What kind of information may be "confidential", and in what circumstances will you be in trouble if you disclose or use "confidential" information?

Businesses often talk about information being "confidential", and as lawyers we recommend businesses protect such information through specific agreements or clauses in contracts.

But just exactly what kind of information may be "confidential", when will such information actually be "confidential", and in what circumstances will you be in trouble if you disclose or use "confidential" information?

The best way to answer these questions is to look at the legal test applied by the courts in New Zealand to establish a breach of confidence. The test, cited in Coco v A N Clarke (Engineers) Ltd [1969] RPC 41 (Ch) and adopted in New Zealand by the Court of Appeal in AB Consolidated Ltd v Europe Strength Food Co Pty Ltd [1978] 2 NZLR 515, has three elements:

  1. The subject information has the necessary quality of confidence about it;
  2. The subject information has been communicated in circumstances importing a duty of confidence; and
  3. There has been an unauthorised use of that information to the detriment of the person communicating it.

The first requirement, that the subject information has the "necessary quality of confidence about it", refers to information that is not public knowledge, i.e. 'private' knowledge. Such knowledge typically includes trade secrets (like the recipe for Coca Cola) or a business's internally-developed customer management system.

The second requirement, that the subject information has been communicated in circumstances importing a duty of confidence, refers to the manner in which the 'private' information has been passed from person A to person B. The obligation frequently arises out of a relationship between two parties in which one party has passed 'private' information to the other party on the basis it is to be used only for a known, agreed and usually limited purpose. For example, a brewery might disclose its own unique recipe for pale ale in confidence to a contract brewer to enable the brewery to meet demand for its pale ale.

The third requirement, which may be the most difficult to prove, is that the recipient of the confidential information has disclosed or used that information without the consent and to the detriment of the owner of that information. There is no requirement the recipient should have dishonestly and deliberately disclosed or used the confidential information, but the recipient must know or ought to know that information is confidential. Further, the owner of the information must show that he/she continues to have an interest in the subject information.

The test in Coco was recently applied by the High Court in Earthquake Commission v Unknown Defendants [2013] NZHC 708. In this case EQC sought, and obtained, an interim injunction against the unknown author(s) of a blog site into whose hands had mistakenly fallen an EQC spreadsheet containing details of claims made to EQC in relation to 83,000 residential properties in Christchurch. You may remember the unfortunate event in the news...

If you need advice about keeping your secret secret, feel free to give me a call (in confidence, of course!) to discuss how we can help make sure your secret remains just that.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

James & Wells Intellectual Property, three time winner of the New Zealand Intellectual Property Laws Award and first IP firm in the world to achieve CEMARS® certification.