Breach of confidential information

At Dundas Lawyers^®, we understand that your business’s confidential information is critical for success.  A breach of confidence can be contractual, statutory or arise in equity.  Those involved in a breach of confidence can also be ‘knowingly concerned’ which means that liability can, subject to the facts, be sheeted home to directors.  Dundas Lawyers^® has experience identifying, enforcing and defending matters involving breach of confidence in Court.

What exactly is confidential information?

Confidential information (Confidential Information) is a broad term that covers information, that is disclosed to another party in business dealings, and is generally not available in the public domain.  There is no defined category or precise definition of Confidential Information, rather a variety of criteria must be considered to determine if information should be deemed to be confidential.  This criterion includes but is not limited to:

• the information having the necessary quality of confidence about it;
• the information having a commercial value that imparts an obligation of confidence;
• the unauthorised use of the information creating a detriment to the disclosing party; and
• the information being not obvious, trivial, or would be reasonably apparent to someone skilled in a particular field.

Confidential Information is valuable while it is kept secret, as such, overtime protections have evolved through common law to ensure it is given, as a quasi-right and not misappropriated by a recipient.

The obligation to maintain an obligation of confidence can arise in equity, contract, and in some circumstances under statute.  Relief is available against a party who discloses confidential information without authorisation, and in some cases against third party recipients of such information.  To enforce a breach of confidence in equity, contract, or under statute the presence of several elements must be established.

Equitable breach of confidence

An equitable breach of confidence can occur in situations where one (1) party imparts information to another, on the express or implied understanding that it is to be used only for a specific purpose.  This obligation can arise because of an agreement, fiduciary relationship, or employment in which an unauthorised disclosure will allow for an action for breach of confidence to be brought against the receiving party.

To establish an action for a breach of equitable confidence, the following four (4) elements must be satisfied:

• the information must be specifically identified as secret, rather than generally available or known;
• the information must have the necessary quality of confidence;
• the information must have been received in circumstances importing an obligation of confidence; and
• there must be an actual or threatened misuse of the information.

Remedies for breach of confidence in equity will often involve an injunction, a declaration, compensation or an account of profits.

Contractual breach of confidence

To bring an action for contractual breach of confidence, there must be a legally binding contract in place which does not include other kinds of agreements, such as Memorandums of Understanding or Deeds.  If two (2) or more parties are bound by a contract that contains an express or implied obligation of confidence, the disclosure of such information allows the discloser to bring an action for breach of contract.

It is necessary to consider the existence of consideration between the parties to the contract.  Consideration, in this context, is essentially the ‘price‘ of the contract that cannot predate the agreement.  The price does not have to be in the form of money or material goods, for example, it can be a mutual promise or an action to be carried out.  In the absence of an exchange of consideration, a confidentiality clause will not amount to a contractual obligation of confidence.

Statutory breach of confidence

Obligations of confidence may arise under statute as federal, state, and territory legislation include several confidentiality provisions.  For example, section 183(1) of the Corporations Act 2001 (Cth) (Corporations Act) provides:

“(1) 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 information to:

(a) gain an advantage for themselves or someone else; or

(b) cause detriment to the corporation.

 Note 1: This duty continues after the person stops being an officer or employee of the corporation.

 (2)  A person who is involved in a contravention of subsection (1) contravenes this subsection”.

Regarding a person’s involvement in a statutory breach of confidence, section 79 of the Corporations Act provides:

“A person is involved in a contravention if, and only if, the person:

 (a) has aided, abetted, counselled or procured the contravention; or

 (b) has induced, whether by threats or promises or otherwise, the contravention; or

 (c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention; or

 (d) has conspired with others to effect the contravention”.

Dundas Lawyers acted for Native Extracts and the applicants in the case of Native Extracts Pty Ltd v Plant Extracts Pty Ltd (No 2) [2024] FCA 106.  In this case, the Applicants alleged that the Second and Third Respondents, Mr Macdougald and Phytoverse, breached the confidentiality clause of a Deed of Settlement when disclosing information to the First Respondent, Plant Extracts, that was confidential to the First Applicant, Native Extracts.  The Applicants successfully argued that the disclosure breached the duty owed, pursuant to section 183(1) of the Corporations Act, because of his former position as a director of Native Extracts. 

Regarding the involvement of the remaining Respondents, the Applicants alleged that they:

“(a) have, for the purpose of sections 79 and 183(2) of the Corporations Act, aided or abetted the Second Respondent in the breach of his Statutory Duty of Confidence;

 (b) have, for the purpose of sections 79 and 183(2) of the Corporations Act, been directly or indirectly knowingly concerned in, or a party to, the Second Respondent’s breach of his Statutory Duty of Confidence“.

Remedies for breach of confidence

Remedies available for the breach of confidence include:

• contractual damages;
• statutory compensation orders;
• equitable compensation; and an
• account of profits.

Note that the precise remedy is usually subject to an election by the applicant and will usually require expert evidence to be adduced.

Court cases involving Confidential Information by Dundas Lawyers^®

• Hill & Smith Holdings PLC v Safe Barriers Pty Ltd (No 2) [2020] FCA 8 (8 January 2020)
• Native Extracts Pty Ltd v Plant Extracts Pty Ltd [2023] FCA 1265
• Native Extracts Pty Ltd v Plant Extracts Pty Ltd (No 2) [2024] FCA 106

Recent videos on confidential information by Dundas Lawyers^®

Disclaimer
This page contains general commentary only about breaches of confidence.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

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Why choose Dundas Lawyers^® as your Confidential Information Lawyer?

Having exerted Blood Sweat and Years^® since April 2010 we are the team you want on your side for the long term to act as the ‘bodyguard’ for your business to protect its intellectual property or to stand up for your rights.  Some of the reasons client’s choose Dundas Lawyers^® include:

• our Uncommon business acumen;
• our Uncommon expertise in transactional, compliance and litigious matters;
• our Uncommon expertise forensic case preparation;
• our Uncommon customer focus;
• the fact that we don’t just know law, we know business!
• how we leverage our Uncommon Nous^® to provide client solutions.

Need a lawyer to advise on breach of confidence?

For a confidential, no obligation initial telephone call to find out how we can help your business gain an uncommon advantage in initiating or defending allegations of a breach of confidence in an Australian Court please phone our team on either 1300 386 529 or 07 3221 0013.

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