ROBERT MICHAEL KIRMAN AND ROBERT CONRY BRAUER AS JOINT AND SEVERAL DEED ADMINISTRATORS OF ALITA RESOURCES LIMITED (ACN 147 393 735) (RECEIVERS AND MANAGERS APPOINTED) (SUBJECT TO DEED OF COMPANY ARRANGEMENT) -v- AUSTROID CORPORATION (A COMPANY INCORPORATED IN THE UNITED STATES OF AMERICA WITH BUSINESS IDENTIFICATION NO NV20201866500) [2023] WASC 350 (12 September 2023)
(This judgment was delivered extemporaneously on 5 September 2023 and has been edited from the transcript.)
[2]
The applicants have sought confidentiality orders in relation to the first confidential affidavit of Mr Kirman.
In considering the position of the parties, it is important to note that the starting point in considering any application to restrict access is that inspection by a party of all relevant documents in the proceeding is considered to be a significant aspect of procedural fairness and that there is a prima facie right for a party to inspect all of the documents that have been filed by an opponent. Courts have previously held that this is important both for the proper conduct of the proceedings, as well as for informed prospective settlement negotiations.[1] It also provides the critical aspect of enabling parties to give adequate instructions to their solicitors.
In an event such as the present application, where a party seeks additional protection beyond the substantive obligation owed to the court in relation to the use of documents obtained in the course of litigation, the party seeking the additional protection is required to prove the existence and degree of confidentiality involved in relation to the particular document, which is sought to be withheld from inspection.
In deciding whether further protection is required, the court considers the degree of commercial sensitivity involved and the extent, if any, of prejudice to the person interested in keeping the document confidential.[3]
Even in cases concerning direct trade rivals, a reasonable and proportionate response to confidentiality concerns frequently involve limiting inspection to a particular officer or officers of a party, accompanied by an express confidentiality undertaking, given by that person.[4]
Where a document is both commercially sensitive and also the parties are rivals, different considerations, however, do apply. This is because, once a confidential document is inspected, information cannot be forgotten. In such a case, the court is required to strike a fair balance between the legitimate concerns of the party producing the document and the needs of the other parties. Commercially sensitive information includes confidential information a rival could use to its advantage and to the disadvantage of the parties resisting inspection.
The courts have also held that confidentiality of documents can be proved either by direct evidence or can be inferred from the document itself.[5]
Each case turns on its own facts. Relevant factors include the degree of commercial sensitivity; the extent of any prejudice to the party giving discovery or producing the document; the age of the information; the identity of the persons who are proposed to inspect the documents; and the reason or reasons why inspection is required.
In this case, the document over which the plaintiffs seek confidentiality orders is an implementation agreement entered into between the plaintiffs and a party that has now been publicly identified as Mineral Resources Limited. Mr Kirman deposes in his open affidavit that the agreement is commercially confidential. The terms of the document requires that the existence and terms of the document be kept strictly confidential and for the plaintiffs to seek confidentiality orders in respect of the document limited to inspection by legal advisors. Whilst that is a term of the document, the plaintiffs now do not press that application but accept that it is appropriate for a representative of each of the defendants to have access to the documents under certain conditions.
The plaintiffs also do not press the application insofar as it concerns the second defendants, subject to the receipt of an appropriately signed undertaking.
Having considered all of the matters, I am satisfied that on the face of the implementation agreement, it is a confidential document. In addition to the specific clause that is provided in the agreement, I accept that an offer by a party to buy a significant asset from a liquidator and the terms of that offer would generally be considered confidential prior to completion of the agreement. The reason for this is that because, in the hands of a competitor, knowledge of the terms and the basis upon which a party is prepared to accept an offer can be used to the advantage of the competitor.
I am also satisfied that in this case each of the defendants is, to a certain extent, a trade rival. Specifically, I note that Austroid is the proponent of a deed of company arrangement (DOCA) to buy the same asset. That DOCA has not yet been extinguished. The directors of Tawana, Lithco and Austroid are identical. For this reason, unless orders are made in respect of each of these companies, the orders will have no practical effect.
In considering whether it is appropriate for additional protection to be given to the document over and above that provided by the substantive undertaking, I have taken into account the following matters. First, the document was only entered into last week. It is subject to a number of steps before finalisation of any agreement can occur including the making of orders in these proceedings. As has been noted by senior counsel for the receivers, there certainly is at least some risk - or significant risk, I think, were the terms that he used - that this will never occur.
Second, unless orders are made, it would be difficult for the defendants not to use the knowledge that they have gained from inspection of an unredacted document to consider what other offer or offers might be made which would fall within the fiduciary carve out contained in the implementation agreement.
Third, the first defendant is not an Australian registered foreign company and does not have a registered office in Australia. The evidence before the court is the fifth defendant is a company based in Hong Kong. On this basis, I accept that there is a significant risk that there could be no effective remedy against either of these defendants if there was a misuse of the document.
For these reasons, I accept that at this point in time the implementation agreement is commercially sensitive. In circumstances where a redacted copy has been prepared and is available for inspection by the defendants and their legal advisors, I consider that additional protection to the unredacted document is required.
In my view, the appropriate balance between the competing interests of the parties is that access be provided to named representatives of the defendants who sign an undertaking. My preliminary view is that the undertaking should extend to an undertaking not to be involved in any commercial negotiation for the assets the subject of the implementation agreement for the reasons that I said earlier. Namely, that once the document has been inspected, it would be difficult for that representative not to use the knowledge gained.
My preliminary view is also that the representatives should be based in Australia but I will hear, particularly in respect of the first and fifth defendants, as to what proposal is made, given my understanding that the fifth defendant does not have any representative present in Australia.
In these circumstances, I consider that it is appropriate to make an order in terms of order (2) of the plaintiffs' minute subject to the amendments to annexure 1 that were indicated by Mr Cook. Amendments should also be made to each of the annexures to label the proceedings correctly as being 134 of 2023. And then in annexure 1 to add the words:
[3]
...or a person in 2(a) to 2(e) who has provided a signed undertaking.
[4]
At this stage, I note that there have been no discussions between the parties as to who those representatives could be and am conscious of the fact that the defendants will need to be able to give instructions to their counsel and solicitors prior to the hearing which is foreshadowed for next Wednesday.
I will adjourn the matter for a time to discussed to enable conferral to take place between the parties as to the appropriate orders to give effect to these reasons.
[5]
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.