First published on NIPC Case Law Update on 28 May 2005
The decision of the Court of Appeal in Douglas and others v Hello! Ltd and others
The Convention Obligation
The Court reached that conclusion as a result of the European Court of Human Rights’ judgment in favour of Princess Caroline of Monaco in Von Hanover v Germany
Performing the Obligation
In applying the Convention obligation, the Court took as its starting point Megarry J’s observation in Coco v A N Clark (Engineers) Ltd  RPC 41 that there are three ingredients to an action for breach of confidence:
the information in question had to be “of a confidential nature”,
it had to be communicated by the confider to the confidant in circumstances of confidence, and
there had to be unauthorized use of the information to the detriment of the confider.
Lord Goff had observed in Attorney-General v Guardian Newspapers Limited (No 2)  1 AC 109, 281 that an express undertaking of confidence by a confidante could be dispensed with where the confidential nature of the information was obvious. In Campbell v MGN Ltd
Commercial Exploitation of Private Information
However, that was not their only claim in confidence. The Court also found for the Douglases on the further ground that the photographs constituted commercially valuable information. In Lord Phillips’s words:
“Where an individual ('the owner') has at his disposal information which he has created or which is private or personal and to which he can properly deny access to third parties, and he reasonably intends to profit commercially by using or publishing that information, then a third party who is, or ought to be, aware of these matters and who has knowingly obtained the information without authority, will be in breach of duty if he uses or publishes the information to the detriment of the owner.”
The Court added that it had used the term ‘the owner’ loosely. It explained that it had also concluded that confidential or private information that is protected only by the law of confidence does not fall to be treated as property that can be owned and transferred.
Nature of the Obligation of Confidence
The reason for the Court’s explanation that a right to enforce an obligation of confidence is a personal and not a property right is that an obligation of confidence can be enforced only if the confidante is or should be aware of the confidential nature of the information. Were it a property right, the first and second probanda of Megarry J’s analysis would be otiose. An obligation of confidence of confidence would arise automatically regardless of whether the confidante had notice of the confidentiality of the information or circumstances of its disclosure. Possibly Mr and Mrs Douglas could have assigned their rights of action against Hello! to OK! but they chose not to do so. In the absence of such an assignment, the only right that OK!’s publisher enjoyed was a licence. Since no obligation of confidence was owed to the publisher of OK! it followed that that proprietor’s claim had to fail.
For many years lawyers had tended to regard the right to enforce that duty as a species of intellectual property. A fair number of business transactions such as business sale and confidentiality agreements will have been entered on that premise. The Court of Appeal has stated in the clearest possible terms that whatever the nature of the right it is certainly not intellectual property. The notion that it is appears to have been founded on a case that was reported nearly 40 years after it had been decided. In O Mustad & Son v Dosen  1 WLR 109, the purchaser of the assets of a business that had gone into liquidation managed to obtain an injunction to restrain a former employee of the insolvent business from disclosing trade secrets that he had gained in his employment. The Court reasoned that that decision appeared to have been based on a contractual obligation not to disclose the information.
It should already be clear that this case has practical consequences far beyond celebrity journalism. On the positive side for confiders, the obligation of confidence is not a contractual obligation and does not require the confidante’s consent in order to take effect. All that is required is that the confidante should have notice of the nature of the information. That does, of course, place on confiders an obligation to keep their information secret. That means keeping the information under lock and key, restricting access, tracking each and every disclosure and requiring the return of confidential documents after the disclosure has taken effect. The protection afforded by the obligation of confidence is of course limited to those with actual or constructive notice of the obligation. Where a formula or drawing has to pass from a confidante to a sub-contractor and perhaps from the sub-contractor to its machine foreman, it can be very difficult to argue that the foreman owed any duty of confidence to the confider. The obvious way that difficulty is to require the confidante to impose an obligation of confidence in favour of the confider and that can only be done by contract.