Horse betting company not liable for breach of confidence, but is liable for unlawful means conspiracy

SIS once had the exclusive right to collect and distribute live horseracing information from Arena’s racecourses to off-course bookies. The information had a high commercial value and was protected by Arena by imposing restrictions on racecourse visitors.

After the expiry of the Arena/SIS agreement, the collection and distribution right was passed to The Racing Partnership (TRP), under a new agreement between Arena and TRP. TRP claimed that notwithstanding that SIS had lost its rights, SIS continued to supply live horseracing information, for an additional six months, to Betfred and Ladbrokes.

SIS collected the information through (i) betting exchange websites (and SIS admitted it was in breach of the exchanges’ T&Cs by using information in the way it did), and (ii) SIS’s contract with Tote (Successor Company) Ltd (Tote) whereby Tote provided data to SIS for fixed-odds betting. Tote was contractually permitted by Arena to collect and distribute certain information only for pool betting.

Arena and TRP sued SIS for breach of confidence, unlawful means conspiracy, copyright and database right infringement and breach of contract. At first instance, the claimants lost on all fronts except for breach of confidence. SIS appealed against its liability for breach of confidence, and TRP cross-appealed against the dismissal of unlawful means conspiracy.

Notice of obligation of confidence required for breach of confidence 

Lewison and Phillips LJJ disagreed with the trial judge (and Arnold LJ) by holding that SIS was not in breach of confidence.

The requisite elements for breach of confidence are:

• information with the necessary quality of confidence;
• information was communicated in circumstances importing an obligation of confidence; and
• an unauthorised use of the information to the detriment of the party communicating it, without lawful excuse.

The court’s discussion predominantly revolved around the second limb, specifically whether a reasonable person in SIS’s position knew or should have appreciated that the information provided by Tote was confidential to Arena/TRP (for purposes other than pool betting), so as to import an obligation of confidence on SIS.

On the facts, Tote supplied the information to SIS under a contract which included an express warranty that Tote had all necessary rights from third parties to provide the information and that SIS’s use of the information would not breach any third party rights (i.e. Arena’s/TRP’s rights). Based on that warranty in the Tote/SIS contract, the majority held that a reasonable person would not be on notice that the information was supplied in breach of confidence unless there were clear countervailing factors. Such factors did not exist: SIS had made enquiries and believed Tote was lawfully entitled to provide the information, so was not liable for breach of confidence.  Even though the information provided by Tote to SIS went beyond what was covered by the Tote/SIS contract, TRP had not asserted that this additional information as confidential, and therefore SIS was protected by the warranty in the Tote/SIS contract.

Knowledge of unlawfulness not required for unlawful means conspiracy

Arnold and Phillips LJJ held that SIS had unlawfully conspired with Ladbrokes, Betfred and Tote to injure Arena/TRP.

Unlawful means conspiracy requires:

• an agreement between two or more people;
• an intention to effect an unlawful purpose;
• an intention to injure the claimant (which need not be the predominant intention, it being sufficient that the conspirators seek a benefit at the claimant's expense); and
• damage to the claimant.

The issue for the court was whether knowledge that the means in question are unlawful is a necessary ingredient of the tort. A different majority held that it was not. Reading Arnold and Phillips LJJ’s judgments together, the unlawful means appear to be: (i) Tote’s (not SIS’s) breach of confidence; and; (ii) SIS’s breach of the exchanges’ T&Cs. (The court’s finding that these unlawful means were the “instrumentality” which caused harm to TRP warrants further discussion, but is beyond the scope of this article.)

Having reviewed the authorities, there were two irreconcilable Court of Appeal decisions on civil conspiracy, being British Industrial Plastics v Ferguson¹ (which held that C’s honest – but incorrect – belief that his receiving confidential patent information from B would not breach B’s employment contract with A, meant C was not liable to A for unlawful means conspiracy) and Belmont Finance Corporation v Williams Furniture Ltd (No 2)² (which held that shareholders in certain companies were liable for unlawful means conspiracy following a breach of a statutory prohibition on unlawful financial assistance, even though one defendant received erroneous legal advice that the transaction in question did not breach the prohibition).

The majority favoured Belmont Finance (ie knowledge of the unlawfulness is not required). Arnold LJ was persuaded by a case on criminal conspiracy, which held that knowledge of the unlawfulness was not required, on the basis that ignorance of the law is generally no excuse.³ As unlawful means conspiracy is a tort of primary liability, Arnold LJ was convinced that the authorities cited in support of his conclusion – which involved underlying unlawfulness of criminal, regulatory and strict liability – could apply to an infringement of private law rights, like on the facts. Therefore, the conspirators only need knowledge of the means (which in this case was the facts underpinning the breach of the exchanges’ T&Cs and possibly Tote’s breach of confidence), not knowledge of the unlawfulness of the means.

Comment

The majority’s decision on the breach of confidence claim can be welcomed for its commercial practicality. Tote had expressly warranted to SIS that it had the right to provide the data, and use of the data would not breach third party rights. It would have cut across the parties’ risk allocation to hold SIS liable for breach of confidence in this scenario.

The debate on unlawful means conspiracy raises numerous value judgements, such as the extent to which criminal and civil conspiracy should be aligned. The court also considered at length whether its finding was correct, considering that knowledge of unlawfulness is required for a very similar economic tort to unlawful means conspiracy, namely of procuring breach of contract.⁴ Further consideration of the knowledge and intent requirements may be warranted for scenarios where the underlying unlawfulness is the infringement of a private law right, rather than a strict liability offence.

With strong dissents on both issues, this is not the last we’ll hear on the scope of breach of confidence or unlawful means conspiracy. Which way will the law go? All bets are off.

Footnotes:

¹[1938] 4 All ER 504.
²[1980] 1 All ER 393.
³Churchill v Walton [1967] 1 All ER 497.
⁴OBG Ltd v Allan [2007] UKHL 21.

Further information

For more information please contact Amy Edwards, amy.edwards@allenovery.com.