Vic Supreme Court restrains Plaintiffs’ misuse (in pleadings) of Defendants’ confidential information

breach of confidential information

The Plaintiffs brought proceedings against the Defendants for breach of confidence, but in a unique twist which prompted Vickery J to invoke the ancient phrase ‘the pot calling the kettle black’, the Defendants alleged that the Plaintiffs had themselves breached confidence by pleading references to confidential information contained in the Defendant’s customer list in its amended statement of claim. The case is DC Payments Pty Ltd v Next Payments Ltd [2016] VSC 315 (7 June 2016).

Background

The Plaintiffs and Defendants are competitors in the market for the supply of automatic teller machines to retail, convenience and hospitality venues.

The Plaintiffs alleged that its former employees and agents, now working for the Defendants, had breached obligations of confidence owed to the Plaintiffs, by making use of confidential information relating to the Plaintiffs’ customers.

The Plaintiffs also alleged that the Defendants induced a number of the Plaintiffs’ customers to break their existing contracts with the Plaintiffs and to install ATMs owned by the Defendants.

The Defendants maintained a “Master Customer List” which recorded confidential details of each customer with whom it had a contract.

After the proceedings commenced the Defendants inadvertently copied an email to a former employee of the Plaintiffs which attached the Defendants’ Master Customer List. The email (minus the attachment) was discovered by the Plaintiffs, which alerted the Defendants to the inadvertent disclosure of its Master Customer List.

Central issues were whether the Master Customer List was confidential despite certain information contained within it being in the public domain, and the character of the information alleged to have been used by the Plaintiffs in its pleadings.

Legal principles

1.   “It is … well-settled that the publication of information which is confidential in nature can amount to an actionable breach of confidence where a person innocently comes into possession of such information either through inadvertence or by some other accidental conduct, either on the part of the recipient of the confidential information or on the part of the owner of the protected material.”(at [30])

2.  “… a customer list is the most obvious example of information the confidentiality of which the courts will secure by injunctive relief.” (at [47], citing Telstra Corporation Ltd v First Netcom Pty Ltd ) (1997) 78 FCR 132, Full Federal Court)

3.   The particular information said to be confidential must be specifically identified. Second, the confidential nature of the identified information must be established. (at [54], citing Streetscape Projects (Australia) Pty Ltd & Anor v City of Sydney (2013) 295 ALR 760, Full Federal Court)

4.   “Determining what is confidential involves a decision on a question of fact in each case where that quality is asserted. Considerations which courts have found to be relevant, in particular cases, in determining this question include:

(a)     The fact that skill and effort was expended to acquire the information;

(b)     The fact that the information is jealously guarded by the employer, is not readily made available to employees and could not, without considerable effort and/or risk, be acquired by others;

(c)      The fact that it was plainly made known to the employee that the material was regarded by the employer as confidential;

(d)     The fact that the usages and practices of the industry support the assertion of confidentiality; and

(e)     The fact that the employee in question has been permitted to share the information only by reason of his or her seniority or high responsibility within the employer’s organisation.” (at [55], citing Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317)

5.   “… the protection which equity provides in relation to confidential information should make adequate allowance for the skill, effort, time and money expended in acquiring, collating and producing the information in a readily workable and useful form.” (at [60])

6.   “… the information is ‘of a confidential nature’ if it is not ‘public property and public knowledge’, or if it is ‘constructed solely from materials in the public domain’, to which ‘the skill and ingenuity of the human brain’ has been applied. … This is a fairly undemanding test.” (at [62], citing Del Casale & Ors v Artedomus (Aust) Pty Limited (2007) 73 IPR 326 at 346 [103])

Findings

The Court rejected the Plaintiffs’ submission that the information contained in the Master Customer List should be disaggregated to determine whether particular information was confidential, and therefore whether there had been a misuse of particular information:

the Master Customer List was a detailed and carefully drafted document that is of considerable value to [the Defendant]. It was also of considerable value to any competitor of [the Defendant]. The fact that the document contains, in addition to sensitive commercial information, the names of its customers that is ultimately information which is in the public domain, does not detract from its essential characteristic as being confidential.” (at [61])

The Court held that “the Master Customer List, being a product of the skill, effort and ingenuity of [the Defendant] and its employees, represents confidential information” (at [63]).

The Court further held (on the requisite Briginshaw v Briginshaw (1930) 60 CLR 336, 361-2 standard) that the Plaintiff had used and misused the Master Customer List, which had inadvertently fallen into its hands, which information was known by it to be confidential, in drafting and amending its pleadings (at [68]-[71]).

Relief and orders

The Court ordered, inter alia, that:

  1. the offending paragraphs in the pleadings be struck out;
  2. the Plaintiff deliver up all hard copies of the Master Customer List and delete any electronic copies;
  3. any lawyer or person within the Plaintiff’s law firm, or any counsel retained by the Plaintiff, who has seen or directly or indirectly made use of the Master Customer List, be restrained from continuing to act or work for the Plaintiff in the litigation;
  4. the existing pleadings be removed from the Court file and the Plaintiff file fresh pleadings omitting those parts struck out.

In so ordering the Court noted that:

  • there was no need for the Plaintiff to rely upon or make use of the Master Customer List in pleading its case. The Plaintiff could have applied for interrogatories which may well have revealed the necessary information (at [73]);
  • Use of confidential information to institute proceedings, in which the same information might subsequently be obtained on compulsory process, is an abuse of information received in, or as a result of a breach of, confidence, and will be restrained by a court of equity” (at [78] per Brereton J in British American Tobacco Ltd v Gordon & Anor [2007] NSWSC 230);
  • When a court grants remedy to enforce an equity of confidence, it aims to provide a remedy which ensures that the defendant gains no advantage from there having been a breach of confidence.” (at [76] per Campbell J in AG Australia Holdings Ltd v Burton (2002) 58 NSWLR 464);
  • even if the amended pleadings were permitted, there was a risk that at trial, any evidence led by the Plaintiff in proof of allegations derived from the Master Customer List may well be excluded by section 138(1) of the Evidence Act 2008 (Vic), which requires the exclusion of improperly or illegally obtained evidence unless the desirability of admitting the evidence outweighs the undesirability of admitting evidence that has been obtained in the way in which the evidence was obtained (at [83]);
  • the risk that reference to the Master Customer List, either directly or indirectly, may be excluded from evidence at trial, added to the factors in favour of the exercise of discretion to strike-out the relevant parts of the pleading;
  • section 7(1) of the Civil Procedure Act 2010 (Vic) required the Court to facilitate the just resolution of the real issues in dispute. To permit the offending parts of the pleading to remain would not be conducive to the fair, and hence just, determination of the proceedings.

Footnote

Footnote 1 of the judgment reads as follows:

The idiom ‘the pot calling the kettle black’ describes a situation in which a person comments on or accuses another of a fault which the accusing party shares. The etymology of this phrase is not beyond controversy: see Adrian Room, Brewer’s Dictionary of Phrase and Fable (HarperCollins, 16th revised ed, 1999). Cf the definition of ‘Pot’ in Ebenezer Cobram Brewer, Dictionary of Phrase and Fable: Giving the Derivation, Source, Or Origin of Common Phrases, Allusions, and Words that Have a Tale to Tell (Henry Altemus Company, 1898).”