ENTITLEMENT TO EQUITABLE RELIEF
25 The contentions advanced on behalf of Elecon Australia and Elecon Engineering in relation to the entitlement to equitable relief are not without considerable difficulty, having regard to the pleadings and the notice of appeal. It is desirable to say something about both before dealing with the arguments advanced at the hearing of the appeals.
26 In their further amended statement of claim of 13 February 2009 (the Statement of Claim), PIV Drives and Brevini Australia make the following allegations in relation to their claim for relief for breach of confidence:
· Under the Know-How Contract, PIV Antrieb provided confidential information to Elecon Engineering for the purpose of Elecon Engineering making gear units and drives in accordance with and pursuant to the terms of the Know-How Agreement.
· The confidential information was imparted in circumstances where Elecon Engineering knew that the confidential information was confidential information of PIV Antrieb and that Elecon Engineering was bound to keep the confidential information confidential and not use it or disclose it for any purpose unless pursuant to the Know-How Agreement.
· Accordingly, the confidential information was imparted by PIV Antrieb to Elecon Engineering in circumstances that gave rise to an equitable duty owed to PIV Antrieb and its successors in title to keep the confidential information confidential, such duty of confidence subsisting beyond the termination of the Know-How Contract.
· By reason of the assignment of 25 October 2001, PIV Drives acquired all rights in relation to the confidential information.
· The confidential information imparted by PIV Antrieb to Elecon Engineering under the Know-How Agreement remained subject to the equitable duty owed to PIV Antrieb and its successors in title to keep the confidential information confidential.
· By not later than 25 March 2002 or, alternatively, 22 May 2002, the Know-How Contract was terminated.
· By reason of the termination of the Know-How Contract, any rights granted to Elecon Engineering to use the confidential information were terminated.
· Elecon Engineering has, after the termination of the Know-How Contract, manufactured gear units and drives using the confidential information.
· At all times since at latest 22 May 2002, the manufacture and sale in Australia by or on behalf of Elecon Engineering of gear units and drives manufactured using the confidential information has been in breach of the equitable duty of confidence owed by Elecon Engineering to PIV Antrieb and to its successor in title, PIV Drives.
· Further, in breach of its equitable obligation of confidence, Elecon Engineering has disclosed the confidential information to Elecon Australia for the purpose of manufacture by Elecon Australia and sale in Australia of gear units and drives made in accordance with the confidential information.
· Elecon Australia was at all material times aware that the confidential information was confidential to PIV Antrieb and its successor in title, PIV Drives.
27 In their second further amended defence of 2 March 2009 (the Defence), Elecon Engineering and Elecon Australia substantially admitted the allegation in the Statement of Claim that Elecon Engineering had received confidential information in circumstances giving rise to an equitable duty owed to PIV Antrieb and its successors in title to keep the confidential information confidential, such duty to subsist beyond the termination of the Know-How Contract. However, they asserted that, by reason of conduct on the part of PIV Drives and PIV Antrieb, PIV Drives and Brevini Australia are not entitled to equitable relief as claimed.
28 The conduct alleged is as follows:
· The assignment by PIV Antrieb of all of its assets and undertaking on 25 October 2001 amounted to a repudiation of the Know-How Contract and its effect was to prevent PIV Antrieb from performing its obligations under the Know-How Contract.
· On 1 November 2001 PIV Drives was purchased by Brevini Italy.
· Any rights that PIV Antrieb held in relation to the confidential information ceased on 25 October 2001 when, by its conduct in transferring all of its assets and undertaking to PIV Drives, PIV Antrieb repudiated the Know-How Contract, which repudiation Elecon Engineering accepted.
· The rights that PIV Antrieb held, in relation to the confidential information under the Know-How Contract, were not transferred to PIV Drives by the assignment.
· PIV Drives and Brevini Australia are therefore not entitled to rely upon the rights under the Know-How Contract.
It is difficult to discern how those assertions disentitle PIV Drives to assert its rights in relation to breach of confidence in relation to confidential information that was transferred to it by PIV Antrieb.
29 The primary judge acknowledged a contention on behalf of Elecon Engineering and Elecon Australia that there had been no effective assignment of PIV Antrieb's interest in the confidential information and that it was therefore necessary to join PIV Antrieb to the proceeding. However, his Honour found that any transfer of the confidential information to PIV Drives by PIV Antrieb was subject to the licence granted to Elecon Engineering for so long as that licence should endure. There was no challenge to that finding.
30 The primary judge also referred to an estoppel defence, to the effect that, because PIV Drives had taken insufficient steps to protect the interest that it now claims, it allowed Elecon Engineering and Elecon Australia to adopt an assumption, to their detriment, that they were permitted to use the confidential information, such that that PIV Drives is now estopped from asserting its rights. His Honour found that clear notice had been given to Elecon Engineering of the claim made by PIV Drives on 22 May 2002 and that Elecon Engineering understood that claim. His Honour therefore rejected the factual basis for any estoppel.
31 The primary judge next referred to a contention advanced on behalf of Elecon Engineering and Elecon Australia that PIV Drives had acted unconscionably in acquiring any equity on which it relies. The contention involved an assertion that, by reason of the assignment, PIV Antrieb had been disabled from fulfilling its obligations under the Know- How Contract and PIV Drives was complicit in that action. His Honour rejected the premise upon which that contention depended. His Honour considered that the contention should not be assessed in the abstract but should be resolved by reference to such contractual obligations as remained to be fulfilled by PIV Antrieb. Relevantly, his Honour found that PIV Antrieb was obliged to check drawings provided by Elecon Engineering in connection with its own projects and to provide "all necessary assistance" to enable it to produce drawings. However, his Honour found that PIV Antrieb was never asked to check any drawings and there was no evidence that any request for support was made or any form of support withheld between 1 November 2001 and 25 March 2002, when Elecon Engineering gave notice of termination.
32 The primary judge found that arrangements remained in place where it would have been possible for PIV Antrieb, through its administrator, to ask PIV Drives for support and, after consideration of the matter on a case by case basis, for PIV Drives to provide it. His Honour found that there was no evidence that the administrator would have been unable to respond to a request from PIV Antrieb. Thus, the contention really depended on conjecture in a context where the possibility did not ever arise. His Honour found, therefore, that there was an insufficient basis to conclude that PIV Antrieb had been disabled in the way contended.
33 The primary judge observed that the action to restrain breach of confidence is not based in contract. Rather, it appeals to the general equitable jurisdiction to grant relief against an actual or threatened abuse of confidential information. The rational basis for that equitable jurisdiction does not lie in proprietary right but in the notion of an obligation of conscience arising from the circumstances in or through which the information was communicated or imparted (see Moorgate Tobacco Co Limited v Philip Morris Limited [No. 2] (1984) 156 CLR 414 at 438).
34 The primary judge had no doubt that the intellectual property that was assigned by PIV Antrieb with effect on 1 November 2001, including the confidential information that had been imparted to Elecon Engineering, was capable of protection. His Honour accepted that, because the benefit of the Know-How Contract was not assigned by PIV Antrieb to PIV Drives, the cause of action of PIV Drives could not be based upon a contractual promise. Nevertheless, his Honour saw no reason to doubt that the interest in the confidential information was directly assignable, such that the title of PIV Drives to sue does not depend upon the assignment of any contractual promise under the Know-How Contract.
35 Although confidential information is not property in the usual sense, it may be transferred by one person to another and the person to whom it is transferred has standing to take action to protect the confidentiality of the information. The Court may therefore grant at the behest of the person to whom, as a purchaser, the confidential information is transferred, injunctions and equitable compensation for breaches of the confidence (see TS & B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 3) (2007) 158 FCR 444 at [72]-[77]). His Honour therefore concluded that it was not necessary that PIV Antrieb be joined as a party. His Honour was satisfied that Elecon Engineering had breached the obligation of confidence that it owed to PIV Drives and that both it and Elecon Australia may be restrained, at least in Australia, from further breach of that confidence.
36 In the amended notice of appeal, the only ground relevant to the finding of breach of the obligation of confidence and the granting of relief on that basis was that the primary judge erred in concluding that PIV Drives and Brevini Australia were entitled to the equitable relief claimed. There was no more specific particularisation of that ground. However, in their written submissions in support of that ground, Elecon Australia and Elecon Engineering advanced the following argument:
· PIV Drives and Brevini Australia should have been refused equitable relief in relation to the claims of breach of confidence as a consequence of the conduct whereby PIV Antrieb had repudiated the Know-How Contract: that was essentially an assertion that PIV Drives did not have clean hands and therefore should not be granted equitable relief.
· The primary judge should have found that PIV Antrieb repudiated the Know-How Contract and therefore should have concluded that the involvement of PIV Drives in the conduct giving rise to the repudiation disentitled it and Brevini Australia from injunctive relief.
· The primary judge failed to recognise that an ongoing obligation of PIV Antrieb under the Know-How Contract was to ensure that Elecon Engineering had the benefit of the exclusive use in India of the manufacturing secrets and know-how necessary to manufacture and sell the gear units and drives and failed to recognise the significance of the capacity of PIV Antrieb to continue to supply technical information relating to the gear units and drives.
· The negotiations for the assignment by PIV Antrieb to PIV Drives were kept secret from Elecon Engineering, which was therefore unable to take steps to protect its rights under the Know-How Contract and PIV Antrieb failed to take steps to protect those rights.
· The transfer of the confidential information from PIV Antrieb to PIV Drives destroyed the benefit of the exclusive licence held by Elecon Engineering under the Know-How Contract.
· The involvement of PIV Drives in the repudiation of the Know-How Contract was unconscionable conduct by PIV Drives.
· PIV Drives should therefore be denied equitable relief.
37 However, his Honour expressly held that PIV Drives received the relevant manufacturing secrets and know-how from PIV Antrieb subject to the licence to Elecon Engineering under the Know-How Contract, for so long as that licence should endure. That holding was not impugned by any contention advanced in the appeal. There was no evidence that German law in that regard differed from Australian law. That is effectively an answer to the contention advanced in the Defence and in the written submissions.
38 However, in the course of oral argument, the contention was put in a different way. The argument may be summarised as follows:
· While confidential information is not property, it has some attributes similar to the attributes of property.
· Protection of confidential information is granted in equity when it is shown that an obligation of confidentiality has arisen from the circumstances in which the information is communicated or imparted.
· The confidential information in question was imparted to Elecon Engineering on the basis that Elecon Engineering would have exclusive use of the information in India.
· Elecon Engineering paid a substantial licence fee for the grant of the exclusive licence.
· PIV Antrieb, as licensor under the Know-How Contract, was obliged to keep the information secret in India and not make the information available for use by a competitor of Elecon Engineering in India, otherwise the benefit of the exclusive licence would be reduced.
· By reason of the mutuality of the promises made in the Know-How Contract, Elecon Engineering was bound by its duty of confidence only for so long as PIV Antrieb maintained its exclusivity in India.
· PIV Drives is a subsidiary of Brevini Italy, which is a competitor of Elecon Engineering with a sales network in India including a sales office in Mumbai near Elecon Engineering's plant.
· Accordingly, by assigning the information to PIV Drives without express reservation of the rights of Elecon Engineering, PIV Antrieb failed to maintain the exclusivity in India of Elecon Engineering.
· Following the assignment by PIV Antrieb to PIV Drives taking effect on 1 November 2001, PIV Antrieb could no longer do anything to protect the right of exclusivity granted to Elecon Engineering and made no arrangement to protect the rights of Elecon Engineering under the Know-How Contract.
· From the time of the assignment on 1 November 2001 until the termination of the Know-How Contract, Elecon Engineering was in a situation where it was bound by the duty of confidence undertaken in exchange for exclusivity but did not have the benefit of exclusivity in India.
· On the other hand, Brevini Italy, a competitor of Elecon Engineering, through its subsidiary PIV Drives, had the capacity to compete in India.
39 It is significant that it was not put as part of the argument that Brevini Italy or its subsidiaries had in fact disclosed or in any way made use of the confidential information in India prior to the termination of the Know-How Contract. The most that was suggested is that there was some evidence to suggest that Brevini Italy or its subsidiaries could have done so had it wished.
40 There was no error in the conclusion of the primary judge that the assignment of the confidential information by PIV Antrieb to PIV Drives was subject to the exclusive right that had been conferred on Elecon Engineering under the Know-How Contract. Any such right, of course, endured for only so long as the Know-How Contract endured. It is common ground that the Know-How Contract came to an end on 25 March 2002. There is no basis upon which the mere possibility of action by Brevini Italy or its subsidiaries in India prior to that time could have discharged Elecon Engineering from the duty of confidence by which it was bound when it received the confidential information under the Know-How Contract.
41 That is the conclusion reached by the primary judge. His Honour made no error in granting equitable relief in respect of breach of the duty of confidence owed by Elecon Engineering to PIV Antrieb and its successor in relation to the confidential information imparted to Elecon Engineering under the Know-How Contract.