Breach of Confidence

Understanding Breach of Confidence

This cause of action is particularly important in commercial and employment settings, where the unauthorised disclosure of trade secrets, client lists, or proprietary data can cause immediate and lasting harm. Unlike intellectual property rights, which must be registered or established at law, the duty of confidence arises from the nature of the relationship and the character of the information itself.

What is Breach of Confidence?

A breach of confidence is established when confidential information is shared, received, or used without permission. Information commonly protected under this doctrine includes business plans, customer databases, pricing models, manufacturing processes, and technical know-how. The protection is equitable in nature, making it flexible and responsive to the facts of each case.

Origins and Legal Foundations

The modern Canadian test for breach of confidence originates from Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574, in which the Supreme Court held that three elements must be proven:

This three-part test has been consistently applied by courts across Canada and remains the foundation of the action today. It is this test that governs how claims are pleaded, how defences are structured, and how courts assess the appropriate remedy.

Key Elements of the Claim

Information with the Necessary Quality of Confidence — The information must be secret, valuable, and not generally available to the public. Courts examine the steps taken to maintain its confidentiality, the effort invested in its creation, and whether it provides a competitive advantage. Information that is publicly available, freely shared, or of trivial value will not attract protection.

Circumstances Importing an Obligation of Confidence — The duty may arise from an express agreement, such as a non-disclosure clause, or it may be implied from the nature of the relationship. Employers, joint venture partners, and professional advisers often owe such duties even without formal documentation. The key question is whether a reasonable person in the position of the recipient would have understood that the information was conveyed in confidence.

Unauthorised Use to the Detriment of the Plaintiff — The defendant must have used or disclosed the information in a way that was not authorised and that caused harm. Detriment can include economic loss, reputational damage, or an unfair competitive benefit gained by the defendant at the plaintiff's expense.

Relationship to Other Claims

A breach of confidence often overlaps with other causes of action. Understanding how these claims interact helps determine the most appropriate strategy for litigation or settlement — including which claims should be pursued in the alternative and which remedies are most likely to be available.

Breach of Confidence vs. Breach of Contract

A breach of contract claim enforces the specific terms of an agreement, while breach of confidence relies on equitable principles that apply even where no contract exists. This distinction is important because an obligation of confidence may arise simply from the relationship between the parties or the nature of the information itself — no written NDA is required.

In Ontario, written confidentiality clauses are enforceable under contract law principles and can be supplemented by equitable duties of confidence. Where an agreement exists, its terms will generally define the limits of confidentiality, but courts can still apply equitable relief where fairness requires it — particularly where the contract does not exhaustively address how certain information may be used.

Breach of Confidence vs. Breach of Fiduciary Duty

A fiduciary duty arises where one party has undertaken to act in the best interests of another. Breach of confidence focuses on misuse of information obtained in confidence — the two are conceptually distinct but often arise from the same facts.

Breach of Confidence and Intellectual Property

Breach of confidence protects information that has commercial value because it is secret. It often complements intellectual property law by filling the gaps where copyright, patent, or trademark protection does not apply. A company's proprietary method or formula that is deliberately kept secret — rather than patented — can still be protected through a breach of confidence claim. The action therefore plays a key role in safeguarding business innovation that depends on secrecy rather than registration.

Distinction From Privacy and Unjust Enrichment

Although breach of confidence may intersect with privacy concerns, its focus is commercial rather than personal. Privacy law protects individual autonomy, while breach of confidence protects control over valuable information where the harm is primarily economic. The doctrine also overlaps with unjust enrichment, particularly where a defendant profits from the misuse of another's information. In those cases, the court may order disgorgement of profits or impose equitable remedies to prevent the defendant from retaining any unjust benefit derived from the breach.

Common Scenarios in Breach of Confidence

Breach of confidence cases arise in many commercial contexts. Businesses often face these claims when confidential information is misused by employees, contractors, competitors, or potential business partners. Prompt action is essential to preserve confidentiality and prevent further damage — courts respond quickly where a real and ongoing risk of dissemination is established.

Misuse of Confidential Business Information

Confidential business information forms the backbone of commercial competitiveness. This includes financial models, pricing structures, marketing strategies, and supplier data. Unauthorised use or disclosure can undermine a company's position in the market, often before any legal proceeding can be commenced. Courts frequently grant injunctions to stop further misuse and may award damages or equitable remedies to restore fairness. Where the harm is ongoing and irreparable, urgent relief is available under Courts of Justice Act, R.S.O. 1990, c. C.43, s. 101 and Rule 40 of the Rules of Civil Procedure.

Employee and Executive Misconduct

Employees and executives have a duty not to misuse confidential information obtained through their employment. When departing staff take client lists or strategic data to a competitor, the employer may have grounds for immediate injunctive relief — and in some cases, liability may extend to the recipient employer as well.

Misuse of Client Lists or Trade Secrets

Client lists and trade secrets are among the most litigated forms of confidential information. Courts consider whether the information required skill, effort, or expense to compile and whether it was protected by internal policies or limited access. Even where some data is publicly available, a compiled database or list that provides a competitive advantage can be protected if it is unique and not easily reconstructed. The key question is whether the information gives an unfair head start to someone who should not possess it.

Breach During Commercial Negotiations or Joint Ventures

Parties entering into commercial negotiations often share proprietary information with the expectation of confidentiality. When one party later uses that information for its own benefit, courts can find that a duty of confidence was breached — even in the absence of a formal NDA. The Lac Minerals case illustrates this scenario precisely: information disclosed during joint venture discussions was used by one party to purchase valuable mineral property for itself. The court ordered the property to be held in constructive trust for the disclosing party, providing full restitutionary relief.

Defending a Breach of Confidence Claim

Defending against a breach of confidence claim requires showing that one or more elements of the cause of action are not made out. This may include challenging the existence of confidentiality, the alleged obligation of confidence, or the claim of misuse and harm. The most effective defences attack the evidence at the foundation of the claim — before expensive proceedings unfold.

When Information is Not Truly Confidential

Information that is already in the public domain, widely known within an industry, or easily discoverable through independent means will not attract protection. Courts refuse to extend confidentiality to material that any competitor could reasonably obtain through research or observation. Demonstrating that the information was public, outdated, or of trivial value can defeat a claim at an early stage — sometimes before the costly disclosure and discovery phases of litigation.

Lack of Confidential Circumstances

Even where information is valuable, a duty of confidence will not arise if it was shared without an expectation of secrecy. Where parties communicated in the course of open negotiations without any agreement or understanding of confidentiality, no equitable obligation may be found. Evidence that information was shared voluntarily or without limitation — such as in public presentations, marketing materials, or open-ended discussions — is often central to this defence.

Absence of Misuse or Detriment

It is not enough that information was disclosed — the claimant must prove that the defendant used it improperly and caused harm. If the information was never used, or if the alleged harm cannot be connected to its use, the claim will fail. In some cases, defendants can show that they independently developed the same information, or that any loss claimed by the plaintiff is speculative and unsupported by evidence of actual commercial damage.

Other Available Defences

Other defences include consent, independent creation, reverse engineering, and disclosure in the public interest — where a court may balance the obligation of confidence against the public benefit in the information being known. A claim may also be barred if brought outside the basic two-year limitation period under Ontario's Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. Where a defendant has been subject to an injunction that should not have been granted, they may also seek damages under the plaintiff's undertaking as to damages.

Remedies and Court Relief

Courts in Ontario have broad discretion to fashion remedies that restore fairness and prevent ongoing misuse of confidential information. The appropriate remedy depends on the nature of the breach, the conduct of the defendant, and the type of loss suffered — and because breach of confidence is an equitable doctrine, courts are not constrained to choose between a limited menu of fixed outcomes.

Damages and Equitable Compensation

Damages are awarded to place the plaintiff in the position they would have been in had the breach not occurred. This may include lost profits, loss of goodwill, or reputational damage caused by the wrongful disclosure or use of confidential information. Where the loss cannot be precisely calculated — as is common in cases involving the misuse of trade secrets or client relationships — the court may award equitable compensation. This ensures fairness even where the harm is difficult to quantify with mathematical precision.

Accounting For Profits and Constructive Trust

If the defendant has gained a financial benefit from the misuse of confidential information, the court may order an accounting for profits, stripping the defendant of the wrongful gain rather than merely compensating the plaintiff. In exceptional cases, it may impose a constructive trust over property or assets acquired through the breach — preventing the defendant from benefiting from their wrongdoing.

Injunctive Relief

Injunctions are one of the most effective remedies in breach of confidence cases. They can prevent further disclosure, require the return or destruction of materials, and preserve the status quo until the dispute is resolved. To obtain an interlocutory injunction, a party must meet the three-part test from RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311:

For procedural guidance on injunctions in Ontario, see Rule 40 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

Anton Piller Orders and Preservation Remedies

In rare circumstances where there is a real risk that evidence will be destroyed, the court may issue an Anton Piller order allowing the plaintiff to enter the defendant's premises without prior notice to search for and secure materials. This extraordinary order is used sparingly and requires proof of a strong case, possession of crucial materials, and a genuine risk of destruction. Legal supervision is mandatory, and the defendant retains the right to seek variation or discharge after execution.

Courts may also issue preservation orders under Rule 45 of the Rules of Civil Procedure to protect documents, electronic files, or other materials containing confidential information until the case is resolved. These orders are particularly important where digital records — which can be easily deleted or overwritten — are at risk, and should be sought early once litigation is anticipated or threatened.