Contract terms which reverse the onus of proving confidentiality – are they valid? Pet Tech Case (Dec 13, 2013).

1. Information – avoiding the need to prove
confidentiality?
Contract terms which reverse the onus of proving confidentiality – are they valid? Pet
Tech Case (Dec 13, 2013).
It is not uncommon to see a reverse onus clause in
non-disclosure terms. It might be to this effect:
“Confidential information” of the discloser means
information which:
• is by its nature confidential;
• is notified to the recipient as being confidential or
• the recipient knows or ought to know is confidential,
but excluding information which:
• has become public knowledge;
• was in the possession of the recipient prior to learning
it from the discloser;
• has been independently developed or acquired by the
recipient;
• has been received from a third party who is not bound
by a duty of confidence or
• is required by law to be disclosed..
The burden of establishing any of these exceptions is on
the recipient.”
This kind of provision was considered in Pet Tech Pty
Ltd v Batson [2013] NSWSC 1954.
Pet Tech was Mr Batson’s ex-employer. It sought to
restrain Mr Batson from using, post-employment, Pet
Tech’s confidential information.
One of the issues in the case involved the nature of
the information and the effect of a reverse onus
clause concerning it.
The court’s reasons for judgment place a cloud over
these types of clauses.
The court considered principles invalidating terms, on
public policy grounds, which attempt to remove a
party’s recourse to the courts. Any contractual
provision which places a substantial fetter on a
party’s right of recourse to the courts will not be valid.
There is no specific list of clause types to which this
principle relates. It is the effect of a provision which
matters, and each agreement needs to be separately
considered.
In this case, the court stated that while the clause
came very close to offending public policy, on
balance it did not because “the party who bears the
onus is at liberty to discharge that onus.” [para 25]
That part of the court’s reasons might be considered
as obiter, because the court ultimately held that Pet
Tech had not sufficiently particularised the
information alleged by it to be confidential. There
was only a very vague outline of what was claimed to
be confidential and some of what was identified as
such would not ordinarily be regarded in that light.
“Even if the reverse onus clause is applicable, it would
seem to me that it only applies where there is some valid
allegation of confidential information so that there really is
a tussle between the disputants. It does not apply where
no case for confidential information is put forward at all.”
[para 33]
Lesson from this case
This case suggests that drafters of reverse onus
clauses should ensure that, on their proper
construction, the clauses do not purport to remove
the need for the discloser to identify the particular
information it is asserting to be confidential and that
the onus which is cast on the recipient is one which it
should reasonably be able to discharge.
Anna Sharpe | Sharpe Ivo
(AU & Int’l) +61 [0]409 809 963 | asharpe@sharpeivo.com | www.sharpeivo.com