The Full Court Decision
60 In breach of confidence cases where protection is sought for an idea, there has been an understandable insistence that the idea itself be "sufficiently developed." So in Fraser v Thames Television Ltd [1984] 1 QB 44 in considering an idea for a television programme (which in its pirated form was broadcast as "Rock Follies"), Hirst J observed (at 65-66):
"I accept that to be capable of protection the idea must be sufficiently developed, so that it would be seen to be a concept which has at least some attractiveness for a television programme and which is capable of being realised as an actuality: see per Harris J in Talbot v General Television Corporation Pty. Ltd. [1981] R.P.C. 1, 9, lines 20-22. But I do not think this requirement necessitates in every case a full synopsis. In some cases the nature of the idea may require extensive development of this kind in order to meet the criteria. But in others the criteria may be met by a short unelaborated statement of an idea. In Talbot's case itself I do not think the detailed submission, quoted at p. 5, added very much of substance to the idea which is set out in one sentence starting at line 10 on p. 5."
61 This variable requirement of specificity or development is, of course, markedly different from the requirement that for a contract to exist, its essential or critical terms must be certain and agreed. The decision of the Full Court in the Bank litigation was concerned solely with the latter question: see esp ANZ Banking Group Ltd v Frost Holdings Pty Ltd [1989] VR 695 at 700. Its conclusion on that matter had no direct bearing at all on the question whether the Frost Holdings' idea was sufficiently developed to be a candidate for protection by equity. The best that could be said of the significance of the Full Court decision to a later decision on the breach of confidence claim had such transpired, would be that the trial judge may have been inclined to re-examine his own view as to the sufficiency of the idea's development before concluding it was an appropriate subject for protection.
62 I have found it necessary to deal with this matter as the respondent has sought to attribute a significance to the Full Court decision in this regard in the present proceeding which it clearly does not have.
Findings and Conclusions on the Chance Lost
63 The applicant has rightly submitted that this is not a case in which I am required to speculate about what the evidence might have been at a hypothetical trial. The case was in fact conducted and an intimation given by the trial judge of his likely view on the issue of liability but not of damages. The applicant's submission in consequence is that it lost the certain chance of a finding in its favour on the merits.
64 For my own part I would have to say I am in broad agreement with this submission though I would not put the matter as absolutely as the applicant does. It may well have been the case that on a remitter to O'Bryan J, His Honour would have invited further submission on the breach of confidence claim generally given that the applicant had not actually addressed on it. That process may have affected the view ultimately arrived at by the trial judge. Nonetheless, I consider the greater likelihood to be that he would have adhered to his tentatively expressed view at the end of his judgment that the Bank had been guilty of an actionable breach of confidence. The matters raised by the respondent before me to suggest the contrary - that the idea was not sufficiently developed or was not novel; that the information used by the Bank differed from Frost Holdings' proposal - are in my view images of, or variants on, the matters actually canvassed at the trial, as witness the exchanges I have set out. While I do not consider that the views expressed by O'Bryan J in those exchanges necessarily reflected his actual or concluded views, they nonetheless indicated that the issues being raised before me were there adverted to. At best, and then to no significant extent, the matters raised by the respondent are merely contingencies that might affect the value of the opportunity. They do not in any way diminish or destroy the opportunity itself.
65 There is no real disagreement between the parties as to what are the essential ingredients to be proved to make out the actionable breach of confidence. The information in question - the "idea" here - must be confidential in the sense of being "relatively secret"; it must be communicated in circumstances importing an obligation of confidence, this commonly being shown by proof that it was disclosed for a particular purpose only; there must be an unauthorised use of the information or of some part thereof; and, because confidentiality is claimed for an idea, the idea itself must be "sufficiently developed": see generally Interfirm Comparison (Australia) v Law Society of New South Wales (1975) 5 ALR 527; Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37; Talbot v General Television Corporation Pty Ltd, above; Smith Kline & French Laboratories (Aust) Ltd v Secretary, Department of Community Services and Health (1990) 22 FCR 73.
66 While it may be that a claim of the variety advanced by Frost Holdings might be considered by some to be somewhat adventurous, I am satisfied that a judge in the position of O'Bryan J could find - and that His Honour would have found - an actionable breach on the material before him.
67 Far more problematic in my view is the level of compensation O'Bryan J might have awarded for the wrong. It is this part of the matter that occasions most difficulty.
C Damages for the Lost Opportunity
68 O'Bryan J did not provide any indication of how, and in what likely measure, he would have assessed damages for the breach of confidence claim beyond observing in argument (i) that those damages would be in "a lesser sum" than for the breach of contract; and (ii) that the judges in Talbot's case experienced "very real difficulty' in assessing damages.
69 The manner in which the claim was put by the applicant was that its loss was the profit it was unable to obtain from the exploitation of the idea (being the profit to be derived from the sale of the calendars to the business sponsor of the project) and that for practical purposes this loss was identical to that suffered in the contract claim. The respondent's submission is that, with the demise of the contract claim in the Full Court, the alleged loss evaporated and no other basis for valuing the loss was put forward as a matter of evidence. Additionally it is claimed that no loss flowed to the applicant from the Bank's use of the "collection" part of the concept as it was only from the sale of the calendar that the applicant was to derive profit.
70 Before expressing my findings and conclusions on this part of the damages claim in the present proceeding I should refer to two matters, the first of evidence; the second of loss.
Additional Evidence
71 First, when the Bank indicated to Mr Frost of 7 August 1986 that it did not wish to go ahead with the calendar the reason given for its decision was that it had been advised that it was not viable. The Bank's letter of that date stated (inter alia) that:
"As you know, we have been conducting further research into the viability of this project.
Our main concern lies in that we have discovered that public perceptions of a calendar produced by a corporation is that it should be a 'giveaway' item as the National Australia Bank have done successfully over many years. As you know this project was planned to be self funding and based on your sales projection of 50,000 calendars, our research now indicates this is not feasible.
Our Market Research area also believes it is impractical to utilise our branch network for the sale of the poster due to the large stock holding requirement and that we would have to consider a direct sales campaign, again, a further costly area.
The Australian Bicentennial Authority Licensing fee also dilutes the attractiveness of the project and, unfortunately, we no longer believe that the project is a viable public relations exercise for us.
Keith, we are just unable to see how, given the above facts, that this could become a successful commercial project or even a break-even venture. On reflection we feel the project would be best sold on a commercial basis, without naming rights, through retail chains; perhaps a 'Myer' involvement would not have the same restrictions."
No evidence was led by the Bank at the trial in support of the views stated in the letter.
72 Secondly, after the Bank's withdrawal from the project, Frost Holdings attempted to induce other sponsors to support what then necessarily was a variant of the original concept that emphasised the calendar, the Bank having appropriated the commissioned collection part of it. These endeavours came to nothing. They properly can be described as attempts to salvage something from the original idea.
Damages for Breach of Confidence
73 The manner in which damages are to be assessed for breach of confidence has a complexity that is compounded, variously, by the significance to be attributed to the nature of the information itself, the use the confider intended to make of it, and the circumstances and consequences of the breach of confidence. The end purpose of an award of damages is, though, to put the innocent party in the position it would have been in had the misuse of the confidential information not occurred: see Dowson & Mason Ltd v Potter [1986] 2 All ER 418; and see general, Dean, The Law of Trade Secrets, 1990, 316 ff; Stuckey-Clarke, "'Damages' for Breaches of Purely Equitable Rights: The Breach of Confidence Example" in Finn (ed), Essays on Damages, 1992. And so, depending on the circumstances, damages may be assessed on the bases, variously, of a loss of profits: cf Dowson & Mason Ltd v Potter, above; of a fair user charge: cf Interfirm Comparison (Australia) Ltd v Law Society of New South Wales, above; of the market value of the information: cf Seagar v Copydex Ltd (No 2) [1969] 2 All ER 415; of a consultant's fee: Seagar v Copydex Ltd (No 2); etc.
74 I mention the above because even if a "loss of profits" basis for an assessment would have been found to be inappropriate in the circumstances of the applicant's breach of confidence claim, another measure may in principle at least have been available - even if its invocation might have required either leave being given to adduce further evidence or, alternatively, the reference of the inquiry as to damages to a Master.
Findings and Conclusions
75 It is not my task to conduct "a trial within a trial." Nonetheless, unusually, I am confronted with a state of affairs in which the breach of confidence claim was in fact all but fully litigated. In consequence what it revealed or suggested ought to be taken into account when evaluating the value of the opportunity lost, constraining though this may be. I should re-emphasise though, that I am not in this proceeding required to decide the breach of confidence claim as a hypothetical. But in the distinctive circumstances it is appropriate, in my view, to have regard to the courses that would have been open to O'Bryan J and to the likely characterisation His Honour would have made of the issues and evidence before him on a remitter.
76 Turning to the breach of confidence action itself, it is important to emphasis that although the idea devised by Frost Holdings and later developed during negotiations with the Bank had two component parts - the collection and the calendar - it was a composite idea. Once the collection element had been appropriated by the Bank, it would have been open to the trial judge to have found that the whole idea had been rendered useless so far as the applicant was concerned, and that any later proposal Frost Holdings may have advanced to other sponsors involving a calendar alone - as was the case - was a separate if partially similar concept. In other words whatever profit-making potential the concept had (via the calendars) before the breach of confidence, that evaporated on the breach. It is more probable than not that the trial judge would have found that the breach of confidence robbed the confidential information of residual value, the integrity of the whole idea having been destroyed by it.
77 Frost Holdings having thus been wholly deprived of the right to exploit the idea for its own advantage, how might the trial judge have measured the loss it thereby suffered? Necessarily I must engage in some speculation as to possibilities and probabilities.
78 First, that assessment would have taken place in a setting in which there was no contract in fact, with the consequence that a contractual measure of loss could not have been relied upon as such to provide the yardstick for the award. Nonetheless, it would properly have been open to the trial judge to consider the likelihood of a contract having been entered into had the Bank not misappropriated part of the idea: cf Talbot's case, at 251. While the Bank intimated that it did not want to proceed with the calendars for commercial reasons, it would have been open to the judge to discount that explanation, lacking as it did any independent evidentiary foundation, and as being self-serving. Equally, the view might well have been taken that the value to the Bank of the collection part of the concept was such that, in order to have the benefit of it, the Bank would have been prepared to accept the calendar component even if at some scaled down price. The above contingencies may well have led the trial judge to conclude that a loss of profits basis for the assessment of the loss remained appropriate, albeit the contingencies to which I have referred requiring quite significant discounting (in the order of 50 per cent) of the sum awarded. There is, in my view, some real likelihood that such an approach would have been taken.
79 Secondly, if the trial judge had approached the matter on the basis that the Bank would not have contracted with the applicant because the calendar proposal was not viable, a loss of profits basis as such for damages would have become distinctly problematic. It would have been necessary to show that the idea, nonetheless, was one reasonably capable of being brought to realisation with another sponsor and at a likely profit. The evidence of this was distinctly lacking, though His Honour may have been prepared to re-open the evidence to allow the remedy of this.
80 Thirdly, while finding the Bank would not have contracted to buy the calendars, the trial judge may well have considered - and inferred - that the Bank would have been prepared to buy the entire concept so as to enable it to use the collection part of it. The difficulty on the evidence before His Honour, in constructing a contract of sale would have been significant but again further evidence may have been permitted. In any event I consider that the profit Frost Holdings would have derived from the projected sale may have provided some foundation from which a process of discounting to arrive at a "sale price" could have been undertaken. Alternatively such profit could have provided some evidence of what a "conversion" measure of damages would have yielded.
81 What is certain, in my view, is that the measure adopted would have resulted, on any of the bases mentioned, in a sum significantly less than that in fact awarded in the contract claim because of the contingencies involved.
82 I am satisfied that, despite the slender material before the trial judge and its direct link only to a loss of profits basis of assessment, His Honour would probably have found sufficient in the material before him to award damages albeit on a significantly discounted non-contractual basis using the findings His Honour had previously made as to the loss of anticipated profits on the sale of the calendars as a foundation for the award.
83 There are obvious limitations to a process of assessing the prospects of a claim as if tried ten years ago. What then the arguments would have been must necessarily be matter of some conjecture. Further, I mean no disrespect in saying that the courses or approaches likely to have been taken by O'Bryan J cannot be predicted with certainty. What, though, I am satisfied of is that Frost Holdings' right to argue its claim was clearly valuable and that if pursued would have resulted in a substantial damages award: cf Instant Nominees Pty Ltd v Redman [1987] WAR 218 at 226-227.
84 In assigning a value to the opportunity lost for the purposes of the present proceedings, I consider that the award of a sum in the order of $55,000 represents a reasonable distillation of the possibilities affecting the prosecution of the breach of confidence claim. I have in arriving at this sum used His Honour's profit estimate on the calendar sales in the contract action, discounted first, by a small percentage against the contingency that on re-argument no breach of confidence would be found on the facts, and secondly, by a much larger percentage (in the order of 50 per cent) to take account of the variety of possibilities and contingencies that could have affected the assessment of damages.
85 There is a number of additional matters to which reference should be made. First, while one contingency affecting the value of the opportunity to which reference should be made was the prospect of an appeal from any decision of O'Bryan J favourable to Frost Holdings on the breach of confidence claim, I would have to say that I do not consider the likelihood thereof to be of any particular moment. Rather, I consider the Bank more likely to have wanted this matter to be finalised. Its moral position was decidedly weak.
86 Secondly, the Bank in fact made offers of compromise both before the trial (of "expenses") and before the appeal (in the sum of $105,000). These were rejected by Mr Frost. The present respondent has claimed that the applicant's loss in the Bank litigation was caused by its refusal to accept any such offer. As to this I need only say that the offers and their rejection pre-date the negligence and breach of retainer I have found. Equally, there is no evidence to suggest Mr Frost was advised to accept any of the offers.
The Additional Damages Claims
87 These, in varying forms, are made up of legal costs. The first relates to the Bank's cost order, the others to expenses incurred both with the respondent and with other legal firms.
(i) The Bank's Costs Order
88 If, as I have found would probably have occurred, the Full Court had remitted the breach of confidence claim to the trial judge, I am satisfied that the Full Court would as well have reserved the issue of the costs of the trial to the trial judge. The costs order for the appeal would, though, have stood in favour of the Bank.
89 Having already found that the applicant would have been successful in recovering substantial damages on the remitter of the breach of confidence claim, the question then arises as to the costs order that the trial judge would probably have made in relation to the trial as a whole.
90 Predictably in submissions the parties have taken polar opposite positions. The applicant's is that there is no reason why costs should not follow the event given that the action as an event was conducted on the basis of two causes of action that were not wholly distinct from each other and that shared a large factual core: cf The Ritz Hotel Ltd v Charles of the Ritz Ltd (1989) AIPC 90-567. The respondent's contention, based in some degree on page references to breach of confidence in the transcript of the original trial, is that the proceeding was in substance one for breach of contract; that claim was unsuccessful; and the costs award accordingly should reflect this. Only a small portion should be attributed to breach of confidence.
91 The nature and scope of the judicial discretion exercised in the award of costs are well known and need not be canvassed here. I am of the view, though, that a trial judge would in the circumstances have been likely to have made some apportionment of costs - albeit an apportionment that reflected that the applicant at the end of the day was vindicated in instituting legal proceedings. Given the extent of the factual core of the two claims and the level of interconnectedness of the claims as prosecuted, that apportionment could have been at some point in the range of 80:20 and 50:50 as between breach of confidence and breach of contract. In these circumstances a 60:40 figure would not be unreasonable and is the one I adopt.
92 Translating these proportions into a monetary sum on the figures provided to me, the amount of the costs as taxed that were attributable to the trial was $26,768.29 (being 53.73 per cent of $48,420). Sixty per cent of that sum is in the order of $16,060. I find that the respondent's negligence and breach of retainer rendered the applicant liable in this sum to the ANZ for costs, a liability it would not have suffered but for that wrongdoing.
(ii) Legal Expenses
(a) O'Loughlin Robertson
93 The costs claimed here are half of those incurred in the initial retainer of O'Loughlin Robertson in South Australia that led ultimately to Frost Holdings' retainer of Darvall McCutcheon first on an agency basis, and then as solicitor on the record in the Bank litigation. The basis of the claim is that as a result of the respondent's negligence and breach of retainer, the applicant lost its opportunity to secure judgment in its favour and so wasted the above proportion of these costs.
94 I am unable to accept this. These costs were of an exploratory and preparatory nature, and were incurred before any claim was formulated and importantly before a breach of confidence claim was envisaged. I do not consider that they properly should be characterised as wasted costs in the Bank litigation.
(b) Darvall McCutcheon
95 The claim here is for $23,615.39 being one half of the sum of $47,230.77 paid to the respondent in respect of its retainer by the applicant. The 50 per cent apportionment represents a crude attempt to attribute costs to each of the two causes of action. I should add that the figure of $47,230.77 is significantly less than the amount for which Frost Holdings was actually billed.
96 It is the case that in some significant degree costs incurred were wasted because of the firm's wrong. It is a matter of no little guess-work to settle upon a figure that properly should be taken reasonably to represent that loss. There can be no science in the matter. A sum in the order of $20,000 would, in my view, be a proper one to adopt in this respect. I should add I do not consider that any detailed analysis of the various accounts rendered would have assisted in the selection of an appropriate figure.
(c) Goldberg & Co/McKean & Park
97 The costs claimed relate to legal expenses incurred in obtaining advice on further proceedings against the Bank and in prosecuting the unsuccessful quantum meruit claim. I need not set out any of these costs here as I do not consider they are properly recoverable in this proceeding.
98 It may well be - and probably was - the case that the applicant had a strong and substantial claim against the respondent for professional negligence in not including a quantum meruit claim in the original proceedings against the Bank: cf Mason and Carter, Restitution Law in Australia, 1995, para 1033ff. That claim would have long since have been statute barred. What, in my view, is now being sought is an impermissible attempt to recover costs thrown away in pursuit of a claim unrelated to the negligence/breach of retainer claim with which I am concerned. Rather, it relates to a matter not part of the present proceedings and it cannot be brought within it by resort to some notion of "salvage" or attempted "mitigation."
(d) Winding-up legal costs
99 The applicant company, as I have previously indicated, was wound up on the petition of the Bank in respect of its unpaid taxed costs. What is sought here by way of damages are the costs incurred in retaining Esau, Meister & Associates to resist the winding-up application.
100 It is unnecessary again for me to enter upon this matter in any detail. The evidence, which I do not set out here, satisfies me on the balance of probabilities that the company's inability to satisfy the Bank's debt was a consequence of actions taken by Mr Frost. Once it became clear that the Bank intended to proceed to a taxation of its costs, Mr Frost set in train steps to preserve the assets of Frost Holdings, transferring out of it both a holding of prints on which, in conversations both with Mr Goldberg and Mr Resch, he placed a value of around $90,000 and a Mercedes-Benz car that he valued at around $25,000. The liquidator's notes confirmed the occurrence of these transfers, but at a great undervalue.
101 Furthermore, while the company was technically insolvent at all relevant times in the sense that its liabilities far exceeded its assets, those liabilities were in large measure debts to shareholders. In reality, it would seem, the company could operate for as long as Mr Frost was prepared to stand behind it.
102 In this instance not only was he not prepared to stand behind Frost Holdings, he took positive steps to ensure it was without assets. In these circumstances I am not satisfied that the money spent in resisting the petition - it was incurred contemporaneously with expenditure on the quantum meruit claim against the Bank - is a proper head of damage in this proceeding.
Conclusion
103 This is a particularly unfortunate proceeding. The applicant, though probably having good claims both in quantum meruit and in breach of confidence against the Bank, has suffered the misfortune of being left remediless against the Bank. Insofar as its claim against the respondent is concerned such remedy as it now has available to it is very much second best. And what is particularly ironic is that such recovery as it has secured in this proceeding may well inure to the benefit of the Bank as a creditor of the company in liquidation.
104 The Bank is not a party to the present proceedings and has not had an opportunity to address me on any of its actions in this matter. In those circumstances I refrain from comment upon its conduct other than to say that, unexplained, it borders on the reprehensible.
105 As to the damages award to be made it will be in the sum of $91,060.00 being the aggregate of the sums of $55,000, $16,060 and $20,000. There will be judgment for the applicant in that sum. The parties have asked to be heard on the question of interest and costs.
I certify that the preceding one hundred and five (105) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.