A recent case of the NSW Supreme Court, Gold and Copper Resources Pty Ltd v Newcrest Operations Ltd [2013] NSWSC 281, highlights the importance of being able to prove your own loss or the other party’s profit as a result of a breach of confidence, and how confidentiality agreements interact with the equitable duty of confidence and disclosure to Government authorities.

Gold and Copper Resources (“GCR”) and Newcrest were both mining companies with exploration licenses over adjacent tenements. GCR gained access to a special form of electromagnetic surveying technology called “induced polarisation” surveying, where unusual electromagnetic features of the land would indicate mineral deposits.

GCR was required to seek its neighbours’ permission to enter the tenements covered by its neighbours’ mining licenses, and to set up the power sources, cables, and other equipment required to conduct the surveying. When GCR approached Newcrest, Newcrest expressed interest in using the technology itself. After some high-level discussion, a confidentiality agreement was signed and Newcrest was presented with detailed information about how the technology worked as part of negotiations with GCR with a view to having Newcrest and GCR work together to perform induced polarisation surveying over each of their tenements. Newcrest pulled out of the negotiations before a final agreement was reached, stating that they were not looking to use the technology at that time and may be interested at a later date.

Subsequently, Newcrest made an application to the Department of Primary Industries (“Department”) to renew its mining tenements. Unless Newcrest could show “special circumstances”, they would be required to give up 50% of their tenement. In Newcrest’s applications, they stated that they would be incorporating the induced polarisation technology in conjunction with GCR.

GCR argued that statement disclosed the confidential negotiations between GCR and Newcrest, in breach of the confidentiality agreement, and that their statements were misleading and deceptive because the negotiations had fallen through.

Stevenson J held that the statements in the Newcrest applications were in breach of the confidentiality agreement. Clause 20 of the agreement specifically made negotiations relating to the induced polarisation technology strictly confidential, and the statements in the Newcrest applications implied those negotiations had taken place and concluded.

Furthermore, the Court also held that disclosure to Government authorities is not necessarily ‘required by law’; here, Newcrest had no obligation to apply to renew their tenements, and no obligation to disclose every piece of information they had available therein (even if doing so might give them a more favourable result). The disclosure of confidential information in this case was entirely voluntary.

However, his Honour disagreed with GCR’s position that Newcrest maintained their entire tenements (i.e. profited) as a result of the breach, and that GCR lost the ability to buy the discarded parts of the tenements themselves (i.e. lost) as a result of the breach. Stevenson J held that GCR had not proved on the balance of probabilities that Newcrest would have failed to keep their whole tenements without the breach of confidence; the Department would most likely have found there were “special circumstances” to justify the renewal of the exploration licenses regardless of the mention of the induced polarisation technology. Newcrest could not be said to have profited from the breach. Furthermore, even if Newcrest had lost 50% of the tenement, it was at Newcrest’s election which 50% they would lose, and in any case there was no guarantee that GCR would obtain the discarded components.

His Honour also held that in this case, where the confidentiality agreement included an entire agreement clause and did not contain a clause preserving other remedies outside of the agreement, it excluded the need for an equitable duty of confidence. His Honour held such an equitable duty is residual in nature and there was no place for equity to interfere where the contract between the parties otherwise dealt with the parties’ rights and obligations in respect of confidential information.

As a result, even if GCR had shown that Newcrest had profited from their maintenance of the tenements, GCR could not obtain an account of profits as a remedy for the breach because the contract did not provide for it and equity would not step in.

GCR’s claim under Section 52 of the former Trade Practices Act 1974 (Cth) also failed, as Newcrest did not make their statements to the Department ‘in trade or commerce’.

This case holds a number of important lessons with respect to confidential information. First, parties must be aware when entering confidentiality agreements that a Court may later conclude they are unable to rely on equitable remedies in addition to (or instead of) standard remedies for breach of contract. Adding statements to the agreement that preserve other remedies in law and equity may assist to avoid such an outcome. Second, to obtain a remedy for breach of confidence, the innocent party must be able to show that they have suffered loss (or the party in breach has made a gain) as a direct result of the breach, and that the breach was not simply incidental to a loss (or profit) that would have occurred anyway. Finally, parties must be wary of disclosing confidential information to Government authorities. Unless the disclosure is actually compelled by law (i.e. it is illegal not to disclose), rather than simply favourable to disclose voluntarily, it is likely to be a breach of confidence for which the other party may take action.