Confidential information
Same problems, different resolutions in the United Kingdom and Australia
Mark Leeming1
Monday, 3 October 2011
Faculty of Law, University of Cambridge
This paper is not about the most obvious divergence between the British and Australian law as to
confidence – that brought about by statute. You will be more familiar than me with the so-called
balancing process required by the Human Rights Act 1998 (UK), an example of which may be seen in
last week's decision in Ferdinand v MGN Ltd.2 Notwithstanding the suggestion made in that decision
that traditional protection of confidential information has been substantially supplanted by the statutory
“action for misuse of private information”,3 the premise of this paper is that conventional non-statutory
protection of confidential information remains important. In Australia, too, legislation and the potential
for further legislation loom large: there is presently debate about privacy law reform,4 and a further
inquiry into Australian media was announced on 14 September 2011;5 these events are not unconnected
with the attention that has been given to a formerly Australian company called News Corporation. In
terms of actual legislation, one important provision in commercial contexts in s183 of the (federal)
Corporations Act. If that statutory invitation were taken up, it could have much the same impact in
confidential information cases as s52 of the (former) Trade Practices Act has in misrepresentation
cases. Like s52, it imposes a new, broadly worded, federal norm of conduct, breach of which engages a
statutory selection of remedies. It provides that “a person who obtains information because they are, or
have been, a director or other officer or employee of a corporation must not improperly use the
1 Senior Counsel in the State of New South Wales; Challis Lecturer in Equity, University of Sydney. This is the written
version of a paper presented to the Centre for Corporate and Commercial Law and the Centre for Intellectual Property
and Information Law, a sound recording of which is available at http://www.sms.cam.ac.uk/media/1177086. I am
grateful to Peter Turner for initiating this paper, and for all of the participants, especially (but in no order) for the
questions and comments of Lionel Bentley, Bill Cornish, Matt Dyson and Richard Nolan.
2 [2011] EWHC 2454 (QB); at the time this paper was prepared, parts of the reasons were not publicly available, by
reason of injunctions granted pending an application for leave to appeal: see The imes, 30 September 2011, p7.
3 See at [106]: “The action for misuse of private information has grown out of the older equitable claim for breach of
confidence. Breach of confidence in its original form does still have a life of its own and may be relevant, for instance,
where the Claimant is not in a position to invoke Article 8.”
4 See for example B McDonald, “Tort Law’s Role in Protecting Privacy”, Private Law Conference, Mainz, Germany, June
2011.
5 Senator Conroy, “Government Announces Independent Media inquiry”, media release 14 September 2011.
information to (a) gain an advantage for themselves or someone else; or (b) cause detriment to the
corporation.” The information is not expressly required to be “confidential”, and what is “improper” is
likewise left undefined. The remedies include injunctions and compensation orders, in respect of
which profits are to be included; there is also a discretionary defence if the person has acted honestly
and ought fairly to be excused.6 There is an unresolved dispute in Australia as to whether this broadly
worded provision is coextensive with the position at general law or expands beyond it; the weight of
authority, perhaps belatedly, construes the legislation to mean what it says, stripped of restrictive
glosses.7
In Australia's nine subnational jurisdictions, broadly worded human rights legislation has been enacted
in two (Victoria and the Australian Capital Territory). The Charter of Human Rights and
Responsibilities Act 2006 (Vic) includes counterparts to Articles 8 and 10 (see sections 13 “Privacy and
reputation” and s15 “Freedom of expression”), and was the subject of sustained attention by the High
Court of Australia four weeks ago in Momcilovic v The Queen [2011] HCA 34, a fractured decision
from which a 5:2 majority emerged holding that the so-called “dialogue model” (with curial
declarations of incompatibility) could not exist at the federal level for constitutional reasons. There
was extensive analysis of decisions of the House of Lords and the Privy Council, and a statement by
Gummow J at [160] that “the House of Lords decisions upon the UK Act exercised a fascination to the
point of obsession in the preparation and presentation of much of the submissions in the present appeal.
That proved unfortunate ...”; that statement tends to confirm the unwisdom in devoting attention to the
various Australian and English statutory regimes, vital in practice though they are.
For comparative purposes what is more interesting is the different approaches to judge-made law.
There are of course various differences at the periphery. For example, Australian courts seem more
readily to protect what has been termed “getting to know you” confidences given by a former client –
as it has been put, “the client's strengths, weaknesses, honesty or lack thereof, reaction to crisis,
6 Sections 1317S and 1318 (derived from the Judicial Trustees Act 1896 (UK), s3: see Youyang Pty Ltd v Minter Ellison
Morris Fletcher (2003) 212 CLR 484 at [33] and cf s727 of the Companies Act 1985.
7 There are first instance decisions of Young J to that effect: Rosetex Company Pty Ltd v Licata (1994) 12 ACSR 779 at
784; Forkserve Pty Ltd v Pacchiarotta [2000] NSWSC 979; (2000) 50 IPR 74 at 79, which were followed (seemingly
without any point being taken) by the Full Court in Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009]
FCAFC 2. On the other hand, in McNamara v Flavel (1988) 13 ACLR 619, Millhouse J (with the agreement of King
CJ) held at 625 that the test is not whether the information is “confidential”, “it is how the information is acquired”.
That broader test was followed most recently by Siopis J in Hydrocool Pty Limited v Hepburn (No 4) [2011] FCA 495 at
[356]. McNamara v Flavel was also relied on in ASIC v Somerville (2009) 259 ALR 574 at [39] where Windeyer AJ
disagreed with Young J. Gordon J agreed with Windeyer AJ's views in Digital Cinema Network Pty Ltd v Omnilab
Media Pty Ltd (No 2) [2011] FCA 509 at [163], where her Honour stated that ““[i]nformation” in s 183(1) covers any
information that a person may have acquired because of their position in the corporation”.
pressure or tension, attitude to litigation and settling cases and tactics”. In Yunghanns v Elfic Ltd (3
July 998, Supreme Court of Victoria), Gillard J said that “The overall opinion formed by a [lawyer] of
his client as a result of his contact may in the circumstances amount to confidential information that
should not be disclosed or used against the client”. New Zealand courts seem to take the same
approach (GBR Investment Ltd v Keung [2010] NZHC 411), although it seems that English courts have
tended to be more reluctant: see Goubran, “Conflicts of Duty: The Perennial Lawyers' Tale – a
Comparative Study of the Law in England and Australia” (2006) 30 MULR 88. And there are
differences within Australia's separate jurisdictions. Although there is a single common law of
Australia,8 the fact of the matter is that courts in New South Wales and Western Australia hold,
agreeing with the Privy Council's decision in Prince Jefri Bolkiah, that there is no “duty of loyalty”
between a solicitor and a former client, so that such he or she is free to act so long as there is no breach
of confidence or conflict with a duty to the court (see Kallinicos v Hunt (2005) 64 NSWLR 561),
whereas Victorian courts persist in recognising such a duty.9
But I wish to focus upon what seem to me to be some more nuanced doctrinal differences, by asking a
simple question: What pecuniary remedies are available for a breach of confidence at general law?
If the confidence is contractual, then ordinary Hadley v Baxendale damages are available. However,
Australian law has not taken what Lord Nicholls described as the “modest step”10 of permitting an
account of profits for breach of contract – ultimately (in my opinion) because of strongly held views
about remedial discretion and adherence to history. In short, Robinson v Harman (1848) 1 Ex 850;
154 ER 363 continues to hold the field: see Hospitality Group Pty Ltd v Australian Rugby Union Ltd
(2001) 110 FCR 157 at [158]-[159] (Hill and Finkelstein JJ, Emmett J agreeing):
Whether or not the law of contract is "seriously defective" (Attorney-General v Blake [1998] Ch
439 at 457 per Lord Woolf MR), if the court is unable to award disgorgement damages (the
terminology proposed by L Smith in "Disgorgement of the Profits of Breach of Contract:
Property, Contract and `Efficient Breach'" (1994) 24 Canadian Business Law Journal 121), the
position in Australia is that the loss recoverable for breach of contract is limited to that laid
down in Robinson v Harman. That is, the aggrieved party is entitled only to compensation. If
he has suffered no loss, he is not entitled to be compensated. In an appropriate case, the
aggrieved party may be able to recover (by a claim in restitution) benefits that he has made
8 Something comparatively recently established by the High Court, in Lange v Australian Broadcasting Corporation
(1997) 189 CLR 520.
9 The decisions are collected in Ismail-Zai v Western Australia (2007) 34 WAR 379; see also PCCW-HKT Telephone Ltd v
Aitken [2009] HKCFA 11, noted Nolan (2009) 125 LQR 374.
10 Attorney General v Blake [2001] 1 AC 268 at 285.
available to the wrongdoer; for example, he may be able to recover the price paid under an
incomplete contract or recover possession of goods sold but not paid for. Presently, however, it
would be inconsistent with the current principles laid down by the High Court to confer a
windfall on a plaintiff under the guise of damages for breach of contract.
That gives rise to a potentially determinative inquiry, in the most common kind of commercial case –
where there is a formal, written, promise of confidentiality – namely, whether a contractual confidence
expressly or impliedly excludes a concurrent obligation in equity. In accordance with conventional
reasoning, it has been said that "If there was a contractual obligation that covered the topic, there
would, of course, be no occasion for equity to intervene to impose its own obligation": Del Casale v
Artedomus (Aust) Pty Ltd [2007] NSWCA 172; (2007) 73 IPR 326 at [118] (Campbell JA), and if that
be so, in Australia until and unless the High Court says otherwise, that means no account of profits.
But there will always be cases of breach, even where the parties have taken the trouble solemnly to
record their promises in a contract, and the breaching party will often seek to obtain a profit from the
breach. Such a case was the decision of the Full Federal Court in Optus Networks Pty Ltd v Telstra
Corporation Ltd (2010) 265 ALR 281, where the question was framed as follows “that does not cover
the present case, where Optus wishes to be able to seek an account of profits, and the question is
whether the contract permits that.”11 The conclusion was a powerful one, because elaborate contractual
provision had been made identifying what was confidential and limiting damages for breach of those
provisions. The conclusion was informed by the proposition that the fact that an account of profits is
not available for breach for contract is a powerful reason telling against the implied exclusion of an
equitable obligation. The consequence is that a plaintiff may sue on an equitable confidence
notwithstanding that it is partly regulated by contract,12 and then elect (if appropriate, after obtaining
discovery) between a compensatory order (either damages or equitable compensation) or an account of
profits.13 Such an election resembles that available under intellectual property statutes, and for breach
of fiduciary duty.14
If the successful plaintiff elects for an account of profits, it may still be denied on discretionary
grounds. Finn J has said of this, although it is probably fair to say that the issue has not been fully
11 (2010) 265 ALR 281 at [34].
12 As it often is; many contracts will provide, often in the context of a compulsory mediation procedure) that “Nothing in
this contract prevents a party from seeking an injunction in the event of breach of the confidentiality provisions”; such
provisions might give rise to an expressio unius argument to the effect equity is otherwise excluded.
13 Optus Networks Pty Ltd v Telstra Corporation Ltd (2010) 265 ALR 281 at [41].
14 Cf Warman International Ltd v Dwyer (1995) 182 CLR 544 at 570.
analysed judicially, in Australian Medic-Care Co Ltd v Hamilton Pharmaceuticals Pty Ltd (2009) 261
ALR 501 at [674] that:
The grant of this form of relief in breach of confidence cases is in the end a matter for the Court,
notwithstanding a party’s election for an account: see eg Seager v Copydex Ltd (No 1) [1967]
RPC 349; see also Conveyor Co of Australia Pty Ltd v Cameron Bros Engineering Co Ltd
[1973] 2 NZLR 38 at 44. An apparent reason for this is that, given the variable character of
confidential information, its misuse even in a profit making activity may not realistically be able
to be said to result in any profit being attributable to it, the misuse merely effecting what was in
effect a saving of time and trouble...
On the other hand, if the confidence is equitable, common law damages are not available, and the
weight of Australian authority is to the effect that Lord Cairns' Act damages are not available.15 There
is an exception in Victoria, where legislative amendment has made the position clear.16
It seems that English courts have grappled with all this quite differently. The starting point for present
purposes is Lord Nicholls' observation in Attorney General v Blake [2001] 1 AC 268 at 285:
If confidential information is wrongfully divulged in breach of a non-disclosure agreement, it
would be nothing short of sophistry to say that an account of profits may be ordered in respect
of the equitable wrong but not in respect of the breach of contract which governs the
relationship between the parties.
Hence an account of profits may be ordered in exceptional circumstances for breach of contract;
perhaps not surprisingly, given the highly unusual facts of Blake, it has been noted that those
“exceptional circumstances” have proven difficult to articulate.17 It seems that English courts are
willing to award Lord Cairns' Act damages for breach of equitable confidences;18 that may have the
effect of sidelining one aspect of the distinctions between contractual and equitable confidences.
To my mind, far more interesting than the debate about whether equitable compensation or Lord Cairns'
Act damages are available for a breach of an equitable confidence are the quite recent suggestions that
there are restrictions on the right of election. Professor Devonshire's note “Damages and the Betrayal
of Commercial Confidence”19 directed me to what Sales J has said in Vercoe v Rutland Fund
15 See Concept Television Productions Pty Ltd v Australian Broadcasting Corporation (1988) 12 IPR 129 at 136.
16 See Giller v Procopets (2010) 24 VR 1 at [403].
17 See D Campbell and P Wylie, “Ain't no Talking (what circumstances are exceptional)” [2003] CLJ 605.
18 For example, see Attorney-General v Observer Ltd [1990] 1 AC 109 at 286.
19 (2010) 126 LQR 526.
Management Ltd [2010] EWHC 424, which invokes what Lord Nicholls had said for the reverse
purpose of restricting the availability of an account of profits for an equitable confidence. It is not
possible in the time available to do justice to the analysis, but the essence of the reasoning emerges
from the following paragraphs:20
Lord Nicholls also identified certain remedial differences between equity and common law in
relation to infringement of rights of property as being the product of mere accidents of history
rather than any valid underlying principle (p280D) and rejected the sophistry involved in saying
that the remedy of an account of profits may be available for breach of confidence but not for
breach of contract, where the equitable and contractual obligations are in substance the same
(p285C-E).
In my view, Lord Nicholls' speech in Blake has opened the way to a more principled
examination of the circumstances in which an account of profits will be ordered by the courts
and where it will not. His reasoning at p285C-E, comparing remedies available in contract and
for breach of confidence in relation to the same underlying facts, flows in both directions. It
both opens up the possibility of an award of an account of profits in relation to breach of
contract relating to confidential information and also opens up the possibility for a more
principled debate about when an account of profits should be refused in relation to a breach of
confidence, and a damages award (typically assessed by reference to a notional reasonable price
to buy release from the claimant's rights, similar to the award made in Wrotham Park and
Seager v Copydex) made instead. Both in cases of breach of contract and in cases of breach of
confidence, the question (at a high level of generality) is, what is the just response to the wrong
in question (cf Lord Nicholls at p284H, set out above)? In both cases, to adapt Lord Nicholls'
formulation at p285A, the test is whether the claimant's interest in performance of the obligation
in question (whether regarded as an equitable obligation or a contractual obligation) makes it
just and equitable that the defendant should retain no benefit from his breach of that obligation.
…
The law will control the choice between these remedies, having regard to the need to strike a
fair balance between the interests of the parties at the remedial stage, rather than leaving it to the
discretion of the claimant. The significance of Seager v Copydex is that it shows that, even in
relation to confidential information closely akin to a patent (such as a secret manufacturing
design or process), the law will not necessarily afford protection to the claimant extending to an
account of profits. Still more strongly will that be the case as one moves further away from
confidential information in a form resembling classic intellectual property rights towards forms
of obligation in respect of confidential information more akin to purely personal obligations in
contract and tort.
The key steps in the reasoning process, for present purposes, are to observe that Lord Nicholls'
reasoning “flows in two directions”, to treat as immaterial whether the obligation is “regarded as” an
equitable obligation or a contractual obligation, and thereby to elide distinctions between the right to
20 [2010] EWHC 424 at [338]-[341].
performance of a contract21 and the right to protection of a confidence.
There may thus be seen two very different approaches to the same problem. The Australian approach is
informed by an inability to obtain a non-compensatory remedy for breach of contract, and it may
readily be conceded that there are respectable arguments on both sides of the “exceptional
circumstances” power to do so identified in Blake. The Australian approach involves questions of
contractual construction (namely, whether expressly or impliedly the parties have abrogated or
qualified their rights in equity; if so, equity follows the law) which are themselves informed by the
additional remedies afforded by equity for breach of an equitable confidence. That sort of interplay is,
in a sense, the converse of the interplay seen in the typical case where the fact that the parties have
stated in a contract that information is confidential is influential (although not decisive) in determining
whether it does indeed have the requisite character of confidentiality. However, if an equitable
confidence has not been abrogated or qualified, then the traditional election is preserved, subject to
discretionary refusal (which might be expected to be rare).
The English approach is simpler; in itself that is certainly no bad thing. It seems to eschew a difference
between a contractual confidence and an equitable confidence whose source is contract. Two (related)
considerations might be identified to question the universality of that elision. The first is that many if
not most contractual confidences are over-reaching, in the sense that as well as protecting by contract
what is inherently confidential, the contractual terms prevent unauthorised use of other information
which would not be protected in equity. The second is that quite different policy goals underlie the
vindication of the performance of contractual obligations (including by equitable remedies in equity's
auxiliary jurisdiction), and the protection of confidential information in equity's exclusive jurisdiction
(such as whether the adequacy of damages has any relevance to the granting of injunctive relief). It
may be recalled that confidence is and has for centuries been one of the three “proper and peculiar
objects of a court of equity”.22
I do not think that a necessary consequence of Blake is the narrowing of the right to elect for an account
of profits, in effect to move from a position where the plaintiff is free to elect, subject to discretionary
refusal, to a position where the plaintiff needs to show “exceptional circumstances” in order to obtain
an account of profits. One could have an account of profits available for breach of contract in
21 See Coulls v Bagot's Executor & Trustee Co Ltd (1967) 119 CLR 460 at 504 (Windeyer J), citing Alley v Deschamps
(1806) 33 ER 278 at 279.
22 See Blackstone, Commentaries, 1768, Vol III, p431, citing Coke, 4 Institutes 84.
exceptional Blake-like circumstances, but still ordinarily available by election for an equitable
confidence not abrogated by contract, subject to discretionary refusal. However, to the extent that
doctrinal simplicity extends “exceptional circumstances” to all of those occasions when traditionally
equity would award an account of profits, then it is difficult to see why they should be labelled
“exceptional”. If it does not, then there has been the cutting down of traditional equitable protection, in
the name of doctrinal simplicity; explaining that outcome to a plaintiff whose confidential information
has been misused to the defendant's profit will be no easy task.
The alternative approaches disclose a trade-off between simplicity and complexity which is far from
atypical, which I have elsewhere considered critically and in more detail;23 the point of this paper, in
contrast, is merely to draw attention to the consequences of the working out of two legal systems'
approach to common problems.
23 See “Equity, Restitution and the Judicature Acts” (forthcoming, November 2011, Journal of Equity) and “Subrogation,
Equity and Unjust Enrichment” in J Glister and P Ridge (eds), Fault Lines in Equity (Hart Publishing 2012).