England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE CHANF 96/0666/B

(THE VICE CHANCELLOR )

Royal Courts of Justice

Strand

London WC2

Tuesday 16 December 1997

B e f o r e:

THE MASTER OF THE ROLLS

(LORD WOOLF)

LORD JUSTICE MILLETT

LORD JUSTICE MUMMERY

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HER MAJESTY'S ATTORNEY GENERAL

Plaintiff/Applicant

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GEORGE BLAKE

Defendant/Respondent

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(Transcript of the Handed-down Judgment of

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD

Tel: 0171 421 4040

Official Shorthand Writers to the Court)

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MR P HAVERS and MISS M VITORIA QC with MR A ROBERTSON (Mr S Richards 6.10.97) (Instructed by The Treasury Solicitor, London SW1H 9JS) appeared on behalf of the Appellant

LORD LESTER QC (6.10.97) LORD FALCONER QC (1.12.97) and MR P SAINI appeared as Amicus Curiae (Instructed by Messrs B M Birnberg & Co, London SE1 1NN) appeared on behalf of the Respondent

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J U D G M E N T

(As approved by the Court)

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©Crown Copyright

JUDGMENT

LORD WOOLF, MR: This is the judgment of the Court to which all the members of the Court have contributed.

The issues which this appeal raises are of considerable importance. They involve consideration of whether Her Majesty's Attorney General ("The Attorney") is entitled to any remedy in (a) private or (b) public law to prevent a former member of the Secret Intelligence Services ("SIS") receiving substantial royalties for the publication of a book which he has written, when the submission of the manuscript of the book for publication was in breach of contract and a criminal offence and when certain information contained in the manuscript had been, but was no longer, secret or confidential.

The appeal is by the Attorney from the decision of Sir Richard Scott, Vice Chancellor, who held that in these circumstances there was no remedy in private law available to the Attorney on behalf of the Crown. The Vice Chancellor did not deal with the position in public law, since it was only as a result of this court indicating on the first day of the hearing of the appeal that they would like to hear argument on the position in public law that the Attorney subsequently sought leave to amend his Statement of Claim so as to rely on public law.

The respondent to the appeal, George Blake, took no part in the hearing before the Vice Chancellor or on the hearing of this appeal. However, both before the Vice Chancellor and on this appeal, Lord Lester of Herne Hill QC and Mr Pushpinder Saini, as Amici Curiae, deployed before this court, all the arguments which the respondent might have wished to present to the court if he had been present. In relation to the position in private law the Attorney was represented by Mr Philip Havers QC, Miss Mary Vitoria QC and Mr Stephen Richards. On the adjourned hearing at which the arguments as to the position in public law were advanced, the Court heard further argument from Lord Charles Falconer QC, the Solicitor General, on behalf of the Attorney, and Mr Pushpinder Saini, as Amici.

The Vice Chancellor has decided what he described as broadly "two issues. First, whether, in writing and authorising the publication of the book, the defendant was in breach of duties he owed to the Crown. Second, whether, if the defendant was in breach of duty as alleged, the proprietary consequences for which the plaintiff contends, namely the copyright in the book, and the profits derived therefrom belong in equity to the Crown" ([1997] Chancery 84 at p.91D). The Vice Chancellor, in coming to the conclusion that the Attorney was not entitled to any remedy and that the action should be dismissed, decided that the duty owed by former members of the Security Services not to disclose secret or confidential information acquired by them in the course of their service did not extend to information which was no longer secret or confidential and therefore the respondent was not in breach of any duty which he owed to the Crown. The Vice Chancellor did, however, suggest that, if the respondent had owed the Crown the duties contended for, then the writing and publication of the book would have constituted a breach of those duties and the respondent, as a wrongdoer, would in equity be required to hold the fruits of his wrongdoing, namely the benefit of the copyright in the book and the profits derived by him therefrom, for the Crown.

At the adjourned hearing, the Solicitor General argued that the Attorney, in his role as the guardian of the public interest, was entitled to seek an injunction to prevent the defendant from receiving any sums due to him as a result of his crime. The defendant had been represented by solicitors until 12 August 1994. The solicitors' application to come off the record was then granted. Subsequently, documents were served upon the respondent in accordance with directions made by Carnwath J on 26 July 1995. During the interval between the two hearings before this Court the proposed amendment to the Statement of Claim to rely on the position in public law was served on the respondent in the same way, but there has been no response. This is not surprising as the defendant has played no part before either Court. Jonathan Cape Limited, who as third parties were notified of the trial, also took no part.

These are well known and can be summarised very shortly. The respondent was from 1944 until 3 May 1961 a member of the SIS. Between 1951 and his arrest in 1960 the respondent became an agent for the Soviet Union and betrayed this country by disclosing secret information of considerable value. On 3 May 1961 the respondent pleaded guilty to five counts of unlawfully communicating information, contrary to section 1(1)(c) of the Official Secrets Act 1911. He was sentenced to 42 years imprisonment, but in 1966 he escaped from prison and eventually arrived in Moscow where he now lives.

The action arises out of the autobiography of the defendant which is entitled "No Other Choice". It was published by Jonathan Cape Limited on 17 September 1990. In addition to other matters, in his autobiography he describes his activities on behalf of the KGB and his trial and imprisonment and subsequent escape. As the Vice Chancellor said (p.90 A-B) :

"The book may fairly be described as his apologia for the course his life has taken. ... Substantial parts of the contents relate to the defendant's activities as a member of the SIS and are based on information acquired by him while an SIS Officer."

The government did not have any knowledge of the book until its publication was first announced in the press. The defendant had not sought, nor has he received, any licence or permission from the Crown for the publication of the book and the manuscript was not submitted for prior approval. A sum of £90,000 remains payable by the publishers. Their contract with him provided for royalties of £50,000 payable on signing the contract, £50,000 on delivery of the final manuscript and £50,000 on publication of the book.

It is obvious that, if the respondent had not been a notorious spy who had also dramatically escaped from prison, royalties of this order would never have been paid to him for his autobiography.

The Attorney has never sought to restrain publication of the book. Instead he seeks to extract from the defendant any financial benefit he may obtain from the publication of the book. He also now contends that he is entitled to an injunction to restrain the defendant from receiving any financial proceeds derived from the book, which have not yet been paid, or any benefit which represents those proceeds. No injunction is claimed against Jonathan Cape Limited. However, if an injunction is granted against the respondents, and Jonathan Cape Limited are given notice of that injunction, they would incur liability if they were a party to the respondent breaching the injunction. The sums already paid to the respondent are realistically regarded as irrecoverable.

At the outset of the hearing before the Vice Chancellor, Mr Havers QC commenced his submissions accepting that "in writing the book the defendant had not committed any breach of his duty of confidence which he owed to the Crown. The information contained in the book that related to the SIS, or that had been obtained by the defendant as a member of the SIS was not by 1988, he said, any longer confidential. The action is not, therefore, based on an alleged breach of a continuing duty of confidence. It was based, Mr Havers said, "on a breach of fiduciary duty that was independent of any concurrent duty of confidence that the defendant might have owed."

Before the Vice Chancellor, the Attorney therefore relied on a breach of fiduciary duty that was independent of any concurrent duty of confidence that the defendant might have owed. The duty is set out in paragraph 3 of the Statement of Claim and is formulated in these terms :

"in the premises the defendant owes and has at all material times owed to the Crown a duty (i) not to use his position as a former servant of the Crown so as to generate a profit or benefit for himself, (ii) not to use any information imparted to him in his capacity as a servant of the Crown so as to generate such a profit or benefit and (iii) to give restitution to the Crown of any such profit or benefit generated by misuse of his position and/or - the information aforesaid."

The Vice Chancellor considered that the way duties were formulated was "too wide to be acceptable". However, he readily accepted that the former members of the SIS owed to the Crown a life long duty not to disclose confidential information acquired by them in the course of their duties. He regarded the Attorney General v Guardian Newspapers Limited (No 2) [1990] 1 AC 109 as providing clear authority for this. However, the Vice Chancellor did not regard the speeches in that case as providing any support for a duty extending beyond not disclosing secret or confidential information. He pointed out that, unlike the case of Snepp v United States [1980] 444 US507, where there was an express agreement not to publish any information or material relating to intelligence activities, during or after the term of employment without specific prior approval, here no such agreement was relied upon. The Vice Chancellor said that, if such an agreement could be relied on, he could see no reason why it would not have been enforceable. However, as it was, he was of the view the Crown case failed since:

"The pleadings and the evidence do not, in my judgment, disclose any breach of duty on the part of the defendant on which the relief claimed can be founded. I do not accept that, as a former member of the security intelligence agency, he owed the Crown a continuing duty "not to use his position as a former servant of the Crown so as to generate a profit or benefit for himself" or a continuing duty "not to use any information imparted to him in his capacity as a servant of the Crown so as to generate such a profit or benefit:" paragraph 3 of the Statement of Claim.

The Crown has not, in my judgment, either pleaded or established by evidence any misuse by the defendant of his position as a former member of the SIS or of information imparted to him in that capacity. This last conclusion may seem strange in view of the defendant's status as a self-confessed traitor. The conclusion is, however a consequence of the Crown's attempt to establish a case in what, in my judgment, is far too broad a statement of the duty owed by ex members of intelligence and security agencies and on the Crown's decision, the rightness of which I do not question, not to base its case on the misuse of secret or confidential information or to allege that information damaging to the national interest had been disclosed".

The Vice Chancellor did, however, as already indicated accept that, if the defendant had owed the Crown the duties contended for, the writing and publication of the book would have constituted a breach of the those duties and the defendant, as a wrongdoer, ought in equity to be required to hold the fruits of his wrongdoing for the person to whom the duty was owed, namely the Crown.

On this appeal, for reasons which we will proceed to explain, we come to a similar conclusion to the Vice Chancellor in relation to the claim in private law. However, we take a different view in relation to the claim which now is advanced by the Attorney in Public Law.

Before the Vice Chancellor the Attorney did not rely on the defendant's contravention of the Official Secrets Acts or a written undertaking he had given in August 1944 referred to below. However, the Amended Statement of Claim now includes the following additional allegations:

"3. The defendant was subject at all material times to the provisions of the Official Secrets Acts 1911 to 1989, including in particular:

(1) prior to 1 March 1990, section 2(1) of the Official Secrets Act 1911 (as amended) which provided in material part:

"If any person having in his possession or control ... any ... information ... which has been entrusted in confidence to him by any person holding office under His Majesty or which he has obtained or to which he has had access owing to his position as a person who holds or has held office under His Majesty ... (a) communicates the ... information to any person, other than a person to whom he is authorised to communicate it, or a person to whom it is in the interest of the State his duty to communicate it, ...that person shall be guilty of a misdemeanour."

(2) from 1 March 1990, section 1(1) of the Official Secrets Act 1989 which provided in material part:

"A person who is or has been (a) a member of the security and intelligence services ... is guilty of an offence if without lawful authority he discloses any information ... relating to security or intelligence which is or has been in his possession by virtue of his position as a member of any of those services ..."

4. A document signed by the defendant on 16 August 1944 in relation to his said employment set out, inter alia, section 2(1) of the Official Secrets Act 1911 (as amended) and contained the following declaration and undertaking on the part of the Defendant:

"I understand that the above clauses of the Official Secrets Act 1911 and 1920, cover also articles published in the press and in book form, and I undertake not to divulge any official information gained by me as a result of my employment, either in the press or in book form. I also understand that these provisions apply not only during the period of service but also after employment has ceased".

The said undertaking was given in consideration of the Crown permitting the defendant to pursue his said employment and in the premises the defendant owes and has at all material times owed to the Crown a contractual duty to comply with the said undertaking."

(1) The Private Law Claim

A. Breach of fiduciary duty

Here, the Attorney renewed his contention that the respondent, in authorising the copying and publication of the book acted in breach of the fiduciary duty which he owed to the Crown, and that the Crown is the beneficial owner of the copyright in the book and that the respondent is accountable to it for all sums received or receivable from Jonathan Cape Ltd in respect of its publication. This is a private law claim in which the Attorney represents the Crown as the respondent's former employer. In order to found the claim, the Attorney contends that, in submitting the book for publication, the respondent acted not only in breach of contract, which would entitle the Crown to claim relief by way of injunction and damages, but also in breach of this fiduciary duty, thereby making available equitable remedies. The characterisation of the respondent's wrongdoing as a breach of fiduciary duty is remedy-led, despite Sopinka J’s salutary warning in Norberg v Wynrib (1992) 92 DLR (4th.) 449 at p. 481 that

"equitable doctrines cannot be imported simply in order to improve the nature and extent of the remedy" :

It is again not alleged that in writing the book (or more accurately in submitting its contents for publication) the respondent committed any breach of confidence. The Crown did not retract its acceptance in the court below that the information contained in the book, which relates to the SIS or which was obtained by the respondent in his official capacity as a member of the SIS, has long since ceased to be either secret or confidential, so that its disclosure would not cause damage to the national interest. Before us the Crown has repeated and amplified what is essentially the same submission as it advanced before the Vice Chancellor. Its reasoning is as follows:

(1) The respondent was formerly a servant of the Crown.

(2) He was therefore in a fiduciary relationship with the Crown.

(3) This fiduciary relationship gave rise to a fiduciary duty to use the Crown’s property, including confidential information, only for the benefit of the Crown or for purposes authorised by the Crown.

(4) The fiduciary duty continued after the respondent's service with the Crown was terminated. Were it to cease when he left the service of the Crown the duty would be emasculated.

(5) Since the duty is based on the fiduciary relationship which exists between employer and employee, and not on the confidential nature of the information in question, it continued after the information ceased to be confidential.

We are unable to accept the last two propositions, which are dependent upon each other. We do not recognise the concept of a fiduciary obligation which continues notwithstanding the determination of the particular relationship which gives rise to it. Equity does not demand a duty of undivided loyalty from a former employee to his former employer, and it does not impose a duty to maintain the confidentiality of information which has ceased to be confidential. The Crown’s attempt to derive a fiduciary duty from a combination of two fiduciary relationships which have both come to an end is entirely misconceived.

In Henderson v Merrett Syndicates [1995] 2 AC 145 at p. 206 Lord Browne-Wilkinson warned that

"...the phrase “fiduciary duties is a dangerous one, giving rise to a mistaken assumption that all fiduciaries owe the same duties in all circumstances. This is not the case.”

There is more than one category of fiduciary relationship, and the different categories possess different characteristics and attract different kinds of fiduciary obligation. The most important of these is the relationship of trust and confidence, which arises whenever one party undertakes to act in the interests of another or places himself in a position where he is obliged to act in the interests of another. The relationship between employer and employee is of this character. The core obligation of a fiduciary of this kind is the obligation of loyalty. The employer is entitled to the single-minded loyalty of his employee. The employee must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third party without the informed consent of his employer.

But these duties last only as long as the relationship which gives rise to them lasts. A former employee owes no duty of loyalty to his former employer. It is trite law that an employer who wishes to prevent his employee from damaging his legitimate commercial interests after he has left his employment must obtain contractual undertakings from his employee to this effect. He cannot achieve his object by invoking the fiduciary relationship which formerly subsisted between them. Absent a valid and enforceable contractual restraint, a former employee is free to set up in a competing business in close proximity to his former employer and deal with his former clients. Such conduct involves no breach of fiduciary duty.

A quite different fiduciary relationship is that of confidentiality. This arises whenever information is imparted by one person to another in confidence. It is often, perhaps usually, imparted in the course of another fiduciary relationship, such as that of employer and employee. If so, the duty will survive the termination of that other relationship, for it is not derived from it: see for example A.G. v Guardian Newspapers (No 2) [1990] AC 109. That case established that members and former members of the SIS owe a lifelong obligation of confidence to the Crown. It did not establish that they owe a lifelong fiduciary duty of loyalty. Had it done so the outcome of the case would have been different. The duty to respect confidence is also a fiduciary duty, but it subsists only as long as the information remains confidential: see ib especially at pp. 265, 282.

The two relationships are not mutually exclusive. They may co-exist between the same parties at the same time. But they generate different obligations, and their duration may be different. It is impermissible to attach to one relationship an obligation which is properly derived from another. In the present case the Crown’s argument goes further still. It seeks to impose an obligation to maintain the confidentiality of information, which has ceased to be either secret or confidential, by invoking a duty of loyalty after the relationship which gave rise to the duty has ceased.

If the Crown’s argument represented the law, then a former director of a public company, who had been privy to secret and highly confidential discussions in the course of a take-over bid, would be prevented from including in his memoirs anything of these negotiations, even though the bid had been successful, he himself had long since retired, and the information in question was public knowledge. Quite apart from the fact that equity does not intervene when it would serve no practical purpose to do so, an injunction restraining publication in these circumstances would be an unjustifiable restraint of trade and an unwarranted interference with freedom of speech going far beyond what is necessary in a democratic society to protect the national interest.

In the course of oral argument Counsel for the Crown advanced a more modest proposition. The respondent, he submitted, owed a fiduciary duty to submit his manuscript to the authorities for clearance before publication, and his failure to do so constituted a breach of fiduciary duty. The problem with this submission is twofold. In the first place, the respondent’s contractual obligation was in fact a negative one. He did not undertake to submit material for clearance. He undertook not to disclose official information, that is to say information which came into in his possession by virtue of his former position as a member of the SIS, without first obtaining permission to do so. His wrongdoing did not lie in his failing to obtain clearance, but in his submitting the manuscript for publication without it. In the second place, equity is proscriptive, not prescriptive: see Breen v Williams (1996) 138 ALR 259. It tells the fiduciary what he must not do. It does not tell him what he ought to do.

In the present case, the respondent was bound by contract not to disclose official information without clearance; but he was bound in equity by a different obligation, not to disclose information which was still confidential. By submitting the manuscript for publication without obtaining clearance the respondent was in breach of contract; but he was not in breach of fiduciary duty. Not every breach of duty by a fiduciary is a breach of fiduciary duty, and a fiduciary may commit a breach of contract without committing a breach of fiduciary duty: Bristol and West Building Society v Mothew [1997] 2 WLR 436. A fortiori a former fiduciary who commits a breach of contract does not ipso facto commit a breach of fiduciary duty.

2. Breach of contract

By submitting the manuscript for publication, without having first obtained clearance, the respondent committed a clear breach of the express undertaking which he signed when he joined the public service. This was a breach of contract which prima facie entitled the Crown to an injunction and damages. The obligation cannot be stigmatised as an unlawful restraint of trade, since the restraint does not exceed what is rendered unlawful by Section 1(1) of the Official Secrets Act 1989. This makes it an offence for a member or former member of the SIS to disclose official information without lawful authority. The offence is committed whether or not the information in question is secret or confidential and whether or not its disclosure would be damaging to the national interest. The respondent's contractual obligation is thus in conformity with the policy which Parliament has adopted in relation to disclosure by members and former members of the SIS.

The Crown has not sought an injunction to prevent publication, and now cannot establish any loss. It is not, therefore, entitled to other than nominal damages.

In the course of the initial hearing we invited submissions on a second issue which had not previously been considered. The second issue is whether, in the particular circumstances of the present case, the Crown might have a private law claim to restitutionary damages for breach of contract. After giving further consideration to the matter, the Attorney decided that the Crown did not desire to advance such a claim in this Court, while wishing to keep the point open for a higher Court.

There is, however, no possibility that this case will reach a higher Court. The Crown is unlikely to seek to appeal this case in view of our decision on the public law claim. The defendant has taken no part in the proceedings; and an amicus curiae has no standing to appeal. Since the subject is of some importance and we are not convinced that it would not have been open to this Court to allow a claim for restitutionary damages for breach of contract in the particular circumstances of the present case, we will express our own views on the subject, even though they are obiter and, being without benefit of argument, necessarily tentative.

The general rule is that damages for breach of contract are compensatory not restitutionary, that is to say, they are measured by the loss to the plaintiff and not by the gain to the defendant. It is unnecessary to cite authority for this proposition, since it is beyond dispute. It is accepted to be the general position by the Law Commission in its Consultation Paper No. 132, Aggravated, Exemplary and Restitutionary Damages (31 August 1993) paragraph 7.7 p.159. Its elevation into a fundamental principle which admits of no exceptions, however, has been disputed, attributed to inertia and has attracted widespread (though not universal) academic criticism: see for example Daniel Friedmann (1980) 80 Columbia Law Review 507 at pp. 513 et seq. Jones (1983) 99 LQR 443; “The Law of Restitution” (4th.ed) (1993) pp.412-417; Birks (1987) LMCLQ 421; (1993) 109 LQR 518; Beatson “The Use and Abuse of Unjust Enrichment” pp. 15-17; Maddaugh and McCamus “The Law of Restitution” pp. 432-438: per contra Jackman (1989) 48 CLJ 302, 318-321; Burrows (1993) LMCLQ 453; Remedies for Torts and Breach of Contract (1994) pp. 307-314; The Law of Restitution (1993) pp.397-403; Even its proponents recognise that some flexibility is desirable, Jackman (for example) suggesting that the moral calibre of the defendant’s conduct might justify an award of restitutionary damages for a cynical breach of contract.

Judicial opinion is also divided. The exclusively compensatory basis of damages for breach of contract does not lack judicial critics, and there are signs that the traditional view that the rule admits of no exceptions may not long survive. In Hospital Products Ltd. v US Surgical Corporation Ltd. (1984) 58 ALJR 587 at p. 620 Deane J indicated that he regarded the question as deserving of reconsideration; and in Jaggard v Sawyer [1995] 1 WLR 269 at p. 281 Sir Thomas Bingham MR expressed the view that the judgments in Surrey County Council v Bredero Homes (1993) 1 WLR 1361 (in which the Court refused to countenance the possibility of awarding restitutionary damages for breach of contract) might “not be the last word on the subject.”

In reality the doctrine is already subject to exceptions, for the gain (or saving of expense) made by the defendant is sometimes used as the measure of the plaintiff’s loss. Wrotham Park Estate Co. Ltd. v Parkside Homes Ltd. [974] 1 WLR 798 and the cases which followed it are examples of this. In such cases the measure of damages is the same, whether they are calculated by reference to the loss sustained by the plaintiff or to the saving of expense by the defendant, with the result that their classification as compensatory or restitutionary has been controversial. Those who insist that they are restitutionary, but reject any further departure from the general rule, justify them by reference to the proprietary nature of a claim to enforce restrictive covenants annexed to land. This is hardly convincing, seeing that the measure of damages cannot depend on whether the proceedings are between the original parties to the contract or their successors in title.

If the Court is unable to award restitutionary damages for breach of contract, then the law of contract is seriously defective. It means that in many situations the plaintiff is deprived of any effective remedy for breach of contract, because of a failure to attach a value to the plaintiff’s legitimate interest in having the contract duly performed: see Professor Coote (1997) 56 C.L.J. 537. In our opinion, the time has come to accept Professor Jones’ view (expressed as long ago as (1983) LQR 443 at p. 452) that the law is now sufficiently mature to recognise a restitutionary claim for profits made from a breach of contract in appropriate circumstances. The difficult question is not whether restitutionary damages should ever be available for breach of contract, but in what circumstances they should be made available. In Surrey County Council v Bredero Homes ( supra) Steyn LJ gave persuasive reasons why such circumstances should remain exceptional.

We do not think that the basis on which damages are awarded should depend on the defendant’s moral culpability alone. The fact that his breach of contract is deliberate and cynical is not by itself a good ground for departing from the normal basis on which damages are awarded. It is not only that the line cannot easily be drawn in practice; it is rather that the defendant’s motives will normally be irrelevant. To adapt an observation of Lord Keith made in a different context in A.-G. v Guardian Newspapers (No.2) ( supra) at p. 261, a natural desire to deprive a deliberate wrongdoer of profit is not a valid ground for departing from the normal measure of damages for breach of contract.

The mere fact that the defendant’s breach of his contract with the plaintiff has enabled him to enter into a more profitable contract with someone else should also not be sufficient: Teacher v Calder (1899) 1 F (HL) 39 is sound law. Nor are we convinced that, by entering into the later and more profitable contract, the defendant has put it out of his power to perform his contract with the plaintiff: the distinction between the two cases is not one of substance. But we think that there are at least two situations in which justice requires the award of restitutionary damages where compensatory damages would be inadequate.

The first may be described as the case of skimped performance. This is where the defendant fails to provide the full extent of the services which he has contracted to provide and for which he has charged the plaintiff. Professor Jones cites the Louisiana case of City of New Orleans v Firemen’s Charitable Association (1891) 9 So 486 as an example. The defendant contracted with the plaintiff to provide a firefighting service and was paid the full contract price. After the expiry of the contract the plaintiff discovered that the defendant had not provided the stipulated number of firemen or horses or the promised length of hosepipe. The defendant had saved itself substantial expense by the breach, but had not failed to put out any fires in consequence. The Court ruled that the plaintiff had not proved that it had suffered any loss and was unable to recover more than nominal damages. Justice surely demands an award of substantial damages in such a case, and the amount of expenditure which the defendant has saved by the breach provides an appropriate measure of damages. This could be achieved by presuming that the plaintiff has suffered a loss of an amount corresponding to the amount by which he has been overcharged for the service actually provided; and the presumption could be justified by invoking the notion of “the consumer surplus”. But it would surely be preferable, as well as simpler and more open, to award restitutionary damages.

The second case is where the defendant has obtained his profit by doing the very thing which he contracted not to do. In his article at (1987) LMCLQ at p. 434 Professor Birks observed that

“If you promise not to pursue a particular profit-making activity and you do pursue it, nothing is more apt than that you should make restitution of your profits.”

This covers the present case exactly. The Defendant’s breach of contract in submitting the book for publication did not merely provide him with an opportunity for profit; nor did his contract with the publishers merely put it out of his power to perform his contractual obligations to the Crown. The connection between the breach and the profit is far more direct. He promised not to disclose official information and he did so for profit. He earned the profits by doing the very thing which he had promised not to do.

The two cases have this in common: that in both the profits in question are occasioned directly by the breach, which do not merely provide the defendant with the opportunity to make them; and in both compensatory damages are an inadequate remedy if regard is paid to the objects which the plaintiff sought to achieve by the contract. They do not precisely coincide with the provisional conclusion of the Law Commission in the Consultation Paper referred to above. However, the present case falls squarely within the two conditions they identify for the existence of such a claim (para 7.20). There was "deliberate wrongdoing" which could have been restrained by injunction. In addition, the gains which would be made by the defendant are "attributable to the interest infringed", in the sense that they are referable to the disclosure of official information the defendant contracted not to disclose.

Only time will tell whether these distinctions are tenable. They may not hold. But it appears to us that the general rule that damages for breach of contract are compensatory can safely be maintained without denying the availability of restitutionary damages in exceptional cases.

C. Conclusion

In Snepp v United States (1980) 100 S.Ct. 763, a majority of the United States Supreme Court awarded restitutionary damages for breach of contract in circumstances closely resembling those of the present case. They did so by invoking the concept of the remedial constructive trust impressed on the proceeds of publication without prior clearance. We find the conclusion more attractive than the route by which it was reached. We would prefer to award restitutionary damages directly for breach of contract, rather than distort the equitable concepts of fiduciary duty or constructive trust in order to accommodate them.

In the absence of a claim for substantial damages for breach of contract, however, we dismiss the Crown’s private law claims.

2. Public Law Claims

A. The Attorney's Role

Until the Statement of Claim was amended, the Attorney was bringing the proceedings on behalf of the Crown seeking to exercise what would be the same rights as those which are available to any citizen in private law. The Attorney was the appropriate party to be named as the plaintiff by reason of section 17(2) Crown Proceedings Act, 1947. If there was an appropriate authorised Government department, the proceedings could also have been commenced on behalf of the Crown in the name of that Government department.

In advancing, in his amended statement of claim, a claim for relief in public law, the Attorney is performing a different role. He is not merely a convenient nominal plaintiff representing the Crown. He is seeking relief in his historic role as guardian of the public interest. This gives the Attorney a special status in relation to the courts. He has a particular role and a particular responsibility. The role extends well beyond the field of criminal law, for example to the fields of contempt of court, charities and coroners' inquisitions. Its source in some instances is derived from statute. However, in relation to other functions, the role is an inherent part of his ancient office. It is the inherent power flowing from his office which enables the Attorney either to bring proceedings ex-officio himself or to consent to the use of his name, so as to enable proceedings to be brought by another party clothed with his authority in what are known as relator proceedings for the protection of the public interest in the civil courts. The proceedings may be proceedings to enforce a duty which a public body, such as a local authority, owes to the public or the proceedings may be to vindicate the criminal law. In connection with the criminal law, the Attorney historically has had, and still has, both statutory and inherent powers of great importance involving the enforcement of the criminal law, which involve him having to make decisions of a highly sensitive nature. He has the overall responsibility for the enforcement of the criminal law.

The nature of the Attorney's role to bring proceedings in the public interest when an ordinary individual cannot do so, was considered in detail by the House of Lords in Gouriet & Ors v The Union of Post Office Workers & Ors [1978] AC 435. That case was not however directly concerned with the extent of the Attorney powers the existence of which were not an issue. The House of Lords was concerned directly with two issues. The first was the extent to which a private individual could bring proceedings on behalf of the public without obtaining the authority of the Attorney to do so in relator proceedings and the second was whether Mr Gouriet's claim against the Post Office Unions was maintainable or ought to be struck out. (472 G) It was accepted by all the members of the House of Lords that the Attorney is entitled to invoke the aid of the civil courts in support of the criminal law and that the court has power to grant injunctive relief in an appropriate case in support of the criminal law. Lord Wilberforce, who described the power as "not without its difficulties and these may call for consideration in the future", regarded the power as confined " in practice ", to cases where an offence is frequently repeated in disregard of a usually inadequate penalty; or to cases of emergency (see p. 481 C to D.) He referred to cases such as Attorney-General -v- Harris [1961] 1 QB 74 and Attorney-General -v- Chaudry [1971] 1 WLR 1614. Viscount Dilhorne(a former Attorney), while accepting that the power was exceptional, did not regard the power to grant an injunction as limited to those types of cases (see page 491 G to H). In the context of applications for an injunction to restrain the commission of criminal offences, Lord Diplock described the procedure as "deterrent and punitive" and one which should not be extended. Lord Edmund-Davies(p.511B) and Lord Fraser (p.519A-B) took a broader approach to the limits of the power as derived from the public interest in seeing that Acts of Parliament are obeyed, though recognising that there are "powerful reasons of a procedural nature for keeping injunctions against criminal conduct as such within narrow limits" (Lord Fraser at p. 521E).

The need to adopt a conservative approach to the extent of the Attorney powers recognised by the House of Lords is probably a reflection of the general reluctance of the civil courts to become involved in criminal proceedings. (see Attorney General v Able [1984] QB 795) It is obviously desirable, where this is practicable, for proceedings in relation to criminal offences to be confined to the criminal courts. There are, however, situations where the criminal courts are powerless to act. In such circumstances the inherent power of the Attorney is extremely valuable and should not be artificially confined. As Devlin J in Attorney General v Brastow [1957] 1 QB 514 said :

"The Attorney General, being the first Law Officer of the Crown, is primarily responsible for the enforcement of the law. If he considers it necessary to come by way of a relator action to ask for the assistance of the court in enforcing obedience to a clear provision of the law, the court, although retaining its discretion, ought to be slow to say that the Attorney General should first have exhausted other remedies". p.521

However, the power, which lies behind the ability of the Attorney to intervene, is not based on any narrow concept of a statute providing an inadequate remedy or the criminal courts not being able to act in sufficient time. It at least extends to preventing the criminal law being flouted (see Gouriet, Lord Edmund Davies (511B)) and in consequence being brought into disrepute. It is to prevent this happening that we understand that the Attorney now advances his claim in public law

Section 1 of Official Secrets Act 1989, so far as is relevant, is set out in the passage of the Amended Statement of Claim to which we have already referred. We agree with the Vice-Chancellor that that provision applies to the respondent. From 1944 until 4 May 1961 he was a member of the SIS. The manuscript of " No Other Choice " contains information relating to security or intelligence, which was in the respondent's possession by virtue of his position as a member of the SIS. He disclosed the information in that manuscript without lawful authority when he submitted it to his publishers, Jonathan Cape Limited, in 1989. Criminal penalties are prescribed for such an offence and conviction could be followed by a confiscation order pursuant to the provisions of the Criminal Justice Act 1988, as amended by the Proceeds of Crime Act 1995, depriving the respondent of the proceeds of that crime.

The Vice-Chancellor observed that, although the respondent had committed a breach of statutory duty in disclosing information to Jonathan Cape Limited, the Attorney action was not based on any breach of statutory duty under the 1989 Act; it was not mentioned in any of the pleadings and would not, in any event, in his view, lead to any of the remedies sought in the action in respect of the copyright in the work and the payment of profits and damages to the Crown for breach of duty. The Vice-Chancellor concluded (at page 95 B):

"Accordingly, the circumstance that Mr Blake's activities on which the present action is founded appear to constitute an offence under Section 1(1) of the Act of 1989 does not assist the Crown to establish a breach of duty under the civil law for which the civil law remedies sought in this action can be claimed."

The situation takes on a different complexion when the respondent's action is seen as a criminal offence, giving rise to public rights and remedies, rather than as a breach of statutory duty, possibly giving rise to private law rights and remedies. The case was argued on behalf of the Attorney before the Vice-Chancellor solely on the basis of a private law claim, though the amici did draw the attention of the court to a possible claim in public law. We are now invited to consider the same facts in a public law context.

B The Public Interest

In public law the two significant features of the case are, first, that the respondent is guilty of a serious criminal offence (ie a breach of the Official Secrets Act) for which he will never be tried and punished, but from which he has derived and, in the absence of a court order, may continue to derive financial benefits; and, secondly, that the plaintiff is the Attorney, who occupies a unique position of responsibility in public law.

In our judgment, the jurisdiction of the courts, on an application made by the Attorney, is not limited, as Lord Lester submitted, to granting an injunction restraining the commission or repeated commission of a criminal offence. If, as here, a criminal offence has already been committed, the jurisdiction extends to enforcing public policy with respect to the consequences of the commission of that crime e.g. restraining receipt by the criminal of a further benefit as a result of or in connection with that crime.

It is not a matter of exercising a power to award damages, compensation or restitution, which, for reasons already explained, are remedies which are not available in this case.It is a case of the civil court providing, in furtherance of a recognised head of public policy, support in upholding the criminal law in an exceptional situation. This approach is consistent with, and not as Lord Lester contends, contrary to, the intention of Parliament, as manifested in the legislative policy that a criminal should not be allowed to retain benefits derived from his crime. It also does not have the disadvantages that Lord Lester and Mr Pushpinder Saini suggest. An order restraining the defendant from receiving further benefits would not be open to any objection on the ground of retrospectivity or lack of proportionality: it only has prospective effect; it is a lesser penalty than a confiscation order under the legislation; it supports the criminal law in an area relating to the interests of national security; and it does not interfere with freedom of expression.

C. Profits of Crime - Public Policy

This is an exceptional case in which the Attorney is entitled to intervene by instituting civil proceedings, in aid of the criminal law, to uphold the public policy of ensuring that a criminal does not retain profit directly derived from the commission of his crime. That policy has been recognised by Parliament in the Criminal Justice Act 1988 (Part IV), as amended by the Proceeds of Crime Act 1995: a criminal should not be allowed to retain the proceeds of an offence he has committed. The proceeds are liable to be confiscated by order of the court. The legislation recognises in Section 71(4) that a person benefits from the commission of a criminal offence if he " obtains property as a result of or in connection with its commission ". His benefit is the value of the property which he has obtained. The court is given wide ranging powers to confiscate such benefits from a person on his conviction of a criminal offence.

Even before that legislation was enacted the courts, in aid of a duty to enforce the criminal law, had granted interlocutory injunctions to Chief Constables freezing the suspected proceeds of crime in circumstances where there had not yet been a conviction for a criminal offence : Chief Constable of Kent -v- V. [1983] QB 34;cf West Mercia Constabulary -v- Wagener [1982] 1 WLR 127; Chief Constable of Hampshire -v- A. Ltd [1985] QB 132; Chief Constable of Leicestershire -v- M [1989] 1 WLR 20. The basis of that jurisdiction was uncertain: it probably derived from the common law right of a constable to detain monies standing to the credit of a bank account, if, and to the extent that, they could be shown to have been obtained from another in breach of the criminal law: per Donaldson L.J. in Chief Constable of Kent (supra) at p.47. The limited basis of the jurisdiction and the recent interventions of Parliament in the Drug Trafficking Offences Act 1986 and the Criminal Justice Act 1988 led Hoffmann J to make this observation in Chief Constable of Leicestershire (supra) at p.23G-H:

"The recent and detailed interventions of Parliament in this field suggest that the courts should not indulge in parallel creativity by the extension of general common law principles."

See also Halifax Building Society v Thames [1996] ZWLR 63 at 72H-73A and 73C-G.

The Attorney, however, stands in a different legal and constitutional position to that of a Chief Constable in relation the administration of the criminal law. This court is entitled to consider the claim by the Attorney in the light of the principle enunciated by Lord Diplock in Erven Warnink -v- J Townend & Sons Hull [1979] AC 731 at 743 C to E.

"where over a period of years there can be discerned a steady trend in legislation which reflects the view of successive Parliaments as to what the public interest demands in a particular field of law, development of the common law in that part of the same field which has been left to it ought to proceed upon a parallel rather than a diverging course."

In the legislation providing for court orders to confiscate the proceeds of crime Parliament recognised the public interest in promoting a policy of preventing a person from retaining property obtained by him as a result of, or in connection with, the commission of a criminal offence. The fact that the statutory machinery cannot be applied in the circumstances of this case, where the defendant has not been and, in all probability, will never be put on trial for his offence, does not detract from force of the policy in the context of the Attorney right, as guardian of the public interest, to bring proceedings in the civil courts to enforce that policy.

This is confirmed by the decision of this court in Attorney General v Chaudry [1971] 1 WLR 1614, a case in which an injunction issued preventing the continued occupation of premises in clear breach of legislation concerning fire risks in circumstances where the criminal courts were unable to act before the date fixed for trial. Lord Denning MR stated the position in these terms :

"There are many statutes which provide penalties for

breach of them - penalties which are enforceable by means of a fine - or even imprisonment - but this has never stood in the way of the High Court granting an injunction. Many a time people have found it profitable to pay a fine and go on breaking the law. In all such cases the High Court has been ready to grant an injunction. ...

Whenever Parliament has enacted a law and given a particular remedy for breach of it, such remedy being in an inferior court, never-the-less the High Court, always has reserved power to enforce the law so enacted by way of an injunction or declaration or other suitable remedy. The High Court has jurisdiction to ensure obedience to the law whenever it is just and convenient so to do." (1624 C-G)

For the respondent to receive the balance of the royalties would amount to the law being flouted in a different way. However, the consequence for the reputation of the criminal justice system would be the same. The ordinary member of the public would be shocked if the position was that the courts were powerless to prevent the respondent profiting from his criminal conduct.

D. Safeguards Against Abuse

This case, as we have already indicated, is exceptional. It is also exceptional in that the Attorney has sought to intervene in order to uphold the criminal law. The occasions on which he does so are extremely rare, as the Solicitor General explained in the course of argument. The fact that the Attorney would only move in cases in which he considered it was right to do so, provides a considerable safeguard against the jurisdiction being abused. The Attorney, because of his central role in the enforcement of the criminal law, is in a peculiarly appropriate position to judge when to make an application to court for a remedy. Furthermore, even though the Attorney is in this position, there is a further safeguard in that the court will carefully scrutinise the application to ensure that it is in the interests of justice that the application should be granted. In accordance with the submission of the Solicitor General, it is unlikely to be granted unless it is "providing carefully targeted support to the enforcement of substantive legislation enacted by Parliament". In addition, the court would be very mindful of avoiding a result which unjustifiably involved interference with free speech. As the Solicitor General submits, the proposed injunction can readily be justified under the European Convention of Human Rights as being a necessary and proportionate measure adopted in the interests of national security.

E. Remedy

This brings us to the question of the appropriate remedy. In public law proceedings the Attorney has standing to seek an injunction and the court has discretion to grant an injunction for the protection of that public right. The remedy should be fashioned to achieve the public law policy of aiming to prevent the offender from profiting as a result of, or in connection with, his crime. Although the court is not asked in this case to make a statutory confiscation order or an order for restitution of royalties received, it does have power to grant an injunction (whether interlocutory or final) " in all cases which it appears to the court to be just and convenient to do so." : section 37 (1) Supreme Court Act 1981. Sub-section (2) provides:

"any such order may be made either unconditionally or on such terms and conditions as the court thinks just."

The power to grant such injunctions is limited to cases where the plaintiff has a legal or equitable right. For reasons already explained, the Attorney has a legal right in public law to apply to the court for an injunction in a case of this kind. The money which will be subject to the injunction is money which is liable to confiscation, so that the injunction will serve the ordinary purpose of preserving assets subject to a claim pending adjudication. There is, of course, no prospect whatever that Mr Blake will ever return to this country and subject himself to the jurisdiction of the court, but in the circumstances of this case we consider that this is an argument for granting the injunction, not an objection for doing so.

The following form of injunction is appropriate to protect the public right asserted by the Attorney in this case:

"an injunction restraining the defendant from receiving or from authorising any person to receive on his behalf any payment or other benefit resulting from or in connection with the exploitation of "No Other Choice" in any form or of any information therein relating to security and intelligence which is or has been in his possession by virtue of his position as a member of the Secret Intelligence Services."

Notice of the injunction should be given to Jonathan Cape Ltd.

The injunction will not determine what is to happen to the proceeds of the crime. It only ensures what is not to happen. If there is a use proposed for the unpaid royalties, which is not contrary to the public interest, then the court can authorise that use, by way of variation of the terms of the injunction on application by the Attorney, having given notice to the respondent and to Jonathan Cape Ltd.

The Attorney will be granted an injunction in the above terms.

Order: Injunction in terms set out. Plaintiff to have costs

of the additional hearing on 1.12.97 and costs of today.