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Reputational disaster: could it happen to you?

Date: 06 Apr 2017

Citywealth

Wiki leaks, dark matter, accountants texting Emma Stone pictures at the Oscars and Beckham’s email leakhave all proven tremendous fodder for the more excitable tabloids and social media and who hasn’t giggled at some of the copy? But before you participate in too much merriment, reputation lawyers believe there is more of this style of expose to come and the next tabloid splash might frame you, a business partner or one of your clients. Beckham’s email leakrevealed some excruciatingly embarrassing thoughts which managed to reach millions by a variety of channels and the question that hangs in the air for Beckham is ‘will he ever get the Knighthood he is alleged to want’? Who knows but the odds do not look good.

To debate the topic of how to protect a reputation, we asked four legal experts who are Julian Pike, partner at Farrer & Co, Dominic Crossley, partner at Payne Hicks Beach Solicitors, Emma Woollcott, legal director, reputation protection at Mishcon de Reya, and Ben Hobbs, senior associate at Schillings for their thoughts on how to protect a high-profile client from the vagaries of phone life.

Can confidentiality or NDA agreements protect clients?

“Yes,‚Äù says Dominic Crossley, partner at Payne Hicks Beach Solicitors, “plus they can help facilitate discussions on tricky topics.‚Äù

However, Emma Woollcott, legal director at Mishcon de Reya says clients need to think carefully in advance about what information they really want to protect. “They need to define where the lines are between public and confidential information,‚Äù she says.

Julian Pike, partner at Farrer & Co, agrees and adds: “These agreements help set the right culture as well as to enforce those rights in the event of a breach or threatened breach. NDAs can be very useful for high-profile or UHNW clients who need to protect sensitive information about their lifestyle, their security arrangements, their family and their finances, especially where individuals work closely with the clients.‚Äù

Ben Hobbs, senior associate at Schillings confirms this unequivocally. “If you’re successful in life, you’re susceptible. As with Beckham, a leak into the public domain may mean your reputation is hard to restore. A planned prevention is better than an expensive cure. I find, clients understand this and want confidentiality agreements as part of their wider preventative measures now.‚Äù

Give us some examples of how they are used?

Dominic Crossley: “Often parties to a commercial negotiation will agree to commit to a NDA before discussing a company sale, or a joint venture or some other agreement that will involve discussing commercially sensitive material. But they can also have a wider application and are sometimes used in the most unusual of circumstances.‚Äù

Pike expands saying on the personal side, “UHNW clients employ assistants, security personnel and household staff who will have access to private information about them and their families. Confidentiality agreements are used protect high-profile clients when they are engaging lifestyle or retail services, for example, a well-publicised wedding.‚Äù

Woollcott says: “It’s any situation which involves information, which has the potential to embarrass or cause damage if used against the person sharing it.‚Äù Hobbs agrees saying: “To make a claim for breach of confidence, or seek an injunction, you will need to show that there is an obligation on that person to keep the information confidential. This doesn’t need to be in a contract, it can be implied because of the relationship of the parties. Where it’s implied or based upon the relationship, the courts will look at whether it is reasonable. It doesn’t need a written agreement, but having it does make everyone’s position clear from the outset. Depending on what they cover, confidentiality agreements can also contain clauses preventing people from texting, tweeting, using Facebook or Instagram at an event or from saying anything derogatory or demeaning about someone during and after the contractual relationship ends.‚Äù

What are the pitfalls?

Pike says: “One of the most common is failing to put a confidentiality agreement in place straight away. You can’t force anyone to sign a confidentiality agreement, so the best time is before you engage someone’s services. Another pitfall is failing to put one in place for staff to make them aware of their confidentiality obligations, not just the client-facing team. The agreement also needs to review the practical enforcement, for example, around the use of mobile devices.‚Äù

Crossley adds:”The problem is enforceability. Do you know if the other party will honour the agreement? Once confidentiality has been breached, the damage has been done, and rushing to court after the event is not ideal.‚Äù

Hobbs adds a further warning: “The main pitfall is that it may seem the person has something to hide and as with most things, being told you can’t do something makes you want to do it more. Having a confidentiality agreement has no guarantee with it. If someone breaches it, you face having to sue them as well as dealing with the consequences. The information could also become known to someone who hasn’t signed the confidentiality agreement, in which case trying to prevent its publication is difficult.‚Äù

Woollcott agrees saying: “It’s important to ensure the language is clear enough to be understood and to make it enforceable, but flexible enough to cover all situations which the parties would hope it to, regardless of the technology.‚Äù

If they are too comprehensive, for instance as revealed in the book, ‘Blair Inc’ on Tony Blair, can the mere presence appear detrimental?

Julian Pike thinks it is the case. “An overly onerous confidentiality agreement will create the wrong impression and can backfire, causing suspicion and speculation. Of course, it’s likely to be more difficult to get over-the-top confidentiality agreements signed in the first place. A dose of common sense and commercial awareness is usually necessary when drafting an agreement.‚Äù

Crossley adds: “I’m not aware of the Tony Blair situation but any agreement has to be tailored to the circumstances.If an excessively lengthy or onerous agreement is put forward in circumstances where it is not warranted, it can be a disincentive. On the other hand, a well-judged NDA can demonstrate that you are serious and are taking sensible steps to protect information.‚Äù

Hobbs agrees, saying: “Anyone can say that a client only wants a confidentiality agreement because they have something to hide but it shouldn’t be suspicious to want to keep your wedding confidential or stop your nanny from telling the world about your home life. There are, of course, examples where confidentiality agreements have caused some reputational harm, but generally they provide effective protection. They ensure that all parties know the position on confidentiality at the outset and the likelihood that action will be taken in the event of a breach.‚Äù

Tell us the three key things that every confidentiality agreement must contain.

Hobbs takes a lead: “The three most important things are: A clear definition of what confidential information is covered by the agreement. You can’t make non-confidential information confidential just by including it in a confidentiality agreement; sufficiently comprehensive undertakings by the party who will receive the confidential information, setting out what they must, should and cannot do in certain circumstances; an acknowledgment that damages for breach of confidence would be insufficient and that you can seek an injunction against them if they threaten to breach it. “This gives you the best opportunity to prevent disclosure rather than seek a remedy after the confidential information has been made public.‚Äù

Crossley adds: “Specifying the consequences of a breach also helps encourage compliance.‚Äù Pike agrees that a strong penalty clause helps: “In my view a confidentiality agreement should be tailored and should be concise, unequivocal and clear on consequences.‚Äù

Risk- scoping

Beckham’s email leak has certainly highlighted the difficulty of keeping conversations private in an electronic world. Crossley says: “Attacks on privacy are increasing. Whether it’s information on your commercial or financial arrangements or private photos of you and your family.My clients are taking more proactive steps to protect their information and I expect this to increase. Likewise, clients will move quickly to challenge activity in the media.‚Äù

Woollcott adds her thoughts: “Multi-generational families are also increasingly aware of the risks posed by changing attitudes with younger generations sharing more information online and that their risk of exposure is increasing.‚Äù

Pike says: “The recent David Beckham story is a prime example, but he is not the first, nor the last, to find sensitive personal information leaked online. Risk-scoping is a growing trend, with clients employing sound risk management practices across all aspects of their lives. Consistency is useful, it’s no use having a great security team if you don’t have appropriate confidentiality agreements or if, metaphorically, you leave your online door wide open.‚Äù

Hobbs adds an interesting point: “Reputation and privacy are interlinked: reputation is what people think of you, privacy is what they know about you. With data sitting at the heart of most day-to-day interactions, advisers now have a crucial role to play because it only takes one weak link in the chain to expose someone. I expect this to become a growing trend over the next eighteen months.‚Äù

Crossley adds a left field thought: “I think, we need more accountability from major search engines and social media sites who should be implementing faster and more effective tools to limit or prevent the publication of high profile, personal material.‚Äù

Fail to plan, plan to fail

Pike has some final thoughts. “Clients shouldn’t wait for disaster to strike. There should be regular risk assessments and preventative action to reduce the risks both physical and online, as well as crisis management planning, and scenario role plays. This will make it less likely risks will materialise, while making the individual and family more resilient when trouble does strike.‚Äù

Taleb, the author of the The Black Swan and Antifragile says random events will always be with us, as with the accountant at the Oscars taking an ill-timed photo of Emma Stone, but with lawyers scoping out your risk position, let’s hope you can prevent the future sting of a high-profile humiliation like in the case of David Beckham.

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