The equitable three-part test

The equitable duty of confidence comes from Coco v AN Clark (Engineers) Ltd [1969] RPC 41: the information must have the necessary quality of confidence, it must have been imparted in circumstances importing an obligation of confidence, and there must be unauthorised use to the confider's detriment. The test is objective - if a reasonable person in the recipient's position would have realised the information was confidential, the duty arises.

This duty needs no contract and no consideration. Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203 confirmed a freestanding doctrine of confidence, and in Attorney-General v Observer Ltd (Spycatcher) [1990] 1 AC 109 Lord Goff extended it beyond any prior relationship: confidentiality attaches even to information received without a relationship, provided the recipient knows or ought to know it is confidential.

It binds third parties with notice

The equitable duty's reach to third parties is its great advantage over contract. A recipient is fixed with the duty where it knows, or has notice, that the information was disclosed in breach of confidence. In Travel Counsellors Ltd v Trailfinders Ltd [2021] EWCA Civ 38, the Court of Appeal held that a recipient will have notice where a reasonable person in its position would make enquiries but it abstains from doing so - so a business receiving a competitor's information from new joiners cannot simply look away.

Liability is, however, founded on conscience, not strict receipt. In Vestergaard Frandsen A/S v Bestnet Europe Ltd [2013] UKSC 31, the Supreme Court held that a person is liable only if they agree or know the information is confidential, or knowingly participate in its misuse. And in Kieran Corrigan & Co Ltd v Timol [2024] EWCA Civ 1233, the Court of Appeal confirmed primary liability requires both receipt and use - a director who approved others' misuse without using the information himself was not personally liable.

Confidentiality as an implied contractual term

Confidentiality can also arise as an implied contractual term. Tournier v National Provincial and Union Bank of England [1924] 1 KB 461 implied a duty of confidence into the banker-customer relationship, subject to four exceptions - compulsion by law, a duty to the public, the bank's own interests, and the customer's express or implied consent - which have been applied by analogy across commercial relationships.

So even without an express NDA, a confidentiality duty may exist by implication. But implied terms are uncertain in scope, which is why an express NDA remains the safer course.

Contract versus equity: different strengths

The two tracks have different characteristics, and they matter in practice. Contractual duties give clarity, tailored scope, and damages as of right - but are confined by privity (they bind only the parties) and limited to the agreed term. Equitable duties can bind third parties who receive information with notice, do not depend on consideration, and persist for as long as the information keeps its confidential quality - potentially indefinitely.

So the contract is precise but bounded; equity is open-ended but less certain. Neither alone is complete: the contract cannot reach the third party who never signed it, and equity cannot give the certainty of a defined term and agreed remedies.

Plead both

The practical upshot is to rely on, and plead, both. The contractual claim gives certainty and a tailored scope and lets you sue for damages as of right; the equitable claim provides gap-filling protection - particularly against third parties who received the information and after the contractual term has expired.

Draft the NDA so it complements rather than displaces the equitable duty (avoid wording that could be read as the parties' exhaustive code), and in any dispute run the contractual and equitable cases together.

Use at the desk

Practical checklist

  • Rely on the equitable duty of confidence as well as the NDA (Coco v AN Clark [1969] RPC 41).
  • Remember equity binds third parties who receive information with notice (Travel Counsellors v Trailfinders [2021] EWCA Civ 38).
  • Note liability rests on conscience - knowledge and use (Vestergaard [2013] UKSC 31; Kieran Corrigan v Timol [2024] EWCA Civ 1233).
  • Do not rely on an implied duty alone - use an express NDA for certainty (cf Tournier [1924] 1 KB 461).
  • Draft the NDA to complement, not displace, the equitable duty.
  • Plead both contractual and equitable breach in any dispute.

This guide is informational only and is not legal advice. It does not replace advice from licensed counsel on the facts of a specific transaction.

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