Fiduciary Obligations and Breach of Confidence:

Examining the High Court’s guidance for lower courts

and relevance to consumer information protection

Atul Kuver

2011

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I. INTRODUCTION

The function and development of equity in commerce has been rationalised on several

grounds. Reasons include the need to raise the standards of business behaviour by requiring

businesses to act selflessly in dealings1 and to make commercial dealings fairer.

2 Millet

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credits the development of commercial equity to the modern complexities and

professionalism of commercial life, changes from an industrial economy to a service

economy, and the broader range of remedies available in equity. The substantial rise in the

‘knowledge economy’ over the last two decades – driven primarily by the development in

information and communication technologies – may require significant changes to the law

relating to consumer protection.4

This essay argues that it is reasonable to expect the High Court to provide appropriate sign

posts for the lower courts to indicate the likely direction of the evolution of commercial

equity. By examining the development of law within the doctrines of fiduciary obligations

and breach of confidence, this essay considers the extent and nature of the guidance provided

by the High Court. The essay then examines whether breach of confidence could be extended

to the protection of consumer information and privacy, or whether consumer protection

should come through the legislature. Overall, the essay will show that there has been

uncertainty at the lower court level with regards to these equitable doctrines and sign posting

by the High Court is an appropriate expectation.

1 Anthony Duggan, ‘The Profits of Conscience: Commercial Equity in the High Court of Australia’, (2003) 24

Australian Bar Review 150. 2 Daniel Clough, ‘Trends in the Law of Unconscionability’, (1999)18 Australian Bar Review 34. 3 P. J. Millet, ‘Equity’s Place in the Law of Commerce’, (1998) 114 The Law Quarterly Review 214. 4 See eg. Competition and Consumer Act 2010 (Cth).

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II. THE DEVELOPMENT OF COMMERCIAL EQUITY AND GUIDANCE FOR

THE LOWER COURTS

This section examines circumstances where the High Court has dealt with the equitable

doctrines of fiduciary obligations and breach of confidence. The discussion will show how

the High Court provides the lower courts with clear direction in certain cases. Other cases are

not without ambiguity — in particular, the High Court’s assertion in Farah Constructions Pty

Ltd v Say-Dee Pty Ltd,5 that lower courts should not depart from the seriously considered

dicta of the High Court. Breach of confidence is then examined to establish if the doctrine

could be used to protect consumer information and privacy.

A. Fiduciary Obligations

The obligations on a fiduciary are intended to secure a loyalty that ensures that actions by the

fiduciary treat the principal’s interests as paramount. A fiduciary cannot have an interest or

inconsistent relationship with a third party where there is a real and sensible possibility of

conflict.6 A fiduciary also cannot obtain an advantage or profit from property, powers,

confidential information or opportunities offered by the principal.7

Breen v Williams8 presented the High Court with an opportunity to reassess the law of

fiduciary obligations. The appellant’s (Ms Breen) claim was that the doctor-patient

relationship was fiduciary in nature and therefore a doctor is obliged to act in the ‘best

5 (2007) 230 CLR 89 (‘Farah’). 6 Phipps v Boardman [1967] 2 AC 46. 7 Chan v Zacharia (1984) 154 CLR 178; 8 (1996) 186 CLR 71 (‘Breen’).

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interests’ of the patient. Ms Breen’s assertion was that doctors were obliged to give their

patients access to their medical information. The High Court unanimously refused to expand

fiduciary obligations to include this type of duty as has been done in Canada.

Canadian courts have imposed fiduciary obligations on doctor patient relationships.9 In

rejecting McInerney the High Court established that the Canadian view of prescriptive

fiduciary obligations did not agree with the law of fiduciary duty as understood in Australia.

The High Court deemed the Canadian decision as having no doctrinal underpinning.10

The

decision in Breen has entrenched the proscriptive nature of fiduciary obligations in Australia.

While the High Court may be prepared to expand or recognise fiduciary obligations in other

relationships, Australia has not followed the trend of Canadian decisions where fiduciaries

have a positive obligation to act to protect the principal’s interests or to disclose information.

The Court decided to leave this type of change to the legislature.11

It stated that the courts

would re-formulate existing law from time to time to take account of changing social

conditions, but that such steps would be taken when the change could be ‘derived logically or

analogically from other legal principles, rules and institutions.’12

Policy considerations will

not ‘justify abrupt or arbitrary change involving the abandonment of settled principle in

favour of a particular result which is merely perceived as desirable.’13

Justice Gummow in

Roxborough v Rothmans of Pall Mall14

emphasised the Court’s strict adherence to precedence

as the basis for judicial reasoning. His Honour stated that ‘general principle is derived from

9 Julie Brebner, ‘A Lost Opportunity or a Welcome Conservatism?’(1998) Deakin Law Review 237, citing McInerney v McDonald (1992) 93 DLR (4th) 415 at 423 (‘McInerney’). 10 Breen, 83. 11 Ibid, 99 12 Ibid, 115. 13 Ibid, 99. 14

(2001) 208 CLR 516.

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judicial decisions upon particular instances, not the other way around.’15

It was a fairly clear

signal to the lower courts of the High Court’s approach to the development of judge made

law. This became significant in Farah.

The High Court’s judgment in Farah is significant because it was the first major

consideration of the rule in Barnes v Addy16

since Consul Development v DPC Estates Pty

Ltd.17

The High Court unanimously affirmed the approach in Consul and strongly asserted

that the NSW Court of Appeal had made a ‘grave error’18

in its decision which was ‘very

unjust’19

and had caused ‘great confusion.’20

It was ‘unjust’ because the Court of Appeal

went down a path of its own and based its decision on a restitutionary basis, which was not

argued in the court below.21

The High Court said that the Court of Appeal’s decision was

influenced by the reasoning ‘advocated by Professor Birks’22

and pointed out that the lower

court had not referred to any ‘particular book, chapter or article’23

by Professor Birks. It

caused ‘great confusion’ because the lower courts would encounter two lines of reasoning.

The first line of reasoning was to follow Consul. The second being the Court of Appeal’s

restitutionary approach. The High Court virtually reversed every decision by the NSW Court

of Appeal. The High Court also responded to the Court of Appeal’s claim that there was no

preceding authority on this matter.24

15 Ibid, 544. 16 (1874) LR 9 Ch App 244 (‘Barnes v Addy’), cited in Rob Chambers, ‘Knowing Receipt: Frozen in Australia’,

(2007) Journal of Equity 40, 43 (‘Chambers’). The first limb, ‘knowing receipt’ describes an event which

initiates a liability to repay the value of assets received as a result of breach of trust or breach of fiduciary duty.

The second limb is referred to as ‘knowing assistance’. 17 (1975) 132 CLR 373 (‘Consul’). 18 Farah, 149. 19 Ibid. 20 Ibid. 21 Lee Aitken, ‘Unforgiven: Some Thoughts on Farah Constructions Pty Ltd v Say-Dee Pty Ltd’ (2007) 29

Australian Bar Review 195, 199 (‘Aitken’). 22 Farah, 149. 23 Ibid. 24

Ibid.

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In trying to reach a decision based on the first limb of Barnes v Addy, the Court of Appeal

reasoned that the statements made in Consul regarding the first limb were purely obiter dicta,

because Consul was decided on the second limb. The High Court pointed out that the

statements made in regards to the first limb were seriously considered by the court in Consul.

It was also emphasised that the views expressed in those statements were shared by the entire

majority,25

and that the Court of Appeal should not have departed from the seriously

considered dicta of the High Court in Consul. In Farah, it was held that while Farah owed

fiduciary duties to Say-Dee, it had not breached that duty. The High Court then discussed

what would have happened if there were a breach of fiduciary duty. Since there was no

breach by Farah, this part of the judgment is all obiter dicta.

Obiter dicta from the High Court clearly provide good guidance to the lower courts on how

the law may develop in areas not directly considered by the court.26

But the dicta in Farah do

not tell the lower courts how the law in this area should develop. Rather, it tells the lower

courts that they cannot disregard the dicta of the majority judgments in Consul and not to

depart from seriously considered dicta of the High Court.27

This implies that it may not be

possible for lower courts to decide not to apply dicta considered in the High Court. The

judgment in Farah seems to have blurred the distinction between ratio and dicta of the High

Court.28

25 Ibid, 150 26 Chambers, 49. 27 Ibid. 28

Aitken, 196.

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B. Breach of confidence, consumer information and the protection of privacy

The near ubiquitous link between people, the internet, and the mobile telecommunications

network is a driver for protection of consumer information and consumers’ ability to access

this information. Consumer information is routinely collected. Some information may be

consumer generated, where the individual is responsible for providing personal information

to the business. In other situations, information is gathered surreptitiously. This includes the

use of loyalty cards,29

identification through mobile phone links, and internet use. Consumers

are relatively powerless to prevent data gathering in a society where these processes are

essential. Many consumers remain unaware of the large volumes of data that is collected by

supermarkets and social networking sites.30

Information can be categorised into personal,31

business32

and governmental information.33

The rationale for the protection is different for each category.34

The enquiry here is limited to

the protection of personal and business (‘the consumer’) information. The adequacy of breach

of confidence as a cause of action for the protection of consumer information is examined.

The statement by Megarry J in Coco v AN Clark (Engineers) Ltd35

outlines the following

three requirements in a breach of confidence claim: first, that the information has the

29 To identify the consumer purchasing patterns. See eg,

http://www.buseco.monash.edu.au/centres/acrs/research/whitepapers/hidden-side-of-loyalty.pdf,

http://www.unley.sa.gov.au/webdata/resources/files/USLT_Item_21_Att1.pdf. 30 The Age, ‘Max’s privacy war beings Facebook to heel’, (2011)

http://www.theage.com.au/technology/technology-news/maxs-privacy-war-brings-facebook-to-heel-20111027-

1mksg.html. 31 Jeremy Birch, ‘Breach of Confidence: Dividing the Cause of Action Along Proprietary Lines’, (2007) 81 Australian Law Journal 338, 339 citing Prince Albert v Strange (1849) 64 ER 293 (‘Birch’) 32 Ibid, citing Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37, 46. 33 Ibid, citing Commonwealth v John Fairfax & Sons Ltd 147 CLR 39. 34 Birch. 35 [1969] RPC 41, 47-48, cited in Graeme S Clarke, ‘Confidential Information and Trade Secrets: When is a

Trade Secret in the Public Domain? (2009) 83 Australian Law Journal 242.

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necessary quality of confidence; secondly, that the information was communicated to the

defendant in conditions importing an obligation of confidence; and thirdly, the information

was used by the defendant without the authority of the plaintiff and to the plaintiff’s

detriment.

In ABC v Lenah Game Meats,36

a case involving the secret filming of the treatment of

animals in a processing factory, Gleeson CJ stated that ‘[i]f the activities filmed were private,

then the law of breach of confidence is adequate to cover the case.’37

This implies that if

information is gathered surreptitiously, then that information has the necessary quality of

confidence and can be treated as being communicated such that it creates an obligation of

confidence. If the information is then used without authority and to the detriment of the

individual, breach of confidence will suffice. However, there may be many cases where the

consumer would not want their information used, even when the consumer does not suffer

any detriment. Without detriment, the consumer’s desire for privacy may not be protected.

Did the judgment in Lenah indicate that there may be a civil cause of action to protect

privacy?

The extension of the doctrine of breach of confidence for the general protection of privacy

has been the subject of much academic discussion.38

After the decision in Lenah, the lower

courts have declared protection against ‘breach of privacy’ on occasions. In Grosse v Purvis39

and Doe v ABC40

the plaintiff was granted relief for the invasion of privacy. But in Giller v

36 (2001) 208 CLR 199 (‘Lenah’). 37 Ibid 225. 38 See eg, N A Moreham, 'Breach of confidence and misuse of private information: how do the two actions work

together?', (2010) 15 Media and Arts Law Review 265; Sir Anthony Mason, ‘Legislative and Judicial Law-

Making: Can We Locate an Identifiable Boundary?’(2003) 24 Adelaide Law Review 15, 35 (‘Mason’). 39 Grosse v Purvis [2003] QDC 151. 40

Doe v ABC & Ors [2007] VCC 281, 54 [164].

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Procopets,41

Gillard J concluded that a cause of action based on breach of privacy42

was not

recognised in Australian law. These contrasting decisions reflect the uncertainty of law in the

area of invasion of privacy. Whether the lower courts interpreted the High Court’s reasoning

in Lenah as an avenue to extend breach of confidence to an action for breach of privacy is

unclear. The lack of any decisions in favour of a breach of privacy doctrine since Doe v ABC

probably indicates the reluctance in current lower courts to continue recognising a general

right to privacy.

On whether breach of confidence would be extended to protect privacy, the Honourable Sir

Anthony Mason has said that ‘for the courts to take this step would be to take a step too

far.’43

Sir Mason gave the following reasons:44

the proposition that the law does not give recognition to a general right of privacy has

not been qualified by the courts;

the law has not taken many incremental steps towards the recognition of a general

right to privacy;

a general right to privacy is a significant political question with many stakeholders;

and

substantial consultation and inquiry would be necessary to qualify stakeholder views

and exceptions to the general rule.

41 Giller v Procopets [2004] VSC 113. 42 Ibid 76 [187]. 43 Mason, 35. 44

Ibid.

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III. CONCLUSION

This essay has considered to what extent the Australian High Court provides appropriate sign

posts for the lower courts that indicate the likely direction of development of commercial

equity. Examining in particular, the doctrines of fiduciary obligations and breach of

confidence, it was shown that the High Court is prepared to extend general principles, but

only through strict adherence to precedence as the basis for its judicial reasoning. The

evidence presented here shows that the High Court has consistently declared this approach

and reasoning. However, not all guidance was well-defined —the requirement for the lower

courts not to depart from seriously considered dicta of the High Court may create confusion

in the lower courts with regard to what constitutes seriously considered dicta.

The essay has also examined the reasons why the development of breach of confidence may

be inadequate for the protection of consumer information and privacy. The gradual approach

of the High Court in the development of law, and the policy considerations means that the

law in the area of consumer information protection and privacy would need to be

implemented through the legislature.

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IV. BIBLIOGRAPHY

A. Articles/Book/Reports

Aitken, Lee ‘Unforgiven: Some Thoughts on Farah Constructions Pty Ltd v Say-Dee Pty Ltd’

(2007) 29 Australian Bar Review 195

Birch, Jeremy, ‘Breach of Confidence: Dividing the Cause of Action Along Proprietary

Lines’, (2007) 81 Australian Law Journal 338

Brebner, Julie, ‘A Lost Opportunity or a Welcome Conservatism?’, (1998) Deakin Law

Review 237

Chambers, Rob, ‘Knowing Receipt: Frozen in Australia’, (2007) Journal of Equity 40

Clarke, Graeme, S, ‘Confidential Information and Trade Secrets: When is a Trade Secret in

the Public Domain?, (2009) 83 Australian Law Journal 242

Clough, Daniel, ‘Trends in the Law of Unconscionability’, (1999)18 Australian Bar Review

34

Commonwealth of Australia, ‘The Nature and Application of Unconscionable Conduct

Regulation’, (2009) Issues Paper

Dean, Robert, ‘A Right to Privacy’, (2004) 78 Australian Law Journal 114

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Dempsey, Gillian, and Andrew Greinke, ‘Proscriptive Fiduciary Duties in Australia’, (2004)

Australian Bar Review 1

Duggan, Anthony, ‘The Profits of Conscience: Commercial Equity in the High Court of

Australia’, (2003) 24 Australian Bar Review 150

Edelman, James and Simone Degeling, ‘Fusion: The Interaction of Common Law and

Equity’, (2004) 25 Australian Bar Review 195

Griggs, Lynden, ‘The Unconscionability Provisions of the Trade Practices Act 1974:

Contrasting Judicial Developments’, (2002) 9 Competition & Consumer Law Journal 241

Hayne, K. M., ‘Address to Commercial Law Conference’, (2002) 23 Australian Bar Review

24

Johnston, Mark, 'Should Australia force the square peg of privacy into the round hole of

confidence or look to a new tort?' (2007) 12 Media and Arts Law Review 441

Mason, Anthony, ‘Legislative and Judicial Law-Making: Can We Locate an Identifiable

Boundary?’, (2003) 24 Adelaide Law Review 15

Millet, P. J, ‘Equity’s Place in the Law of Commerce’, (1998) 114 The Law Quarterly Review

214

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Moreham, N.A, 'Breach of confidence and misuse of private information: how do the two

actions work together?' (2010) 15 Media and Arts Law Review 265

Wishart, David, ‘Does the High Court Understand Corporations Law?’, (1996) 6 Australian

Journal of Corporations Law 424

B. Cases

ABC v Lenah Game Meats (2001) 208 CLR 199

Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37

Barnes v Addy (1874) LR 9 Ch App 244

Breen v Williams (1996) 186 CLR 71

Chan v Zacharia (1984) 154 CLR 178

Coco v AN Clark (Engineers) Ltd [1969] RPC 41

Commonwealth v John Fairfax & Sons Ltd 147 CLR 39

Consul Development v DPC Estates Pty Ltd (1975) 132 CLR 373

Doe v ABC & Ors [2007] VCC 281

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Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89

Giller v Procopets [2004] VSC 113

Grosse v Purvis [2003] QDC 151

Hospital Products Pty Ltd v United States Surgical Corporation (1984) 156 CLR 41;

McInerney v McDonald (1992) 93 DLR (4th)

Phipps v Boardman [1967] 2 AC 46

Prince Albert v Strange (1849) 64 ER 293

Roxborough v Rothmans of Pall Mall (2001) 208 CLR 516

C. Legislation

Competition and Consumer Act 2010 (Cth)