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Damages for breach of the equitable duty of confidence*

Published online by Cambridge University Press:  02 January 2018

David Capper
David Capper*
Affiliation:
Queen's University of Belfast
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Extract

Protection of confidential information has two main juridical bases, contract and equity. Where the defendant is or was the employee or agent of the plaintiff he may be subject to an express or implied contractual duty not to use the latter’s confidential information without his consent Other defendants who receive such information knowing or believing it to be confidential, either from the plaintiff himself or a thiid party, may be subject to an equitable duty of like kind

The purpose of this article is to examine the range and scope of compensatory remedies for breach of the equitable duty of confidence. The term ‘damages’ is sometimes used generically to describe these remedies which are several and different from one another in certain respects? albeit difficult to pinpoint exactly.

Type
Research Article
Information
Legal Studies , Volume 14 , Issue 3 , November 1994 , pp. 313 - 334
Copyright
Copyright © Society of Legal Scholars 1994

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Footnotes

*

An earlier version of this paper was presented to the Restitution Group at the Society of Public Teachers of Law Annual Conference at Oxford in September 1992. Similar views were expressed in (1986) 37 NILQ 273.

References

1. There appears to be no comprehensive definition but trade secrets (Saltman Engineering Co Ltd v Campbell Engineering Co Lrd [1948] 65 RPC 203; [1963] 3 All ER 413). personal confidences (Argyll v Argyll [1967] 1 Ch 302), information about the processes of government (A-G v Jonathan Cape Ltd [1976] QB 752) and national security (A-G v Guardian Newspapers Ltd (No 2) [1990] AC 109) are all within its grasp. See generally Francis Gurry Breach of Confidence (Clarendon Ress, 1984); Robert Dean The Law of Trade Secrets (The Law Book Company Ltd, 1990); Goff and Jones The Law of Restitution (4th edn, Sweet and Maxwell, 1993) ch 35; Meagher, Gummow and Lehane Equity Doctrines and Remedies (Butterworths 3rd edn, 1992) ch 41.

2. See Gurry, above n 1, ch 8–9.

3. There has been some confusion about the equitable duty in the past. See Gareth Jones ‘Restitution of Benefits Obtained in Breach of Another's Confidence,’ (1970) 86 LQR 463: ‘A cursory study of the cases, where the plaintiffs confidence has been breached, reveals great conceptual confusion. Property, contract, bailment, trust, fiduciary relationship, good faith, unjust enrichment, have all been claimed, at one time or another, as the basis of the judicial intervention. Indeed some judges have indiscriminately intermingled all these concepts. The result is that the answer to many fundamental questions remains speculative.’ Peter North, ‘Breach of Confidence: Is there a new Tort?’ (1972) 12 JSPTL 149, suggests that breach of confidence may be a tort. The Law Commission in Working Paper No 58 at p 11 stated that ‘the courts do not confine themselves to purely equitable principles in solving the problems which arise in breach of confidence cases and it would seem more realistic to regard the modem action as simply being sui generis.’ However the grounding of non-contractual duties of confidence in equity seems settled after the Spycatcher cases. There are statements in the interlocutory proceedings and in the main action, at first instance and appellate level, which clearly establish this. See A-G v Guardian Newspapers Lrd [1987] 1 WLR 1248 at 1264–65 (Browne-Wilkinson V-C) and 1293 (Lord Templeman); A-G v Guardian Newspapers Ltd(No2)[1990]AC 109 at 147 (Scott J), 177 (Lord Donaldson MR), 215–216 (Bingham U), 255 (Lord Keith), 268 (Lord Griffiths), and 281 (Lord Cow.

4. This will be discussed more fully in section 5 below.

5. Since this would be a breach of contract. See n 2 above.

6. See section 4 below.

7. Coco v AN Clark (Engineers) Ltd [1969] RPC 41; Peter Pan Manufacturing Cop v Corsets Silhouette Ltd [1964] 1 WLR 96.

8. It has been said that: ‘The purpose of ordering an account of profits … is to prevent an unjust enrichment.’ See Coco v AN Clark (Engineers) Ltd, above n 7. If so an account of profits might not be ordered where the defendant has made none but should have been able to. It should also be remembered that an account is a difficult, laborious and expensive operation. See Siddell v Vickers [1892] 9 RPC 152 at 162–63 per Lindley W.

9. See section 4 for a further discussion.

10. [1979] 2 All ER 620 at 633.

11. [1986] 5 NI 290.

12. Ibid pp 300–303.

13. See Jill Martin ‘Fusion Fallacy and Confusion, a Comparative Study’ [1994] Conv 13.

14. [1978] AC 904 at 924.

15. The debates on the Judicature Bills and the legislative intent of the framers are well described in Pettit Equity and the Law of Trusts (Butterworths 7th edn. 1993) pp 9–11 and Meagher, Gummow and Lehane Equity Doctrines and Remedies (Butterworths 3rd edn, 1992) p 38.

16. Sinclair v Brougham [1914] AC 398; Re Diplock [1948] Ch 465; Chase Manhattan Bank v Israel-British Bunk (London) Ltd [1981] Ch 105. Professor Birks has argued that a proprietary base is all that is required. See Peter Birks An Introduction to the Law of Restitution (Oxford University Press, 1985) pp 378–85.

17. Felton v Callis [1969] 1 QB 200, Allied Arab Bank v Hujjar [1987] 3 All ER 739.

18. Derry v Peek (1889) 14 App Cas 337.

19. Hedley Byrne and Co Ltd v Heller and Partners Ltd [1964] AC 465.

20. Misrepresentation Act 1967, s 2(2). The right to rescind must not have been lost.

21. Price v Strange [1978] Ch 337.

22. JA Jolowicz ‘Damages in Equity - A Study of Lord Cairns’ Act', (1975) 34 CW 224 at 227.

23. Lord Diplock used this concept at a later stage in his judgment. See [1978] AC 904 at 925.

24. See section 5 below.

25. [1992] 2 NZLR 559 at 566. (The decision was reversed by the Privy Council on a ground not presently material. that there had been no breach of fiduciary duty. See [1993] 4 All ER 268.) Very similar statements by the same judge appear in Coleman v Myers [1977] 2 NZLR 225 at 359–60; Day v Mead [1987] 2 NZLR 443 at 451 (Citing Lord Diplock in United Scientific above); A-G for the United Kingdom v Wellington Newspapers Lrd [1988] 1 NZLR 129 at 172; Aquaculture Corporation v New Zealand Green Mussel Co Ltd [1990] 3 NZLR 299.

26. [1991] 85 DLR (4th) 129.

27. Ibid at 152.

28. Peter M McDermott ‘Jurisdiction of the Court of Chancery to Award Damages’ [1992] 109 LQR 652.

29. See City of London v Nash (1747) 26 ER 1095; Nelson v Bridges (1839) 48 ER 1172; Martyn v Blake (1842) 3 Dr and War 125; Gedye v Duke of Monfrose (1858) 53 ER 813.

30. (1674) 23 ER 90.

31. See Jones and Goodhart Specific Performance (Butterworths, 1986) pp 234–43.

32. See Sutton v Mashifer (1829) 57 ER 880; Cox v Barnard (1850) 68 ER 379.

33. (1786) 29 ER 1156.

34. Ibid.

35. (1806) 33 ER 149.

36. (1810) 34 ER 106.

37. Ibid at 108.

38. See Blore v Surton (1817) 26 ER 91; Jenkins v Parkinson (1833) 34 ER 846; Sainsbury v Jones (1839) 41 ER 272.

39. (1855) 44 ER 280.

40. bid at 285.

41. Substantially re-enacted by Supreme Court Act 1981, s 50.

42. The Third Report of the Chancery Commissioners (1856). Parliamentary Papers Vol. 22, pp 1–4, stated that damages could be awarded to any person ‘injured by a wrongful act which would entitle him to damages in a court of law’. See Meagher, Gurnmow and Lehane Equity Doctrines and Remedies (3rd edn Butterworths, 1992) p 650.

43. A-G v Guardian Newspapers Ltd (No 2) [1990] AC 109 at 286 (Lord Goff).

44. See eg Eastwood v Lever (1863) 4 De GJ and S 114; Wrotham Park Estates Ltd v Parkside Homes Ltd [1974] 2 All ER 321; Johnson v Agnew [1980] AC 367 at 400 (Lord Wilberforce).

45. Lavery v Purse11 (1888) 39 Ch D 508 (damages refused but on the ground that the court had no jurisdiction to entertain an application for an injunction.)

46. See n 43.

47. Leeds Industrial Co-op Society v Slack [1924] AC 851; Johnson v Agnew [1980] AC 367 at 400 (Lord Wilberforce).

48. Saltman Engineering Co Ltd v Campbell Engineering Co Ltd [1948] 65 RPC 203; [1963] 3 All ER 413.

49. Hooper v Rogers [1975] Ch 43 at 48 (Russell W).

50. Hooper v Rogers [1975] Ch 43; Ferguson v Wilson [1866] 2 Ch App 77 at 91–92 (Cairns W); Spry Equitable Remedies (Sweet and Maxwell.4th edn, 1990) p 611; Jolowicz [1975] 34 CW 224 at 242.

51. See Scott v Rayment (1868) LR 7 Eq 112 (no damages in lieu because court will not grant specific performance of a partnership agreement). In Price v Strange [1978] Ch 337 at 359 Goff LJ left open the question whether damages in lieu must be refused because of some settled principle against equitable relief but Buckley W (at 369) thought this must be so.

52. See Pettit Equity and the Law of Trusts (Butterworths, 7th edn, 1993) p 535. To the same effect is Meagher, Gummow and Lehane Equity Doctrines and Remedies (Butterworths, 3rd edn, 1992) p 642, and Jones and Goodhart Specific Performance (Butterworths, 1986) p 224.

53. Johnson v Agnew [1978] Ch 176 CA.

54. Lavery v Purse11 (1888) 39 Ch D 508; Ferguson v Wilson (1866) 2 Ch App 77; Price v Strange [1978] Ch 337.

55. Above n 10.

56. Above n11.

57. [1973] 2 All ER 1190.

58. Ibid at 1197.

59. Above n 10.

60. Above n 11.

61. See Lee Aitken ‘Developments in Equitable Compensation; Opportunity or Danger’ (1993) 67 AW 596.

62. [1914] AC 932.

63. Knott v Cottee (1852) 16 Beav. 77; Fry v Fry (1859) 27 Beav 144; Re Bell's Indenture [1980] 1 WLR 1217; Bartletr v Barcluys Bank Ud [1980] Ch 515.

64. Nocton v Lord Ashburton [1914] AC 932; In re Leeds and Hanley Theatres of Varieties Ltd [1902] 2 Ch 809; Coleman v Myers [1977] 2 NZLR 225; Day v Mead [1987] 2 NZLR 443.

65. [1976] 67 DLR (3d) 493.

66. Ian E Davidson ‘The Equitable Remedy of Compensation’ (1982) 13 MULR 349 at 35742.

67. (1805) 10 Ves 470; 32 ER 927.

68. (1860)1 De GF and J 518; 45 ER 462.

69. These cases went largely unnoticed after Derry v Peek (1889) 14 App Cas 337 decided that actual dishonesty as opposed to equitable fraud was necessary for an action for deceit. The ground formerly covered by these cases is now occupied by the tort of negligent misstatement. See Hedley Bryne and Co Ltd v Heller and Partners Ltd [1964] AC 465.

70. (1878)8 Ch D 808.

71. bid p 819.

72. Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949.

73. Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949; Standard Chartered Bank Ltd v Walker [1982] 1 WLR 1410; Tse Kwong Lam v Wong Chit Sen [1983] 1 WLR 1349; Bishop v Bonham [1988] 1 WLR 742; Parker-Tweedale v Dunbar Bank plc (No 1) [1990] 2 All ER 577.

74. [1988] 1 WLR 742 at 752.

75. [1971] Ch 949 at 966.

76. [1982] 1 WLR 1410 at 1415.

77. [1990] 2 All ER 577.

78. Ibid at 582.

79. [1971] Ch 949 at 967.

80. [1993] AC 295.

81. [1990] 1 QB 665(CA); [1991] 2 AC 249 (HL). I am grateful to Mr Paul Matthews for this reference.

82. [1990] 1 QB 665 at 782–89.

83. [1991] 2 AC 249 at 280.

84. Ibid at 281.

85. Ibid at 269.

86. See [1990] 1 QB 665 at 782–89.

87. Day v Mead [1987] 2 NZLR 443 at 451 per Cooke P.

88. Barrlett v Barclays Bank Ltd [1989] Ch 515 at 545 per Brightman W.

89. [1966] 2NSWR 211. The principles stated there were approved by Brightman W in Burrlett v Barclays Bank Ltd, above n 87 at 543. The case is quoted with approval in Underhill and Hayton Trusts and Trustees (Butterworths 4th edn, 1987) p 736. It has been approved also in Canada:Guerin v R [1984] 13DLR (4th) 321 and in New zealand: Day v Mead [1987] 2 NZLR 443.

90. [1991] 85 DLR (4th) 129.

91. Ibid at 141–53.

92. bid at 154–64 (McLachlin J) and 164–66 (Stevenson J).

93. [1992] 96 DLR (4th) 289.

94. Ibid at 322.

95. [1991] 85 DLR (4th) 129 at 152.

96. [1992] 96 DLR (4th) 289 at 337.

97. Ibid at 340.

98. [1992] 92 DLR (4th) 449.

99. Ibid at 484–507.

100. [1992] 2 NZLR 559. (Reversed by the privy Council on other grounds - [1993] 4 All ER 268.)

101. Ibid at 569.

102. [1992]4NZLR311.

103. [1992] 2 NZLR 559 at 567 (Cooke P), 573 (Richardson J), 575 (Gault J). Similar concepts were applied with similar results in Day v Mead [1987] 2 NZLR 443.

104. Ibid at 567.

105. Above n 89.

106. [1992] 2 NZLR 559 at 568.

107. [1992] 1 NZLR 676.

108. Ibid at 705.

109. [1993] 1 WLR 1285.

110. [1966] 2 NSWR 211.

111. [1993] AC 295.

112. [1986] 5 NI 290.

113. See the discussion of Stephens v Avery [1988] 2 All ER 477 in the next section.

114. See Norberg v Wynrib [1992] 92 DLR (4th) 449; KM v HM [1992] 96 DLR 289; Mouat v Clark Boyce [1992] 2 NZLR 559; Watson v Dolmark Industries Ltd [1992] 3 NZLR 311.

115. Alcock v Chief constable of South Yorkshire [1992] AC 310.

116. Jarvis v Swan Tours Ltd [1973] 1 All ER 71; Hayes v James and Charles Dodd (a firm) [1990] 2 All ER 815.

117. Law Commission, Breach of Confidence, Cmnd 8388 (London, HMSO, 1981).

118. Professor PBH Birks ‘Civil Wrongs: a New World’Buttenworths Lectures 1990–91 (Butterworths, 1992).

119. Paper delivered to the Society of Public Teachers of Law, Frontiers of Liability Seminar, The Condition of the Law of Tort, All Souls College Oxford 3rd July 1993. More cynically, and refemng to Sir Robin's judicial statements in this area, Aitken asserts that ‘His Honour appears to contemplate confectioning a potpourri of claims and remedies from which, according to the tribunal's taste, an appropriate selection can be made.’ See (1993) 67 AW 596 at 601.

120. AB v South West Water Services Ltd [1993] 2 WLR 507. See also Law Commission Consultation Paper No 132 favouring statutory recognition of exemplary damages in a limited class of cases.

121. [1948] RPC 203; [1963] 3 All ER 413.

122. [1956] RPC 272.

123. Ibid at 281.

124. [1957] RPC 214.

125. [1962] RPC 97.

126. [1970] RPC 605.

127. [1967] 2 All ER 415.

128. Ibid at 419.

129. Ibid at 419.

130. [1978] 1 WLR 93 at 111.

131. [1986] 5 NI 290 at 297.

132. See Francis Gurry Breach of confidence, above n 1, p 435. Jones (1970) 86 LQR 463 at 484 suggests that an injunction may have been refused because of the defendants' innocence and because some of the information was already in the public domain.

133. [1987] 2 NZLR 443 at 461.

134. [1969] 2 All ER 718.

135. Ibid at 719.

136. Ibid at 721.

137. See the comments of Ricketson (1978) 11 MULR 223 at 301 and Stuckey (1981) 9 Syd LR 402 at 421.

138. Johnson v Agnew [1980] AC 367.

139. [1986] 2 All ER 418.

140. [1975] 2 All ER 173 at 177. Quoted at [1986] 2 All ER418 at 421.

141. [1986] 2 All ER 418 at 424.

142. [1992] 3 All ER 257.

143. [1988] 2 All ER 477.

144. In Horsler v Zorro [1975] Ch 303 where the plaintiff withdrew his claim for specific performance and claimed damages instead it was held that the court could not award damages in lieu of the equitable relief. This would also seem to be the case where the equitable relief is never even claimed. However this case was overruled on a different point in Johnson v Agnew [1980] AC 367 and may, with respect, be wrong on the award of damages. The court may have jurisdiction to entertain an application for an injunction or specific performance even when not claimed as it could always allow the plaintiff to amend his pleadings.

145. KM v HM [1992] 96 DLR (4th) 289.

146. Mouat v Clark Boyce [1992] 2 NZLR 559.

147. A-G v Guardian Newspapers Ltd (No 2) [1990] AC 109.

148. Ibid at 218.

149. Ibid at 262.

150. [1990] 3 NZLR 299. See Beatson (1991) 107 LQR 209; Michalik ‘The availability of compensatory and exemplary damages in equity: a note on the Aquaculture decision’ (1991) 21 Vict U Well L Rev 391.

151. Ibid at 301.

152. See s 5(b) above. Similarly premature would be the views of Professor Birks who has no hesitation in sweeping away the historical foundation of the duty of confidence and recognising damages as the ordinary remedy. See Professor PBH Birks Civil Wrongs: a New World, above n 118, pp 101–104.

153. [1990] 3 NZLR 299 at 302.

154. Ibid at 301–02.

155. [1989] 61 DLR (4th) 14.

156. Birks (1990) LMCLQ 460.

157. See Canson Enterprises Ltd v Boughton and Co [1991] 85 DLR (4th) 129; KM v HM [1992] 96 DLR (4th) 289; and the discussion at section 5(b) above.

158. [1989] 61 DLR (4th) 14 at 17.

159. Ibid at 36.