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Non-disclosure agreement injunction granted by Court of Appeal

25 October 2018

The Court of Appeal (“CA”) has upheld a set of non-disclosure agreements (“NDAs”) and granted an interim injunction which prevents the Daily Telegraph newspaper from publishing details about allegations of “discreditable conduct” by a business executive towards five employees.

Background

NDAs are currently a controversial topic, particularly where they are used to prevent employees from reporting allegations of sexual harassment or other similar misconduct. A recent Women and Equalities Committee (“WEC”) report on sexual harassment in the workplace called for NDAs to be better controlled and regulated, and condemned their use in sexual harassment cases where the effect is to prevent the victim from ever being able to talk about what has happened. The Solicitors Regulation Authority has also made it clear that NDAs should not be used to prevent anyone from notifying regulators or law enforcement agencies about reportable misconduct.

This case was slightly different, as it was the press rather than the victims who wanted to make the allegations public. A senior executive of two group companies was accused of misconduct by five separate employees, some of whom went on to bring Employment Tribunal proceedings. The complaints were all resolved with settlement agreements, under which the complainants received substantial payments. The agreements contained NDAs under which all parties agreed to keep confidential the subject matter of the complaints and the settlement payments. The NDAs did allow the complainants to make legitimate disclosures, including reporting any criminal offences.

A Daily Telegraph journalist contacted the executive and the two companies about a story they were proposing to publish about the complainant’s allegations, including details about the settlement agreements and the NDAs. The executive and the companies immediately applied for an injunction to prevent publication of what they considered was confidential information. The High Court refused to grant an interim injunction (which would keep the material confidential until a full trial), and this decision was appealed.

Court of Appeal’s decision

The CA allowed the appeal and granted an interim injunction preventing the Telegraph Media Group Ltd (“TMG”) from publishing details of the allegations and the settlement agreements. This involved balancing arguments about privacy and confidentiality against freedom of speech. The main reasons for the CA’s decision were as follows:

  • There was a real prospect that publication would cause immediate, substantial and possibly irreversible harm to the executive and the companies.
  • It was likely to be established at trial that the information was obtained through a breach of confidentiality, either in breach of the NDAs or by those with knowledge of the NDAs, and that TMG knew about the NDAs and the breach of confidence.
  • It was unlikely that TMG would be able to show that it was in the public interest for the duty of confidence to be breached. There was no evidence that the settlement agreements were reached through bullying, harassment or undue pressure on the complainants, they all received independent legal advice, and they had the right to disclosure to regulatory or statutory bodies.
  • There is a public benefit to enforcing contracts which have been freely entered into by the parties in order to settle their disputes, including in the field of employment. NDAs will often benefit all the parties to them and, in this case, two of the employees expressly supported the application for an injunction.
  • Although the role of the media as a watchdog was not in doubt, on the facts the “important and difficult” policy considerations involved were best considered at a full trial. In the meantime, an interim injunction was appropriate.

Implications

TMG has reported this decision as “The British #MeToo scandal which cannot be revealed”. The CA’s decision is certainly very topical in light of recent high-profile sexual harassment allegations and the #MeToo movement. It is also interesting to see NDAs being upheld in a climate in which they have been widely criticised as a way of allowing abusive behaviour by the rich and powerful to go unchecked. It is important, however, to remember that this case turns on its own facts:

  • This is only an interim injunction, which keeps the information confidential until a full trial can consider all of the evidence. Although the CA has assessed that the executive and companies are “likely” to show a breach of confidence, legally this only means “more likely than not”. The judge who deals with the full trial may make a different decision.
  • The case was about press publication of allegations that may have been revealed in breach of confidence. This is not a situation where victims have been prevented from revealing information to regulators or the police, which is what the WEC was particularly concerned about. The employees involved were - and still are - free to do so under the terms of the NDAs.
  • The CA’s judgment specifically considers the WEC report, and draws a distinction between unfair use of NDAs as compared to truly consensual agreements on confidentiality which benefit the victim as well as the employer. The CA makes an important point that there is a public interest in enforcing contracts which settle disputes. It is also notable that two of the employees also wanted the matter to remain confidential, in accordance with the NDAs to which they had agreed.

There will now be a “speedy trial” to decide whether there should be a permanent injunction preventing TMG from publishing this information – although this is unlikely to be the end of the matter as there may well be further appeals.

In the meantime, this should not be taken as an indication that all NDAs can be enforced. The CA’s judgment makes clear that these types of agreements should be freely entered into with the benefit of independent legal advice, and should not prevent victims from reporting misconduct to regulators or the police. In addition, the courts will not enforce NDAs which prevent employees from making disclosures that are protected by whistleblowing laws. NDAs should still be used with care, although this decision does show that they can benefit all parties in the right circumstances.

ABC and others v Telegraph Media Group Ltdjudgment available here

 

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