Confidence and Confidentiality Part 5 – Confidential Circumstances

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Table of Contents

• Confidential Circumstances
• Third Party Liability
• Conclusion

Over the coming weeks we will explore the topic of confidence and confidentiality. Our conversation will mainly focus on how the requirements of confidentiality can protect your intellectual property but some concepts also have broad commercial applicability (e.g. the execution of a confidentiality agreement or inclusion of a non-disclosure clause). Last week we discussed different types of protectable information under the equitable action for breach of confidence. This week we continue to examine action for breach of confidence by looking at when confidential circumstances arise. 

Confidential Circumstances

Whether information divulged under certain circumstances gives rise to a situation of confidence will be determined according to the ‘reasonable person’. The reasonable person does not refer specifically to you, your competitor or another individual. Nor does it refer to the average person. The reasonable person is a hypothetical construct within particular circumstances created and used by the courts.

In an action for breach of confidence, it must be established that the circumstances are such that any reasonable person standing in the shoes of the recipient of the information would have realised that upon reasonable grounds the information was given to him or her in confidence. It is not a determination by the recipient or as the discloser of the information, on reasonable grounds, that the information was given in confidence.

Third Party Liability

A third party may be bound if they came by the confidential information innocently. In the appropriate case, the court will grant an injunction (that is an order stopping an identified party from doing certain acts) against those who acquired the confidential information innocently. Therefore, under the equitable action for a breach of confidence, third parties may be under the same duty of confidence as others. Note that the above situation varies from the situation where a party develops confidential information independently.

Conclusion

Confidential information is a broad term that can includes many variations of information. However, obligations of confidentiality can apply not only to intellectual property but also to other business or commercially sensitive information and know-how. The information must be disclosed in circumstances giving rise to the requirement of confidentiality. The test to determine whether confidential circumstances exist can be quite broad and difficult to determine, subject to court rules.

Executing a confidentiality agreement, or including a confidentiality clause in a relevant agreement can assist with protecting confidential information and avoid seeking court enforcement to enforce obligations of confidence. It is a useful document clarifying the rights and obligations of both the discloser and recipient of confidential information. It is very prudent to have any agreements regarding confidentiality be in written form. Our team of lawyers have extensive experience in this area and would be happy to assist. To speak with one of our lawyers today, contact LegalVision on 1300 544 755.