The recent decision of the Federal Court in Krueger Transport Equipment Pty Ltd v Glen Cameron Storage & Distribution Pty Ltd [2008] FCA 803 deals with the misuse of confidential information during a tender process. The relevant information related to the design of a load restraint system for a curtain-sided trailer used for carrying cargo (the Krueger Concept).
This case highlights the importance of maintaining the confidentiality of any information or trade secrets imparted during a competitive tender process.
Facts
Krueger Transport Equipment Pty Ltd (Krueger) is a designer and manufacturer of trailers for the Australian transport industry. The Glen Cameron Group (Camerons) are a transport and logistics group involved in transporting goods throughout Australia. Vawdrey Australia Pty Ltd (Vawdrey) is a manufacturer and retailer of semi-trailers and truck bodies throughout Australia. Vawdrey is a competitor of Krueger.
Camerons was invited to respond to a Request for Proposal issued by Amcor for the cartage of Amcor cargo (the tender). Camerons sought designs and quotes from three parties, including Krueger and Vawdrey, for the manufacture of a number of curtain-sided trailers which it would need if it were to succeed in its proposal to Amcor. After receiving preliminary quotes, Camerons met separately with Vawdrey (Camerons/Vawdrey meeting) and Krueger (Camerons/Krueger meeting) to discuss, among other things, methods by which to restrain the trailer load. Vawdrey and Krueger produced to Camerons various sketches and quotations both at the initial meetings and subsequently. Camerons’ response to the tender, which was ultimately successful, included drawings, made by Krueger, of the Krueger Concept. Despite this, Camerons ultimately awarded the contract for the manufacture of the trailers to Vawdrey. Vawdrey’s final submissions, made to Camerons a day after Camerons won the tender, included a load restraint system remarkably similar to the Krueger Concept.
Krueger brought proceedings against Camerons for breach of confidential information, and against Camerons and Vawdrey for copyright infringement and contravention of the Trade Practices Act 1974 (Cth). Krueger alleged that it had devised the Krueger Concept as a load restraint system for the Amcor cargo and that after it disclosed the system to Camerons at the Camerons/Krueger meeting, Camerons disclosed it to Vawdrey and Vawdrey used it to win the contract with Camerons. Justice Gordon accepted these submissions. She found that ‘the sequence and temporal proximity of events’ provided a reasonable basis on which to conclude that there was a disclosure of the confidential information (and in particular, the Krueger Concept) by Camerons to Vawdrey.
The decision on breach of confidentiality
Krueger submitted that Camerons owed Krueger an obligation of confidence in relation to the information on two bases: first, on the basis of a contractual obligation arising out of an express agreement to keep certain information confidential between Krueger and Camerons; and second, on the basis of an equitable obligation arising from the relationship of the parties, the nature of the information in issue and the circumstances in which Krueger disclosed it to Camerons.
Equitable obligation of confidence
Both parties’ counsel referred to principles described by Justice Megarry in Coco v AN Clark (Engineers) Ltd [1969] RPC 41. According to Justice Megarry, three elements are necessary for a successful action for breach of an equitable obligation of confidence:
- the information disseminated must have the necessary quality of confidence
- the information must have been imparted in circumstances importing an obligation of confidence, and
- there must have been an unauthorised use of that information to the detriment of the party communicating it.
Justice Gordon found that each of the above elements were satisfied in this case.
Contractual obligation of confidence
Despite conflicting evidence, Justice Gordon found that there was an oral agreement between Krueger and Camerons. The agreement was that ‘any quotation, drawings, and technical and pricing information provided by Krueger, including the Krueger Concept, would be kept confidential’. The agreement was found to be a reasonable restraint of trade as the Krueger Concept was not already in the public domain. Camerons breached its contractual obligation of confidence by disclosing the Krueger Concept to Vawdrey.
Camerons was therefore held to be in breach of both the equitable obligation of confidence and the contractual obligation of confidence.
Causation
Justice Gordon found that but for the disclosure of Krueger’s confidential information by Camerons to Vawdrey, Krueger would have won the contract with Camerons. Her honour also noted that it was reasonably foreseeable to Camerons at the time it disclosed the confidential information to Vawdrey that Vawdrey would use the information to improve its design solution and win the contract to the detriment of Krueger.
Practical implications
This case is a serious reminder to treat information imparted in meetings between parties during a competitive tender process as confidential, even in the absence of a written confidentiality agreement. This being said, the equitable cause of action for breach of confidence should only be considered a last resort, where other more certain means of maintaining the confidentiality of valuable information are not available. In Krueger, for example, the absence of a written confidentiality agreement meant that each of the parties expended considerable time and resources litigating the matter.
Therefore, where confidential information is proposed to be disclosed by a participant in a tender process, it would be prudent for the participant to ensure that a mutual confidentiality agreement or separate confidentiality undertakings are formally executed before disclosure of that confidential information. Equally, a recipient of confidential information would be well advised to make it clear in its tender terms what information disclosed by a participant during a tender process will be treated as confidential information.
This article was written by Anjalee de Silva, Vacation Clerk, Melbourne.
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