On 13th August, the High Court rejected an application for an injunction made by 3 parties who were seeking to prevent the disclosure of confidential information. It was alleged the information had been unlawfully disclosed to a media outlet in breach of the terms of a series of non-disclosure agreements (NDA’s). On Thursday this week, the Court of Appeal overturned that decision, granting the companies and senior executive an interim injunction preventing the disclosure.
Later the same day, the identity of the senior executive was revealed in the House of Lords under parliamentary privilege as being Sir Philip Green. The media outlet seeking disclosure of the confidential information was Telegraph Media Group, publishers of the Daily Telegraph newspaper.
Basis for the application
It had come to the attention of the Telegraph that 5 employees of companies Green was an executive director of had made various allegations of discreditable conduct by Green via the company’s grievance procedures. Two of the employees had gone on to pursue claims in the Employment Tribunal. All of the complaints were eventually settled before any of the details came into the public domain. This was done by recording the terms in a contract known as a settlement agreement. Settlement agreements are commonly used for the purposes of recording the terms of a compromise reached between employers and employees in circumstances like this. Typically, settlement agreements contain provisions requiring parties to keep the terms and existence of the agreement along with the subject matter of the employee’s complaints confidential. It is this provision within a settlement agreement which is sometimes referred to as an NDA or “gagging clause”.
In deciding whether to grant an injunction restraining the Telegraph from publishing the confidential information (which would potentially be in breach of its right to freedom of expression under Article 10 of the European Convention on Human Rights), the Courts had to be satisfied that Green and his companies had reasonable prospects of successfully demonstrating that publication of the confidential information was unauthorised (ie, in breach of confidence). They also had to consider the extent to which disclosure of the confidential information would be in the public interest. A balance must then be struck between the two issues which involves asking whether in all the circumstances was it in the public interest to breach the duty of confidence?
Court of Appeal Decision
In applying the above test, the Court of Appeal reached a number of conclusions.
Firstly, it felt there was a real prospect of immediate, substantial and potentially irreversible harm being caused to Green and the companies if the confidential information was disclosed at this stage (ie, before a full trial of the issues).
It also concluded that Green and the companies were likely to establish at trial that a lot of the confidential information which the Telegraph had obtained was through a breach of the NDA’s or individuals who were aware of the existence of the NDA’s.
The Court noted that Green and the companies continued to deny the most serious of the discreditable allegations made against them and given that the claims had been compromised under the terms of a settlement agreement without an adjudication by the Employment Tribunal, they had lost the opportunity to properly challenge them before a Court. These were however matters which could be properly addressed at a full trial which the Court considered to be more appropriate than Green and the companies having to challenge them via the media which is what was likely to have happened if the injunction was not granted.
Following earlier controversies involving misconduct and sexual harassment in the workplace, the Court referred to the report of the House of Commons Women and Equalities Select Committee titled “Sexual Harassment in the Workplace” (WESC report) which, whilst critical of NDA’s, did acknowledge there were legitimate uses for them in certain circumstances. From a public interest perspective, the Court referred to the fact that there was no evidence that the settlement agreements containing the NDA’s had been obtained by any form of bullying, harassment or undue pressure and that each employee had received independent legal advice prior to entering into the agreements and consequently did not fall within the criticisms contained within the WESC report.
In addition to the above, the Court attached weight to the argument that there was a clear public benefit in parties being allowed to enforce contracts which had been freely entered into in order to settle disputes, particularly, in the field of Employment Law and regard had to be given to the fact that NDA’s played an important and legitimate role in the consensual settlement of disputes.
The Court also considered the fact that other parties’ interests also had to be taken into consideration, namely, the employees who were a party to the various settlement agreements who may not want details of their dispute to be public knowledge for various reasons. In doing so, the Court took into consideration the fact that two of the employees supported the injunction application, one of them expressly stated that they wanted their privacy to be protected, whilst another confirmed they were happy for their complaints to be disclosed, this was on the condition that they were not named, which the Court considered unrealistic.
Taking into account all of the above, the Court of Appeal concluded that whilst the role of the media in informing the public of matters of legitimate public interest was undoubtedly of great importance, granting an interim injunction would then allow all of the issues to be properly considered in great detail at a full trial, in the near future, ensuring that proper justice could be delivered to the parties.
Apart from the obvious media interest, given the identity of the senior executive in this case, what it has done is put the issue of NDA’s back in the spotlight. The WESC report made a number of recommendations including legislation making it an offence for an employer to use a confidentiality clause which was intended to prevent or limit the making of a disclosure of a criminal offence. During Prime Minister’s questions on 24th October 2018, Theresa May stated that some businesses are using NDA’s unethically and that the Government would be expediting its consideration of the use of NDA’s going forward.
The issue is likely to spark fierce debate given that there is unquestionably a real and justified need for NDA’s in settlement agreements. The question is, how far should they apply? How do you differentiate between a clause attempting to protect an employer’s reputation as opposed to covering up allegations of sexual harassment for example?
Clearly, what there needs to be is a fair balance between parties being able to use them legitimately without abusing authority. How that can realistically be achieved however, remains to be seen.
Russell is a Partner and Head of Glaisyers' Employment Team.
Russell Brown - Partner
To discuss how Glaisyers can assist you contact Russell Brown on Russell.Brown@glaisyers.com or via 0161 832 4666.