Breach of Confidence and Fraud
Breach of confidence or breach of confidential information is when an individual or a company discloses information that is known, or ought to have been known (express or implied,) to be confidential and that information is for a restricted purpose and the recipient then uses it without consent. It can arise in either the law of contract or equity (being an action to prevent extreme unfairness).
What is breach of confidence?
In short, it is when information is disseminated to others, that should have been kept secret. Lord Denning MR in Seager v Copydex Ltd (No 1) [1967] in essence said “a person who has received information in confidence cannot take unfair advantage of it, and must not make use of it to the prejudice of the person who gave the information, without obtaining their consent. Equity acts on the recipient’s conscience to prevent them making an unauthorised use or disclosure of the information”.
What can be protected?
Breach of confidence can apply to nearly any type of information. It applies to both private and commercial information. Areas could include commercially sensitive details around manufacturing, customer lists, contact details or information around pricing structures. In JN Dairies Limited v Johal Dairies Limited [2009] it was found that information contained in invoices prepared by a wholesaler for its customers had the necessary degree of confidentiality for the wholesaler to bring an action for breach of confidence against the person responsible for the misappropriation and the competitor responsible for using that information to its advantage.
Basic Requirements for Breach of Confidence
To get a claim for breach of confidence up and running, three elements need to be satisfied. These were established in the leading case of Coco v AN Clark (Engineers) Limited [1968]
- The information itself must be confidential
Saltman Engineering Co Ltd v Campbell Engineering Co Ltd [1948] set out two main areas of consideration:
- The information must have a degree of secrecy; and
- The information must not be in the public domain or be common knowledge.
- The information must have an obligation of confidence
This can arise in various ways. It could be implied because of the relationship between the parties, the circumstance of disclosure or imposed by a contract. In an ideal world, there would be a confidentiality agreement between the parties as this would make it clear there is an obligation of confidence. Where that does not exist, the exact circumstances must be analysed and the “reasonable person test” adopted. In other words, would a reasonable person standing in the shoes of the recipient of the information have realised that the information was given to them in confidence.
- There must be an unauthorised or misuse of that information
The third and final condition to satisfy is that the entity who received the confidential information must have used it or passed it to someone else without the owners consent or authority.
Remedies
If the necessary tests are satisfied, action can be taken against the recipient of the information and any subsequent third-party recipient of the information.
A Claimant is potentially entitled to obtain against the Defendant:
- An injunction
- An account of profits
- Damages
Obtaining an injunction once the information has been disclosed is of little use as the “genie is out of bottle”. If it is apparent that the Defendant has yet to use the confidential information and release it in the public domain, an injunction is the first choice of action to prevent this. That being said, if there is no real risk of disclosure, the court will be reluctant to grant an injunction Bolkiah v KPMG [1999].
Over and above an injunction, a Claimant can also seek an account of profits and damages. The usual measure of damages is that the defendant should compensate the claimant for loss which the defendant has caused the claimant. If the claimant would have used the information to earn profits, the correct measure of damages is that the claimant should receive fair compensation for what they have lost.
Breach of confidence and fraud
We often see breach of confidence and fraud go “hand in hand”. People dishonestly take confidential information and fraudulently use it for their own benefits and gains. As their actions have been so well concealed, it is not until further down the line that issues arise and their actions become known. At that time it is often found they have undertaken various fraudulent actions that has severely impacted on the innocent party. This is something the team at Tenet can help you with.
Should you require advice regarding the above, please do not hesitate to get in touch at hello@tenelaw.co.uk
