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The Singapore Law Gazette

The Importance of a Clean Conscience in Breach of Confidence Claims

In a significant decision by the Court of Appeal in I-Admin (Singapore) Pte Ltd v Hong Ying Ting and others [2020] SGCA 32 (I-Admin), the well-established test for breach of confidence was modified to provide more robust protection to owners of confidential information by placing the burden on the defendant to show that his conscience is unaffected. This article seeks to explore the implications of the decision and offer some thoughts on what a clean conscience may entail.

Introduction

The law on breach of confidence is well established in Singapore. The courts have consistently cited and applied the test as set out in in the seminal decision of Coco v Clark (Coco):1Coco v AN Clark (Engineers) Ltd (1969) RPC 41, which was cited and applied by the Court of Appeal in Adinop Co Ltd v Rovithai Ltd and another (2019) 2 SLR 808 at (41).

  1. the information must possess the necessary quality of confidence;
  2. the information must have been imparted or received in circumstances giving rise to an obligation of confidence; and
  3. there must be unauthorised use and detriment on the party who disclosed the information.

In recent years, however, the application of the third element has been subjected to increased scrutiny.2I-Admin at (43). Several High Court decisions have questioned:

  1. whether unauthorised use can extend to the mere taking of confidential information by the defendant but who may not have strictly used or disclosed the same;3See Clearlab SG Pte Ltd v Ting Chong Chai and others (2015) 1 SLR 163 at (199)–(207). and
  2. whether detriment to the plaintiff has to be shown.4See Leiman, Ricardo and another v Noble Resources Ltd and another (2018) SGHC 166 at (165)–(169) and Vestwin Trading Pte Ltd and another v Obegi Melissa and others (2006) 3 SLR(R) 573 at (69)–(75).

The above questions were squarely addressed and resolved by the Court of Appeal in I-Admin which modified the Coco test to remove the third element altogether. Under this modified approach, a breach of confidence is presumed upon the establishment of the first two elements of the Coco test, and the defendant bears the burden of proof of showing that his “conscience is unaffected” in order to displace the presumption of liability (Modified Test).5I-Admin at (61).

The I-Admin decision as well as the implications of the Modified Test will be examined below.

The Decision in I-Admin

In I-Admin, the plaintiff claimed for, inter alia, breach of confidence against its ex-employee and a competitor company set up by said ex-employee based on their accessing, circulating and referring to its confidential information.6I-Admin at (44). For instance, the ex-employee retained and used log-in credentials given by the plaintiff to access and download the plaintiff’s confidential materials on a number of occasions.7I-Admin at (23).

However, the High Court dismissed the claim principally on the basis that mere copying of or access to the confidential information did not satisfy the requirement of unauthorised use and the plaintiff was unable to show that its confidential information had been used by the defendants.8I-Admin at (21) and (23).

On appeal, the Court of Appeal reviewed the law of confidence and held that the purpose of an action for breach of confidence served two purposes:

  1. preventing the defendant’s wrongful gain from the confidential information (Wrongful Gain Interest);9I-Admin at (50). and
  2. preventing wrongful loss to the plaintiff in the form of loss of confidentiality of its information (Wrongful Loss Interest).10See I-Admin at (51)–(53).

The Court of Appeal considered that the protection of a plaintiff’s Wrongful Loss Interest was significantly challenged when considered against the backdrop of a digitised society; it is now significantly easier to access, copy and disseminate vast amounts of confidential information without the plaintiff’s knowledge.11I-Admin at (3) and (55). It was held that the requirement of unauthorised use and detriment overemphasized the Wrongful Gain Interest at the expense of the Wrongful Loss Interest.12I-Admin at (58).

Accordingly, the Court of Appeal propounded the Modified Test to correct this imbalance. The reversal of the burden of proof on the defendant to show an unaffected conscience was justified on the basis that there is often delayed discovery of potential breaches of confidence by the plaintiff which result in evidential difficulties when bringing a claim. In contrast, defendants are better positioned to account for their suspected wrongdoing.13I-Admin at (62).

Applying the Modified Test, the Court of Appeal found the defendants in breach of confidence by their downloading, possession, and referencing of the plaintiff’s confidential information.14I-Admin at (64)–(66).

The Modified Test – Presumed Breach Upon Mere Receipt

The removal of the requirement of detriment is welcome as it authoritatively confirms that the law seeks to uphold confidences and not necessarily just to prevent or to recover loss.15See I-Admin at (51) which considered that an “obligation of conscience is to respect the confidence (of the relevant information), not merely to refrain from causing detriment to the plaintiff”. See also Smith Kline and French Laboratories (Australia) Ltd and others v Secretary to the Department of Community Services and Health (1990) FSR 617 at p 664 where the Federal Court of Australia held that “equity intervenes to uphold an obligation and not necessarily to prevent or to recover loss”. As stated by Lord Keith in AG v Guardian Newspapers:16AG v Guardian Newspapers Ltd (No 2) (1990) 1 AC 109 (“AG v Guardian”) at p 256.

[A]s a general rule, it is in the public interest that confidences should be respected, and the encouragement of such respect may in itself constitute a sufficient ground for recognising and enforcing the obligation of confidence even where the confider can point to no specific detriment to himself.

Conversely, the removal of the unauthorised use requirement may seem incongruous as the defendant’s breach of confidence is traditionally assessed under this limb. As stated in I-Admin, the defendant’s equitable duty is “not to deal with confidential information in a manner that adversely affects their conscience”.17I-Admin at (51). However, under the Modified Test, the defendant’s mere receipt of confidential information would appear to be considered a prima facie “breach” of confidence.18See I-Admin at (66) where the Court of Appeal held that the defendants’ “very possession of the (plaintiff)’s client data without its consent amounted to a breach of confidence”.

This conclusion may not lead to hardship to defendants who surreptitiously and improperly obtain confidential information without consent. However, it may be a surprising result to find a presumed breach where confidential information is voluntarily disclosed to the defendant by the plaintiff or obtained innocently (e.g. by picking up a document “wafted by an electric fan out of a window into a crowded street19This example “beloved of law teachers” was given by Lord Goff in AG v Guardian at p 281. or more commonly in the modern context, receiving an unsolicited e-mail sent in accident).

Of course, a defendant may seek to prove that his conscience was unaffected notwithstanding his receipt of confidential information. This is necessarily a fact-sensitive inquiry and some common factual scenarios are considered below.

Proving a Clean Conscience Where Confidential Information is Obtained or Received

Where confidential information is voluntarily disclosed by the plaintiff to the defendant, it is obvious that the defendant’s conscience is not impacted whatsoever, thereby displacing a presumed breach of confidence.20As stated by the UK Court of Appeal in Imerman v Tchenguiz (2011) Fam 116 (“Imerman”) at (69): “It is of the essence of the claimant’s right to confidentiality that he can choose whether, and, if so, to whom and in what circumstances and on what terms, to reveal the information which has the protection of the confidence.

If a defendant “came across the information by accident” (I-Admin at [61]), he is also likely to displace a presumed breach based on mere receipt as he would be blameless in its acquisition. However, any further perusal or use of the information is likely to attract liability as such acts compromise the information’s confidentiality without proper justification.21See also AG v Guardian at p 260: “It is a general rule of law that a third party who comes into possession of confidential information which he knows to be such, may come under a duty not to pass it on to anyone else.” (per Lord Keith). As stated by the UK Court of Appeal in Imerman v Tchenguiz,“[i]f a defendant looks at a document to which he has no right of access and which contains information which is confidential to the claimant, it would be surprising if the claimant could not obtain an injunction to stop the defendant repeating his action, if he threatened to do so22Imerman at (72). (emphasis added).

If a defendant accessed and acquired confidential information deliberately and without consent (as in I-Admin), he is very likely to face an uphill task in showing that his conscience was not affected. In Imerman v Tchenguiz, it was held that “intentionally obtaining such information, secretly and knowing that the claimant reasonably expects it to be private is itself a breach of confidence.”23Imerman at (68).

Finally, if the defendant “believed there to be a strong public interest in disclosing” confidential information (I-Admin at [61]), this may also displace liability for breach. For example, Lord Griffiths in AG v Guardian Newspapers firmly held that the courts have “always refused to uphold the right to confidence when to do so would be to cover up wrongdoing”.24AG v Guardian at p 268: “In Gartside v. Outram (1857) 26 L.J. Ch. 113, it was said that there could be no confidence in iniquity. This approach has been developed in the modern authorities to include cases in which it is in the public interest that the confidential information should be disclosed” (per Lord Griffiths). Even then, there are limits to the extent of permissible disclosure; the High Court in X Pte Ltd v CDE held that disclosure in such circumstances should only be made to a party who has a proper interest to receive the information, for example the police.25See X Pte Ltd and another v CDE (1992) 2 SLR(R) 575 at (39)–(42). Similarly, Lord Goff held in AG v Guardian at p 282 that “It does not however follow that the public interest will in such cases require disclosure to the media, or to the public by the media. There are cases in which a more limited disclosure is all that is required: see Francome v. Mirror Group Newspapers Ltd. (1984) 1 W.L.R. 892”.

Concluding Thoughts

While there may be understandable concerns that the Modified Test unduly favours owners of confidential information, it must be recalled that a breach of confidence action is ultimately an equitable claim. Liability will not attach to a blameless defendant who had acted with a clean conscience.

In addition, the Court retains a discretion to refuse relief under equitable principles even if liability is established.26See I-Admin at (67) where the Court of Appeal stated: “The appellant’s claim being founded on equity, remedial action is a matter of the court’s discretion. In Imerman v Tchenguiz, the UK Court of Appeal pertinently held:27Imerman at (74).

“A claim based on confidentiality is an equitable claim. Accordingly, the normal equitable rules apply. Thus, while one would normally expect a court to grant the types of relief we have been discussing, it would have a discretion whether to refuse some or all such relief on familiar equitable principles. Equally, the precise nature of the relief which would be granted must depend on all aspects of the particular case: equity fashions the appropriate relief to fit the rights of the parties, the facts of the case, and, at least sometimes, the wider merits.

For example, the Court of Appeal in I-Admin declined to order an injunction and/or delivery up as the defendants were no longer relying on the plaintiff’s confidential information in the course of their business.28I-Admin at (69)–(70). Instead, an award for equitable damages was made which was to be assessed at the value of the plaintiff’s confidential information, i.e. the “cost saved by the [defendants] in taking that information”.29I-Admin at (78).

Lastly, there are also other safeguards which discourage or prevent frivolous claims of breach of confidence, such as:

  1. the plaintiff’s obligation to identify with precision the particular information claimed to be confidential;30See Ng-Loy Wee Loon, Law of Intellectual Property of Singapore (Sweet & Maxwell, 2nd Ed, 2014) at (39.2.1): “A plaintiff in an action for breach of confidence must identify with precision the particular information which he claims is confidential. So important is this requirement for specificity that it has been recognised as the fourth element in the cause of action. Failure to comply with this requirement is fatal to the plaintiff’s action.
  2. trivial or useless information not being protected;31See Invenpro (M) Sdn Bhd v JCS Automation Pte Ltd and another (2014) 2 SLR 1045 at (130(f)): where “it has been held that trivial information or tittle tattle falls outside the scope of protection of equity.” See also AG v Guardian at p 282 where Lord Goff held that “the duty of confidence applies neither to useless information, nor to trivia.
  3. frivolous or vexatious claims being liable to be struck out summarily;32See in particular Order 18 Rule 19(1)(b) of the Rules of Court (Cap 322, Rule 5, 2014 Rev. Ed.) (“Rules of Court”). and
  4. appropriate costs sanctions imposed by the Court for unreasonable conduct.33See in particular Order 59 Rule 5 of the Rules of Court which states that the Court in exercising its discretion to costs shall take into account, inter alia, the parties’ conduct and any attempts to resolve the matter by alternative dispute resolution measures.

On balance, this author believes the Modified Test to be a welcome development in the law of confidence as it protects a plaintiff’s legitimate interest to protect the confidentiality of his information while not over-extending liability to defendants who have acted with a clean conscience.

The author wishes to thank his colleagues, Mr M. Ravindran and Mr Alvin Tan, at Ravindran Associates LLP, as well as Mr Lim Tianjun from That.Legal LLC for their invaluable comments in the writing of this article.

Endnotes   [ + ]

1.Coco v AN Clark (Engineers) Ltd (1969) RPC 41, which was cited and applied by the Court of Appeal in Adinop Co Ltd v Rovithai Ltd and another (2019) 2 SLR 808 at (41).
2.I-Admin at (43).
3.See Clearlab SG Pte Ltd v Ting Chong Chai and others (2015) 1 SLR 163 at (199)–(207).
4.See Leiman, Ricardo and another v Noble Resources Ltd and another (2018) SGHC 166 at (165)–(169) and Vestwin Trading Pte Ltd and another v Obegi Melissa and others (2006) 3 SLR(R) 573 at (69)–(75).
5.I-Admin at (61).
6.I-Admin at (44).
7.I-Admin at (23).
8.I-Admin at (21) and (23).
9.I-Admin at (50).
10.See I-Admin at (51)–(53).
11.I-Admin at (3) and (55).
12.I-Admin at (58).
13.I-Admin at (62).
14.I-Admin at (64)–(66).
15.See I-Admin at (51) which considered that an “obligation of conscience is to respect the confidence (of the relevant information), not merely to refrain from causing detriment to the plaintiff”. See also Smith Kline and French Laboratories (Australia) Ltd and others v Secretary to the Department of Community Services and Health (1990) FSR 617 at p 664 where the Federal Court of Australia held that “equity intervenes to uphold an obligation and not necessarily to prevent or to recover loss”.
16.AG v Guardian Newspapers Ltd (No 2) (1990) 1 AC 109 (“AG v Guardian”) at p 256.
17.I-Admin at (51).
18.See I-Admin at (66) where the Court of Appeal held that the defendants’ “very possession of the (plaintiff)’s client data without its consent amounted to a breach of confidence”.
19.This example “beloved of law teachers” was given by Lord Goff in AG v Guardian at p 281.
20.As stated by the UK Court of Appeal in Imerman v Tchenguiz (2011) Fam 116 (“Imerman”) at (69): “It is of the essence of the claimant’s right to confidentiality that he can choose whether, and, if so, to whom and in what circumstances and on what terms, to reveal the information which has the protection of the confidence.
21.See also AG v Guardian at p 260: “It is a general rule of law that a third party who comes into possession of confidential information which he knows to be such, may come under a duty not to pass it on to anyone else.” (per Lord Keith).
22.Imerman at (72).
23.Imerman at (68).
24.AG v Guardian at p 268: “In Gartside v. Outram (1857) 26 L.J. Ch. 113, it was said that there could be no confidence in iniquity. This approach has been developed in the modern authorities to include cases in which it is in the public interest that the confidential information should be disclosed” (per Lord Griffiths).
25.See X Pte Ltd and another v CDE (1992) 2 SLR(R) 575 at (39)–(42). Similarly, Lord Goff held in AG v Guardian at p 282 that “It does not however follow that the public interest will in such cases require disclosure to the media, or to the public by the media. There are cases in which a more limited disclosure is all that is required: see Francome v. Mirror Group Newspapers Ltd. (1984) 1 W.L.R. 892”.
26.See I-Admin at (67) where the Court of Appeal stated: “The appellant’s claim being founded on equity, remedial action is a matter of the court’s discretion.
27.Imerman at (74).
28.I-Admin at (69)–(70).
29.I-Admin at (78).
30.See Ng-Loy Wee Loon, Law of Intellectual Property of Singapore (Sweet & Maxwell, 2nd Ed, 2014) at (39.2.1): “A plaintiff in an action for breach of confidence must identify with precision the particular information which he claims is confidential. So important is this requirement for specificity that it has been recognised as the fourth element in the cause of action. Failure to comply with this requirement is fatal to the plaintiff’s action.
31.See Invenpro (M) Sdn Bhd v JCS Automation Pte Ltd and another (2014) 2 SLR 1045 at (130(f)): where “it has been held that trivial information or tittle tattle falls outside the scope of protection of equity.” See also AG v Guardian at p 282 where Lord Goff held that “the duty of confidence applies neither to useless information, nor to trivia.
32.See in particular Order 18 Rule 19(1)(b) of the Rules of Court (Cap 322, Rule 5, 2014 Rev. Ed.) (“Rules of Court”).
33.See in particular Order 59 Rule 5 of the Rules of Court which states that the Court in exercising its discretion to costs shall take into account, inter alia, the parties’ conduct and any attempts to resolve the matter by alternative dispute resolution measures.

Senior Associate
Ravindran Associates LLP
Member, Lawyers Committee
E-mail: [email protected]