Attorney-General v Blake (Jonathan Cape Ltd, Third Party) (Jonathan Cape Ltd (Third Party))

An account of profits may exceptionally be awarded for breach of contract where ordinary remedies are inadequate and the claimant has a legitimate interest in preventing the defendant's profit-making activity. The remedy is discretionary and depends on all the circumstances, including the contract's subject matter and purpose, the breach, its consequences and the context in which relief is sought.

A deliberate breach of a negative obligation, or entry into a more profitable contract, does not alone justify an account. The remedy was appropriate for breach of an undertaking protecting the integrity of the security and intelligence services. Civil courts have no general common law power to confiscate property or the proceeds of crime without compensation.

A former member of the Secret Intelligence Service had undertaken contractually not to divulge official information gained through his employment. After escaping from prison following convictions for disclosing secrets, he published an autobiography without clearance. Its information was no longer confidential or damaging, but publication breached the undertaking. About £90,000 remained due from the publisher.

The Vice-Chancellor dismissed the Crown's fiduciary claim: [1997] Ch 84. The Court of Appeal upheld that ruling but granted the Attorney-General, acting in the public interest, an injunction preventing receipt of the royalties: [1998] Ch 439. The issues were whether an account of profits was available for breach of contract and whether the public-law injunction could stand.

1. Appeal dismissed; Court of Appeal's order varied. Lord Nicholls delivered the leading speech. Lord Goff and Lord Browne-Wilkinson expressly agreed, and Lord Steyn reached the same conclusion. By a majority of four to one, the Crown was entitled to a sum equal to the amount due from the publisher under the publishing agreement. Lord Hobhouse dissented on the private-law claim.
2. Per Lord Nicholls, ordinary contractual damages are compensatory, but financial loss is not the law's only measure. In suitable cases, damages may reflect the benefit obtained by the contract-breaker. There was no principled basis for excluding an account of profits in every contractual case.
3. An account is discretionary and exceptional. It may be ordered where ordinary damages, specific performance and injunction are inadequate, and where the claimant has a legitimate interest in preventing the defendant's profit-making activity and depriving him of the profit. No fixed rule governs the jurisdiction. Relevant circumstances include the contract's subject matter and purpose, the circumstances and consequences of breach, and the context in which relief is sought. A cynical breach, a profitable substitute contract or breach of a negative obligation is insufficient by itself.
4. The Crown had a legitimate interest in enforcing the absolute undertaking. Its purpose was to protect trust, morale and the willingness of informers to co-operate with the security and intelligence services. The obligation closely resembled a fiduciary duty. Ordinary remedies were inadequate because publication had occurred and the disclosed information was no longer confidential. Requiring surrender of the remaining benefit was therefore a just response.
5. Per Lord Nicholls and Lord Steyn, the Attorney-General's public-law injunction could not stand independently. Although framed as preservative, it had an indefinite confiscatory effect. Parliament had defined the circumstances for restraint and confiscation of criminal proceeds. The common law could not supplement that statutory scheme by confiscating property without compensation.
6. Lord Hobhouse agreed that the public-law injunction was invalid but dissented from the account of profits. He considered the award punitive and proprietary in substance. In his view, contractual damages remained compensatory, and restitution required a proprietary, fiduciary or unjust-enrichment basis absent from the case.

1. House of Lords: By a majority of four to one, dismissed the appeal but varied the Court of Appeal's order by declaring that the Attorney-General was entitled to a sum equal to the amount due to Blake from Jonathan Cape under the publishing agreement. The public-law injunction could not independently be sustained.
2. Court of Appeal: Allowed the Crown's appeal and granted an injunction preventing Blake from receiving benefits connected with the autobiography, while upholding rejection of the fiduciary claim: [1998] Ch 439 .
3. High Court, Chancery Division: Sir Richard Scott V-C dismissed the Crown's fiduciary claim, holding that the former intelligence officer's lifelong duty did not extend beyond secret and confidential information: [1997] Ch 84.