Thursday, 1 April 2010

When an account of profits is not right reports a (two-month old) High Court decision that a venture capital company that breached the confidentiality of businessmen who came to it with a proposition should only have to pay damages as compensation and not a share of their profits from the deal. Vercoe & Ors v Rutland Fund Management Ltd & Ors [2010] EWHC 424 (Ch) (5 March 2010) involved the acquisition of a pawnbroking business which the VC firm later floated – in breach of the confidentiality agreements made with the two men. Mr Justice Sales found that there was a breach of confidence, and it looked as if an account of the profits made by the VC on the flotation would be an obvious measure of damages. Too obvious, perhaps. The judege took the view that because this was a breach of a contractual obligation of confidence, not a fiduciary one, and because it didn’t involve information about a secret design or process or anything else analogous to intellectual property, damages should be awarded on the basis of what it would have cost the VC to buy out the claimants. It wasn’t a shabby amount: £860,000 for one and £1.72m for the other, based on the equity the judge thought they would have been given, but against a profit of £29m it’s not such a lot.

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