Why secret true gossip is still a secret - the JK Rowling Factor

When could that little tidbit of interesting information you pass over to a trusted confidante be putting you in danger?

Most people assume that passing on information they know to be true is allowed because of an idea that truthful gossip can’t be defamatory.

But author JK Rowling's lawyer recently demonstrated that truthful information can still be confidential and its disclosure could be dangerous.

JK Rowling thought she would test her skills and see if she could be recognised as a good writer under a different name.

She published a crime novel, The Cuckoo's Calling, under the pseudonym Robert Galbraith and watched it receive good reviews and sell slowly but well for a first novel.

Suddenly a complete stranger tweeted that Robert Galbraith was in fact JK Rowling.

Rowling had confided Galbraith's true identity to only a handful of people. So who had leaked the truth?

Rowling had told her lawyer, who told his wife's trusted best friend during a private conversation.

The truth found social media, then landed in The Sunday Times and a furore erupted. Rowling sued her lawyer and his wife's best friend (Ms Callegari).

The case settled quickly, and a donation to charity was made.

So what was the fuss about? The information that came out was true, and it actually boosted the sales of The Cuckoo's Calling.

However Rowling wanted the information to be kept confidential and when it became public she lost her ability to test her writing anonymously – which was obviously important to her.

The confidential information (her identity) was protected in two ways.

The first is the ethical obligation placed on lawyers.

Anything discussed as part of the lawyer-client relationship should not be disclosed – even if they are telling it to a trusted person who promises to keep it secret.

Clients need to have complete confidence that what they tell their lawyer remains confidential.

This ethical obligation is regulated in New Zealand by the New Zealand Law Society, which imposes its own penalties and could include a fine or censure.

The second protection comes from the general law for breach of confidence.

In the JK Rowling case, the legal proceedings that resulted in the charity payment would have been a result of an action under this general law. This is separate to the lawyer's ethical obligations, and applies to everyone when the right conditions are met.

In some circumstances, it is obvious that people owe each other a duty of confidentiality because they have a contract that says so.  Examples include joint venture, mediation and due diligence agreements.

Confidentiality clauses are also common in employment agreements.

This is a special area of law, but generally speaking, trade secrets will be subject to an obligation of confidence. However, information that just becomes part of the employee's general knowledge and skill is not subject to an obligation of confidence.

Sometimes a contract between the parties will not deal with the issue of confidentiality.

In these cases, the court might say that there was an implied (unwritten) term in the contract about confidentiality because the surrounding circumstances indicated that this was intended.

For example, if JK Rowling's lawyers’ terms of engagement did not deal with confidentiality a court would no doubt have found that the obligation of confidence was an implied term of their contract.

So when will there be an implied term of confidence, and when will people who are not in contractual relationships be caught?

First, the information must have "the necessary quality of confidence". This means that the information must not be trivial, and must not be public knowledge.

Trade secrets or other commercial information are obvious examples.

For JK Rowling, the true identity of Robert Galbraith would have been sufficiently private and personal to be confidential information.

Prince Charles successfully sued Associated Newspapers Limited for publishing extracts from his personal diary, which revealed his personal thoughts. Information about the health and diet of a celebrity has also been subject to an obligation of confidentiality.

Secondly, the information must have been passed in circumstances that carry an obligation of confidence.

Even where businesses have not entered into a formal joint venture agreement or put in place formal due diligence parameters, the court may find their dealings took place in circumstances that carried an obligation of confidence. 

The obligation does not just apply to commercial information. We trust our doctors, bankers and accountants with a lot of very personal information.

Public officials like social workers, the IRD or ACC can be in a similar position.

The obligation also extends outside the commercial world. When we tell friends or family members personal information, we trust them with secrets and the law recognises this.

It does not matter that the person being sued did not get the confidential information from the person it was about.

It is enough that s/he knew the information was obtained in breach of confidence.

So although Ms Callegari got the information from Ms Rowling's lawyer, rather than Ms Rowling herself, Ms Rowling was still able to sue Ms Callegari.

It must have been obvious to Ms Callegari that she should not have known who Robert Galbraith really was.

Lastly, the person whose information it was must have suffered detriment.

This does not mean s/he must have suffered financial loss.

Sales of The Cuckoo's Calling in fact increased massively after the author's true identity was revealed, giving financial benefit to JK Rowling.

But it was enough that the information was disclosed to people who Ms Rowling did not want it to be given to.

Next time you are tempted to disclose something interesting, stop and think about whether you are legally able to.

Taryn Gudmanz is a litigation lawyer with Anderson Lloyd