneE Group attendees with a copy of draft instructions from KCL to Mr. Sherry that explained in some detail the proposed structure involving the use of a UK LLP to enable corporate investors to obtain enhanced sub-contractor R&D relief. Mr. Corrigan also made a presentation of his views on the key technical and commercial issues on sub-contractor R&D relief and how it would work.

At the meeting Mr. Corrigan indicated that he was contemplating a full joint venture between KCL and OneE Group under which KCL would be entitled to participate in all capital profits made by companies exploiting the proposed structure. It was explained to Mr. Corrigan that the executives of OneE Group had a private investment in Nemaura. Mr. Corrigan indicated that KCL's structure could be used to introduce funds to Nemaura provided that he was fully informed as to the background and activities of Nemaura and the terms of the joint venture had been agreed.

After the 4 February 2014 meeting, the joint venture discussions between KCL and OneE Group continued, but did not come to any conclusion. Instead, Mr. Slattery and Mr. Johnson developed a tax structure for OneE Group which also involved the use of a UK LLP in connection with sub-contractor R&D reliefs and which was intended to be used in connection with Nemaura (the “Nemaura structure”).

The opportunity to invest through the Nemaura structure was subsequently presented by OneE Group to a number of potential investors at a meeting on 7 October 2014 at the Lowry Hotel in Manchester. One of the attendees reported the presentation to Mr. Corrigan. Mr. Corrigan took the view that OneE Group had used confidential information which he had provided at the meeting on 4 February 2014 in the development of the Nemaura structure. On 23 October 2014, Mr. Corrigan contacted Mr. Slattery to complain. That prompted Mr. Johnson and Mr. Slattery to obtain a

The Nemaura structure was implemented by OneE Group through a company called NPL FC Limited which was incorporated in December 2014. According to its accounts, NPL FC Limited had raised £33 million from investors by the end of 2015, rising to £77 million by the end of 2018.

The Claim and the Judgment on liability

Shortly before the end of the limitation period in 2020, KCL issued proceedings against OneE Group Limited, Mr. Timol, Mr. Slattery and Mr. Johnson. The claim alleged (i) breach of confidence, (ii) procuring a breach of the NDA, and (iii) an unlawful means conspiracy. Pursuant to an order of Master Clark, the trial before the Judge was as to liability only, with questions of relief and quantum to be decided at a second stage.

In his judgment, [2023] EWHC 649 (Ch) (the “Judgment”), the Judge made a number of important findings. The key factual finding was that the inspiration for OneE Group's use of sub-contractor R&D relief in the Nemaura structure came from Mr. Corrigan and KCL, and was not something that the defendants arrived at for themselves: see the Judgment at [165]–[175].

The Judge then noted, at [178]–[179], the basic requirements for liability for breach of confidence which were summarised by Megarry J in Coco v AN Clark (Engineers) Ltd [1969] RPC 41 at 47, namely,

i) the information must have the necessary quality of confidence about it;

ii) the information must have been imparted in circumstances importing an obligation of confidence; and

iii) there must have been an unauthorised use of that information to the detriment of the person communicating it.

In relation to the third element, the Judge added, at [190],

“[190]. A person who owes an equitable obligation of confidence is liable for acting in breach of that obligation even though he is not conscious of doing so: Primary Group (UK) Ltd v Royal Bank of Scotland plc [2014] EWHC 1082 (Ch) at [244], relying on the Court of Appeal decision in Seager v Copydex Limited [1967] 1 WLR 923.”

Applying the law to the facts, the Judge held, at [229]–[230], that a number of the elements of KCL's structure that were conveyed to the defendants at the...