Confidentiality can be found in all facets of life, whether it’s Peter Andre, a famous pop star who will only date people who sign a confidentiality agreement or a company entering into a transaction involving sensitive valuable information that cannot be made known to the masses, and in all various aspects, the foundation of a confidentiality agreement is the same: it serves to protect privacy.
A company’s confidential information forms part of its assets and, therefore, having a confidentiality or non-disclosure agreement in place serves to ensure, firstly, that all those exposed to confidential information will think twice before leaking any sensitive information and, secondly, when and how the company can seek legal recourse should such information in fact be released outside the terms of the agreement.
The law prescribes a certain privilege to confidential information in some relationships, for example: doctor and patient, attorney and client, and police and informant, however, in South Africa, we do not have a general and well known “law of privacy” (outside of the Constitutional right to privacy in section 14 of the Bill of Rights). Therefore, information disclosed in confidence will not necessarily be protected by law. The Protection of Personal Information (POPI) Bill is currently being drafted by the South African Law Commission and is such a general law.
There are some statutes – the National Credit Act and the Consumer Protection Act for example – that regulate the treatment of certain “confidential information” for the benefit of consumers in South Africa, but in the ordinary course, confidentiality agreements are the best way of protecting commercially confidential information.
A general confidentiality agreement will usually include the following:
- A description of the confidential information / business idea / concept that you would like to disclose.
- Clarification of the purpose for which the disclosure is made e.g. evaluation of possible business opportunity.
- The disclosure period, for how long the recipient company / party is authorised to use the disclosed concept / information.
- The obligation on the recipient company / party to return the confidential information at the end of the disclosure period, alternatively, the recipient company / party must undertake to destroy the confidential information and provide proof of such destruction.
- Non- circumvention: the receiving company / party must undertake that it will only exploit the concept / business opportunity with you, the discloser.
- Confidentiality term: the agreement must either provide that the recipient will respect the confidentiality of the information indefinitely or for a defined period. If you are the discloser, you would naturally want the confidentiality term to be as long as possible, however there would usually have to be some sort of compromise between the parties.
- Remedies for breach: the agreement must indicate penalties (e.g. damages) to be borne by the recipient company / party. It is sometimes appropriate to cap the damages that must be payable by the recipient party, in the event of a breach, at a pre-determined amount.
It is important to note that even if a written confidentiality agreement is not executed, one can still allege that a verbal agreement existed, which would afford the same contractual remedies including specific performance, injunctive relief, cancellation and/or damages.
Considering the difficulty of proving the existence of the verbal contract, in such cases it is often easier to prefer a delictual action arising perhaps from unfair competition and/or the unlawful use of such confidential information (however, such information must be valuable to the disclosing party, may not have already been public knowledge or learnt by the recipient in a lawful manner).
Again, the remedies available if a delictual claim is proved based on unfair competition and/or unlawful use of confidential information, in the appropriate circumstances, are damages and/or injunctive relieve prohibiting such party misusing such confidential information.
Although alternative remedies exist, it is obviously always wiser to have a signed confidentiality or non-disclosure agreement in place which clearly and concisely sets out the rights and obligations of all the parties concerned.
A confidentiality agreement serves only to protect and a party who wishes to use such an agreement as an instrument to keep certain information a secret which should actually be made known for reasons of ethics, morality, justice or public policy, may be unpleasantly surprised to find out that our courts are empowered to strip away the label of confidentiality and sift through the information and facts to establish whether or not the information is inherently confidential and, hence, worthy of being kept secret.
A recently decided case, Tulip Diamonds FZE v Minister of justice and Constitutional Development & others  ZASCA 111, provided a certain clarity to the South Africa legal fraternity in regard to confidentiality of information and when our courts will interpret that such information is indeed worthy of protection.
The case involved a Belgian company who sought to review the decision of a Government Minister to co-operate with the Belgian authorities in terms of the International Co-operation in Criminal Matters Act (1996) by allowing a search and seizure operation to obtain documents for a Belgian criminal investigation. Irrespective of the fact the party seeking relief was foreign, the court found that such party nevertheless would have legal standing to litigate if they can demonstrate actual confidentiality in respect of the information concerned.
This is where the proof in the proverbial pudding comes to light: one can claim any information whatsoever to be confidential however that does not make it so. Our courts will take into account the nature of the information and the legal basis on which a right to confidentiality is asserted in order to determine whether that information in fact bears a reason to be considered confidential.
Competition Commission of South Africa v ArcelorMittal South Africa Ltd & others (680/12)  ZASCA 84 involved leniency applications and the documents attached to such applications being disclosed by the Competition Commission.
The decision on confidential information – which was on all fours with the Tulip Diamond judgment – illustrated the court’s willingness to take into account the true nature of the information and went further to consider what the consequences of disclosure would be, in order to determine whether such information is truly confidential. Again it was held that merely stating that the information is confidential is not nearly enough to prove it as such.
These judgments highlight the importance of understanding what, when and how information can be safe guarded in a confidentiality agreement, as well as the fact that one cannot merely rely on the wording in a confidentiality agreement to try enforce a claim against another, as in many cases, these claims may be completely baseless if the information was not worthy of protection in the first place.