In the light of recent high-profile cases, Mike Smith looks at the increasing propensity of the courts to override confidentiality agreements in favour of the public interest

The recent charges faced by Westminster councillor Paul Dimoldenberg once again highlight the increasing tendency of confidentiality agreements being breached in the name of the public interest.


An adjudication panel found that Mr Dimoldenberg did not bring his office into disrepute but had breached the councillor's code of conduct by leaking confidential documents to the BBC regarding the attempts by Westminster Council to recover millions owed to it by its former leader Dame Shirley Porter. Mr Dimoldenberg claims the council did not do enough to recover the money and that his actions were in the public interest. No sanction was imposed upon him because he had gained neither financially nor politically.


This case, together with the recent failure of David and Victoria Beckham to secure an injunction against the News of the World to prevent the publication of the revelations of the Beckhams' former nanny, could have potentially wider implications for business confidentiality. Both cases highlight the fact that courts are, in certain circumstances, prepared to override confidentiality agreements if they consider that the revelations are in the public interest.


The Beckham brand, which earns the Beckhams an estimated £15 million in endorsements, has always relied on an image of the clean-living sporting icon, devoted to his family. As most sponsorship contracts carry a clause prohibiting conduct that prejudices the sponsor's image, it is in the couple's interests that they are seen to display domestic harmony. Abbie Gibson claimed in the News of the World that this was not the case in reality and that David had wanted to split up from Victoria. He later told the court they had arguments like any married couple but that this did not mean they were not happily married. The Beckhams' case against disclosure was probably not helped by information about his alleged infidelity already being in the public domain.


Media lawyers agreed that the ruling had sent a clear message to celebrities that confidentiality clauses may not assist them in obtaining an injunction to restrain disclosure in such circumstances. After publication, the Beckhams told the court they had never presented themselves as a couple that never had arguments or disagreements. The trial on the issues is yet to take place. This ruling could buck the trend that courts will go out of their way to enforce agreements made by celebrities with members of staff, particularly domestic staff. In 2000, the prime minister's wife, Cherie Blair, was able to stop her nanny publishing a book about her time with the Blairs. Significantly, the public interest in running the story was considered, but rejected, by the judge.


However, the sands are shifting as the Beckhams found out to their cost, particularly if there are suggestions that the image the employer is alleged to be trying to portray and the content of the disclosure do not tally.


The Beckham case then raises the question of to what extent the public interest test applies to confidentiality agreements in other areas of business and commercial life.


It is already established that the public interest test can be applied to confidentiality agreements signed in the context of a contract of employment. The Human Rights Act 1998 has caused the very broad concepts of good faith, loyalty and fair dealing that applied to confidentiality previously to be somewhat adapted to reflect the provisions of the Act. The court now evaluates and weighs up duties of confidentiality, competing rights of privacy and of free expression and more general considerations of the public interest.


There is a further set of exceptions to an employee's duty of confidence provided by the Employment Rights Act 1996. Section 43J of the Act provides that 'any provision in an agreement to which this section applies is void in so far as it purports to preclude the worker from making a protected disclosure'. A protected disclosure is one that tends to show some type of misconduct on the part of the employer, for example the commission of a criminal offence, a failure to follow health and safety regulations, damage caused to the environment, or a failure to comply with any other legal obligation.


The Public Interest Disclosure Act 1998 specifies to whom the protected disclosure must be made (for example, to an employer or the relevant authorities) and it does provide that the disclosure cannot be for personal gain under any circumstances. If it is made to someone other than an employer or the relevant authorities, it must be reasonable in all the circumstances for the disclosure to be made.


In addition, the Freedom of Information Act 2000, which came into force in January 2005, gives the right to request information held by public bodies. These requests of disclosure are subject to a number of important exceptions. There is an exemption qualified by the application of a public interest test under section 43, which covers information where disclosure 'would, or would be likely to, prejudice the commercial interests of any party'. Under section 41, there is also an absolute exemption, which is free from the application of a public interest test, from the right to know information that, if disclosed, would 'constitute an actionable breach of confidence'.


The question that remains is whether the courts will be tempted to follow the Beckham decision and override confidentiality clauses made between private sector organisations in the name of the public interest. Private sector agreements that affect the public, like a contract to build a hospital or a school, could be particularly vulnerable.


The case of London Regional Transport and another v The Mayor of London and another [2001] All ER (D) 80 (Aug), was another key indicator of a shift towards the loosening of the obligation of confidence under pressure from a court's perception of the public interest.


The case involved London Regional Transport's ultimately unsuccessful attempts to stop London Mayor Ken Livingstone and Bob Kiley, the commissioner of Transport for London, disclosing details of a report on the controversial public-private partnership deal for the London Underground. Here, it was a public authority seeking to enforce the confidentiality provision and there was an obvious public interest but, despite this, it is another step in the wrong direction as far as those who believe in the sacrosanct nature of confidentiality agreements.


There seems to be a significant trend towards more openness, accountability and transparency in agreements that affect the public in general and an expansion of the boundaries of what the courts feel to be in the public interest.


The consequences for any business of a move to increase the application of the public interest test to commercial confidentiality agreements could have serious consequences. Much business-sensitive information and know-how is difficult to protect via intellectual property rights. Tightly worded contractual obligations of confidentiality are often the best means for businesses to protect these assets.


The courts have traditionally been reluctant for the law to develop in a way that would compromise the sensitive nature of business dealings or that would open the floodgates to unwelcome claims with undesirable consequences.


However, this development cannot be ruled out and businesses should be aware that the courts are increasingly prepared to override confidentiality agreements in the name of the public interest.


Mike Smith is a trainee in the commercial group at Bristol-based law firm Osborne Clarke