confidential information

The law of confidential information is premised on the theory that information received in confidence, either expressly or impliedly ought to be able to protected from disclosure to others, or used by the person receiving it without the consent of the discloser.

So what is confidential information, how does it arise, and how is it protected?

Receiving Confidential Information

A person may receive confidential information by the follows means:

1. directly from the confidant;
2. indirectly, through a third party (who owes a duty of confidence to the confidant), with or without notice that the information is confidential;
3. accidentally, carelessness, or mistake, either directly from the confidant or through a person in whom the confidant has confided;
4. surreptitiously through dishonest, discreditable or reprehensible means or conduct, either directly or indirectly.

What a confidential communciation?

The general principles are:

1. The duty of confidentiality may arise from an express or implied term of the contract or as an equitable obligation;
2. The nature of the information and the circumstances in which it was imparted and obtained, and whether notice was given or not are taken into account in determining whether a confidence has arisen. The equitable obligation is based on principles of good conscience;
3. The circumstances include where information is received:

• during a relationship where a reasonable person would ordinarily expect a duty of confidentiality to exist. Instances include employment relationships, consultancy arrangements (such as freelancers), doctor-patient relations, solicitor-client relationships;
• for a limited purpose, for instance under a contract or to a government authority;
• with an element of dishonesty or underhand conduct, such as electronic eavesdropping; or
• from a person who themselves are subject to a duty of confidentiality.

4. The information must be of a nature that a person would regard it as confidential - trivia or useless information is not protectable.
5. The information received must have been misused, or threatened to be misused.
6. The public interest defence may override the duty of confidentiality in limited circumstances.

What is Confidential Information?

Three elements must be shown by a claimant to obtain the benefit of protection:

1. the information must have the necessary quality of confidence;
2. the information must have been imparted in circumstances imposing an obligation of confidence; and
3. there must be an unauthorised use of the information to the detriment of the party communicating it.

Information that has been released into the public domain - that is, freely accessible - cannot be confidential as it is public knowledge. Information with limited distribution may whoever retain the requisite quality of confidence. The confidence lies in the information itself that may be passed orally whether it is contained in a  document or not: it is therefore the information that is protected and not the form that it takes. In respect to copying documents that contain confidential information, copyright law may also apply so as to provide a separate basis to a legal claim.

An obligation not to disclose information may arise either by the circumstances in which it was imparted or separately by contract. An employer's information is not necessarily secret, thus confidentiality may not protect such information. Due to the fiduciary relationship between an employer and an employee, an employee cannot lawfully however act contrary to an employer's interests without full disclosure and consent.

Detriment for the purposes of a duty of confidence does not need to be reflected in financial loss or potential financial loss.

The law of confidence applies to commercial interests and personal matters and is frequently relied upon by governments to preserve information. It is long standing law that there is no confidence in an ’iniquity’.

Confidentiality Provisions and Contracts

Confidentiality clauses are frequent participants in commercial contracts. Such provisions are unenforceable to the extent that:

1. an employee is prevented from making use of their acquired skills, or the provision amounts to a restraint of trade;
2. competition law applies to render the provision void;
3. the confidentiality would prevent the material being published in the public interest;
4. the confidentiality is forms part of an illegal contract or is otherwise unlawful.

Simply because a confidentiality provision does not appear in a contract, does not mean that the subject matter of the contract is not confidential. Provided the requisite tests are made out, the information will be confidential to the extent and purposes warranted in the circumstances.

Rectifying Unauthorised Disclosure and Misuse

The remedies for a misuse of confidential information or threatened misuse of confidential information are: injunction; damages; an account of profits; a constructive trust; delivery up of the material and/or destruction; an adverse costs order for the unsuccessful party to the proceedings and charge of contempt for if a court order is disobeyed. In some cases, a search order or action for discovery may be appropriate in order to serve the interests of justice.

Calculating Damages and Loss by Disclosure

When a contract exists between two parties, there are two ways to calculate the loss that is sustained by the confider:

1. Assuming that the information could be obtaining by engaging a consultant, the fee that an independent consultant would charge for the information;
2. Otherwise, the price that a willing buyer would be prepared to pay for the information.

An account of profits is available to a claimant where the equitable right has been misused (that is, where no contract exists).