Damages for emotional distress in action for breach of confidence

Proposal 12–1 If a statutory cause of action for serious invasion of privacy is not enacted, appropriate federal, state, and territory legislation should be amended to provide that, in an action for breach of confidence that concerns a serious invasion of privacy by the misuse, publication or disclosure of private information, the court may award compensation for the claimant’s emotional distress.

12.9 There are several arguments in favour of the ALRC’s proposal. First, if legislation clarified or confirmed that compensation could be awarded for emotional distress, the existing action for breach of confidence would more readily be seen as a useful response to serious invasions of privacy, and be more attractive to potential claimants.[6] This is particularly important in the event that the statutory cause of action is not enacted. Secondly, the effectiveness and availability of the remedy may deter invasions of privacy involving disclosures of private information. Thirdly, this proposal would be an effective way of addressing a significant gap in existing legal protection of privacy while being more limited and directed than the introduction of a new statutory cause of action. Fourthly, this provision would also indicate that Australian legislatures intended that the action for breach of confidence could be relied on to remedy these kinds of invasions of privacy.

12.10 In traditional claims for breach of confidence in Australia, claimants have generally sought one of three remedies: an injunction to restrain an anticipated or continuing breach of confidence; compensation for economic loss due to a breach; or an account of the anticipated profits derived from a breach. This has been so, whether the relevant confidence concerned commercial, governmental or personal information.

12.11 However, where a breach of confidence in relation to personal confidential or private information has already occurred and an injunction is futile, the consequence that a claimant is most likely to suffer is emotional distress, rather than harm in the nature of economic loss.[7] Professor Michael Tilbury has noted that ‘the very object of the action [for invasion of privacy] will be to protect plaintiffs against [mental or emotional distress], at least in part.’[8]

12.12 The Law Institute of Victoria submitted that ‘harm caused by breaches of privacy is more likely to be harm such as embarrassment, humiliation, shame and guilt. Given the centrality of privacy to identity, these harms should not be seen as insignificant, even though they are not physical or financial’.[9]

12.13 While the limited circumstances for the recovery of compensation for ‘mere’ emotional distress, even intentionally caused, has been a perennial issue for the law of torts,[10] the issue of recovery in equity had not been raised in Australia until the case of Giller v Procopets,[11] decided by the Supreme Court of Victoria Court of Appeal in 2008. In that case, Neave JA noted: ‘The Australian position appears to be at large on this issue. I am not aware of any appellate court decision which has considered it.’[12] Ashley JA stated: ‘No Australian authority was cited at trial or on appeal to support the proposition that, in the context now under discussion, equitable compensation or equitable damages … can be awarded for mental distress alone.’[13]

12.14 In Giller v Procopets the court held that the claimant could recover damages for emotional distress in her equitable claim for breach of confidence. The claim was clearly one for breach of confidence, as the material that had been disclosed by the defendant, a videotape of intimate activities, had been created by the claimant and defendant while in a de facto relationship. The court unanimously agreed that the claimant could recover compensation for her consequent emotional distress as equitable compensation. Neave JA, with whom Maxwell JA agreed, also upheld the award as damages under the Victorian equivalent of Lord Cairns’ Act,[14] s 38 of the Supreme Court Act 1986 (Vic).[15] An application by Procopets to the High Court of Australia for leave to appeal was rejected.[16]

12.15 There are several reasons why it would be desirable for legislation to clarify the courts’ powers to award compensation for emotional distress, notwithstanding the judgment in Giller v Procopets.

12.16 First, at the time of this Discussion Paper, Giller v Procopets remains the sole appellate authority for the recovery of compensation of emotional distress in a breach of confidence action, over five years after it was decided. The position reached in that case has not been further tested or applied in Australia. Prior to that decision, a county court judge in Victoria, in the 2007 case of Doe v Australian Broadcasting Corporation, awarded equitable compensation of $25,000 for breach of confidence, for ‘hurt, distress, embarrassment, humiliation, shame and guilt’, as part of a larger award for other wrongs.[17] The case was settled before appeal.

12.17 Secondly, s 38 of the Supreme Court Act 1986 (Vic), relied upon to justify the award of compensation in Giller v Procopets, differs from the form of Lord Cairns’ Acts in other jurisdictions[18] where there is still controversy as to whether Lord Cairns’ Act applies in aid of purely equitable rights such as breach of confidence.[19]

12.18 Thirdly, even if Lord Cairns’ Act or s 38 of the Supreme Court Act 1986 (Vic) does apply, this does not explain the basis on which equity can award compensation, in the form of common law compensatory damages and aggravated damages, for emotional distress arising from the breach of an equitable wrong. Regardless of the wording of the statute, it is problematic to have an equitable grant of compensation or ‘damages’ by analogy with tort law: as Ashley JA points out, ‘with few exceptions, the common law has turned its face against awards of damages for distress’[20] and, as the majority held, tort law would not have provided a remedy in the circumstances. This point is not an argument that the judgment undesirably fuses law and equity.[21] Rather it is an argument based on the need for legal coherence.

12.19 Fourthly, if the award for emotional distress in Giller v Procopets is better treated as an award of equitable compensation, there remains an unsettling lack of precedent for the decision. Further it is arguably inconsistent with another decision in which a state appellate court rejected a claim in an equitable action for punitive damages, previously only given at common law.[22] While the courts of the United Kingdom, starting with Campbell v MGN Ltd in 2004, have routinely awarded damages for emotional distress in the so-called ‘extended’ action of breach of confidence which protects against disclosures of private information, they are clearly underpinned by the requirements of the Human Rights Act 1998 (UK), which provides a very different remedial framework from that in the Australian legal system.

12.20 However, equity is traditionally seen as having a great deal of remedial flexibility and, provided the award is seen as consistent with broad equitable principles and doctrines, a lack of precedent may not be a significant problem.[23] Gummow J has contrasted the approach of equity to the common law:

The common law technique … looks to precedent and operates analogically as a means of accommodating certainty and flexibility in the law. Equity, by contrast, involves the application of doctrines themselves sufficiently comprehensive to meet novel cases. The question of a plaintiff ‘what is your equity?’[as posed by Gleeson CJ in ABC v Lenah Game Meats Pty Ltd[24]] thus has no common law counterpart.[25]

12.21 Further, there is much strength in the simple point made by Neave JA, that ‘[a]n inability to order equitable compensation to a claimant who has suffered distress would mean that a claimant whose confidence was breached before an injunction could be obtained would have no effective remedy.’[26] On these grounds, it is strongly arguable that compensation for emotional distress should be part of the armoury of remedies available to a court of equity when determining a claim for breach of confidence through the disclosure of private information.

12.22 It may well be that courts will arm themselves with this power by following the lead of Giller v Procopets in the future. However, the position would be rendered more certain, and there would be less room for argument and expensive litigation along the way, if legislation were the source of that power. As Gurry has commented, ‘[a]ny discussion of the application of the remedy of damages in breach of confidence cases is fraught with difficulty at the outset’.[27] It is therefore highly desirable that there be some legislative clarification.

[6] Normann Witzleb, ‘Giller v Procopets: Australia’s Privacy Protection Shows Signs of Improvement’ (2009) 17 Torts Law Journal 121, 123–124: ‘Considering that breach of confidence will, until more specific protection is in place, continue to act as Australia’s quasi-privacy tort, courts need to afford adequate protection against emotional distress.’

[7] A claimant may suffer some other harm that the law accepts as actual damage, such as personal or psychiatric injury.

[8] Michael Tilbury, ‘Coherence, Non-Pecuniary Loss and the Construction of Privacy’ in Jeffrey Berryman and Rick Bigwood (eds), The Law of Remedies: New Directions in the Common Law (Irwin Law, 2010) 127, 140. Note also: Privacy Act 1988 (Cth) s 52(1) provides that the Information Commissioner investigating a complaint concerning a breach of that Act may make a determination that the complainant is entitled to compensation for loss, which is defined to include injury to the complainant’s feelings or humiliation suffered by the complainant.

[9] Law Institute of Victoria, Submission 22.

[10] Unlike the position in the United States, Australian courts, like those in the United Kingdom and elsewhere, do not recognise a cause of action for wilful infliction of emotional distress. The tort action for wilful infliction of nervous shock, known as the action under Wilkinson v Downton (1897) 2 QB 57 is an 'action on the case', and like an action in negligence, requires proof of actual damage, such as a recognised psychiatric illness: Giller v Procopets (2008) 24 VR 1 (Neave JA & Ashley JA, Maxwell P dissenting); Nationwide News Pty Ltd v Naidu (2007) 71 NSWLR 417; Wainwright v Home Office [2004] 2 AC 406. See further, Barbara McDonald, ‘Tort’s Role in Protecting Privacy: Current and Future Directions’ in James Edelman, James Goudkamp and Degeling (eds), Torts in Commercial Law (Thomson Reuters, 2011).

[11] Giller v Procopets (2008) 24 VR 1.

[12] Ibid [419].

[13] Ibid [133].

[14] A statute following Lord Cairns’ Act (21 & 22 Vict c 27) 1858 generally provides, in brief, that where a court has power to grant an injunction or to order specific performance, the court may award damages to the party injured either in addition to or in substitution for the injunction or specific performance. An example of the common form is s 68 of the Supreme Court Act 1970 (NSW). Section 38 of the Supreme Court Act 1986 (Vic) has different wording: 'If the Court has jurisdiction to entertain an application for an injunction or specific performance, it may award damages in addition to, or in substitution for, an injunction or specific performance'.

[15] Ashley JA in Giller v Procopets (2008) 24 VR 1 at [141] did not agree that s 38 empowered the award: ‘I should next say that, upon the question of the availability of damages for mental distress, the common law would provide no assistance to the appellant even if s 38 was treated as making common law remedies available in a case within the exclusive jurisdiction. With few exceptions, the common law has turned its face against awards of damages for distress.’ Later at [148]: ‘But that does not mean that equity must do so’. He supported the award of compensation under the exercise of equity’s inherent jurisdiction.

[16] Procopets v Giller (M32/2009) [2009] HCASL 187.

[17] Doe v Australian Broadcasting Corporation [2007] VCC 281, [186].

[18] Supreme Court Act 1970 (NSW) s 68; Supreme Court Act 1935 (SA) s 30; Supreme Court Act 1935 (WA) s 25; Supreme Court Civil Procedure Act 1932 (Tas) s 11; Judicature Act 1876 (Qld) s 4; RP Meagher, JD Heydon and MJ Leeming, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (LexisNexis Butterworths, 4th ed, 2002), [23–030]. See above n 14.

[19] Tanya Aplin et al, Gurry on Breach of Confidence (Oxford University Press, 2nd ed, 2012) [19.11] states that some courts ‘have taken the view that Lord Cairns’ Act could, and should, apply to confidence claims’, but that ‘leading commentators continue to argue that Lord Cairns’ Act had no effect on causes of action which were purely equitable (such as breach of confidence), rather in such cases equitable compensation should be awarded.’ See also Ibid [19.15] and Cadbury Schweppes v FBI Foods [2000] FSR 491.

[20] Giller v Procopets (2008) 24 VR 1, [141].

[21] Aplin et al, above n 19, [17.13] notes the ‘acceptance by the courts in most common law jurisdictions that (in relation to remedies at least) the rules of equity and law can be moulded to do practical justice means that the availability of remedies for breach of confidence are not, and should not be, confined by the nature of the jurisdiction upon which the claim is based. Rather the approach the court adopts should be flexible with the full panoply of remedies being available in appropriate cases. Nevertheless, this approach is not at present acknowledged by the Australian courts, and there is some indication that fusion has not been fully embraced elsewhere.’

[22] Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298.

[23] Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298, 304 (Spigelman CJ), quoted in Giller v Procopets (2008) 24 VR 1, [436] (Neave JA).

[24] Australian Broadcasting Commission v Lenah Game Meats Pty Ltd (2001) 208 CLR 199, 216.

[25] Roads and Traffic Authority of New South Wales v Dederer (2007) 324 CLR 330, [57] (emphasis added).

[26] Giller v Procopets (2008) 24 VR 1, [424]. Cf [168]–[169] (Gillard J).Ibid [424], ibid [168]–[169].

[27] Aplin et al, above n 19, [19.02].