Attorney General v Blake [2001] 1 AC 268 is a pivotal case in English contract law, primarily focusing on the extraordinary circumstances under which restitutionary damages may be awarded for breach of contract. This case is crucial for law students as it expands on the traditional understanding of contractual remedies and introduces the concept of disgorgement of profits as a potential remedy.

  • In the case of Attorney General v Blake [2001] 1 A.C. 268, it was held that on exceptional grounds justified by public policy, a breach of contract not to disclose confidential information stemming from being employed by the Crown could justify imposing an account for profits on the defendant.

Facts of the Case Attorney General v Blake

  • D was employed by the security and intelligence services from 1944 to 1961.
  • In 1951, D became an agent for the Soviet Union. From then until 1960 he disclosed valuable secret information and documents.
  • On 3rd May 1961, D pleaded guilty to charges of unlawfully communicating information contrary to the Official Secrets Act 1911.
  • D was sentenced to 42 years’ imprisonment. In 1966, D escaped from prison and fled to Berlin, and then to Moscow.
  • In 1989, D wrote his autobiography, some sections of which related to his activities as a secret intelligence officer.
  • By 1989 this information was no longer confidential, nor was its disclosure damaging to the public interest.
  • On 4th May 1989, D entered into a publishing contract giving the publisher the exclusive publishing rights in the UK for royalties. This included a £50,000 advance for signing, £50,000 on delivery and £50,000 on publication.
  • The book was published on 17th September 1990. D had not sought authorisation from C to disclose the information.
  • C sued D for breach of his contract not to disclose official secrets when he joined the security and intelligence services.

Issues in Attorney General v Blake

  • Was there a restitutory principle that would entitle C to all profits D made on the book, including those he had yet to receive from the publisher?

Held by the House of Lords

  • Finding for C, that under exceptional grounds of public policy, since normal remedies were inadequate to compensate for the breach of contract that had occurred, the court could order D to account for all profits. It was in the government’s legitimate interests to ensure D did not benefit from revealing state information.

Lord Nicholls

  • The general principle regarding assessment of damages for breaches of contract is that they are compensatory for loss or injury. They are measured by C’s loss, not D’s gain, to put C in the same position they would have been if the loss had not occurred. However, the common law has long recognised that there are many common situations where strict application of this principle would not do justice.
  • In some patent infringement cases, the courts of equity have regarded an injunction and account of profits as more appropriate remedies than damages because of the difficulty of assessing the extent of the loss.
  • Equity reinforces the duty owed by a fiduciary by requiring them to account for any profits derived from their position. They must not make any unauthorised profit. If they do, they are accountable. Whether the persons to whom the fiduciary duty is owed suffered any loss is altogether irrelevant.
  • The present case concerns employment as a member of the security and intelligence services. In the ordinary course of commercial dealings, disclosure of non-confidential information might be regarded as pardonable. In this case, disclosure of this information was also a criminal offence under the Official Secrets Acts.
  • The Official Secrets Act 1989 states that a current or former Crown Servant is guilty of an offence if without lawful authority he makes a ‘damaging disclosure’ of information relating to security or intelligence.
  • “C had and has a legitimate interest in preventing D profiting from the disclosure of official information, whether classified or not, while a member of the service and thereafter. Neither he, nor any other member, should have a financial incentive to break his undertaking. It is of paramount importance that members of the service should have complete confidence in all their dealings with each other, and that those recruited as informers should have the like confidence. Undermining the willingness of prospective informers to cooperate with the services or undermining the morale and trust between members of the services when engaged on secret and dangerous operations, would jeopardise the effectiveness of the service” [287E].
  • The undertaking was akin to a fiduciary obligation, where account of profits is a standard remedy for breach. Had the information D disclosed still been confidential, an account of profits would have been ordered almost as a matter of course.
  • In the special circumstances of the intelligence services, the same conclusion should follow even though the information is no longer confidential. Most of the profits from the book derive indirectly from D’s extremely serious and damaging breaches committed in the 1950s.

Significance of the Case on the Development of the Law

The decision in Attorney General v Blake has profound implications for contract law, particularly in the area of remedies for breach of contract:

  1. Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798: This case introduced the notion of hypothetical negotiation damages, where damages are calculated based on the amount that would have been reasonably negotiated for the permission to breach the contract.
  2. Experience Hendrix LLC v PPX Enterprises Inc [2003] EWCA Civ 323: Applied the principles from Blake, emphasizing that restitutionary damages could be awarded where the breach of contract involved a misuse of property or rights similar to fiduciary duties.
  3. Morris-Garner and another v One Step (Support) Ltd [2018] UKSC 20: This case revisited and clarified the principles surrounding “negotiating damages”, restricting their application more tightly to situations where the loss calculated cannot be based on conventional measures.

Exam Questions and Answers

Below you will find answers to questions that are most commonly asked based on this case.

What are the ethical considerations in awarding disgorgement damages in contract law?

Ethical considerations in awarding disgorgement damages primarily involve the balance between penalizing a breach and unjustly enriching the claimant. The essence of disgorgement damages is to prevent the breaching party from profiting from their wrongdoing, as highlighted in Attorney General v Blake. However, the courts must ensure that these damages do not exceed what is necessary to strip the breacher of their ill-gotten gains, thus avoiding the transformation of a contractual remedy into a punitive measure. This balance aims to maintain fairness and deterrence without turning contractual remedies into punitive sanctions, which are not typically the domain of contract law.

How does the Blake decision impact contractual negotiations in sectors dealing with confidential or sensitive information?

The decision in Attorney General v Blake influences contractual negotiations in sectors handling confidential or sensitive information by underscoring the potential financial consequences of breaching confidentiality agreements. Parties are more likely to insist on specific clauses that penalize breaches more severely, incorporating stipulations for disgorgement of all profits resulting from any breach. For example, in industries like technology or pharmaceuticals, where proprietary information is crucial, the Blake decision may lead companies to establish more stringent control over information and higher penalties for breaches to deter misuse of confidential information.

What are the limitations on the applicability of restitutionary damages in commercial contracts following this judgment?

Following the judgment in Attorney General v Blake, the limitations on the applicability of restitutionary damages in commercial contracts include the requirement that such damages are awarded only in exceptional circumstances. The breach must involve behavior where the usual remedies of damages for loss suffered would be inadequate. This was further clarified in Morris-Garner and another v One Step (Support) Ltd, where the Supreme Court emphasized that negotiating damages are confined to cases where the harm is not readily quantifiable by conventional methods. Therefore, restitutionary damages are not universally available but are limited to situations where the breach involves a misuse or gain from property rights that traditional damages cannot adequately address.

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