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Formula One Breach of Confidence Ruling

In a ruling which usefully clarified the correct measure of damages in breach of confidence cases, the Court of Appeal has refused to increase a Euros 25,000 award made to a Formula One racing team whose confidential information was copied and misused in breach of contract.

The team had engaged a company  to design and build wind tunnel models and to perform aerodynamic testing and development of a proposed Formula One car. The team had persistently failed to pay sums due to the company on time and the latter withdrew from the contract and instead began work for a rival motor racing team.

The High Court subsequently ruled that the team’s failure to meet its financial obligations amounted to a repudiatory breach of contract and that the company had been entitled to withdraw its services. However, the Court also found that the company had in some respects acted in breach of contract in that some of its personnel had copied and made use of confidential information belonging to the team. The team was awarded Euros 25,000 in respect of those breaches, a sum which was exceeded by amounts that the team owed the company in fees under the contract.

The team argued on appeal that the quantum of damages should have been far greater and calculated on the basis of a reasonable licence fee and the benefit derived by the rival racing team from the misuse of the confidential information. For its part, the company insisted that the only benefit that it had derived from its breach of contract was a modest saving in time in the work it performed for the other team.

The Court of Appeal differed from certain of the findings of fact made by the High Court, in particular the precise date on which the contract had been terminated. However, in dismissing the team’s appeal, the Court found that the Euros 25,000 award was proportionate to the loss suffered by the team and the benefit derived by the company through the misuse of the confidential information.