Media Research Group Pty Ltd v Department of Premier and Cabinet

The Appeal 12The appellant now appeals against that decision under ss 112, 113 of the Administrative Decisions Tribunal Act 1997 (ADT Act). The Department is the respondent. An appeal to the Appeal Panel may be made on any 'question of law', and, with the leave of the Appeal Panel, it may be extended to the merits, and the case finalised. 13There has been no involvement in the proceedings at any point by the access applicant. 14The issue at this point is simply whether the Tribunal erred in law in its reasoning leading to the conclusion that the total amount paid for the 12 month period was not exempt matter; and whether leave should be given to remake the decision, the appellant's submission being that the Tribunal was wrong and the total amount paid is exempt matter.

Adequacy of Reasons 15The primary error of law advanced by the appellant is that the Tribunal failed to give adequate reasons. The Tribunal has a duty under the general law to give adequate reasons for decision, a duty reflected also in s 89 of the ADT Act. See recently for a discussion, Department of Education and Training v EM [2011] NSWADTAP 3. 16As noted earlier, the Tribunal gave an ex tempore decision. In our view, some care must be taken in applying to oral reasons given at the close of hearing, especially where both parties have competent legal representation, some of the strictures that appear in the leading cases on the issue of adequacy of reasons. 17The leading cases typically are ones where there are significant disputes as to the facts and the decision was reserved, sometimes for a considerable period. This case involved a debate over two narrow items of information. The Tribunal was essentially engaged in a task involving a discretionary evaluation, as distinct, for example, from making findings of fact and assessments of credibility. It had detailed written submissions before it. The Tribunal alludes in its reasons to matters explored in some detail in the written submissions, and, once those submissions are read, it is reasonably clear that the Tribunal agreed with the key submissions made by the Department, and the arguments given there for rejecting the appellant's case. 18It will often be the case that the party objecting to release has one set of practical objections. This was a case of that kind. The practical objections are then framed in a way that seeks to take advantage of any exemption perceived to be available. Here the appellant saw three as potentially available. So it sought to fit its concerns into the terms of each of the exemptions. Of course it only needed to succeed in respect of one. 19The Tribunal must then differentiate between the terms of each of the exemptions. For the reasons which follow, we think the Tribunal did not differentiate sufficiently between the terms of the exemptions when considering the appellant's objections, with the result that the reasons were not adequate. 20The Tribunal began by giving the background to the review application. It continued [we have added paragraph numbers to the reasons, for ease of further reference]:

1. The applicant in support of its contention, relied on two affidavits sworn by Mr Michael Francis O'Connell the managing director of the applicant.
2. Due to the nature of this application, at the commencement of the proceedings and on the application of Ms Graycar, counsel for the applicant, I made an order under section 75 (2) of the Administrative Decisions Tribunal Act 1997 prohibiting and restricting the publication or disclosure of the exempt matter contained in the document in issue, to the extent the exempt matter is contained or referred to in the evidence and written submissions filed in this application (see also section 55 of the FOI Act).
3. It is the evidence of Mr O'Connell that there are two competing providers of media clipping services, the applicant and Media Monitors. The applicant, he explained was a small provider in this very competitive market. He asserted that if the total amounts paid to the applicant were to be disclosed the applicant's competitor, Media Monitors, would have the necessary information to be able ascertain the exact terms on which the applicant had contracted and with its greater market power it would be in a position to undercut the applicant in any future tender application.
4. This, he said, would adversely affect the applicant's business, not only in relation to its contract with the New South Wales Government but also other contracting parties.
5. The applicant asserts that the information is exempt under a number of the provisions in clause 7 of Schedule 1 of the FOI Act. It is convenient to deal with these separately.

Clause 7(1)(a1) 21The Tribunal first dealt with this claim. It said: 6. The first exemption relied on is clause 7(1)(a1) which provides that a document is exempt if disclosure of the document would 'disclose the commercial-in-confidence provisions of a government contract (within the meaning of section 15(A))'. It is the applicant's contention that disclosure of the document in its redacted form would disclose the basis on which it had contracted. A copy of the contract was provided in support of this contention. 7. In my opinion, section 15A of the FOI Act is of no application as the disclosure of the redacted document does not disclose a commercial-in-confidence provision of the contract. The document in question is not the contract but a document created by the respondent. In any event the 60 day period in section 15A has well and truly expired as the applicant's contract came into effect some years ago. Section 15A sets out what must be published in regard to a Government contract with the private sector and this includes the total value of the contract. Accordingly, the total value of a contract between Government and a private sector entity is information that is to be made available to the public. 8. Hence, it is difficult to see how disclosure of the total amount paid pursuant to a contract between a Government agency and the private sector, could be considered as a commercial-in-confidence provision of the contract between the parties. 9. However, having regard to the evidence of the applicant, which was not disputed, there is some basis to the argument that if the redacted document in its current form were to be released together with the total amount paid, it would contain information as to the basis on which the applicant tendered. This, in my opinion, would be addressed by deleting all the information that is above the information, which has already been deleted across the middle of the document [i.e. the months from July to June of the relevant year]. 22We will not deal with the appellant's objections in detail. In our view the appellant was wrong and the Tribunal in error in treating as applicable cl 7(1)(a1). It is concerned with s 15A contracts. This, in our opinion, was not a s 15A contract. As previously noted, the contract had been entered into during 2006. In our view therefore, the exclusion from application of s 15A found in sub-s (10) of s 15A is applicable, i.e.: (10) This section does not apply to or in respect of any of the following: (a) a government contract entered into by or on behalf of an agency before the commencement of this section, 23Contrary to the appellant's submissions at hearing, in our view the position in the 2008-2009 period was that the original contract was still on foot. All that occurred here was that an option to renew was exercised after the s 15A requirements took effect. The contract itself remained in our view a 'pre-commencement' contract. 24As we interpret the Ombudsman's reasoning, his office's references to s 15A and cl 7(1)(a1) were intended to support an overall discretionary judgment as to where the public interest lay in respect of disclosure of the amount paid for services. The Ombudsman was not invoking cl 7(1)(a1) as a possibly applicable exemption. The Ombudsman's letter of 4 December 2009 to the appellant included the following paragraph: Clause 7 clearly contemplates that some adverse effects flowing from disclosure of information are inevitable. However, for the exemptions to be made out the adverse effect has to be 'unreasonable'. [The Appeal Panel interpolates that this is a clear reference to cl 7(1)(c)(ii).] When determining what is unreasonable it is appropriate to consider any public interest in favour of disclosure which may outweigh any adverse effects such disclosure may have on the business affairs of the affected party. I agree with the DPC that the public interest in accountability on government expenditure of public funds is particularly strong. This is evidenced by the fact that in 2007 Parliament amended the FOI Act to include s 15A requiring certain particulars of government contracts to be published. One of the particulars is the estimated amount to be paid to the contractor under the contract. 25For completeness, however, we add that we do agree with the appellant's submission as to two of the further considerations relied upon by the Tribunal at this point of its reasons. One, it may be too strict to read the meaning of 'commercial-in-confidence' provisions, as the Tribunal did, to refer only to a term of the contract itself in the sense of one of the express clauses or covenants. Price is a fundamental term of a contract. Depending on the circumstances, it could, we think, be argued that the price itself might fall within category (e) of the definition of 'commercial-in-confidence' provisions, i.e. (e) any matter whose disclosure would place the contractor at a substantial commercial disadvantage in relation to other contractors or potential contractors, whether at present or in the future. 26Secondly, we do not think weight should have been given in this case to the 60 day rule (see s 15A(1)). We enquired at hearing as to whether any steps had been taken by the Department to subject this contract to the s 15A procedure and its legal representative advised that she was unaware of any steps; and to similar effect, the legal representatives of the appellant. In these circumstances, it was inappropriate, we consider, for the Tribunal to put forward as a justification that the appellant had had an opportunity to suppress the price from the s 15A register, had not done so and therefore was stuck with the consequence that it was now publicly available information; and consequently the amount sought by the FOI request was publicly available information.

Clause 7(1)(b) 27The Tribunal then turned to cl 7(1)(b). 10. The next exemption is that contained in clause 7(1)(b) of Schedule 1 of the FOI Act. That provision provides that a document is exempt if it contains matter which: (i) would disclose information that has a commercial value to any agency or any other person, and (ii) could reasonably be expected to destroy or diminish the commercial value of the information. 11. Having made my findings in regard to the exemption in clause 7(1) (a1) of Schedule 1 of the FOI Act the issue is whether the amount paid, that is the total amount paid to the applicant during the year in question, has a commercial value. 12. The applicant argues that the services that are provided are unique in that it is a unique type of service and also that it is a very, very small market. The applicant relies on the same argument in that if the total amount paid were to be revealed it would inform its competitor the basis on which it has contracted. 13. As I have said I am not persuaded by this argument if the other deletions I have referred to are also made. 28The appellant's objection to the adequacy of this reasoning in respect of this head of exemption is, we consider, made out. The difficulty with the above passage is that it basically adopts by reference the reasoning given in relation to cl 7(1)(a1). We have set out our concerns with the approach taken in relation to cl 7(1)(a1). In our view, it was not the case that the price needed to be published as part of the register required to be maintained under s 15A. 29The appellant did not receive a reply independent of that consideration to its argument that the total amount paid for the financial year had a 'commercial value'. If it had made out its case on 'commercial value', it was then entitled to be heard and provided with a response in the terms of the discretionary test set out in cl 7(1)(b)(ii), which as previously explained is kinder to exemption claimants than that in cl 7(1)(c)(ii).

Clause 7(1)(c) 30The Tribunal then turned to cl 7(1)(c). 14. The remaining exemption is that contained in clause 7(1)(c) of Schedule 1 of the FOI Act. That clause provides that a document is exempt if it contains information disclosure of which: (i) would disclose information concerning the business, commercial or financial affairs of an agency or any other person, and (ii) could reasonably be expected to have an unreasonable, adverse affect on those affairs ... 15. It is not disputed that the information, namely the information as to the total amount paid to the applicant during the relevant year is information concerning the business, commercial or financial affairs of the applicant. The issue is whether the disclosure of this information could reasonably be expected to have an unreasonable adverse affect on those affairs. 16. Once again, the applicant relies on the same arguments. I accept that this particular exemption does not give rise to any presumption in favour of disclosure. I also accept that as to whether the disclosure of the total amount paid to the applicant during the relevant year could be expected to have an unreasonable, adverse affect on the applicant's business affairs must be assessed objectively. Once again, for the reasons I have already stated I am not persuaded on the material before me that disclosure of this information alone is such that it will have an unreasonable, adverse affect on the applicant's business affairs. 17. Had I found on the material before me, that disclosure of this particular information would disclose the basis on which the applicant had contracted, I would have reached a different conclusion. For the reasons I have already stated the disclosure of the information above that which has already been deleted across the middle of the page [i.e. the months and amounts paid per month], would have given rise to such a conclusion. 31There is no dispute that item (i) of s 7(1)(c) was satisfied. The Tribunal moved appropriately to the item (ii) question - could disclosure of the total amount paid reasonably be expected to have an unreasonable, adverse effect on those affairs. At this point, the Tribunal gave no additional reasons. It simply again referred back to its earlier discussion, in effect to what was said in connection with s 15A and cl 7(1)(a1). In our view, the Tribunal did not sufficiently expose its thinking on this question.

Leave to Extend to Merits 32The appellant's case for leave to extend the hearing to the merits is made out, so far as cl 7(1)(b) and cl 7(1)(c) are concerned. It will be seen from what follows that we agree with the decision ultimately made by the Tribunal, and give the following reasons.

General 33FOI laws have always included provisions designed to uphold the reasonable privacy claims of business in respect of information that they have given to government in processes of a broadly confidential character, such as tender bids and product approval applications. See generally, Senate Standing Committee on Constitutional and Legal Affairs Report, Freedom of Information (1979), 272-273, recommending for the Commonwealth provisions of the kind later adopted in the laws elsewhere in Australia including NSW. 34Clause 7, as originally enacted, contains a discernible hierarchy of protected information. The first is 'trade secrets', cl 7(1)(a). There is no additional public interest or similar test to be satisfied. (Clause 7(1)(a) is not relied upon in this case. It is simply mentioned to illustrate the difference between its structure and that of the provisions which follow.) 35Clause 7(1)(b) then deals with information that has 'commercial value'. This is, obviously, a broader category than trade secrets. A discretionary test is introduced to limit its operation. The test focuses on damage to the business party - the exemption is only made out if it is demonstrated that the disclosure would 'destroy' or 'diminish' the commercial value of the information. Finally, cl 7(1)(c) has a very broad sweep covering in effect any information that relates to the 'business, professional, commercial or financial affairs' of a party. The off-setting balancing test is more stringent and introduces a broader range of considerations than cl 7(1)(b), i.e. : 'could [disclosure] reasonably be expected to have an unreasonable adverse effect on those affairs or to prejudice the future supply of such information to the Government or to an agency'. 36The Commonwealth exemption equivalent to cl 7(1)(b), and in similar terms, now appears at s 47 of the Freedom of Information Act 1982 (Cth), not s 43, following amendments in 2010. The 2010 Explanatory Memorandum at p 32 noted that there is no broad public interest test because information of this type has very high commercial value and includes information that gives a business an advantage over its competitors. 37In construing and applying cl 7(1)(b) and 7(1)(c) their statutory context must be kept in view. They are found within a law designed to foster public disclosure and knowledge of the information held by government. Care must be taken not to give the provisions an unduly wide construction. To similar effect, see Secretary, Department of Employment, Workplace Relations and Small Business v Staff Development and Training Centre Pty Ltd [2001] FCA 382 at [58] (observations endorsed, in a successful appeal as to another aspect of the decision, Secretary, Department of Employment, Workplace Relations and Small Business v Staff Development and Training Centre Pty Ltd [2001] FCA 1375 at [28]).

Clause 7(1)(b) 38Clause 7(1)(b) deals with a broader category of information, information of 'commercial value', than the subject of 'trade secrets' with which 7(1)(a) is concerned. 39The term 'trade secret' when used in the FOI legislation is directed to commercial secrets of a high order to do with such things as product ingredients or manufacturing processes: see further, Searle Australia Pty Ltd v Public Interest Advocacy Centre (1992) 36 FCR 111. Information of 'commercial value' may be something less than a 'trade secret' but, in our view it still should be something which has some measure of exclusivity. 40The Queensland Information Commissioner reviewed relevant Commonwealth and Queensland authorities in Seeney and Department of State Development [2004] QICmr 4 at [36]. The Commissioner concluded that the term 'commercial value' in its primary meaning refers to information that is 'valuable for the purposes of carrying on the commercial activity in which the ... person is engaged'. The Commissioner added: 'The information may be valuable because it is important or essential to the profitability or viability of a continuing business operation, or a pending 'one-off' commercial transaction'. 41The Commissioner continued at [37]: 'The second meaning is that information has a commercial value to [a] ... person if a genuine arms-length buyer is prepared to pay to obtain that information from that ... person, such that the market value of the information would be destroyed or diminished if it could be obtained under the FOI Act from a government agency ...'. There needed, the Commissioner noted, to be some evidence of a legitimate market for information of that character. 42In a recent ADT case, Hoy v Department of Lands [2010] NSWADT 193, the Tribunal gave the following summary at [16]-[17]: 16 It is well accepted that information has commercial value where the information has a value that is capable of being described as commercial in character: see Re Mangan and the Treasury [2005] AATA 898 at [36]. In Re Sitel Australia Pty Ltd and Employment Advocate (2005) 40 AAR 552 and [2005] AATA 617 at [49], the Administrative Appeals Tribunal held that the term, as it appears in the equivalent section of the Commonwealth Freedom of Information Act 1982, had two meanings. The first is where the information is valuable for the purposes of carrying on the commercial activity in which a government agency or another person is engaged in and the second is where a genuine arm's-length buyer is prepared to pay to obtain the information. 17 Commercial value has been found to attach to information contained in a document which concerns the nature of, techniques used in, and the actual results of tests or research of a commercial activity undertaken by an agency or another person: Neary v State Rail Authority [1999] NSWADT 107 at [42], CH Real Estate Pty Ltd (t/s Raine & Horne Commercial Penrith) v Penrith City Council [2005] NSWADT 147 at [40] and [41], Re Pfizer Pty Ltd and the Department of Health, Housing and Community Services (1993) 30 ALD 647 at 676 and Surf Life Saving Australia Ltd v Department of Education and Training [2001] NSWADT 76. 43The bid process occurred in 2006. The Tribunal, by suppressing the month headings, sought to respond to the appellant's concern that their disclosure would reveal to an informed third party such as its rival the pricing structure used by it to win the tender. 44The question of whether an item of information has 'commercial value' is to be determined by the Tribunal in an objective way taking account of the subjective view of the business party, here the views expressed by Mr O'Connell in his affidavits. 45In Searle , cited earlier, the Full Court of the Federal Court noted that public interest was a factor to be taken into account in deciding whether a person could reasonably expect to be adversely affected by the disclosure of documents having commercial value. (See also Colakovski v Australian Telecommunications Corp (1991) 29 FCR 429 at 438-441.) 46In our view, a bare statement setting out the amount paid annually under a contract by a government agency does not, on its face, involve anything that could be said, reasonably, to be of 'commercial value'. 47That quality only attaches to it, on the appellant's case, when it is put together with other information (sometimes called the 'mosaic' effect). For example, the interested rival might access the annual payments made for other contract periods and the original contract price, and then deduce what the pricing arrangement originally agreed was. The appellant would then be able to deduce that the pricing arrangement was a fixed or lump-sum one with an annual inflation adjustment. The rival would also deduce that the appellant had therefore offered an alternative pricing arrangement to the standard one (per-clip) in the bid process of 2006. It is in this way that the 'commercial value' case is mounted. The appellant then, via Mr O'Connell's affidavit, gives evidence that the 'commercial value' of this pricing arrangement for future bids could therefore be reasonably be expected to be 'destroyed' or 'diminished' (the second element of cl 7(1)(b)). 48In our view, information of 'commercial value' would ordinarily be information with a proprietary character, information of an internal character (such as specialised statistics) or information the product of some unique or special intellectual processes of a high order that might fall below the level of a 'trade secret'. There should, as we see it, be some uniqueness attaching to the information that justifies treating it as exclusive, secret or confidential. 49As noted, the appellant in this case has tried to reach that point by the argument that the price obtained would reveal to an informed observer the pricing model used and this has some unique or distinctive character marked by exclusivity and enterprise on the appellant's part. In our view, the FOI cases dealing with the meaning of 'commercial value' have concerned themselves with the primary information proposed to be released, and not engaged in a mosaic analysis of this kind. 50Moreover, we think it is unrealistic to seek to ascribe a 'commercial value' to the amount paid by government for services rendered to a business party under a contract in the modern environment of government-business contracting. 51The bill enacting s 15A itself reflected a trend towards greater transparency of information about government contracts, and a rejection of blanket commercial-in-confidence or similar claims to suppress such information. In our view, it cannot be reasonably contended today that the amount of government expenditure under a contract with a business party is an item of 'commercial value' of the kind protected by cl 7(1)(b). 52So it will be seen that we agree with the conclusion reached on this issue by the Tribunal below.

Clause 7(1)(c) 53As noted earlier, it is not in dispute that the information sought to be withheld relates to the 'business, commercial or financial affairs' of the appellant. The live issue is whether disclosure of that amount 'could reasonably be expected to have an unreasonable adverse effect on those affairs or to prejudice the future supply of such information to the Government or to an agency'. 54We do not accept the case made by Mr O'Connell in his affidavits as to 'unreasonable adverse effect'. 55In our view, smaller size contractors seeking to enter a market in which there is a dominant player will always be looking for an 'edge' which makes their services more attractive than those of the dominant player. That may come from quality of service considerations, price considerations or both. 56In this case his company was successful, at least in part, it would seem, because of the certainty that its price proposal offered government from a budget management perspective. His company had contracts with governments interstate, so presumably there was also a record of quality of performance that was attractive. 57We accept that if the rival becomes aware of the price paid for one year's service and then sees the pattern for other years, the rival would be able to make a deduction as to the pricing formula as suggested by Mr O'Connell. 58However, in our view, it would, we think, be reasonably obvious to a rival in a services market that the usual alternative pricing models are: (a) fixed, or lump sum which is indexed; and (b) fee-for-service. This is a well-known alternative. The ordinary consumer is familiar with the difference between lump sum quotes (as is common in building contracts) and fee-for-service (as is common among medical specialists). 59Further, as noted in the discussion in relation to cl 7(1)(b), there is an increasing demand for transparency on the part of government in relation to its spending decisions and the contracts it enters into. Section 15A speaks to that pressure. This is also a relevant consideration in considering whether, viewed objectively, an applicant has demonstrated an unreasonable adverse effect flowing from disclosure of the information. 60In our view the adverse effect is not unreasonable. [These reasons were released to the parties on 4 March 2011 with the following final paragraph: 61 As indicated at hearing, we will make these reasons in full available to the parties, and hold a directions hearing to assess what parts of the text can be published immediately, as against what text is ultimately published which may depend on whether an appeal is pursued, so as not to prejudice the position of the appellant if successful in any appeal. The appellant subsequently advised that no appeal is to be pursued. Following further advice from the parties relating to the background to the dispute, the above reasons do contain some minor corrections, as against the reasons released on 4 March 2011.]

Order

1. Appeal allowed.
2. Leave granted to extend appeal to the merits.
3. Decision under appeal affirmed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 April 2011