Enforcing the terms of a confidentiality agreement

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Legally enforceable obligations to maintain confidence may arise in contract or in equity.  Relief is available against a party who discloses confidential information without authorisation, and in some cases against third party recipients of such information.  In order to enforce a breach of confidence in contract or in equity, the presence of a number of elements must be established.

What must be proven in order to enforce a breach of confidence in equity?

In order to enforce a breach of confidence in equity, Megarry J held in Coco v AN Clark (Engineers) [1969] RPC 41 that:

• the information must be confidential information (that is, it must have the necessary “quality of confidence”);
• the information must have been communicated in circumstances importing an obligation of confidence; and
• there must be unauthorised actual or threatened use of the confidential information to the detriment to the plaintiff.

Remedies for breach of confidence in equity include compensation or an account of profits, an injunction and a declaration.

What must be proven in order to enforce a contractual breach of confidence?

People in a contractual relationship may expressly or impliedly arrange to protect confidential information exchanged between them.  A confidentiality agreement, also referred to as a non-disclosure agreement (NDA), is a commercial contract which expressly provides that certain information disclosed between the parties will be kept secret and used only for an agreed purpose (Permitted Purpose).

Whether a court will be prepared to imply a term into a contract will depend upon the nature of the relationship between the parties.  For example, the Courts are not usually prepared to imply a term into an employment contract that an employee will not use skills acquired during their employment after the termination of their employment contract, however, the Courts readily accept that an employee cannot use or disclose their employer’s trade secrets.

The nature of the obligation of confidence will depend on the terms of the contract.  A contractual breach occurs where either:

• the relevant party, in this case the recipient of confidential information (Recipient) fails to comply with its contractual obligations, in this case, the duty to maintain the confidentiality of the information (Actual Breach); or
• the Recipient evidences:
  • an intention not to be bound by its obligations; or
  • an unwillingness to perform its obligations (Anticipatory Breach);

for example, in this case the Recipient threatens to disclose the confidential information.

Remedies for breach of an NDA or implied obligation of confidence

Remedies for a breach of an NDA or an implied obligation of confidence include:

• injunctive relief, which is desirable in cases of Anticipatory Breach; and
• damages, where there has been an Actual Breach.

Links and further references

Cases

Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VicRp 7

Burica Pty Ltd v Tops To Bottoms (Australia) Pty Ltd [1997] FCA 1147

Maggbury Pty Ltd and Another V Hafele Australia Pty Ltd and Another (2001) 185 ALR 152

SAI Global Property Division Pty Ltd v Johnstone [2016] FCA 1333

Prime Creative Media Pty Ltd v Vranjkovic [2009] FCA 1030 (14 September 2009)

Further information about confidential information and breach of confidence

If you need assistance to ensure that your confidential information is protected, contact us for a confidential and obligation-free discussion:

Disclaimer

This article contains general commentary only.  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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