This is the second in a series of articles concerning the case of PJSC Uralkali v Rowley & Baker as Former Administrators of Force India Formula One Team Limited (in Liquidation).
Breach of confidence by administrators
The December 2020 case of PJSC Uralkali v Rowley & Baker as Former Administrators of Force India Formula One Team Limited (in Liquidation) is an interesting case concerning, primarily, the duty of care owed by administrators in company sales. It also deals with some interesting points concerning the duty of confidence, and the liability of jointly appointed administrators.
Firstly, it is useful to set out the background facts. The company, Force India, entered into administration, with a number of parties interested in purchasing the team and/or the business and assets of the company. The administrators decided, after some to-ing and fro-ing, to require interested parties to submit a plan A (a rescue plan) and a plan B (an asset purchase).
One of the interested parties was PJSC Uralkali, who submitted a bid that was ultimately unsuccessful. They then brought this claim against the administrators alleging amongst other things:
The administrators had been negligent in the sale process (specifically that they had made representations they knew to be false which had a detrimental effect on PJSC Uralkali).
The administrators had breached confidence.
The administrators were both liable individually.
In this series of articles, I look at each claim in turn. The first article can be found here. This second article is about the breach of confidence claim.
PJSC Uralkali brought an equitable breach of confidence claim. They had to rely on equity as there was no specific contractual duty of confidence. The confidential information, PJSC Uralkali said, was contained in their bid letter, which they had both headed “Strictly Private and Confidential”, and a particular section of the letter said that it was “being submitted on the understanding that its terms and conditions, including all contents of this letter and all discussions concerning the Proposed Transaction, will be kept confidential and will not be disclosed to anyone outside the Joint Administrators”.
The breach, PJSC Uralkali said, was that the administrator disclosed its bid structure (essentially being that it would firstly attempts a rescue by a share purchase with interim funding, and in the alternative bid for the assets) to other bidders.
The court relied on the 2020 case of Racing Partnership Ltd v Sports Information Services as a recent summary of the necessary elements of an equitable breach of confidence claim. That case referred to the case of Coco v A.N. Clark (Engineers) Ltd, which lists the element as follows:
The information itself must have the necessary quality of confidence about it.
The information must have been communicated in circumstances importing an obligation of confidence.
There must have been an unauthorised use of the information to the detriment of the party communicating it.
In analysing these elements against the facts of the present case, the court held that the information did not have the necessary quality of confidence.
Firstly, it is common sense that administrators would be able to reveal the fact there are other bidders in a bidding process (but, of course, not the amount of any bids, but that was not alleged here) to maintain “competitive tension”. The structure of the deal proposed by PJSC Uralkali was also not confidential – the administrator had requested such structures in general.
Because of this lack of quality of confidence about the information, it was not possible that it could be communicated importing an obligation of confidence. However even if it could have been, the court found that because of the duty on administrators to seek to achieve the statutory objectives, they should not be placed under undue restrictions which would prevent them maintaining a competitive process. It is important that no unfair advantage was gained by any other party, as was avoided in this case.
This part of the court’s decision will also be welcomed by administrators, and be seen as very much a case of them being able to simply get on with fulfilling their roles without worrying about unnecessary constraints on achieving the best possible outcomes.
For more information or to discuss such cases, please do not hesitate to get in touch.