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Cite as: [2013] EWCA civ 780

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Neutral Citation Number: [2013] EWCA civ 780
Case No: A3/2012/1282

Mr Justice Arnold

Royal Courts of Justice
Strand, London, WC2A 2LL
3rd July 2013

B e f o r e :



- and -

(1) AEROLAB SRL (an Italian company)


(Transcript of the Handed Down Judgment of
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MR G HOBBS QC, MR J MELLOR QC & MS L LANE(instructed by Fladgate LLP) for the Appellant
MR I PURVIS QC & MR T ALKIN (instructed by Withers LLP) for the Respondents



Crown Copyright ©

    Lord Justice Lewison:


  1. On 3 April 2008 Force India and Aerolab entered into a contract described as an Aerodynamic Development Agreement. The agreement recited that Force India designed and built Formula 1 racing cars; and that Aerolab had the facilities, experience and techniques to design and build wind tunnel models and to perform wind tunnel aerodynamic testing and development. The purpose of the contract was for Aerolab to perform development services for Force India in the development of a Formula 1 racing car. The contractual term of the agreement was twenty months starting on 1 May 2008 and ending on 31 December 2009. In return for Aerolab's services Force India agreed to pay a fee of €246,833 per month in 2008 and €253,400 per month in 2009, payable on the 15th of each month.
  2. However, on 3 August 2009 Aerolab began work for Team Lotus, who aspired to be one of Force India's rivals on the racing circuit. Arnold J held that Aerolab was entitled to do that because by that time it had accepted a repudiatory breach of contract on the part of Force India. He held, however, that in some respects Aerolab was in breach of the contract (alternatively liable in equity) because some of its personnel had copied confidential material belonging to Force India which the latter had supplied to Aerolab for use in providing the contractual services. The extent of copying was not as great as Force India had claimed; and resulted in an award of damages of €25,000. The amount of the damages was overtopped by the amount that Force India owed Aerolab in fees due under the contract. His judgment is at [2012] EWHC 616 (Ch), [2012] RPC 29.
  3. The judge gave permission to appeal on the contractual issues; and on a renewed hearing I granted further permission to appeal on limited grounds in respect of some other points which had the potential to be points of principle, while adjourning more detailed points to the hearing of the appeal itself. Having heard Mr Mellor QC who argued this part of the case on behalf of Force India, we granted permission to appeal on the remaining grounds. Although there are some aspects of the judge's reasoning with which I do not agree, those disagreements do not affect the overall outcome of the case. Since an appeal is an appeal against the judge's order, rather than against the reasons which led him to make it, I would dismiss the appeal.
  4. Force India's case was argued by Mr Geoffrey Hobbs QC, Mr James Mellor QC and Ms Lindsay Lane. Aerolab's case was argued by Mr Iain Purvis QC and Mr Tom Alkin. The case on each side was extremely well argued, and the outcome of this appeal is a testament to the value of oral advocacy.
  5. The shape of the litigation

  6. The claim was originally pleaded against Team Lotus (as it was then called), Mr Gascoyne (who was Team Lotus' Chief Technical Officer) as well as Aerolab. In effect what was alleged was that all the defendants had engaged in a concerted plan to copy the design of Force India's car with the aid of its confidential CAD files. The central allegation was that there had been systematic copying of fundamental parts of Force India's car including the aerodynamic system which is crucial for achieving aerodynamic performance.
  7. The claims against all the main defendants failed, and there is no appeal against that. But the way in which the case was originally put explains the way in which the claim for damages was advanced by reference to the huge sums of money that Formula 1 teams both spend and earn on the racing circuit.
  8. The judge heard the case over 14 days. He heard a mass of evidence both factual and expert and was referred to many documents. The credibility of many of the witnesses was in issue and the judge came to conclusions about the extent to which he believed the various witnesses. He was also required to delve into the technical mysteries of fluid mechanics, aerodynamics and racing car design. It is clear that he immersed himself in the detail; and no criticism is made of his technical understanding. I mention that because some of Force India's grounds of appeal raise questions of fact on which it is said that the judge was wrong.
  9. Appeals on fact

  10. As mentioned, some of the grounds of appeal complain that the judge was wrong on the facts. In Piglowska v Piglowski [1999] UKHL 27 [1999] 1 WLR 1360 Lord Hoffmann (with whom the other Law Lords agreed) said:
  11. "… the appellate court must bear in mind the advantage which the first instance judge had in seeing the parties and the other witnesses. This is well understood on questions of credibility and findings of primary fact. But it goes further than that. It applies also to the judge's evaluation of those facts. If I may quote what I said in Biogen Inc v Medeva Ltd [1997] RPC 1:
    "The need for appellate caution in reversing the trial judge's evaluation of the facts is based upon much more solid grounds than professional courtesy. It is because specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impression which was made upon him by the primary evidence. His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance. . . of which time and language do not permit exact expression, but which may play an important part in the judge's overall evaluation"."
  12. This authoritative statement of principle was recently applied by the Supreme Court in Re B (a Child)(Care Proceedings: Threshold Criteria) [2013] UKSC 33 [2013] 1 WLR 1911. In Smith New Court Securities Ltd v Citibank NA [1997] AC 254, 274 Lord Steyn said:
  13. "The principle is well settled that where there has been no misdirection on an issue of fact by the trial judge the presumption is that his conclusion on issues of fact is correct. The Court of Appeal will only reverse the trial judge on an issue of fact when it is convinced that his view is wrong. In such a case, if the Court of Appeal is left in doubt as to the correctness of the conclusion, it will not disturb it."
  14. In the light of Re B (a Child) "convinced" may be putting it too high, but otherwise the principle stands. In order to outflank this principle Force India argued that although the judge directed himself correctly on the facts, and in particular on the need to test oral evidence by reference to the contemporaneous documents, he failed to apply that self direction. Let me say at once that this argument fails. As Mr Purvis demonstrated, the judge followed his self-direction. There is no need to set these out in detail, but the process can be seen at work at, for example, [117] to [125], [129] to [130], [168] and [297].
  15. Racing car design

  16. The judge set out a helpful description of the design process involved in creating an F1 racing car at [41] to [53]. It is not necessary to do more than pick out a few salient points in order to understand the issues arising on the appeal.
  17. A key aspect of design is the aerodynamic design of the car. Aerodynamic design involves designing the exterior surfaces of the car so as to maximise its aerodynamic efficiency. The way in which air flows over the surface of an object like a racing car is very complex. The aerodynamic properties of a complex surface are difficult to predict accurately. No aspect of the car's surface operates independently. On the contrary, the aerodynamic performance of each part will influence, and/or be influenced by, the performance of other parts. Generally, the front wing will have the most influence over other parts and the rear wing will have the least influence, since the air flow over the car is front to rear. All parts will contribute to the overall efficiency, however, and small changes to any part can have a significant impact.
  18. By summer 2009 the use of computational fluid dynamics (CFD) to model airflow had become widespread, but in the case of F1 racing car design it was not a satisfactory substitute for a wind tunnel testing programme.
  19. Wind tunnel testing involves placing a scale model of a car, in a wind tunnel equipped with a rolling road and measuring the downforce and drag. The model does not include the engine, gearbox and other mechanical parts. Instead the aerodynamic parts are attached to a rigid internal spine. The spine is attached to a main balance which measures the global forces acting on the model. During a testing session different versions of a particular part are fitted to the spine, and then the resulting performance recorded. In this way the effect of small changes to each aerodynamic part of the car on the overall aerodynamic efficiency of the car can be measured.
  20. As a wind tunnel programme progresses, the surface of the model steadily evolves. The evolving surface geometry is known as the "baseline". A model part design which is retained following a testing session is said to have been "promoted to the baseline". A well-planned wind tunnel programme will normally involve sessions devoted to improving the parts at the front of the car, then sessions on the parts in the middle of the car and finally sessions on the parts at the rear of the car, before starting over again. But there may be a need to work on a particular part or sets of parts out of sequence.
  21. In an established F1 team the starting point for the design of each season's car will normally be the design with which it finished the previous season, to which modifications will be made as required to accommodate changes in the Regulations or other factors. Even in that situation, however, the aerodynamic design of the car will be subject to continuous refinement during the course of the season. It is normal for each team's cars to be considerably more aerodynamically efficient at the end of the season than at the beginning of the season.
  22. Because aerodynamic design is so important in F1, all teams keep a close eye on what other teams are doing. Not only do they study the cars on the track, but also it is common for teams to take photographs of each other's cars and/or to commission photographers to do so. Furthermore, photographs are widely available on the internet. Both for this reason, and because of a high turnover of engineers and technicians between competing teams, it is common to see aerodynamic designs adopted by successful teams being imitated by other teams. Although design at the level of overall shape and configuration of cars is available by this route, precise dimensions are not.
  23. Designing a wind tunnel model involves the skills of two types of people: aerodynamicists and CAD draftsmen. Aerodynamicists are engineers with a specialised knowledge of the aerodynamics of racing cars, and in particular F1 cars. CAD draftsmen are skilled in producing drawings using CAD software. The CAD drafting process involves two main stages: first, the creation of a "master surface" for each component; and secondly, the creation of production drawings for scale model parts. Part of the point of this procedure is that the master surface drawings can subsequently be used to create production drawings for full sized parts.
  24. The latest generation of CAD software is "parametric". Parametric CAD software uses a series of commands to produce a piece of three-dimensional geometry. Once an initial design has been created by specifying a series of commands, the draftsman can then manipulate these commands to modify the design as he wishes. A CAD draftsman will generally be given a specification of the design required by an aerodynamicist. He then has two options. He can create a new CAD file and create the required geometry by specifying a new set of commands one by one (this set of commands is known as a "part history" or "construction history"). Or he can open an existing file that contains similar geometry, and change the associated commands to create the geometry that he wants. A CAD draftsman may start from a pre-existing CAD file not because he wants the actual geometry contained in that file, save at a broad level, but rather because he wants to take advantage of the part history associated with that geometry as a convenient means of specifying a new design. Obviously, the pre-existing file must be one that contains geometry which is sufficiently similar to the desired geometry to be useful for this purpose. The second method involves at least some degree of copying of the CAD file. However, that the fact that the CAD draftsman has chosen to use a pre-existing CAD file to take a short cut in this way does not necessarily mean that the aerodynamicist who specified the design copied any of the geometry from the pre-existing CAD file.
  25. The material terms of the contract

  26. I have already referred to the duration of the contract and the monthly fee. The remaining material terms of the contract were as follows. Clause 3 c obliged Aerolab to deal with Force India in the utmost good faith and to use its best endeavours to ensure that its staff did likewise. Clause 3 h provided that intellectual property (including copyrights and designs) created or developed by Aerolab pursuant to the contract became the sole property of Force India. Clause 5 provided:
  27. "5. Confidentiality
    a. For the purposes of this Article, 'Information' will mean IP materials, Prototype Materials, software, drawings, electronic data, product or program descriptions, layouts and renderings, timing and planning schedules, records, papers, print-out, designs, sketches, model parts, samples, parts, components and systems, cars, models or prototypes, procedures, specifications and standards, visual or audio-visual media and any other type of information on whatever media including, without limitation, business for operational secrets, methods or inventions.
    b. AEROLAB will maintain, and will procure that each of its employees, agents and subcontractors will maintain the confidentiality of, and avoid any disclosure to any third party of any of the Information which AEROLAB has obtained or gathered from FORCE INDIA or has created or developed as part of the performance of the work under this Agreement, unless prior written approval has been obtained from FORCE INDIA. All AEROLAB employees, representatives or advisers have signed a Confidentiality Agreement (see Appendix of the Agreement).
    c. Such Information will be used exclusively for the work conducted under this Agreement. It will be made accessible to the personnel of and subcontractors of AEROLAB only insofar as required for such purposes. Any subcontractors who gain access to such confidential information shall be subject to the same terms and conditions concerning confidentiality as AEROLAB to this Agreement.
    d. Having obtained written consent from FORCE INDIA to disclose certain limited information to a specified third party for a clearly defined purpose, the Information may be disclosed only after receipt of written confirmation from such third party that it will avoid further disclosure to any other third party and will use the Information only for such defined purpose and in accordance with the terms of this article.
    e. The obligation of non-disclosure in this article is not applicable to Information:
    *which is in the public domain other than by breach of this Article 4 or any other obligation of confidentiality; or
    *which is made available AEROLAB by a third party who was not subject to an obligation of non-disclosure in respect of such Information and other than by violation of this Article or any other obligation of confidentiality; or
    *of which AEROLAB was free to disclose and which that AEROLAB can prove was already in its possession prior to its disclosure by FORCE INDIA and prior to the date hereof of the effective date of any previous outstanding obligation of confidentiality with FORCE INDIA; or
    *which is independently developed in good faith by employees of AEROLAB, such employees having had no access to such information.
    f. Neither AEROLAB nor its subcontractors will derive rights from any such information received from the other.
    g. Upon request from FORCE INDIA, AEROLAB and its subcontractors will forthwith (at the option of FORCE INDIA) deliver up to FORCE INDIA or destroy all Information received under this Agreement and any other property of the other in their possession or control (including in each case transcriptions, copies, records and further developments thereof) (together hereinafter called 'Products') at any time such a request has been received, and automatically after the termination of the Agreement. If and to the extent FORCE INDIA requests AEROLAB and its subcontractors to destroy or have destroyed the Products then forthwith following destruction, AEROLAB will certify that all such Products have been destroyed and evidence of compliance therewith will be provided to FORCE INDIA on request.
    h. AEROLAB will take reasonable steps to provide secure working areas in which to undertake the Services for FORCE INDIA and in particular restrict access to such areas only to such employees or representatives of AEROLAB for whom it is necessary to have access. Visitors can only be allowed access to such areas with the express permission of FORCE INDIA. No person connected or associated in any way with any competitor of FORCE INDIA shall be permitted access to this area or to view the wind tunnel facilities generally whilst AEROLAB is working for FORCE INDIA Services."
  28. Clause 6 contained an exclusivity clause in the following terms:
  29. "a. During the term of this Agreement, neither AEROLAB as an entity nor individual employees of AEROLAB will participate in any way in services of which the subject is the aerodynamic development of Formula 1 racing cars for customers other than FORCE INDIA.
    b. However, AEROLAB is not prevented by this Agreement from making its wind tunnel available to third parties involved in Formula 1 for the performance of tests, provided that AEROLAB restricts its contribution to provision of the wind tunnel and the staff necessary for operation of the same and, in particular, does not give any assistance and advice with performance or evaluation of tests."
  30. Clause 7 provided:
  31. "a. Either party shall be entitled to terminate this agreement forthwith upon the giving of written notice to the other in the event that the other shall have committed a serious or persistent breach of the terms of this agreement and (if such break shall be capable of remedy) shall have failed to remedy the same within 2 weeks of the service of written notice specifying details of the breach complained of.
    b. If delivered by recorded delivery or similar system, the time of receipt shall be evidenced, if necessary, by production of the proof of delivery of the postal service and otherwise shall be deemed to have occurred no later than 2 days after dispatch (5 days if sent by air mail).
    c. On termination of the Agreement the provisions of clause 5.g must be complied with as soon as practically possible."
  32. The Appendix to the contract contained the Confidentiality Agreement for Aerolab's employees. The material parts of this were clauses [4] to [7] which read:
  33. "[4] I accept that the customers feel that the information that may become available to me is of significant importance to them, and a separate agreement on confidentiality of information is required. This agreement will survive my employment with AEROLAB and/or AEROLAB's agreement with the customers for a period of two years.
    [5] I understand that in the case of my employment with AEROLAB being terminated for reasons outside my control and I feel that this agreement restricts my ability to find alternative employment I can write to AEROLAB requesting a written release of all or part of this agreement, and AEROLAB will not unreasonably withhold such release.
    [6] I undertake to keep information entrusted to me or discovered by me in the course of my work on the customers projects and/or providing services to the customers in complete confidence and I will not use or attempt to use the information in any manner except for the purposes for which it shall have been disclosed. I will not disclose or transmit any of the information to any person other than those persons within AEROLAB to whom it is strictly necessary to the purposes of the performance of the Services.
    [7] I understand that the requirement to keep information confidential will cease once it becomes publicly available or I receive it from another source without a duty of confidentiality. I undertake to check out as far as practically possible whether receiving such information would be a breach of confidentiality."

    Events leading up to termination

  34. By the beginning of 2009 Force India was having difficulty in keeping up with the payments due under the contract. In an email dated 4 January 2009 Mrs Sweeney (Force India's Chief Accountant) apologised to Mr Migeot (Aerolab's founder and CEO) for this and offered a payment plan to address the outstanding balance. This was acceptable to Mr Migeot, but by 19 February 2009 Force India had defaulted on the payment plan and Mr Migeot had to chase Mrs Sweeney for payment. On 11 March 2009 Mr Migeot complained that Aerolab had not been paid for its work since mid-December 2008 and threatened to stop work at the end of 13 March 2009. No payment was made by Force India, and so Aerolab stopped work during the period 16-25 March 2009. After a series of apologies from Mrs Sweeney, Force India made a payment which cleared the outstanding balance from December 2008 and the January 2009 invoice. However, Aerolab continued to experience difficulties in obtaining payment from Force India. Aerolab's February 2009 invoice due on 15 February 2009 was not paid until 5 May 2009. Aerolab's March 2009 invoice due on 15 March 2009 and Aerolab's April 2009 invoice due on 15 April 2009 were only part paid on 23 June 2009.
  35. On 4 June 2009 Mr Migeot wrote formally to Force India to record its "persistent (and serious) breach of your financial obligations" under the contract, and inviting it "to cure forthwith your breach by settling our outstanding credit". The amount outstanding at that point was €764,260. This letter plainly complied with the requirements of clause 7 of the contract.
  36. On 9 June 2009 Force India replied proposing a payment plan. But Force India did not honour that plan. By the end of July 2009 Force India owed Aerolab €846,230; the equivalent of more than three months' work. Thus the breach complained of in the letter of 4 June had not been remedied. On Friday 31 July 2009 Mrs Sweeney sent Mr Migeot an email saying that Force India was "'unable to remit our payment to you as previously planned"; and would not be able to discuss the matter further until after the end of the Formula One Teams Association August shutdown.
  37. This shutdown was a shutdown agreed by the Formula One Teams Association for all F1 teams for the period Monday 3 August to Sunday 16 August 2009 inclusive. During this period no team was allowed to carry out any aerodynamic development.
  38. On Friday 31 July 2009 the following further relevant events occurred:
  39. i) Mr Migeot telephoned Mr Liboni (Aerolab's IT manager). He was on holiday but due to return to work on 3 August 2009. Mr Migeot instructed him to transfer all Force India data (most of which was in the form of CAD files) from Aerolab's servers to an external hard drive and put this in a crate with Force India's model parts as soon as possible.

    ii) Mr Belcher (Force India's Chief Aerodynamicist) sent the Aerolab aerodynamicists an email in the afternoon seeking confirmation that they were clear as to what they could and could not do during the shutdown period. Mr Crosetta (an aerodynamicist at Aerolab) replied saying "Any development and manufacturing activities relating to the Force India program will be temporarily stopped".

    iii) Later that afternoon Mr Crosetta said that Aerolab would resume work on 17 August 2009.

  40. On the following Monday, 3 August 2009, the following relevant events occurred:
  41. i) In response to Mr Migeot's instructions Mr Liboni disabled Force India's connection to the Aerolab servers;

    ii) Aerolab sent Force India an invoice for €228,500 for the month of August 2009, in accordance with its usual practice of issuing invoices prospectively at the beginning of each month. The sum of €228,500 was a reduced fee to reflect the FOTA shutdown, which had previously been agreed between the parties in May 2009. At about the same time Mr Migeot instructed Aerolab's Italian lawyers to prepare an application to secure the debt.

  42. Soon after Force India's staff returned to work on Monday 17 August 2009 they discovered that the connection to Aerolab's servers had been severed. Mr Key telephoned Mr Migeot a couple of days later on 19 August to ask what was going on. Mr Migeot told Mr Key that Aerolab had stopped work on 31 July 2009, that Force India's stuff had been packed in a box and would be returned when Aerolab received all the money it was owed; and that Mr Migeot had put the matter in the hands of his lawyers. It was clear to Force India that Aerolab's actions had come about because of Force India's failure to make the monthly payments.
  43. On 28 August 2009 Aerolab applied to the Tribunale di Monza for an order for protective seizure of Force India property at the forthcoming Italian Grand Prix in Monza on 13 September 2009 to secure the outstanding debt. In its application Aerolab set out the position with regard to the payment of its invoices down to the end of July 2009, quoted Mrs Sweeney's email of 31 July 2009 and then stated:
  44. "No communication has been passed between the parties, and Aerolab has not received any payment of the amount due, which, with August's monthly payment, amounts to €1,074,730.00."
  45. On 2 September 2009 Force India was notified that the application would be heard on 7 September 2009. It was then adjourned to 11 September 2009. It was not clear whether the Tribunale di Monza granted Aerolab the order it sought on that occasion; but it was common ground that the upshot was that Force India provided security to the full amount claimed either to prevent seizure, or to secure release, of its property.
  46. On 18 September 2009 Force India's solicitors wrote to Aerolab stating:
  47. "As you are aware, our client will not be requiring your services for the remainder of the contract.
    We are aware from press reports that your sister company, FondTech, has agreed to carry out aerodynamic work for the new Lotus F1 team."
  48. The first sentence refers to the discussions between Mr Key and Mr Migeot. The letter went on to require Aerolab to comply with the confidentiality provisions in the Development Contract. Although no complaint of breach of the Development Contract was made by Force India in this letter, Force India relied upon it as constituting an acceptance of alleged repudiatory breaches of the Development Contract by Aerolab.
  49. Did Aerolab terminate the contract on 3 August 2009?

  50. It was common ground that Force India's persistent non-payment of the sums due under the contract culminating in Mrs Sweeney's email dated 31 July 2009 indicating that no payment would be forthcoming until 17 August 2009 at the very earliest amounted to a repudiatory breach of the contract. Aerolab's case, which the judge accepted, was that it terminated the contract by accepting that repudiatory breach. The acceptance was the disabling of the server connection on 3 August 2009; and it had retrospective effect from 31 July. Thus the judge held that the contract was terminated by Aerolab with effect from 31 July 2009. Mr Purvis QC did not seriously maintain that the judge was right to conclude that the acceptance of the repudiation could have retrospective effect; and in my judgment Mr Purvis was quite right in not seeking to defend that part of the judge's judgment.
  51. In Vitol SA v Norelf Ltd [1996] AC 800, 810-11 the House of Lords accepted that the following were established principles of law:
  52. i) Where a party has repudiated a contract the aggrieved party has an election to accept the repudiation or to affirm the contract.

    ii) An act of acceptance of a repudiation requires no particular form: a communication does not have to be couched in the language of acceptance. It is sufficient that the communication or conduct clearly and unequivocally conveys to the repudiating party that that aggrieved party is treating the contract as at an end.

    iii) The aggrieved party need not personally, or by an agent, notify the repudiating party of his election to treat the contract as at an end. It is sufficient that the fact of the election comes to the repudiating party's attention, e.g. notification by an unauthorised broker or other intermediary may be sufficient.

  53. The first proposition is that acceptance of a repudiatory breach (like its counterpart affirmation) is based on the principle of election. The doctrine of election rests on the basis of informed choice. If a person has (and knows he has) the choice between two inconsistent courses of action; and unequivocally communicates his decision to pursue one of them, he cannot, thereafter, pursue the other. The doctrine of election rests on the communication of the choice, and not on the reaction of the person to whom the choice is communicated. In other words, there is no need to prove reliance on the communication. Reliance belongs to the realm of estoppel; not election.
  54. In my judgment it is the second of these propositions that is critical to this appeal. It is clear from that proposition (a) that there must be a communication to the party in default and (b) that the communication must be clear and unequivocal. In deciding whether these criteria are satisfied, it is important to consider the communications (if more than one) as a whole.
  55. The judge concentrated his attention on the disabling of connection with the server. Had that stood alone, it might have been an unequivocal communication once Force India became aware of it. But it did not. On the working day before the connection was disabled Mr Crosetta had said that work would be temporarily stopped but that Aerolab would resume work on 17 August 2009. Disabling of the server connection (at least until 17 August) was entirely consistent with that position. Moreover on the very day that the connection was disabled Aerolab had sent Force India an invoice for a fee that would not become due until 15 August. That invoice covered the whole of August.
  56. In the law of landlord and tenant the common law principle of election is the foundation of waiver of forfeiture. A solid body of authority stands for the proposition that a demand for rent accruing due in the future operates as an election to affirm the contract (i.e. to waive the right to forfeit). In my judgment a demand for future instalments of periodical payments due under a contract is not consistent with an unequivocal communication that the contract is at an end. In my judgment the disabling of the connection with the server, carried out on the same day as the sending of the August invoice, did not amount to a clear and unequivocal communication that the contract was at an end. Aerolab's subsequent actions, and in particular its inclusion of the amount due under the August invoice in its claim before the Tribunale di Monza are also inconsistent with the contract having been terminated on 3 August 2009.
  57. Quite apart from that, it was known by Aerolab at the time when the connection was disabled that the August shutdown meant that no work would be done until 17 August. I cannot see how, in those circumstances, there could have been any communication until at least that date.
  58. In my judgment, therefore, the judge was wrong in deciding that the contract was terminated by Aerolab on 3 August 2009.
  59. As a fall-back position Mr Purvis argued that the contract had been terminated on 19 August. It was on that date that Mr Migeot told Mr Key that Aerolab had stopped work on 31 July 2009, that Force India's stuff had been packed in a box and would be returned when Aerolab received all the money it was owed and that Mr Migeot had put the matter in the hands of his lawyers. He also told Mr Key that Aerolab had been subcontracted by FondTech for various works, but did not reveal the identity of FondTech's customer. In this conversation Mr Migeot signalled:
  60. i) That Aerolab would not carry out any further work for Force India (because the return of Force India's "stuff" would make further work impossible) and

    ii) That Aerolab would be working for someone else (thus ceasing to work exclusively for Force India).

  61. In my judgment that was a communication that would reasonably have been understood as treating the contract as being at an end. The invoice previously sent on 3 August has no bearing on this conclusion. First, the monthly instalment fell due on 15 August, four days before this conversation. Second, although Mr Hobbs QC argued that the sending of the invoice amounted to an affirmation of the contract (with the result that a further cure notice under clause 7 had to be served), this overlooks the fact that the sending of the invoice was accompanied by the disabling of the server connection. Taken together, just as they did not amount to the acceptance of a repudiatory breach of contract because the totality of conduct was equivocal, so they did not amount to an affirmation for the same reason. Mr Purvis also argued that the failure to pay was a continuing breach of contract, and that the existence of the code for termination in clause 7 did not exclude the ordinary right at common law to accept a repudiatory breach of contract. These latter points are not straightforward, and since they are of little if any importance in the context of this appeal, I prefer to say nothing about them.
  62. However, for the reasons I have given, in my judgment the contract came to an end on 19 August 2009.
  63. Force India's data held by Aerolab

  64. As early as February 2007 a file transfer protocol (FTP) site was set up to facilitate the exchange of wind tunnel data and CAD files between Force India and Aerolab. By the end of July 2009 Aerolab held a substantial quantity of CAD files containing designs for Force India parts, including CAD files for all the parts in respect of which complaint is made by Force India in these proceedings. The judge found at [268] that the CAD files:
  65. "… were the product of a considerable degree of skill and labour; they comprised valuable information; they were not in the public domain; they were protected by express contractual obligations of confidence, including obligations directly affecting Aerolab's employees; there was a great deal of evidence that such information was regarded in F1 as highly confidential and that it was well known that there were severe penalties for misusing it; and the information was generally separable from the employees' skill, knowledge and experience, even if some individual dimensions were memorable and could be regarded as forming part of the employees' skill, knowledge and experience."
  66. However, the files were not completely up to date. The judge found that by April or May 2009 Force India wanted to terminate the contract. As a result it took the precaution of ensuring that Aerolab were not given any work in connection with the development of its 2010 car and that, as far as possible, model updates for the ongoing 2009 development were kept to a minimum. Thus Force India stopped sending Aerolab updated geometry from its own wind tunnel sessions. In particular the front wing (which, as noted, is the most significant part aerodynamically) was not the latest version on Force India's car.
  67. On 3 August 2009 Mr Liboni restricted access to the folder containing Force India's data to the aerodynamicists and CAD draftsmen. This was to allow the aerodynamicists and CAD draftsmen to transfer personal files from this folder to their personal areas. On 14 August he made two copies of the data in the Force India folder on two new external hard drives, one for Aerolab and one for Force India to take away. He gave the former to Mr Migeot who removed it from Aerolab's premises. On 19 August 2009 Mr Liboni restricted access to the Force India folder to himself.
  68. On 20 August 2009 Mr Liboni sent the aerodynamicists and CAD draftsmen an email instructing them to remove all confidential data relating to Force India from their personal folders after first copying it to a backup folder. But he did not police this instruction; and the judge found that some CAD draftsmen had copied Force India CAD files into their personal folders. Some had already done this before 31 July 2009, but Mr Legnani and possibly others made such copies after that date. Moreover, some copies remained accessible for some time after 20 August 2009. On 21 August 2009 Mr Liboni shut down the Force India server.
  69. The judge summarised his conclusion at [97]:
  70. "In summary, Aerolab's aerodynamicists and CAD draftsmen had access to all the Force India CAD files until 19 August 2009. Even after that, there was some degree of access on the part of at least some of the aerodynamicists and CAD draftsmen."
  71. The critical findings for present purposes were:
  72. i) The CAD files were highly confidential and the information contained in them was not in the public domain;

    ii) Both the aerodynamicists and the CAD draftsmen had some degree of access to them even after 19 August 2009;

    iii) That information was generally separable from the employees' skill, knowledge and experience; and

    iv) His earlier finding that no aspect of the car's surface operates independently; but on the contrary, the aerodynamic performance of each part will influence, and/or be influenced by, the performance of other parts.

    Breach of contract

  73. The principal pleaded allegations of breach of contract were:
  74. i) Breach of clause 5 b by failing to maintain the confidentiality of Information;

    ii) Breach of clause 5 c by using Information for Team Lotus;

    iii) Breach of clause 6 a by participating in the development of Formula 1 racing cars for Team Lotus.

    Clause 5 b

  75. In considering the scope of a clause such as clause 5 b there are two separate questions:
  76. i) What does it mean? and

    ii) Is it enforceable?

  77. Although these two questions may be interlinked at the margin the starting point must be the words of the contract themselves. Clause 5 a contains a very wide definition of "Information". That definition is not limited to trade secrets, or, indeed to information that is not in the public domain. The structure of the clause is that under clause 5 b Aerolab undertakes to maintain the confidentiality of, and avoid any disclosure to any third party of any of the Information which Aerolab has obtained or gathered from Force India. The obligation also extends to Information (as defined) that Aerolab has created or developed as part of the performance of the work under the contract. However, there is in the first place a carve-out which contemplates that prior written approval may be obtained from Force India. There are further carve-outs in clause 5 e. The obligation does not extend to Information in the public domain. Nor does it extend to Information that Aerolab obtains from third parties who were free to disclose it. Nor does it extend to Information that Aerolab already knew. Nor does it extend to Information that is independently developed by Aerolab's employees who did not have access to the Information as defined.
  78. There are, therefore, safeguards for Aerolab built in to the contractual structure. They operate by way of exceptions to the general obligation to maintain the confidentiality of the Information. In general where a contract imposes an obligation but qualifies it by means of exceptions, it is for the party relying on the exception to establish that it applies: Munro Brice & Co v War Risks Association Ltd [1918] 2 KB 78, 88.
  79. It is, in my judgment, clear that the parties carefully balanced their respective rights and obligations under clause 5. This, in my judgment, is the sort of case in which the court should be very slow to substitute its own perception of what is reasonable for that of the parties to the contract.
  80. There was no allegation on the pleadings that clause 5 b was unenforceable as being in unreasonable restraint of trade. Had that been alleged then the question of reasonableness would have loomed large, and no doubt evidence would have been led on that topic. Thus the position on the pleaded case was that, whatever clause 5 b meant, it was enforceable. At [214]the judge said:
  81. "Aerolab contends that, if it continues after termination, clause 5(b) is only enforceable in so far as it applies to trade secrets, arguing in short that the principles developed in relation to employees apply equally to a contractor in the position of Aerolab. Force India disputes this. Since essentially the same dispute arises with regard to the scope of the equitable obligation of confidence which it is common ground bound FondTech, I shall deal with this issue in that context."
  82. In my judgment this was not the question. The question was not whether the contract was enforceable after termination of the contract; the question was what it meant. The judge did not really answer that question.
  83. In a later part of his judgment at [269] and [270] the judge said that Force India had failed to identify in its pleadings or evidence any features of modularity (the way that parts fit together) or spatial relationship (how they stand in relation to each other) that were confidential. I do not see why Force India had to do that. The contract itself defined what Information had to be kept confidential and, as I have already said, the judge found that the CAD files and what they contained were in the nature of trade secrets. In those same paragraphs he accepted the submission that Force India had not shown that these features were not in the public domain. But if Aerolab wished to rely on the carve-out dealing with information in the public domain, it was for Aerolab to show that they were within the exception, not for Force India to show that they were not.
  84. The judge's consideration of the scope of clause 5 b runs from [214] to [238]. It is notable that in that part of his judgment he hardly refers to the words of the contract at all. He began by a lengthy discussion of the extent of an implied term in a contract of employment of the kind discussed in Faccenda Chicken Ltd v Fowler [1987] Ch 177. I confess that it seems to me that this detailed discussion of the content of an implied term has little to do with answering the question: what does the express term mean? In Balston Ltd v Headline Filters Ltd [1987] FSR 330, 348 Scott J, rightly in my judgment, declined to read Faccenda Chicken as holding that confidential information that was not protected by the implied term could not be protected by an express term. At [229] the judge said:
  85. "The key question for present purposes is the impact of the doctrine of restraint of trade on the enforceability of covenants against the use of confidential information by employees after their employment has ended."
  86. He went on to consider the extent to which a confidentiality clause could be enforced against an employee after termination of his contract of employment. Again I have real difficulty in seeing what bearing this has on the current dispute. First, we are not dealing with a case of an employer/employee relationship. We are dealing with a commercial agreement negotiated between commercial parties of equal bargaining power bargaining at arms' length. Second, we are not dealing with a case in which the clause is sought to be enforced only after the relationship has come to an end. We are principally concerned with what it means during the subsistence of the relationship. Third, the clauses are designed to protect a particular asset, namely the Information as defined. On the facts of this case that means the CAD files, and on the judge's own findings the CAD files were indeed highly confidential and in the nature of trade secrets. Thus the judge's lengthy discussion was, on the basis of his own findings, irrelevant. I have not, therefore, had to consider whether his analysis of the case law is correct or not.
  87. It is clear that one of the judge's concerns was that clause 5 b should not unduly restrict the ability of Aerolab's employees from making use of their skill and knowledge, even if that skill and knowledge had been enhanced by information that they had acquired in the course of working on the Force India project. Mr Purvis QC submitted on behalf of Aerolab at [232] that:
  88. "Aerolab's employees could not be prevented from using information which had become part of their skill, knowledge and experience, even if it was learnt during the course of their work for Force India, when working for Lotus, as opposed to trade secrets. In support of this submission, he pointed out that, if Aerolab's employees had left Aerolab's employment on 1 August 2009 and joined a new employer, they could not have been prevented from putting their skill, knowledge and experience at the disposal of the new employer. He argued that it made no difference that they remained employed by Aerolab."
  89. The judge found the logic of that argument compelling; and he accepted it. However, it is difficult to see how this argument informs the question: what does clause 5 mean, as opposed to the question: could it (or its analogue) be enforced against Aerolab's employees after they had left their employment? The judge, in effect, reasoned backwards from the position of Aerolab's employees under the confidentiality agreement that they were required to sign. But even when one comes to consider that agreement in detail there are safeguards for the employee built in. The first step in the argument that the judge accepted was that if Aerolab's employees had left Aerolab's employment on 1 August 2009 and joined a new employer, they could not have been prevented from putting their skill, knowledge and experience at the disposal of the new employer. I am not sure that it is quite as simple as that. First, the confidentiality agreement between Aerolab and its employees is limited in duration. It will come to an end either two years after the termination of the employee's employment or two years after the termination of Aerolab's contract with the customer. Restrictive covenants limited in duration can be valid, if they are reasonable in duration. What is reasonable is a question of fact. In the case of a specialist field like the aerodynamic design of F1 racing cars, determining that question might well require evidence. Second, the employee's agreement contemplates that if the employee leaves Aerolab the confidentiality agreement might restrict his ability to find alternative employment. But in that event he is entitled to ask to be released from the agreement, either in whole or in part; and Aerolab cannot unreasonably withhold consent. Third, there is a distinction to be drawn between the general skill and experience of an employee and particular pieces of knowledge whose origin can be traced to confidential information.
  90. The next step in the argument is that the position is no different if they remained employed by Aerolab. But that, as it seems to me, begs the question at issue. If Aerolab had contracted with its customer not to use confidential information in servicing other customers, then there would be no occasion for a continuing employee of Aerolab to use confidential knowledge acquired in the service of one customer on behalf of a different customer. The ability of an employee who leaves Aerolab to ask for a release shows that the contract itself differentiates between an employee who goes and an employee who stays.
  91. Having said that, clause 5 is concerned with Information as defined. It is not concerned with skill or experience. Knowledge is a bit more problematic because of the difficulty of identifying the source of any particular piece of knowledge. Mr Purvis also pointed out that the definition of "Information" in clause 5 a is primarily concerned with information in tangible form; and that that reading is consonant with clause 5 g which required Aerolab to destroy "Information" (as defined) on request and automatically on termination of the contract. As Mr Purvis said, Aerolab could not destroy what was in an employee's head. I accept that submission up to a point.
  92. In Terrapin Ltd v Builders' Supply Company (Hayes) Ltd [1967] RPC 375, 391 Roxburgh J said in a similar case:
  93. "… when I use the word "information", I mean something that can be traced to a particular source and not something which has become so completely merged in the mind of the person informed that it is impossible to say from what precise quarter he derived the information which led to the knowledge that he is found to possess."
  94. In my judgment that is an eminently sensible approach to interpreting a covenant that deals with confidential information. The judge appears to have considered both at [268] and [284] that if the CAD files contained a precise dimension that was "memorable" then that dimension could be regarded as part of the employees' skill, knowledge and experience. I disagree. An identified piece of confidential information does not cease to be confidential simply because it is memorable.
  95. Clause 5 c

  96. Clause 5 c provides that the Information will be used exclusively for the work conducted under the contract. Any use of the Information in supplying services for other customers would, in my judgment, be a breach of that clause rather than clause 5 b.
  97. Clause 6 a

  98. It follows from my conclusion that Aerolab did not terminate the contract on 3 August 2009 that clause 6 a (the exclusivity clause) continued in existence until 19 August 2009. A breach of this clause was pleaded in paragraph 54.4 of the Re-Amended Particulars of Claim. It is clear on the facts found that Aerolab was in breach of this clause. However, the statement of case on the question of quantum did not claim damages or compensation for any breach of that clause or compensation on the basis of what Aerolab would have paid to be released from it.
  99. Breach of confidence

  100. The equitable remedy for breach of confidence might matter for two reasons. First, some work was carried out (at least nominally) by FondTech, another company founded by Mr Migeot, which had no contractual relationship with Force India. Second, to the extent that a contractual obligation is unenforceable as being in unreasonable restraint of trade, equitable obligations in relation to confidential information survive.
  101. As I have said, the judge found that the CAD files were confidential information, akin to a trade secret, and not in the public domain. As this court held in Imerman v Tchenguiz [2010] EWCA Civ 908 [2012] 2 WLR 592 at [69]:
  102. "It is of the essence of the claimant's right to confidentiality that he can choose whether, and, if so, to whom and in what circumstances and on what terms, to reveal the information which has the protection of the confidence. It seems to us, as a matter of principle, that, again in the absence of any defence on the particular facts, a claimant who establishes a right of confidence in certain information contained in a document should be able to restrain any threat by an unauthorised defendant to look at, copy, distribute any copies of, or to communicate, or utilise the contents of the document (or any copy), and also be able to enforce the return (or destruction) of any such document or copy."
  103. It is clearly not a defence that the person in breach of confidence could have obtained the information elsewhere if he did not in fact do so. This is illustrated by Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203. In that case, the plaintiffs instructed the defendant to make tools for the manufacture of leather punches in accordance with drawings which the plaintiffs provided to the defendant for this purpose. The defendant used the drawings to make tools, and the tools to make leather punches, on their own account. The finished product (i.e. the leather punches) were readily available to buy in the shops; and the defendants could have bought one and reverse engineered it. But they did not. Lord Greene MR said at 215:
  104. "What the defendants did in this case was to dispense in certain material respects with the necessity of going through the process which had been gone through in compiling these drawings, and thereby to save themselves a great deal of labour and calculation and careful draughtsmanship. No doubt, if they had taken the finished article, namely, the leather punch, which they might have bought in a shop, and given it to an expert draughtsman, that draughtsman could have produced the necessary drawings for the manufacture of machine tools required for making that particular finished article. In at any rate a very material respect they saved themselves that trouble by obtaining the necessary information either from the original drawings or from the tools made in accordance with them. That, in my opinion, was a breach of confidence."
  105. As Mr Hobbs pointed out, the relief ordered in that case was an inquiry into damages suffered by the plaintiffs caused by (a) the defendants' use of the drawings (b) the tools made as a result of using the drawings and (c) the sale of the finished product made with the tools. All three activities, therefore, were caught by the obligation of confidence. But it is important not to confuse the absence of a defence with the measure of compensation payable for breach of confidence.
  106. In Seager v Copydex Ltd (No 1) [1967] 1 WLR 923 Lord Denning MR said at 931:
  107. "When the information is mixed, being partly public and partly private, then the recipient must take special care to use only the material which is in the public domain. He should go to the public source and get it: or, at any rate, not be in a better position than if he had gone to the public source. He should not get a start over others by using the information which he received in confidence. At any rate, he should not get a start without paying for it. It may not be a case for injunction or even for an account, but only for damages, depending on the worth of the confidential information to him in saving him time and trouble."
  108. The reach of the obligation of confidence is shown by Terrapin Ltd v Builders Supply Company (Hayes) Ltd [1967] RPC 375. In that case the plaintiff contracted the first defendant to manufacture prefabricated portable buildings to the plaintiff's designs, and in particular a design referred to as the Mark 24. The plaintiff disclosed to the first defendant all the drawings, specifications, technical information and know-how needed to make the Mark 24 in confidence and solely for the purpose of the contract. Subsequently the plaintiff also disclosed to the first defendant in confidence proposals for a new and improved design featuring a flat roof and a stressed skin construction, later referred to as the Mark 36, which the plaintiff originally proposed to make itself, but later suggested that the first defendant should manufacture. Subsequently negotiations between the parties for a renewal of the contract broke down, and it expired. Four months after the end of the contract the defendants launched a portable building called the Swiftplan with a flat roof and stressed skin construction, the design of which it had commenced during the currency of the contract. They said that the Swiftplan had been designed by their works manager, Mr Chambers. Roxburgh J said at 390:
  109. "… Mr Chambers knew every stage in the actual production of the Mark 24 unit … and accordingly his mind must have been saturated with every detail of its design, features and methods of construction; and if his mind was so saturated from observing the work in progress on the manufacture of Mark 24 buildings, obviously that information was either directly or indirectly derived from the original confidential communications made by the plaintiffs to the first defendants. Moreover, upon what were Mr Chambers' first efforts now directed? – to improve the floor of the Mark 24; not to make some new building unit. If, therefore, his mind was not already saturated with the Mark 24, his efforts to improve it must assuredly have completed that process. There is no better way of really understanding something [than] to try and improve it, and if you produce a different result it is absurd to say that you made no use of the thing which you set out to improve."
  110. On the same page Roxburgh J added:
  111. "… information is none the less used if it serves as a starting point for a new design, because in the end the design wholly or partially discards the information from which it was originally built up."

    Aerolab's work for Lotus

  112. Mr Migeot of Aerolab and Mr Gascoyne of Lotus agreed on 31 July 2009 that FondTech and Aerolab would design and manufacture two scale models for wind tunnel testing. Mr Gascoyne's e-mail recording his conversation ended by saying:
  113. "We are also starting from the current level of Force India due to the historical knowledge, not starting as a new team."
  114. The judge found that Aerolab began work for Lotus on 3 August 2009. At an internal meeting held on that date Mr Migeot outlined the project for Lotus. Aerolab was to prepare two models within two months. It was common ground that during that meeting Mr Migeot told his staff that "they should not invent anything". Quite what this meant is obscure. The judge accepted that Mr Migeot did not instruct his staff systematically to copy the Force India CAD files. On the other hand the judge did not accept Mr Migeot's evidence that what he meant was that his staff should use their past experience and not try to do anything radically new. The judge found that the clearest contemporaneous record of what the staff understood was contained in a note that Mr Lenoci sent Mr Neira on 12 August 2009:
  115. "Introduction
    1. The starting aerodynamic configuration must reflect, to the extent possible, a recognised structure that can be drawn quickly, without any need at this level to develop new shapes. The design of the internal structure can, however, take into account the direction that aerodynamic development is to take as soon possible (see RIS v diffuser).
    2. Guidelines are (JCM) to invent as little as possible, unless time and costs dictate otherwise. Therefore use the previous F1 model as much as possible where design work is concerned."
  116. It was common ground that the "previous F1 model" was Force India's car. The judge found that Mr Migeot intended his staff to take as their starting point the design of the Force India car at the level of the general shape and configuration of its component parts, but no more. That, in the judge's view, explained why there was no record of Aerolab and FondTech having carried out any initial work on the overall design of the model before plunging into the designs of the individual parts and relatively little evidence of any overall direction of the project so far as the design of the model was concerned, particularly during the initial stages. The judge also found that Aerolab had taken the aerodynamic performance of the Force India 2009 car as the target for the aerodynamic performance of the initial Lotus model.
  117. However, it was common ground that:
  118. i) The general aerodynamic design of the Force India 2009 car was in the public domain, having been raced at 10 Grands Prix by August 2009.

    ii) As at the beginning of August 2009 the Force India car was the least successful car in 2009 F1 Championship.

    iii) The structural and mechanical components of the Lotus car were being independently designed by others. The aerodynamic components for the Lotus model had to fit those structural and mechanical components.

    iv) Lotus had decided to use a Cosworth engine and Xtrac gearbox, which differed from the engine and gearbox used by Force India. Again, the aerodynamic components had to accommodate this engine and gearbox.

    v) The FIA Regulations for the 2010 season contained two important changes from the 2009: refuelling was to be prohibited, meaning that the car would have a significantly longer wheelbase and a higher ride height to accommodate a bigger fuel tank; and the width of the front tyres was to be reduced from 270 mm to 245 mm. These changes had to be reflected in the aerodynamic design of the car. In addition, it was confirmed that the use of double diffusers, which had been made possible by a controversial reading of the 2009 Regulations, would be allowed in the 2010 season.

    vi) It was always intended that the initial design would be subject to changes during the course of wind tunnel testing from October 2009 onwards, that is to say, well before the car was going to be raced for the first time.

  119. These findings formed the background to the judge's findings on the question of copying and breach of contract. The judge also recorded that most of Force India's claims related to what was done during the early stages of the project. At [133] the judge recorded who had worked on the Lotus project. The aerodynamicists were Mr Crosetta, Mr Neira, Mr Mirani, Mr Paganelli and Mr Lenoci. The CAD draftsmen included Mr Balboni, Mr Carafoli, Mr Columbanu, Mr Domenicali, Mr Legnani and Mr Urru.
  120. Between [135] and [158] the judge recorded the general progress of the design of the Lotus model, culminating in an initial model ready for wind tunnel testing at the beginning of October 2009. The first part of the work, occupying the first ten days or so, related to designing the spine. As the judge explained the spine itself is not aerodynamically significant. It is a component to which aerodynamically significant parts are attached for the purpose of wind tunnel testing. It is clear, however, that both the front spine and the central spine were to be drawn by "modifying the existing one".
  121. The judge also recorded the number of hours spent by Aerolab personnel on the project. In August 2009 FondTech and Aerolab's aerodynamicists had worked 714 hours, their CAD draftsmen 957.5 hours and their CNC operators and model makers 645.5 hours on the project. Nominally some of the services were provided by FondTech, with Aerolab acting as its sub-contractor. By the time that the initial design was complete at the beginning of October the totals were: Aerolab and FondTech's aerodynamicists 1,336.5 hours and Aerolab and FondTech's CAD draftsmen 2,530 hours. In very round terms the aerodynamicists spent about half the number of hours on the project as the CAD draftsmen. Aerolab and FondTech charged Lotus €132,144 for this work. The gross profit margin was 20 per cent (about €26,500). There is no suggestion that the contract price was other than arms' length; and no suggestion that it was agreed on the basis that any of Force India's confidential information would be used in performing that contract. In other words the contract price was agreed on the footing that Aerolab would start from scratch.
  122. Misuse of confidential information

  123. In [253] and [254] the judge recorded that:
  124. "253. The Force India 2009 model consisted of around 370 parts, of which about 203 were aerodynamic parts and the remainder mechanical parts. Force India alleges copying of 71 designs. Of these 57 are designs or precursors of designs for wind tunnel model parts and 14 are assemblies or combinations of individual model part designs. Of the 57 individual model part designs, 36 are for aerodynamic components, the full size equivalents of 25 of which were visible on the Force India F1 car during the 2009 season. The remaining 21 out of 57 are mechanical wind tunnel model parts which have no equivalent in a full size car.
    254. Of the 36 aerodynamic designs:
    i) nine are front wing parts;
    ii) 12 are wheel barrel and brake duct parts;
    iii) four are rear diffuser parts;
    iv) two are rear wing parts;
    v) nine are miscellaneous development parts which never made it onto the Force India racing car."
  125. The judge proceeded to consider these parts one by one. Before doing so, however, he distinguished between the activities of the aerodynamicists and those of the CAD draftsmen. At [267] and [268] he said:
  126. "267. In my view it is important to distinguish for this purpose between what the Aerolab/FondTech CAD draftsmen did and what the aerodynamicists did. As will become clear below, I consider that a number of the initial Lotus model parts were drawn by a process which involved misuse of confidential information, since it involved the CAD draftsmen using the Force India CAD files to take a short cut; but it does not necessarily follow that the aerodynamicists misused any Force India confidential information in creating the designs of those parts. It is when one comes to consider the latter point that it becomes crucial to identify the precise dimensions alleged to have been confidential and to have been misused by the aerodynamicists. As will also become clear, in this context I agree with counsel for the Corporate Defendants that Force India's case is lacking in particularity.
    268. In so far as the CAD draftsmen used Force India CAD files to take a short cut, then I consider that they misused confidential information akin to a trade secret."
  127. As mentioned, when the judge came to consider two aspects of Force India's complaints the judge said that Force India had failed to identify in its pleadings or evidence any features of modularity or spatial relationship that were confidential. Force India have two complaints about this. First, they say that the judge was wrong to place the burden on Force India to prove that the features relied on were not in the public domain. Once it was shown that the information in question fell within the contractual definition of "Information" in clause 5 b it was for Aerolab to show that the information was in the public domain in order to be able to rely on the exception in clause 5 e. Second, they say that the judge was wrong to exclude from the scope of clause 5 b matters that mainly fell within the employees' skill, knowledge and experience. I have already said that I agree with Force India on the first point and I agree with Force India on the second point to the extent that the judge excluded from the obligation confidential information that was memorable. But I cannot see that my disagreement with the judge on these points appreciably undermines his findings of fact.
  128. The judge turned to consider the individual designs that Force India had said Aerolab had copied. In fact 33 instances of copying had been admitted on the pleadings. The judge considered a number of items in detail between [272] and [337]. Having made his detailed findings he summarised his overall conclusion at [339]:
  129. "This is a convenient juncture at which to consider Force India's case that the use made by Aerolab and FondTech of Force India's CAD files amounted to systematic copying of key parts of the Force India car, and in particular systematic copying of the aerodynamically significant parts. … In my view Force India has come nowhere near establishing that this was the case. On the contrary, such misuse as I have found to have occurred mainly consisted of opportunistic copying of CAD files by CAD draftsmen in order to take a short cut."
  130. Force India seek to overturn this overall conclusion. They say that the judge should have found that there was, if not systematic actual copying, then an approach on Aerolab's side that their personnel (both aerodynamicists and CAD draftsmen) regarded themselves as free to use Force India's CAD files as and when they wanted to. In effect they treated Force India's CAD files as their own. On the question of systematic copying, the judge was clear in his finding that Aerolab had not copied or taken the aerodynamic system of the Force India car. Although he dealt with this point in the section of his judgment on quantum, he dealt with it in terms. At [439] he said:
  131. "Mr Phillips' own evidence was that "the aerodynamic system of a car works as a whole, so it is unlikely that a part from one car will be aerodynamically compatible with another car". The evidence of Dr Hurst and Mr Dernie showed that, if anything, this was an understatement. As the experts agreed, the complex airflows achieved beneath, above and around a F1 car are dependent on the precise arrangement of the components in relation to each other and in relation to the road surface. They may also be affected by very small design changes, particularly of aerodynamic surfaces. When one compares the critical components in the initial Aerolab wind tunnel model with the Force India components relied on, Dr Hurst accepted that the aerodynamic system was quite different. Mr Dernie's evidence was very clear on this point."
  132. That overall finding is in my judgment undoubtedly one that the judge was entitled to make. Let me turn to the judge's findings about what the aerodynamicists did:
  133. i) Mr Crosetta. In an e-mail of 4 August he told his colleagues that the front and central spines could be drawn by modifying the existing one. The existing one was the Force India spine. At [279] the judge found that Mr Crosetta took a note of the Force India front wing profiles by extracting a number of data points from a Force India CAD file. In order to create the initial Lotus model front wing mainplane, primary flap and secondary flap profiles, he reprocessed these points to create profiles which were very similar (although not quite identical) to the Force India profiles, placed them in an arrangement which was different to the Force India arrangement, and gave these to Mr Balboni in an Excel file. At [283] the judge found that Mr Crosetta designed a set of strakes for testing on the Lotus front wing during the first wind tunnel session, but these were discarded with a view to fitting revised strakes at a later stage. He knew the spacing of the strakes from his work on the Force India model, and used the same spacing. Otherwise, he designed the strakes himself. The judge went on to say that the spacing was a "rather memorable number" that formed part of Mr Crosetta's skill, knowledge and experience. If he meant that the fact that Mr Crosetta memorised the number deprived it of its quality as confidential information, I disagree.

    ii) Mr Lenoci. It will be recalled that Mr Lenoci's understanding of Mr Migeot's instruction was that they were to "use the previous F1 model as much as possible where design work is concerned". At [315] the judge recorded Mr Lenoci's admission that he copied the geometry of the Force India forward bargeboard in the forward bargeboard of the initial Lotus model. At [318] he recorded that Mr Lenoci admitted that he based the vortex generator of the initial Lotus model on the Force India vortex generator. At [320] he recorded that Mr Lenoci admitted that he copied the rearview mirror from the Force India mirror, the CAD file for which he had retained in his personal folder.

    iii) Mr Mirani. At [322] the judge recorded that Mr Mirani admitted making direct reference to the Force India front spine and front support web geometry when designing the Lotus model equivalents. Mr Mirani gave evidence in which he appeared to accept that more extensive reference to Force India's CAD files had taken place. The judge said at [13] that he should approach Mr Mirani's evidence with caution, but otherwise did not refer to it any further.

    iv) Mr Paganelli. At [322] the judge recorded that Mr Paganelli also admitted making direct reference to the Force India front spine and front support web geometry when designing the Lotus model equivalents. In addition at [317] the judge recorded that Mr Paganelli admitted that the initial Lotus chin fences had been copied from the Force India design, but gave unchallenged evidence that the remainder of the chin had been designed from scratch.

    v) Mr Neira. Mr Neira was the other principal aerodynamicist who worked on the Lotus model. Mr Neira's evidence was that he had designed the parts for which he was responsible from scratch; and the judge accepted that evidence although it had been challenged in cross-examination. On the other hand, the judge did find at [305] that Mr Neira instructed Mr Urru to adapt the Force India study of a profiled foot for the Lotus model.

  134. The judge also made findings about the CAD draftsmen.
  135. i) Mr Balboni. Mr Balboni referred directly to the Force India model part CAD file for the front wing endplate and turning vane when drawing the Lotus parts; but he did not reproduce any of the Force India geometry exactly. He also referred to the Force India CAD file for the front wing transition element rather than drawing the part from scratch.

    ii) Mr Carafoli. Mr Carafoli used a Force India master surface file as a means of realising the rear wing geometry specified by Mr Crosetta. He used the same file when realising the central section.

    iii) Mr Columbanu. Mr Columbanu started with the Force India rear spine CAD files and modified them as a means of realising Mr Paganelli's specification for the rear spine.

    iv) Mr Legnani. Mr Legnani created an exploded drawing of the diffuser from Force India CAD files for model parts as a visual reference when drawing up a list of model parts that would have to be made for the Lotus model. In addition, Mr Legnani based his drawing of the diffuser strake on a Force India CAD file, although the strake itself had been independently designed by Mr Neira. Finally Mr Legnani used a Force India CAD file as a short cut when drawing the outboard area of the diffuser.

    v) Mr Urru. In accordance with Mr Neira's instruction Mr Urru adapted the Force India study of the profiled foot. In addition he used a Force India CAD file relating to the driveshaft as a short cut when drawing the Lotus parts.

  136. I think it fair to say that these detailed findings of fact are very benevolently described by the judge as "opportunistic copying of CAD files by CAD draftsmen in order to take a short cut." His overall conclusion understates the use by the aerodynamicists of Force India data; and overlooks Mr Neira's instruction to Mr Urru (so that Mr Urru's use of the CAD file is difficult to describe as "opportunistic"). It may be that his use of the word "mainly" was meant to acknowledge the activities of the aerodynamicists; but if so it was unfortunate phrasing.
  137. Does this vitiate the judge's conclusion that there had not been systematic copying? Mr Hobbs relied on the principle that everything is to be presumed against wrongdoers and referred to Norbrook Laboratories Ltd v Bomac Laboratories Ltd [2006] UKPC 25. In that case, Lord Bingham, giving the advice of the Privy Council, said at [31]:
  138. "In argument before the Board Norbrook accepted that the burden of proving a breach of the secrecy agreement lay on it, as in any other case where a party seeks to establish a breach of contract. In such a case the legal burden of proof lies on the plaintiff and never shifts. But if the plaintiff adduces evidence from which, in the absence of any adequate explanation or answer, an inference of breach may properly be drawn, an evidential or provisional burden falls on the defendant, as explained by Lord Denning in Brown v Rolls Royce Ltd [1960] 1 WLR 210. Thus if A entrusts B in confidence with secret proprietary information not publicly available, and B is precluded by contract from using that information for its own purposes, and the relationship between them ends, and B puts on the market a product which could not ordinarily be made without using A's secret information, a claim by A for breach of contract is likely to succeed unless B shows that it obtained the information from another legitimate source, or as a result of independent research, or in some other manner not involving misuse of A's information. This is an approach to decision-making which depends not on abstruse legal doctrine but on the application of common sense."
  139. But as Lord Bingham went on to say in the immediately following sentence:
  140. "It is, however, an approach which has little bearing on a case such as the present in which discovery has been given and evidence heard at length on both sides. The question then is whether, in the light of all that evidence, the plaintiff has proved its case on the balance of probabilities…"
  141. In our case the judge had extensive material before him, largely obtained from Aerolab, and also heard a large number of witnesses who were cross-examined at length. In such circumstances the presumption can have little if any part to play. Moreover the judge's conclusion was one of fact. In particular it is impossible to interfere with the judge's finding that Aerolab did not copy or take the aerodynamic system. Once that finding stands, I do not think that the judge's benevolent description of his more detailed findings takes the case any further. In my judgment it is simply not possible for this court, on the basis of a highly selective exposure to only some of the materials that were before the judge, and without having his advantage in seeing the witnesses, to interfere with his primary findings of facts or his evaluation of the primary facts that he found. There are two possible exceptions to this. First, to the extent that the judge acquitted Mr Crosetta of having misused confidential information in relation to the strakes on the basis that the spacing on the Force India car was memorable, I think he was in error. But the judge also found that the spacing of the strakes could be seen on exterior of the car itself, and was entitled to find that these were in the public domain. Second, Mr Purvis accepted that the judge was wrong about a part called the rear brake duct winglet. But these are only minor changes in the judge's overall appreciation of the actual scale of misuse.
  142. However, this does not deal with Force India's point that whatever the extent of Aerolab's actual use of the confidential information, its aerodynamicists and CAD draftsmen regarded themselves as free to use it as they thought fit. I do not think that the judge made findings of fact about this, although he dealt with the point obliquely in the section of his judgment on quantum. He said at [436]:
  143. "The Defendants contend that the subject matter of the negotiation would be the actual confidential information found to have been misused by Aerolab/FondTech. Force India contends that the subject matter would be the entire aerodynamic design of the Force India car. The basis for the latter contention is that Aerolab and FondTech had (almost) all of the aerodynamic design of the Force India car available to them to use as a reference, even if they only used a small proportion. I reject that contention, since it would mean that Aerolab/FondTech would pay the same licence fee regardless of the extent of the misuse. This is contrary to principle, authority and basic fairness."
  144. Whether Aerolab's aerodynamicists and CAD draftsmen regarded themselves as free to use the CAD files as they thought fit is essentially a question of fact, which turns on the state of mind of the people in question. We were not shown any evidence about that, nor any questions put to the witnesses about their state of mind. In those circumstances I do not consider that we are in a position to make a finding of fact that the judge did not make. That said, if the judge had made that finding, then it seems to me that compensation should have been assessed on the basis of the value to Aerolab of the whole corpus of information. After all, if A wrongfully retains B's dictionary, it does not matter that he only looked up a few definitions.
  145. Quantum

  146. Force India's statement of case on quantum asserted that the basic measure of damages should be assessed by reference to a reasonable licence fee (i.e. the sum which would be agreed between willing buyer and a willing seller) for the use that the defendants made of the design of Force India's car. Aerolab's pleaded response was to agree that the measure of damages should be assessed at such a level as reflected the value of any unlawful use which had been made; and that the concept of a reasonable licence fee might assist in the assessment. Despite this agreement, between [374] and [423] the judge embarked on a lengthy discussion of a plethora of cases, most of which had not been cited to him. Again, this was unnecessary, and I have not considered whether his analysis of the cases is correct or not.
  147. There was no claim that Force India had suffered any loss as a result of the misuse of the confidential information. Force India's pleaded case on quantum was squarely aimed at the benefit alleged to have been derived by Team Lotus from the use of the confidential information. There was no separate plea about the benefit that had been derived by Aerolab. Indeed Aerolab is not mentioned individually in the pleading on quantum. Accordingly, once the judge had decided that Team Lotus were not liable, he was placed in a very difficult position in assessing what compensation Aerolab should pay.
  148. Aerolab's case was that the benefit that it had derived from the misuse of the CAD files was that it had saved a modest amount of time in creating a functionally comparable design from scratch; and that this should be measured by reference to what freelance CAD designers would have charged.
  149. Since compensation was to be assessed by reference to the benefit that Aerolab had derived from misuse of the confidential information, the first question for the judge was to identify that benefit. Having considered the arguments on both sides, the judge concluded that the benefit to Aerolab was in the time saving in producing a model that could be subjected to wind tunnel testing. That was a factual conclusion to which the judge was entitled to come. He also concluded that there was no "knock-on" benefit to Aerolab in its other work. Thus he concluded that the benefit to Aerolab should be measured by reference to what it would have cost Aerolab to commission a consultant to produce equivalent designs.
  150. I do not consider that there is any error of principle in this approach. In Seager v Copydex (No 2) [1969] 1 WLR 809, 813 Lord Denning MR said:
  151. "The value of the confidential information depends on the nature of it. If there was nothing very special about it, that is, if it involved no particular inventive step, but was the sort of information which could be obtained by employing any competent consultant, then the value of it was the fee which a consultant would charge for it: because in that case the defendants, by taking the information, would only have saved themselves the time and trouble of employing a consultant. But, on the other hand, if the information was something special, as, for instance, if it involved an inventive step or something so unusual that it could not be obtained by just going to a consultant, then the value of it is much higher. It is not merely a consultant's fee, but the price which a willing buyer — desirous of obtaining it — would pay for it. It is the value as between a willing seller and a willing buyer…. [I]f … the confidential information was very special indeed, then it may well be right for the value to be assessed on the footing that in the usual way it would be remunerated by a royalty. The court, of course, cannot give a royalty by way of damages. But it could give an equivalent by a calculation based on a capitalisation of a royalty. Thus it could arrive at a lump sum. Once a lump sum is assessed and paid, then the confidential information would belong to the defendants in the same way as if they had bought and paid for it by an agreement of sale."
  152. In Experience Hendrix LLC v PPX Enterprises Inc [2003] EWCA Civ 323 [2003] FSR 46, 26, Mance LJ said at [26]:
  153. "In a case such as Wrotham Park, the law gives effect to the instinctive reaction that, whether or not the appellant would have been better off if the wrong had not been committed, the wrongdoer ought not to gain an advantage for free and should make some reasonable recompense. In such a context it is natural to pay regard to any profit made by the wrongdoer (although a wrongdoer surely cannot always rely on avoiding having to make reasonable recompense by showing that despite his wrong he failed, perhaps simply due to his own incompetence to make any profit). The law can in such cases act either by ordering payment over of a percentage of any profit, or, in some cases, by taking the cost which the wrongdoer would have had to incur to obtain (if feasible) equivalent benefit from another source."
  154. In my judgment it is clear from these cases that, depending on the facts, the cost of engaging a consultant can be an appropriate measure of compensation for misuse of confidential information if that is an alternative means of obtaining an equivalent benefit from another source. This is the approach that the judge adopted. He had some material from a Mr Chosse who is experienced in managing CAD draftsmen. He gave an estimate of the number of hours and hourly rates that would be charged by CAD draftsmen in preparing CAD drawings representing designs with which he had been supplied. The hourly rates were rates charged in Germany and there was evidence that hourly rates in Italy were lower. Mr Chosse neither gave evidence nor made a witness statement. The material that he produced was simply exhibited to a witness statement made by Mr Migeot. It is also not entirely clear what exercise Mr Chosse was asked to cost. The judge also had evidence from Mr Migeot estimating the number of aerodynamicist hours that would have been spent; and that the ratio of time spent on a given project is roughly 2:1 as between CAD draftsmen and aerodynamicists. This ratio is empirically supported by the judge's findings on the hours actually spent on the Team Lotus contract. In addition he had evidence from Aerolab's expert that the number of hours estimated by Mr Migeot for aerodynamicists' time was reasonable. Aerolab's accountancy expert, Mr Bezant, calculated that, assuming that all the allegations of infringement were established, the amount that Aerolab would have had to pay (using Italian hourly rates) would have been €24,750. Based on this material, and taking into account the reluctance of Force India to allow any of its confidential material to be used at all, the judge concluded that the parties would have agreed on €25,000. This amount was close to the whole of Aerolab's profit on its contract with Team Lotus. Since Mr Bezant had assumed that all the allegations of copying would be proved, and the judge found that some had not, minor adjustments to the judge's findings of fact would not affect the overall result.
  155. There is no doubt that the evidential basis for the judge's assessment was slender. But if the judge had not relied to some extent on this material, it is difficult to see how he could have made any award in Force India's favour. Mr Hobbs argued that in the hypothetical negotiation the parties would also have had to negotiate the release of the exclusivity agreement in clause 6 a of the contract. In theory that is true. But no pleaded case based on clause 6 a was ever advanced, and we were not shown any evidence (on either side) directed to its significance. Given that Force India were already seriously in arrear with the monthly payments due under the contract, and that retention of the exclusivity clause would have entailed their continuing liability to make those payments, it cannot be said that clause 6 a was a trump card in Force India's hands. But since the point was not argued, and the judge made no findings, it is not a point that is open on this appeal.
  156. However, Force India argue that the judge's selection of this measure of compensation is flawed because it has eliminated the misuse itself; and it fails to give effect to 2004/ 48/EC, The Enforcement Directive.
  157. In relation to the first point Force India rely on the decision of this court in London Borough of Enfield v Outdoor Plus Ltd [2012] EWCA Civ 608. That was a case of trespass in which an advertising hoarding was (by mistake) erected partly on land owned by Enfield. The contractor in fact had intended to erect it wholly on adjoining land (No 67). It could without difficulty have been erected in such a way as to avoid any trespass, and it was the ease of so doing that led the trial judge to award nominal damages of £2. This court reversed his decision and awarded substantial damages. Henderson J, giving the only reasoned judgment, said at [51]:
  158. "I fully accept that any ability on the part of a trespasser to achieve the object of the trespass by alternative means is a factor which must be taken into account in the hypothetical negotiation. The alternative must, however, be one which is consistent with the trespass and which can co-exist with it. An alternative cannot be taken into account if it would eliminate the trespass itself, because that would again negate the very basis of the exercise. In Sinclair v Gavaghan there was no conceptual difficulty about taking into account the alternative means of access to the Yellow Land which were available to the defendants, because they were true alternatives to the more convenient route through the Red Triangle, and the defendants could therefore pray them in aid when notionally negotiating a fee for use of the Red Triangle access. By contrast, what the defendants wish to do in the present case is to rely on the possibility of placing the hoarding entirely within No. 67, not as an alternative to the admitted trespass, but as a means of eliminating it. Such a procedure cannot be legitimate, because it would subvert the basis of the negotiation."
  159. In this passage Henderson J clearly accepts that the availability of alternatives is a legitimate consideration in assessing compensation. It could hardly be otherwise. In any negotiation the parties to the negotiation will be considering what their alternatives are to doing the deal. There is no reason why a hypothetical negotiation should be any different in that respect. It is, of course, different from a real negotiation in one respect because in the hypothetical negotiation not doing the deal at all is not an alternative. In selecting as the measure of damages the cost of employing a consultant in order to obtain an equivalent benefit from an alternative source the judge was, in my judgment, following a well-trodden path. I see no error of principle here.
  160. On the assumption that the Enforcement Directive applies to a misuse of confidential information (an assumption about which I am sceptical), the argument is that the judge's award failed to comply with article 3 which requires a remedy to be "effective, proportionate and dissuasive". I do not consider that the judge's award falls foul of this principle. It is proportionate to the loss suffered by Force India and to the benefit gained by Aerolab; and it is dissuasive because it equates to almost the whole of Aerolab's profit on this part of its contract with Team Lotus.
  161. Result

  162. I would dismiss the appeal.
  163. Lord Justice Briggs:

  164. I agree with both judgments.
  165. Sir Stanley Burnton:

  166. I agree that the appeal must be dismissed for the reasons so clearly and cogently given by Lord Justice Lewison.
  167. I would add only comment on the evidence of Mr Chosse, referred to at [103]. His evidence was, as both Mr Mellor and Mr Purvis accepted, expert evidence within the meaning of CPR Part 35.2. Mr Chosse's material was provided by him in response to an email from Mr Migeot for the purposes of this litigation. Mr Migeot reminded Mr Chosse that Aerolab was in a legal battle with Force India. He asked for a report by a "neutral" (the quotation marks are in the email) of the time required to draw 45 items for the model. Mr Migeot stated:
  168. "'Neutral' means that you do not have a current engagement or one expected in the short term with either Force India, or Lotus … or eventually (?) with Mike Gascoyne personally."

    The translation is mine. The question mark and parentheses are in the email.

  169. The material provided by Mr Chosse should not have been admitted in evidence without the permission of the Court: CPR 35.4(1). If an application had been made for that permission, the Court would have had to consider whether it was clear what he was asked to cost. Any report submitted by him should have complied with the formal requirements of CPR Part 35.10 and the Practice Direction to Part 35. The question of cross examination, or that of instructing a single joint expert, would have had to be considered.
  170. Force India did not object to the admission of Mr Chosse's material, but contested the weight and value to be attributed to it. The attention of the judge was not drawn to the application of Part 35. However, the present case demonstrates the dangers of circumventing its provisions. The neutrality of Mr Chosse, on first name terms with M Migeot, and informed of the legal battle between Force India and Aerolab, was not evident. His duty to the Court was not brought home to him. Quite what he was quantifying was not clear, and could not be clarified by cross examination. Exhibiting his material to a witness statement of Mr Migeot was a shortcut that produced a risk of injustice. It should not have occurred.
  171. The Court was helpfully informed by Mr Hobbs of two High Court decisions that are the subject of appeal to this Court and in which questions as to the admissibility of hearsay opinion evidence were considered, namely the judgment of Arnold J in Interflora v Marks & Spencer Plc [2013] EWHC 936 (Ch) and that of Leggatt J in Rogers and Rogers v Hoyle [2013] EWHC 1409 (QB). Neither of those judgments was concerned with irregularities of the kind to which I have referred above.

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