Unclear pleadings can be terminal for breach of confidence actions
Manderson M & F Consulting (A Firm) v Incitec Pivot Limited (No. 2)  VSC 205
This was a confidential information case. It again illustrates the necessity in such cases to precisely identify the information alleged to have been imparted in confidence and to have been misused by the recipient. As stated by the Court:
“the absolutely critical element in the pleading of a claim of this kind is the identification or definition in specific; and not merely general, global terms, or on some inferential basis, of that which it is said to be the confidential information in question.”
The confidential information and conduct in question
The case concerned alleged breach of confidence by Incitec in relation to a “Model” for the creation of asset leases in the form of operating leases rather than finance leases in order to obtain certain advantages in their treatment under accounting standard AASB 117. It came on as an application by the plaintiff, MMFC, for leave to amend, for the tenth time, its Statement of Claim, and a motion by Incitec for summary judgment.
It was alleged that the principals of MMFC developed the Model and had made a PowerPoint presentation to Incitec for use of the Model in a particular transaction with which Incitec was then concerned. Incitec did not proceed to use the services of MMFC and apparently used the Commonwealth Bank to whom the Model was allegedly disclosed. The Commonwealth Bank was not a party to the proceedings and no separate proceedings had been brought against it. The relevant principles do not appear to have been in dispute. Those principles were set out by the judge in previous interlocutory proceedings in the matter,1 quoting Gummow J, in Corrs Pavey Whiting & Byrne v Collector of Customs:2
“As I have indicated the case is to be approached in terms of the general law, not as a case of confidence protected by contract, but as one, if anything of confidence protected in equity. It is now settled that in order to make out a case for protection in equity of allegedly confidential information, a plaintiff must satisfy certain criteria. The plaintiff: (i) must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question; and must also be able to show that (ii) the information has the necessary quality of confidentiality (and is not, for example, common or public knowledge); (iii) the information was received by the defendant in such circumstances as to import an obligation of confidence; and (iv) there is actual or threatened misuse of that information …”.
The importance of precise claims
As the issue in this case, and in the earlier decision, related solely to the adequacy of the pleadings and as much of the relevant facts were referred to by reference to paragraphs of the pleading and to confidential exhibits it is not clear from the judgment what was actually alleged. The Court, however, appears to have accepted Incitec’s submission that:
“all that was contained in the proposed pleading was a reference to inputs and outcomes. Nowhere was there identified anything which explained the “machinery” by which the critical inputs and their values determined to produce a range of desired outcomes. In spite of reference to the “grey box” in the PowerPoint presentation claiming copyright in the Model and confidentiality, no piece of paper setting out the Model or any software – such as an Excel spreadsheet which would respond to varying inputs, showing outputs – was identified”.
and held, citing the High Court in O’Brien v Komesaroff,3 that:
“the fatal flaw in the proposed Statement of Claim is that it refers to the Model, discusses the problems it seeks to overcome, but never actually states what the Model is.”
Whilst not necessary to its decision, the Court also accepted Incitec’s submissions in relation to the pleadings in respect of the extent of any unauthorised use and disclosure that it:
“does fail to disclose a cause of action, is embarrassing and includes irrelevant and unparticularised allegations of knowledge. It follows that, even if MMFC were able to identify or define the confidential information which it seeks to protect as required by the authorities to which reference has been made, the cause of action would fail on the basis of the pleadings with respect to breach as now contained in the proposed Statement of Claim”.
In conclusion the Court found that:
“For the reasons, I find that the claim of MMFC in these proceedings fails in that it “does not disclose a cause of action” within the meaning of rule 23.01 of the Rules and, further, that the whole of its claim has “no real prospect of success” within the meaning of s 63 of the Act. The appropriate course if that I should now dismiss the proceeding with summary judgment for the defendant or permanently stay the proceedings.”
The case confirms the view that in confidential information cases it is not usually the law which is in dispute but the ability of the plaintiff to establish the facts and plead them with precision. MMFC failed to do so notwithstanding ten attempts and representation throughout by highly regarded senior counsel.
-  VSC 63.
-  FCA 266.
-  HCA 33.