Equity & Trusts Topic 2

BREACH OF CONFIDENCE Confidentiality is an equitable doctrine which relates to the uses to which confidential information can be put if the information has been directly or indirectly obtained without consent. Different interests are protected according to the form which the information takes. Secret information that one person learns from another are of 3 main types:
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BREACH OF CONFIDENCE (cont)

1. Trade secrets (e.g., confidences in business or industry, secret processes etc). Relevant interests include the prevention of unfair competition, and the encouragement of invention. 2. Personal and artistic secrets (e.g., marital secrets, scandals, identity) Relevant interests include personal integrity, autonomy, and the social/moral imperatives associated with privacy claims.
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3. Government secrets (e.g., ministerial deliberations, communications with foreign governments) Relevant interests are essentially the public interest - cf. FOI and commercial in confidence.
Comparing personal and commercial confidences:

Douglas v Hello! [2008] 1 AC 1

Is it relevant to the existence of personal confidentiality that that the Douglases intended to provide public photographs of their wedding? Can celebrities claim commercial confidentiality in respect of their right to publicise personal matters?
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Doctrine: Equitable protection of confidences is sui generis (or in a class of its own). Three things are to be helpt in Conscience; Fraud, Accident and things of confidence: (1535) Sir Thomas More, quoted in Coco v AN Clark 46

Protectable confidences need not be interests in property - ideas cf. copyrights, patents.

An example - a hybrid confidence (breach of both a trade secret and a personal confidence were alleged): Douglas v Hello! (1st inst., confirmed by HL photos of wedding were information of commercial value which the law of confidence would protect) Is a right of privacy a more appropriate way to protect private confidences? Is it more transparent than confidentiality doctrine? cf. US right of privacy the need to balance the right of privacy against the right of free speech a conflict of absolutes and incommensurables?
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cf. UK and the European Convention on Human Rights - was the legitimate interest which the Douglases had in their image trumped by free speech, etc. Lindsay J (at 1st inst.): question of priority better left to Parliament. Lenah Meats - could a right of privacy be used to prevent the ABC from broadcasting a surreptitously obtained film of Lenahs possum abattoir operation? should the absence of any tortious conduct on the part of the ABC be irrelevant?
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The Lenah Game Meats response:

Gleeson CJ: the law of confidentiality is adequate to cover the case. Kirby J: yes, would consider privacy claim, but not in interlocutory proceedings. Gummow & Hayne JJ (Gaudron concurring): no, privacy implies personal autonomy and a commercial corporation can have no relevant injury.
Callinan J: upheld a right of privacy in Australia.

 A contract between the parties is often present and a right to confidentiality arises as an express or implied term (e.g., of employment) - equitable principles apply to contractual claims. There is not always a confider and a confidant the right is not relational - secrets are protected, not confidences imparted from one to another confidence-breakers may be thieves. Confidences and relationships of trust are protected in analogous ways, but are not the same.
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Cause of action: the threshold requirements:

1.

Information must be specific

Confidentiality claims must contain a precise description of information said to be confidential.

OBrien v Komesaroff (1982) Tax evasion - alleged confidential information on how to evade an Act of Parliament - draft unit trust deed and articles of association - just knowledge and skill, not secrets.
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2.

Information must be confidential

A very general requirement the quality of confidence protected may be a novel combination of commonplace or well-known things - but cannot be public knowledge (e.g., Coco: the engine design not secret and was what any competent consultant could produce). The quality of confidence is a matter of access and pathways data or fact combinations may be confidential if special labours must be undertaken to reach or reproduce them the doctrine explicitly protects commercial value.
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Proviso that subject information cannot be public knowledge, or general knowledge within a particular industry or trade.
e.g., Profit-making ideas equity protects the right to make a profit from the application of labour, effort and skill in the derivation of something not publicly known (cf. patent protection): Talbot v General Television Corp

.claimant conceived of How to make a million series of television programmes a saleable proposition its kernel was of value.
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Hospital Products v US Surgical Corp [1983] 2 NSWLR 157 (CA) and reverse engineering. Harmful confidences: Where the defendant threatens to disclose some economically deleterious or compromising fact about the claimant: Douglas v Hello! Ltd - actors images confidential (in CA) the significance of no protection under the NY law where (the initial) breach of confidence occurred.
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Harmful confidences (cont): ABC v Lenah Game Meats mode of killing not secret public knowledge within a particular industry: Gummow/Hayne [77] cf. Gleeson CJ at [42].

AFL v The Age (2006) 15 VR 419

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3. Circumstances importing a duty to respect the confidentiality of confidential information: The equitable duty of confidence is based on what the defendant knew or ought to have known about restrictions placed on use of the information by those who confided it, or for whom it was originally confidential A reasonable man formulation is used.
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Coco v AN Clark (Engineers) [1969] RPC 41 (HL 3.17C). Design information was volunteered by an inventor negotiating for the sale of his invention. a reasonable man in the [defendants] circumstances would have believed that an obligation of confidentiality was imported (see Megarry J at 46).
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Saltman Engineering Co v Campbell Engineering Engineering drawings misused by an manufacturers sub-contractor - an indirect or triangular relationship of confidence . How the element of confidentiality and the resulting obligation was inferred. Saltman underlines the non-relational nature of the doctrine and the fact that equity responds to the quality of confidentiality.
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Smith Kline French v Dept of Comm Services (1990) 22 FCR 73, 87-110, Gummow J, aff. FC (1991) 28 FCR 291. Claimant sough to restrain officials in the patents office from performing public tasks. Inferring the confidentiality obligation:

Did the Dept know or ought it have known that SKF disclosed its formula for a limited purpose which excluded expediting approval of a competitors generic copy?
No.
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Smith Kline was a marginal case - no unreasonable or unfair use was made of SKFs confidence. Franklin v Giddins The stolen tree-cutting.

a thief who steals a trade secret should be in no better position than a traitorous servant Confidential information inhered in the budwood of a nectarine tree - no relationship existed between the parties (facts thus comparable to Saltman).
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Cf. public display of compromising material did the need for a trespass in order to obtain it imply that information about the slaughtering process was confidential? no, illegality of the trespass and the use that the ABC made of it were a separate matter [?] ABC v Lenah Game Meats - Gleeson [30].

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4. Breach of duty to respect confidence Unauthorised use of the information, including publication contrary to the owners restrictions. Castrol Australia v Emtech Associates .prosecution under the Trade Practices Act, could not be based on data supplied for a TPA authorisation - Castrol disclosed a fuel report for the limited purpose of the TPC approving a marketing campaign. There is no breach of duty if the information is discovered through the defendants own efforts - for instance, by searching in a public library or through reverse engineering: Hospital Products v USSC. 20

Remedies Assume that the confidence is protected solely in equity. i. - Injunctions - the primary remedy - duration relief can be tailored to reverse a market advantage that D has obtained. Douglas v Hello! - on the appropriateness of interlocutory relief CA at [140]

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Injunctions (cont) - headstarts and springboards as metaphors to describe reversible market advantages;

- how employees, in principle, should not be prevented from using their knowledge in the service of new employers:
- Ocular Sciences v Aspect Vision Care [1997] RPC 289 (Laddie J, at 370) .how a confidentiality obligation should not be inferred where the information forms part of an employees general skill and knowledge.
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Twofold aims of equitable remedies for the breach of confidence wrong: Restitution is the primary goal restoring claimants to the positions that they would have been in had no confidences been breached. Compensation is subordinate where restoration is not possible, equitable compensation (or equitable damages) are awarded on a restitutionary basis.

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Redistribution of gains made by a defendant may serve either the restitutionary, or compensatory goals. Defendants are not allowed to retain the profits of their wrongdoing.

Gains may be redistributed by:

- account of profits

- constructive trust
- damages/compensation

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Illustrating the interrelation of remedial goals for breach of confidence in a market context: 1. Confidence-breaker wrongfully pirates an idea in one market and introduces it into another market where the confider does not operate. The defendant makes a profit.

The restitutionary goal is served by the award of an injunction, permanently preventing the defendant from using the idea in the new market, and also by an account of profits, to redistribute the profit made.
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2. Confidence-breaker appropriates only an unrealised idea and is brought to court before any profits are made. (e.g. as in Coco v AN Clark)

How to fulfil Ps restitutionary interest? In Coco, the value of the inventors invention was influenced by a finding as to its nature interaction of remedy with cause of action.
What Coco lost and should be recompensed for was equal to the value of a consultants services - a damages award would treat Coco as though he had sold the conception to the engineer.
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3. Confiders and confidence-breakers compete in the same market.

Equitable relief should be proportioned to market forces. An injunction might be awarded equal to the 3-month head-start that the confidencebreaker achieved by the wrong or, if the wrong is serious enough, the defendant might be permanently prevented from competing.
Incidental profits to be re-distributed.
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Account of profits
The classic restitutionary entitlement? remedying an enrichment of the defendant obtained at the expense of the plaintiff where the enrichment can be valued and cashed-out

Attracting the plus and minus equation confidence-breakers must make an indentifiable gain
equitable relief is broader and applies (without distorting categories) where there is no cash equivalence and even before profits are made.
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Equitable compensation (damages) Monetary compensation in equity to restore victims of confidence-breaking to their previous positions - valuation of the information is the critical exercise - does it amount to a lost opportunity, or only a lost consultants fee? Talbot v GTV-9 pirated concept of a TV show - plaintiff was awarded a limited injunction plus damages for the wrongful act how to compute damages: aff. Young CJ (FC): P awarded an amount to reflect Ps expected profit reduced by the many contingencies which might have prevented any profit being made.
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Equitable compensation (damages) (cont) Is equitable compensation (or are damages) the appropriate remedy for the Douglases in Douglas v Hello! ? substantial proceedings were too late for the Douglases to claim an injunction - an account of profits was too hard to administer. Douglases made commercial and private claims. Hello! made a separate claim.

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Equitable compensation (damages) (cont)

1. The private confidentiality claim Douglases at 1st instance were awarded 3,750 each for distress caused by unauthorized photographs not appealed.

CA at [109] Douglases were entitled to complain about the unauthorised photos as infringing their privacy on the ground that these detracted from the favourable picture presented by the authorised photos
A modest sum?
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Equitable compensation (damages) (cont) 2. The Douglas commercial claim HL (maj) found that the wedding photos were equivalent to a trade secret in the Douglases hands the value of interference with this interest at 1st instance was put at 7,000, a figure which was not appealed. Damages in Douglas for breach of commercial confidentiality were justified as (limited to) additional labour and expense of editing the selection of photographs. But what is the commercial value of a confidential information to someone who has already extracted the market value of the confidence and agreed to make it public?
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3. OK! Magazine claim 1m+ damages allowed at 1st instance confirmed by HL (Lord Hoffman) Obligation binding on surreptitious photographer and on persons like Hello! who acquired the information from him. cf. LL Nicholls and Walker (diss): photos to be published to the world by OK! and not intended to be kept confidential is this persuasive? Maj. - OK! purchased the benefit of the obligation from the Douglases and was entitled to protect the valuable right against Hello!
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Constructive trust The need for an effective remedy, where damages are speculative, or impossible to compute, few or no profits are made for the purposes of an accounting, and an injunction is inappropriate.

e.g., where the confidence-breaker has established a business structure based on the misappropriated information. Personal and proprietary remedies (equity and the advantages of the Anglo-American over civilian legal systems).
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Constructive trust (cont)

Lac Minerals v International Corona Resources [1989] 2 SCR 574 (SC of Canada) .small mining company discovers mineral in distant territory and enters discussion with larger company to exploit discovery as a joint venture no agreement larger company acquires land and spends development money

La Forest J remedy for breach of smaller companys confidence must achieve restitution quantum of damages too hard to establish.
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