Topic 2 Breach of confidence(2)-1.ppt

7/27/2019 Topic 2 Breach of confidence(2)-1.ppt

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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 hasbeen directly or indirectly obtained without

consent.

Different interests are protected according tothe 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 ofunfair competition, and the encouragement ofinvention.

2. Personal and artistic secrets(e.g., marital secrets, scandals, identity)

Relevant interests include personal integrity,autonomy, and the social/moral imperativesassociated with privacy claims.


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3. Government secrets

(e.g., ministerial deliberations, communications withforeign governments)

Relevant interests are essentially thepublicinterest- 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 personalconfidentiality that that the Douglases intended to

provide public photographs of their wedding?

Can celebrities claim commercial confidentiality inrespect 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 Clark46

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


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An example - a hybrid confidence (breach of botha trade secret and a personal confidence werealleged):

Douglas v Hello!(1st inst., confirmed by HL -photos of wedding were information ofcommercial value which the law ofconfidence would protect)

Is a right of privacy a more appropriate way toprotect private confidences?

Is it more transparent than confidentialitydoctrine?

cf. US right of privacythe need tobalance the right of privacy against the rightof free speech a conflict of absolutes andincommensurables?


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cf. UK and the European Convention on HumanRights - was the legitimate interest which theDouglases had in their image trumpedby freespeech, etc.

Lindsay J (at 1st inst.): question of prioritybetter left to Parliament.

Lenah Meats - could a right of privacy be used toprevent the ABC from broadcasting asurreptitously obtained film of Lenahs

possum abattoir operation?should the absence of any tortious conducton the part of the ABC be irrelevant?


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The Lenah Game Meats response:

Gleeson CJ: the law of confidentiality is adequateto 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.


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A contract between the parties is often present

and a right to confidentiality arises as an express or

implied term (e.g., of employment) - equitableprinciples apply to contractual claims.

There is not always a confider and a confidant -

the right is not relational - secrets are protected, notconfidences imparted from one to another -

confidence-breakers may be thieves.

Confidences and relationships of trust areprotected 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 precisedescription of information said to beconfidential.

OBrien v Komesaroff(1982)

Tax evasion - alleged confidential informationon how to evade an Act of Parliament - draft

unit trust deed and articles of association - justknowledge and skill, not secrets.


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2. Information must be confidential

A very general requirementthe quality of

confidence protected may be a novelcombination of commonplace or well-knownthings - but cannot be public knowledge (e.g.,Coco: theengine design not secret and was

what any competent consultant could produce).

The quality of confidence is a matter of accessand pathways data or fact combinations may

be confidential if special labours must beundertaken to reach or reproduce them thedoctrine explicitly protects commercial value.


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Proviso that subject information cannot be publicknowledge, 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 thederivation of something not publicly known (cf.patent protection):

Talbot v General Television Corp

.claimant conceived of How to make a millionseries of television programmesa saleableproposition its kernel was of value.


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Hospital Products v US Surgical Corp [1983] 2NSWLR 157(CA) and reverse engineering.

Harmful confidences:

Where the defendant threatens to disclose some

economically deleterious or compromising factabout the claimant:

Douglas v Hello! Ltd - actors images confidential

(in CA) the significance of no protection underthe NY law where (the initial) breach ofconfidence 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 confidentialinformation:

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] RPC41 (HL 3.17C).

Design information was volunteered by aninventor negotiating for the sale of hisinvention.

a reasonable man in the [defendants]circumstances would have believed that anobligation of confidentiality was imported

(see Megarry J at 46).


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Saltman Engineering Co v Campbell Engineering

Engineering drawings misused by anmanufacturers sub-contractor - an indirect or

triangular relationship of confidence .

How the element of confidentiality and the

resulting obligation was inferred.

Saltman underlines the non-relationalnature ofthe 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 thepatents office from performing public tasks.

Inferring the confidentiality obligation:

Did the Dept know or ought it have known thatSKF disclosed its formula for a limited purpose

which excluded expediting approval of acompetitors generic copy?

No.


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Smith Kline wasa 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 obtainit imply that information about the

slaughtering process was confidential?

no, illegality of the trespass and the usethat 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 TPAauthorisation - Castrol disclosed a fuel reportfor the limited purpose of the TPC approving amarketing campaign.

There is no breach of duty if the information isdiscovered through the defendants own efforts- for instance, by searching in a public libraryor through reverse engineering:

Hospital Products v USSC.


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Remedies

Assume that the confidence is protected solely in

equity.

i. - Injunctions - the primary remedy - duration -

relief can be tailored to reverse a marketadvantage that D has obtained.

Douglas v Hello!- on the appropriateness ofinterlocutory 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 beprevented 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 notbe inferred where the information forms partof an employees general skill andknowledge.


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Twofold aimsof 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) areawarded on a restitutionary basis.


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Redistribution of gains made by a defendant may

serve either the restitutionary, or compensatorygoals. 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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Illustratingthe 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 restitutionarygoal is served by the award

of an injunction, permanently preventing the

defendant from using the idea in the newmarket, and also by an account of profits, to

redistribute the profit made.


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2. Confidence-breaker appropriates only anunrealised idea and is brought to court beforeany profits are made.

(e.g. as in Coco v AN Clark)

How to fulfil Ps restitutionary interest? InCoco, the value of the inventors invention

was influenced by a finding as to its natureinteraction of remedy with cause of action.

What Coco lost and should be recompensedfor was equal to the value of a consultantsservices - a damages award would treatCoco as though he had sold the conceptionto 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 confidence-

breaker achieved by the wrong or, if the

wrong is serious enough, the defendant mightbe 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 previouspositions - valuation of the information is thecritical exercise - does it amount to a lostopportunity, or only a lost consultants fee?

Talbot v GTV-9pirated concept of a TV show- plaintiff was awarded a limited injunction plusdamages for the wrongful act how tocompute damages:

aff. Young CJ (FC): P awarded an amountto reflect Ps expected profit reducedby themany contingencies which might haveprevented any profit being made.


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Equitable compensation (damages)(cont)

Is equitable compensation (or are damages) theappropriate remedy for the Douglases inDouglas v Hello!?

substantial proceedings were too late for theDouglases to claim an injunction - an account ofprofits was too hard to administer.

Douglases made commercial and private claims.Hello!made a separate claim.


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1. The private confidentiality claim Douglasesat 1st instance were awarded 3,750 each fordistress caused by unauthorizedphotographs not appealed.

CA at [109] Douglases were entitled tocomplain about the unauthorised photos asinfringing their privacy on the ground thatthese detracted from the favourable picture

presented by the authorised photos

A modest sum?


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2. The Douglas commercial claim HL (maj) found

that the wedding photos were equivalent to a tradesecret in the Douglases hands the value ofinterference with this interest at 1st instance was putat 7,000, a figure which was not appealed.

Damages in Douglas for breach of commercialconfidentialitywere justified as (limited to) additionallabour and expense of editing the selection ofphotographs.

But what is the commercial value of a confidentialinformation to someone who has already extractedthe market value of the confidence and agreed tomake it public?


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3. OK!Magazine claim

1m+ damages allowed at 1st instance

confirmed by HL (Lord Hoffman)

Obligation binding on surreptitiousphotographer and on persons like Hello!whoacquired the information from him.

cf. LL Nicholls and Walker (diss): photos to bepublished to the world by OK!and not intendedto be kept confidential is this persuasive?

Maj. - OK!purchased the benefit of theobligation from the Douglases and was entitledto protect the valuable right against Hello!


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Constructive trust

The need for an effective remedy, wheredamages are speculative, or impossible tocompute, few or no profits are made for thepurposes of an accounting, and an injunctionis inappropriate.

e.g., where the confidence-breaker hasestablished a business structure based onthe misappropriated information.

Personal andproprietaryremedies (equity andthe advantages of the Anglo-American overcivilian 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 indistant territory and enters discussion with

larger company to exploit discovery as a jointventure no agreement larger companyacquires land and spends development money

La Forest J remedy for breach of smallercompanys confidence must achieve restitution

quantum of damages too hard to establish.

Topic 2 Breach of confidence(2)-1.ppt

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