Interesting case of breach of confidence

• Candid business discussion captured on CCTV

There has been an interesting UK court decision dealing with breach of confidence: Clearcourse Partnership and others v Jethwa (2022).

In this case, a party involved in a business sale heard and used information he was not supposed to hear.

Clearcourse was instructed to handle the sale of a company of which Jethwa was the part-owner and then CEO. Two directors of Clearcourse had a meeting with Jethwa at his offices, in a conference room that was monitored by CCTV.

At one point, Jethwa left the room and went to his own office next door. While he was out of the room, the two Clearcourse directors had what is described in the judgment as an “unguarded and candid” discussion.

They discussed their strategy for the negotiations and their views on Jethwa, predicting he would probably be fired if the transaction went ahead.

Jethwa heard it all, and though he claimed that what he heard came through the wall rather than through the CCTV footage, he did take a screenshot of the footage.

Jethwa said nothing of what he had heard to the Clearcourse directors, apparently because he wanted the deal to go ahead.

The sale was concluded but a dispute subsequently arose.

Jethwa then sent Clearcourse the screenshot, adding these words: “You should know this doesn’t do you any favours … what you both say should be interest for social [sic].”

Clearcourse interpreted this as a threat to disclose what had been discussed privately on social media, and brought an action in the high court seeking an interim nondisclosure order.

Clearcourse alleged breach of confidence.

The judge accepted that Jethwa’s screenshot and message was a threat and he found in the company’s favour.

The judge said that to succeed with a breach of confidence claim you need to establish three things:

● The discussion had the necessary quality of confidence.

● The defendant came to know of what was being said in circumstances importing an obligation of confidence.

● There had been unauthorised use, or a threat to use, that information to the detriment of the owner of the information.

The judge found that the requirements had been met, saying “there is no reason why a person overhearing a private discussion through a window or a wall, and who is aware of the context and private nature of the discussion, should not come under a duty of confidence. The fact that he makes no specific effort to eavesdrop is not determinative in this regard.”

The judge accepted this claim too, saying Clearcourse “would regard their conversation, behind closed doors, as giving rise to a reasonable expectation of privacy”.

The judge said that there was no general interest or justification for its disclosure.

It is worth noting South African law would also offer a remedy in a case like this, under the general ground of unlawful competition.

THEFT: HERALDRY

Heraldry is a rather obscure area of the law that is loosely linked to intellectual property. We don’t get to write about it much.

When SA became a democracy in 1994, the old flag was replaced with the “horizontally oriented Yshape flag” that comprises six colours: blue, green, black, white, yellow and red.

It has always been accepted that the flag was created by Harold Frederick Brownell, a man who was the state herald at the National Archives from 1982-2002.

There is now a claim that the design for the South African flag was stolen.

Thembani Hastings Mqhayi, a manager at the Eastern Cape department of arts & culture, claims he submitted five potential designs for the new flag to the department of sport, arts & culture in 1994.

The suggestion is that Brownell, who was part of the committee that made the final decision, took Mqhayi’s designs and submitted them as his own.

Mqhayi has filed an action at the high court in Pretoria, citing sports, arts & culture minister Nathi Mthethwa as the first respondent and the state herald as the second respondent.

Mqhayi alleges Mthethwa failed to disclose pertinent information about the creation of the flag, and that a request made under the Promotion of Access to Information Act, 2000, in July 2021 was ignored.

He is seeking a great deal of information about how the flag was created, including:

● The identities and capacities of all those who made up the committee.

● Minutes of meetings about the designs.

● Details of all those who submitted designs.

● Details regarding the selection process.

● The committee’s final recommendation that was sent to the president for approval

Unfortunately, Brownell cannot be consulted because he died in 2019. It will be interesting to see how this matter plays out.

IGNORANCE: DENEL

According to recent news reports, the arms company Denel sold intellectual property relating to the RG35 armoured vehicle’s developed version, the N35, to a company called NIMR, a subsidiary of UAE governmentlinked Tawazun.

This sale occurred in 2015 and the purchase price was $16m (R208m at the time of writing).

Reports suggest that if Denel had not sold this intellectual property, it could have earned some R480m in the period 2013-2018. More worryingly, the report says projections for the N35 vehicle for the period 2015-2021 were R4.1bn.

The news reports are vague. But what the story does is highlight the need for proper intellectual property valuation, and an understanding of the value of IP and the revenue it can generate.

This is particularly important in the context of mergers and acquisitions, where the target company’s intellectual property may be sold to the acquirer as part of the merger, or sold separately to a third party (which could affect the target’s value to the acquirer).

REPORTS SUGGEST THAT IF DENEL HAD NOT SOLD THIS IP, IT COULD HAVE EARNED R480M FROM 2013-2018

THERE IS NOW A CLAIM THAT THE DESIGN FOR THE NEW SOUTH AFRICAN FLAG WAS STOLEN