5.3 Confidential Information

A person who receives information of a confidential nature, in circumstances of confidence, cannot make unauthorized use of that information. Equity will restrain any threatened abuse and otherwise will hold the confident accountable for any profits acquired by such improper use: Coco v A N Clark (Engineers) Ltd.

The plaintiff, the confider, must show that the information was of a confidential nature, and not a matter of common knowledge: Saltman Engineering Co Ltd v Campbell Engineering Co Ltd.

The circumstances in which the information is imparted must be confidential.  The trade secrets of an employer will be protected under this doctrine, but an employee will not be prevented from using skills and knowledge acquired in the course of employment: Herbert Morris Ltd v Saxelby.

Coco v A N Clark (Engineers) Ltd [1969]
Inventor of a moped went to Clark with a view to selling them the design for manufacture. Clark said no thanks but later produced a moped very much similar to Coco’s. Sued and lost – couldn’t make out the second element listed below. Coco was careless in the way he imparted the information.
1.    The information at issue is of a confidential nature;
2.    The information was communicated in circumstances of confidence;
3.    There was unauthorized use of the information;

The reasonable man’ test: The obligation of confidence will arise out of a contract between the parties, and the extent of the obligation will be determined by that agreement, although the existence of such an agreement will not necessarily exclude the operation of general equitable principles. An obligation of confidence may arise simply from the circumstances surrounding the receipt of the information  the question then is whether the information was disclosed for a limited purpose.

One view is to take the objective test where the confident will be found to have received the information for a limited purpose if a reasonable person, standing in the shoes of the recipient, would have realized that the information was being given to him or her in confidence: Mense v Milenkovic.
However, it is stated that the better test would be to ask whether an equity lawyer, ‘observing the analogies so far drawn from the produce of labour, would in all the circumstances recognise the information in question as being the property of the plaintiff’.

Information needs to be confidential
-    Often if it is in the public domain it will not be considered confidential.
-    But it can still be confidential if there are a number of elements that are known to the public but which are brought together in a unique way;
-    This has also been applied to cases of idea poaching in TV networks and in reprehensible means involving industrial espionage;
-    In situations of employees and confidential information the Courts in Australia have adopted the Faccenda approach:

Faccenda Chicken Ltd v Fowler
There are three kinds of employee knowledge with degrees on confidentiality:
1.    information which is publicly available and trivial so obvious it cannot be protected;
2.    information which is confidential only during the term of employment. It becomes part of the person’s fund of knowledge should the employment be terminated;
3.    Confidential trade secrets which will be protected even after termination of the employment.
Goulding J noted that information in the second category might be protected after the period of employment by express agreement restraining the employee from competing, subject to reasonable limits such as time and geography. As seen in

Wright v Gasweld Pty Ltd
Facts: Wright was employed by Gaswald who imported goods from 4 Taiwan dealers out of 3000 which produced similar goods. They were chosen for their reliability. Only Gaswalds managing director dealt directly with the suppliers in Taiwan. Wright was sent to Taiwan but was required to sign a written agreement containing a promise to keep confidential the identity and whereabouts of any supplier used by Gaswald during his employment with the company and thereafter. After leaving Gaswald, Wright set up competition and Gaswald
sought to restrain him from using information about its suppliers.
Held: An injunction was granted restraining Wright from using the information for a period of 4 years from the date of termination of his employment. The clause of the contract restraining Wright for an unlimited period of time is void at common law for being too wide under s4 of the Restraining of Trade Act.

Information obtained by reprehensible means: Someone who obtains information by dishonest, unlawful or superstitious means cannot be said to have been given information ‘in confidence’, and yet there can be no good reason why a person in that position in the same way as a consensual recipient of such information.

The Springboard doctrine: A person who receives information in confidence will not be allowed to use it as a springboard for activities detrimental to the party who provided the information, even though all other aspects of the product have been published or can be ascertained by actual inspection by any member of the public. This is to ensure that the possessor of such information does not get an unfair start.

Reciept by third parties: The obligation of confidence will apply not only to the original confidant, but also to any third party to whom the information is conveyed and who knows, or becomes aware, of the confidentiality of the original communication, regardless of whether they acquired the information innocently or for value: Wheatley v Bell.
 
If the third party possesses actual knowledge of the dishonesty or of the circumstances surrounding it, then they may fall under the second leg of Barnes v Addy, and be held liable to account as constructive trustee, if need be as strangers participating with knowledge in a dishonest and fraudulent design on the part of a trustee or fudiciary.

Breach of duty

It is not clear whether the confider must suffer any detriment from such use. It has been argued in some cases that detriment is essential and in other cases that it is not. If detriment is essential it gives the action for breach of confidence the flavour of a cause of action at common law with the element of damage rather than that of an equitable claim concentrating on the conduct of the defendant. Detriment is not necessary in an action to restrain a breach of fiduciary duty.

Defences

Change of position: Where a party receives confidential information innocently (or at least in innocence of the limitation placed on its use) and, believing he or she has the right to use the information, makes some significant or otherwise acts to his or her detriment by materially altering his or her circumstances on the understanding that he or she can use the information, that party can plead that change of position as a defence against a confider seeking to assert the right to confidentiality.

Public interest:

Sometimes the confident will be justified in disclosing the information when it is in the public interest. In Australia, the courts have not been so willing to apply this principle as seen in Castrol Australia Pty Ltd v Emtech Associates Pty Ltd.
Facts: Plaintiff provided certain documents to the Trade Practices Commission for the purpose of establishing whether some proposed advertisements satisfied a part of the act. The commission later attempted to prosecute Castrol for other breaches on the basis of information contained in the documents. Castrol sought to restrain this on the ground that the documents were supplied for a limited purpose. The commission argued that such use was justified in the public interest.
Held: the proposed use was a breach of confidence and that the defence of public interest was not made out. He said that a just cause for breaking a confidence must be more weighty and precise than a public interest in the truth being told.

When the confider is the government, or some government agency, the public interest consideration takes on a different meaning. In Commonwealth v John Fairfax & Sons Ltd it was held that “It is unacceptable in our democratic society that there should be a restraint on the publication of information relating to the government when the only vice of that information is that it enables the public to discuss, review and criticize government action”.

Access to the Cmlth Govt documents in the normal course of events is governed by the Freedom of Information Act 1982 (Cth) and also the Privacy Act 1988.

In some circumstances, the law may compel disclosure of information received in confidence, such as the Public Health Act 1902 which imposes a requirement on medical practitioners to inform the relevant authorities when a patient tests positive for the HIV virus.