205W2Obligationsof Confidence PDF

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MODULE 2 – EQUITABLE OBLIGATIONS W2 OBLIGATIONS OF CONFIDENCE

WHEREARE WE? • Module 2:

1. Jurisdictional Basis of Liability 2. Elements of an Action for Breach of Confidence 3. Third Party Liability

Obligationsof Confidence Equitable Obligations Fiduciary Obligations

4. Defences

5. Remedies 6. Government Information / Secrecy

JURISDICTIONAL BASIS OF LIABILITY • Common Law: – Contract • Express or implied contractual terms, breach results in a remedy. – Tort • Interference with contractual relations – Inducing the breach of a contract • Conversion – Depends upon the acceptance of the view that information is property, it is not very accepted • Statute: – Government information and privacy – Intellectual property law. Copy right laws

• Equity: – Equity has an original, inherent and independent jurisdiction to grant relief against actual or threatened breaches of confidence. Doesn’t rely on a contract. •

Founded upon an: obligations of confidence : ‘ it is an obligation of conscience arising from the circumstances in or through which the information was communicated or obtained’ – Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) (1984) 156 CLR 414, 438 (Deane J)

So what is an equitable obligation of confidence? A confidence is formed when one party (the confider) imparts to another (the confidant) private or secret matters on the express or implied understanding that the communication is for a restricted purpose.

Equity will restrain the confidant from disclosing or making unauthorised use of the information and if necessary, hold him or her accountable for any profits gained or impose liability for losses incurred by such improper use, this general occurs trough equitable compensation. 1. Duty not to use confidential information 2. If used or disclosed without consent –> equitable remedy ELEMENTS OF AN ACTION FOR BREACH OF CONFIDENCE- Coco v A N Clarke (Engineers) Ltd • Plaintiff must establish that: 1. The information has a necessary quality of confidence or secrecy (confidential information) 2. The information was imparted, or obtained, in circumstances importing an obligation of confidence (obligation of confidence) 3. An actual, or threatened, use or disclosure of the information has occurred, that is unauthorised (breach) - Coco v A N Clarke (Engineers) Ltd [1969] RPC 41, 47 (Megarry J) (aff’d * The Commonwealth of Australia v John Fairfax & Sons Limited (1980) 147 CLR 39, 51 (Mason J)) 1. IS THERE CONFIDENTIAL INFORMATION?  Specifically identify the relevant confidential information. show that the information has a necessary quality of confidential. It has to be identify because the order would be in an injunction -order to no doing it. o Information can take a range of different forms:  Words  Pictures / Photographs  Duchess of Argyll v Duke of Argyll [1967] Ch 302-petition for divorce -adultery Videos  Genetic material  Franklin v Giddins [1978] Qd R 72-a cutting taking from the pantry.  Electronic information 1.1 Test  To be confidential, information must have some degree of secrecy, and must not be in the public domain o A test of “relative” secrecy-doesn’t have an absolute secret-if it is known by other it only need to be known by a small group. o Question of fact in each case HRH Prince of Wales v Associated Newspapers Ltd [2008] Ch 57  Prince’s travel diaries copied and given to 45-75 people  Information contained in the diaries still regarded as confidential as despite its circulation amongst the Prince’s friends, it was not in the broader public domain.

o Complexity not necessary- info doesn’t need to be important  Ideas may be protected as information, if sufficiently developed o Talbot v General Television Corporation Pty Ltd [1980] VR 224  Talbot had The idea for a series of television shows called “To Make a Million” was communicated through written submissions and a pilot script handed over channel 9 during negotiation meetings for the sale of the idea  The concept was sufficiently developed and capable of protection. Channel 9 did not responded to Talbot but then Ch advertised as if it was its own.  Applied an interim injunction to stop it quickly to go on the air.  And court confirmed that the concept was sufficient developed. o Information may still be secret, even if derived from pubic information, if something new and confidential has been brought into being by the application of the skill and ingenuity of the human brain • Coco v A N Clarke (Engineers) Ltd [1969] RPC 41 – For example: If the component parts of a machine are in the public domain, if there is some particular application of skill and ingenuity on the part of the plaintiff in the use of those component parts to make their machine (ie. that is novel or unusual), then the end product can still possess the necessary quality of confidence. For instance, ingredients for a product or how the product is made and part of it is in the public domain but some still confidential. o Note the springboard doctrine-later 1.2 Loss of Confidentiality  Information can lose its character as confidential by: o Lapse of time  Attorney-General v Jonathon Cape Ltd [1976] 1 QB 752 o Concerned government information in the form of diaries of a former British cabinet minister o Court-10 years had passed since the events and discussions reported in the diaries, such that although confidential at the time, it was no longer be regraded as confidential. o Publication  Subject to the nature of the information and the medium of communication  Australian Football League v The Age Company Ltd (2006) 15 VR 419 The names of football players who had tested positive to drugs had been disclosed anonymously on internet discussion forums, and there had been gossip about who the players were.

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Information remained confidential: given their lack of accountability, veracity and authority, publication on such websites did not place the information into the public domain or destroy its confidential nature

1.3 Types of Information Protected o Creative:  Concepts or ideas (which are sufficiently developed)  Talbot v General Television Corporation Pty Ltd [1980] VR 224 o Government:  Government information can be protected as confidential-special rules  Attorney-General v Jonathon Cape Ltd [1976] 1 QB 752  The Commonwealth of Australia v John Fairfax & Sons Limited (1980) 147 CLR 39 o Personal:  May include a person’s medical or legal information  Earl v Nationwide News Pty Ltd [2013] VSCA 236 o Medical information about a person’s particular medical condition and the fact that they are seeing a certain doctor, can be protected  Duchess of Argyll v Duke of Argyll [1967] Ch 302  Giller v Procopets [2008] VSCA 236 Giller v Procopets [2008] VSCA 236 • • • •

Ms Giller and Mr Procopets were in a de facto relationship Mr P filmed their sexual activities across a variety of 10 occasions Their relationship broke down and Mr P decided to show, or attempt to show, the video to Ms G’s friends and family-humiliating and upsetting her Ms G succeeded in her action: 1. Confidential Information: Information about the private sexual activities between two people was obviously not in the public domain 2. Obligation of Confidence: Arose due to the nature of the relationship: [P]ersons indulging in a sexual activity in the privacy of their own home create a confidential relationship during such activity. In my view it is difficult to think of anything more intimate than consensual sexual activities between two parties in the privacy of their home. It involves a relationship of mutual trust and confidence which is to be shared between the persons but is not to be divulged to others without the consent of both parties: [2004] VSC 113, [156] (Gillard J) 3. Breach: Satisfied by the actual and threatened disclosures o Commercial or Technical:  Many cases for breach of confidence involve commercial information  Additional issues may arise in this context: A. Trade Secrets B. Springboard Doctrine

C. Information Acquired During Employment A. Trade Secrets o If you can categorise information as a trade secret, that will of itself mean that the information is confidential-then 1st element would be satisfied. o When is something a trade secret?: * Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd -commercial or technical info [1967] VR 37, 50 (Gowans J) o Consider the: some factor to determine if it is secret are: 1. Extent to which the information is known outside the plaintiff’s business 2. Extent to which the information is known by employees and others involved in the plaintiff's business 3. Extent of measures taken to guard the secrecy of the information 4. Value of the information to the plaintiff and their competitors 5. Amount of effort or money spent in developing the information 6. Ease or difficulty with which the information could be acquired or copied by others. 7. Employees understood that info could not be disclosed. o Information as to the process and design of machinery making flock-lined rubber gloves was a trade secret o Secret – the subject matter of a trade secret must be secret. Matters of public knowledge or general knowledge in a industry cannot be appropriated by one as his secret. Matters which are completely disclosed by the goods which one markets cannot be his secret. The owner might have revealed the secret to others, like employees and it is ok. o Novelty and invention are not requisite for a trade secret as they are for patentability. * The “KFC Original Recipe”: https://en.wikipedia.org/wiki/KFC_Original_Recipe B. Springboard Doctrine = A qualification to the public domain principle • If a defendant takes commercial information and uses it, it is no defence that, given sufficient time, labour and expense, the confidential information, product or process, once released into the market, could have been reproduced anyway: (reverse engineering) – there is a defence for this too. A person who has obtained information in confidence is not allowed to use it as a springboard for activities detrimental to the person who made the confidential communication, and springboard it remains even when all the features have been published or can be ascertained by actual inspection by any member of the public ... the possessor of such information must be placed under a special disability in the field of competition to ensure that he does not get an unfair start • Terrapin Ltd v Builders Supply Co (Hayes) Ltd [1967] RPC 375, 391 (Roxburgh J) – Defendant will be restrained from using confidential information to obtain an unfair start for the period of time that it would take other competitors to reverse engineer and develop the product -> “springboard period” To stop

competing in the market during the time that the other engineers would take to reverse engineer the product and make the product. • Remedy = Monetary remedy (for time and expense saved); Injunction for the springboard period. C. Information Acquired During Employment • To what extent can ex-employees use information obtained during their employment? – Depends upon the category of the information • Faccenda Chicken v Fowler [1987] Ch 117 • Find out costumers, prices, delivers. Then he quit and set up a business with the same characterises. Court found 3 types of information: 1. Public or trivial information: Eg: A published patent specification • Not confidential. Can be used during or after employment 2. Know-how: The build-up of knowledge, skills or experience over time. Eg: Accumulated knowledge of delivery routes, pricing and customers • Cannot use during employment (must treat as confidential) but can use after UNLESS a valid restraint clause • Still protected after if deliberately copied, removed or memorised • Court - Then the D could use this know-how info because he was no longer working there 3. Trade secrets: • Confidential: cannot use during or after employment • IN EXAM- preference to allege that the info is a trade secret cause it cannot be use during or after. If not success wit this argument the move to the others types of info. – Applied in • * Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 * Wright v Gasweld Pty Ltd • Gasweld (G) imported tools and hardware from Taiwan – Purchased from only 4 suppliers out of a possible 3000 – G had spent a lot of time carefully selecting reliable suppliers and manufacturers -info considered of value • Initially only G’s managing director dealt directly with the Taiwanese suppliers – From 1985, Wright (W) signed a confidentiality agreement and went to Taiwan • W left G and set up a competing business using the 4 suppliers. An injuction was sought • The confidentiality agreement contained a restraint clause: 6. Secrecy

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(a) The employee shall not during the continuance of this agreement or after its determination (however caused) disclose, use or attempt to disclose or use in any manner any information obtained during the course of employment as to the identities and whereabouts of any supplier utilised by the company … Held: info as not a trade secret but (protected during the course of employment), so not trhis catregory. It was Category 2 information (know-how) – information the employee must treat as confidential until the termination of their employment, but which once learned, remains in the employee’s head and becomes part of their skill and knowledge This info was then protected by the restraint, an as such it could be protected after employment by the restraint clause. None of the information which the employers sought to protect could be classified as a trade secret, accepting the expression as being far end of the spectrum which runs btw inf which is: • Publicly available or trivial • Common to a particular trade or calling even if not publicly known • Confidential info properly so called • Secrets that attract equitable protection whether or not there is a contractual agreement. Determining what is confidential is a question of fact and in previous cases have been considered: • The fact that skill and effort was expanded to acquire the information • The fact that the info is jealously guarded by the employer, is not readily made available to employees and could not, without considerable effort and or risk, be acquired by others • The fact that it was plainly made known to the employee that the material was regarded by the employer as confidential • The fact that the usages and practices of the industry support the assertion of confidentiality. • The fact the employee in question has been permitted to share the information only by reason of his or her seniority or high responsibility within the employer’s organisation.

In exam- do not need to know what a valid restraint clause is, assume it is valid, alternatively if I am dealing with cat 2 info and not mention of restr clause just point out that of it is c 2 info cannot be used during employment, it is confidential but might be use following the employment, subject to a restraint clause.

Equity’s protection of confidential information

WHEREAREWE? 1. Jurisdictional Basis of Liability

Equitable Obligationsof Confidence

2. Elementsof an Action for Breach of Confidence

1. Confidential Information

3. ThirdParty Liability

2. Obligation of Confidence

4. Defences

3. Breach

5. Remedies 6. Government Information / Secrecy

2. IS THERE AN OBLIGATION OF CONFIDENCE? • An obligation of confidence can arise: 1. By Agreement • Express or Implied 2. Due to the Nature of the Relationship Between the Parties 3. Due to the Subject Matter and Circumstances of Communication 4. Where Information is Obtained by Reprehensible Means 2.2 Nature of the Relationship Between the Parties  If the parties fall within an established category of relationship, you can assume that there is an obligation of confidence between them  The types of established categories include: o Professional person and client  Eg: Doctors, bankers, accountants o Employer and employee o Relationships of mutual trust and understanding  Husband and wife  Duchess of Argyll v Duke of Argyll [1967] Ch 302- sexual pictures case  Close friends / de facto relationships  Giller v Procopets [2008] VSCA 236 o Fiduciary relationships  Eg: Trustee and beneficiary; agent and principal, director and company, solicitor and client If there is not a relationship of these types, then look at the Subject matter and the circumsnatnce of the communication

2.3 Subject Matter and Circumstances of Communication • An obligation of confidence may be implied by the subject matter or nature of the information, and the circumstances in which the information is disclosed • Two tests: 1. The Reasonable Person Test: Would a reasonable person in the shoes of the recipient have realised, on reasonable grounds, that the information was given to them in confidence?if yes, then an obligation existed. In the context of commercial info, this test is easy to satisfy. • Coco v A N Clarke (Engineers) Ltd [1969] RPC 41 2. The Limited Purpose Test: Has the information been disclosed for a particular purpose? If so, it cannot be used for another purpose • The purpose for which the information is conveyed determines the scope of the obligation of confidence • * Castrol Australia Pty Ltd v EmTech Associates Pty Ltd (1980) 22 ALR 31 * Castrol v EmTech - Confidential circumstances 

The P wished to develop a new lubricanting oil. D carried out tests on different oils submitted by the P. A report was produced and as a result the P prepared to market the new product. The P then consulted the TPComision seeking assessment whether the proposed promotional material compied with the consumer protection p[rovisions on the TPA. Then the commission indtcated that the P advertisement could fall for consideration under the TPA and then sough to prosecute the P for breaches of other provisions of the TPA. The P sought to restrain the use of doc, arguing that they had been supplied for a limited purpose.

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Plaintiff provided documents to the Trades Practices Commission solely to review an advertisement. Commission found some serious issues and sought to prosecute Castrol for those Castrol supplied the Trade Practices Commission with a test report prepared by EmTech on new motor oil, so that the Commission could advise whether proposed advertising breached the Trade Practices Act (Cth) (TPA) o Castrol was claiming that the use of its oil would reduce a car’s fuel consumption by 3.5% The Commission subsequently used the reports to investigate and bring proceedings against Castrol for breaches of the TPA

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Castrol sought to restrain the use of the documents on the basis that the documents had been supplied for a limited purpose

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Issue - Was the Commission's use of the plaintiff's information a breach of confidence?

Held: Yes, it was a breach of confidence 

The documents were allows to be used for one purpose only, for the review of an advertisement

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"The Trade Practices Commission cannot use a particular confidential report for the purpose of investigating possible breaches of the Trade Practices Act." Injunction awarded to restrain use of the report for purposes other than for which it was supplied o Obligation of confidence arose on the basis that the information was provided for a limited purpose: at 46-7 (Rath J)-to advise as to whteher breaches to the act. Outside of this ourpose the use of the info would be a breach of confidence.

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2.4 Information Obtained by Reprehensible Means • An obligation of confidence may arise if information is obtained: – Surreptitiously; or – By reprehensible, unlawful or improper means • Obligation of confidence is imposed due to unconscionability-D acting contraru to the P’s rights. • * Franklin v Giddins [1978] Qd R 72: Information gained by reprehensible means

– Fra...