Centaur Mining and Exploration Ltd v Anaconda Nickel Ltd
[2001] VSC 224
•29 June 2001
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 5767 of 2001
| CENTAUR MINING AND EXPLORATION LIMITED (Receivers and Managers Appointed) (Administrators Appointed) (ACN 004 805 145) and CENTAUR NICKEL PTY LTD (Receivers and Managers Appointed) (Administrators Appointed) (ACN 079 092 104) | Plaintiff |
| v | |
| ANACONDA NICKEL LTD | Defendant |
(ACN 060 370 783)
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JUDGE: | Warren J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 6, 7 and 15 June 2001 | |
DATE OF JUDGMENT: | 29 June 2001 | |
CASE MAY BE CITED AS: | Centaur Mining and Exploration Ltd v Anaconda Nickel Ltd | |
MEDIUM NEUTRAL CITATION: | [2001] VSC 224 | Revised 16 July 2001 |
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Corporations Law, s.424 – Directions from Court to receiver – confidential material – joint venture
Words and phrases – "in confidence" – "confidentiality"
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G.A.A. Nettle QC with Mr P.W. Collinson | Minter Ellison |
| For the Defendant | Mr R.M. Garratt QC with Mr I.B. Stewart | Andersen Legal |
HER HONOUR:
Centaur Mining and Explorations Limited ("Centaur") was placed in receivership on 14 March 2001. Prior to the receivership Centaur entered into a joint venture agreement with the defendant. The receivers now wish to make available all or parts of a document said to be confidential relating to the joint venture agreement. The defendant opposes that course. The receivers seek directions pursuant to s.424 of the Corporations Law as to whether they may disclose all or parts of the confidential document to third parties.
Centaur
Centaur, together with five other companies[1] forms a group known as the Centaur Group. The group engages in gold, cobalt and nickel mining. Centaur owns nickel tenements in the Eastern Goldfields Province, approximately 50 kilometres north‑west of Kalgoorlie, Western Australia. Centaur owns and operates a nickel and cobalt mining and processing facility in the tenements. The mining and process facility are referred to as Cawse Nickel or "Cawse". The processing plant at Cawse has a production capacity of 9,000 tonnes of nickel and 1,000 tonnes of cobalt in sulphide per annum. The Centaur Group intended to expand the nickel production capacity to a stage known as Cawse Stage II. In order to pursue the expansion, Centaur negotiated a system from a neighbouring operator, the defendant, Anaconda Nickel Limited ("Anaconda"). The negotiations culminated in a preliminary agreement between Centaur and Anaconda to conduct, among other matters, a pre-feasibility study of Cawse Stage II. In summary, under the preliminary agreement, Anaconda agreed to pay the costs of the study (ultimately $4,161,676.85) and was to acquire ownership in the Cawse Stage II project in a proportion of between 50-60 per cent (the proportion to be determined at a later time). The project was expected to reap at least 40,000 tonnes of nickel and 3,000 tonnes of cobalt per annum. Hence, the project was about four times the size of the existing operation at Cawse.
[1]Centaur Nickel Pty Ltd, Centaur Nickel Investments Pty Ltd, Australian Gold Resources Ltd, Centaur Resources Pty Ltd and Centaur Oil and Gas Corporation.
Anaconda
Anaconda conducts a nickel mining operation known as the Murrin Murrin plant. It also conducts operations at Mt. Margaret and Burlong. The Murrin Murrin plant is the largest laterite nickel-cobalt production facility in the world. It has a production level of 40,000 tonnes per annum. The Murrin Murrin plant is a fully integrated operation producing nickel and cobalt metal from ore at a single plant site that burns sulphur to produce sulphuric acid, steam and power required for the process of dissolving minerals and high temperature and high pressure in sulphuric acid. The Murrin Murrin plant was constructed at a cost of over $1.2B. In addition, Anaconda spent an undisclosed amount, said to be millions of dollars, on plant and equipment design and research to achieve its operation at Murrin Murrin.
The Preliminary Agreement
The preliminary agreement was dated 1 November 1999 and effective immediately.
Under the agreement (clause 4.1) Anaconda undertook to commission and manage a Pre‑Feasibility Study and a Feasibility Study. The preliminary agreement provided specifically that the property in both studies would be equally owned by Anaconda and Centaur. Anaconda undertook, further, to pay the costs of the Pre‑Feasibility Study and the Feasibility Study (clause 4.1) other than the cost of drilling and assaying, such costs to be shared equally by Anaconda and Centaur. The agreement provided, further, that if the interest of Anaconda under a joint venture exceeded 50 per cent then Anaconda was required to reimburse Centaur a corresponding part of those shared costs.
The preliminary agreement provided (clause 4.2) that the Pre‑Feasibility Study and the Feasibility Study would be conducted by Anaconda but supervised by a committee consisting of an even number of representatives, half appointed by Anaconda and half appointed by Centaur and including Mr Andrew Forrest appointed by Anaconda and Mr Joseph Gutnick appointed by Centaur. There was further provision in the event of a deadlock that is not relevant for present purposes.
The preliminary agreement (clause 4.3) required Anaconda to use its best endeavours to complete the Pre‑Feasibility Study before the end of August 2000 and the Feasibility Study before the end of October 2001. There was provision (clause 4.3 and 4.6) that if after the conclusion of the Pre‑Feasibility Study Anaconda and Centaur were unable to agree whether or not to proceed to the conduct of the Feasibility Study the joint committee already referred to was required to meet within 30 days to determine whether or not to proceed. If a decision to proceed was made the parties were required to "promptly" enter into a further agreement described as "the Joint Venture Agreement". There was provision that if the committee determined not to proceed to the feasibility stage but Centaur was in favour of so proceeding, Centaur could elect within 30 days of the committee meeting to proceed with the project on a sole risk basis upon giving notice to Anaconda and paying Anaconda 25 per cent of the cost incurred in connection with the Pre‑Feasibility Study and the Feasibility Study. There was provision (clause 4.6(b)) that if Centaur elected to proceed on a sole risk basis it would constitute an offer to Anaconda to participate, such offer being open for acceptance for a period within 30 days. If the offer was not accepted Centaur was allowed to proceed alone and obliged immediately to reimburse Anaconda an additional 50 per cent of the costs incurred by it in connection with the Pre‑Feasibility Study and the Feasibility Study. The preliminary agreement provided, also, (clause 4.6(b)) that Centaur would have the right to elect to proceed with the project and joint venture with a third party but that in such circumstance Anaconda would have a pre-emptive right to match the terms agreed to by the third party. The agreement contained further provision with respect to offer obligations by Centaur to Anaconda and reimbursement of costs not relevant for present purposes.
The preliminary agreement recorded (clause 4.10) that Anaconda and Centaur intended to obtain "traditional project finance" and that Anaconda would use its best endeavours to obtain finance for itself and Centaur. If no "material progress" was made towards obtaining finance within 12 months or, in certain circumstances 24 months, Centaur was entitled to seek to procure finance for itself and Anaconda or proceed with the project on a sole risk basis or with a third party.
The preliminary agreement referred throughout to the "Feasibility Study" and defined (in clause 2.2) the study as meaning:
"Feasibility Study
Means a detailed written evaluation demonstrating the geological, metallurgical, engineering, environmental and economic feasibility of expanding the Cawse Project to attain the Expanded Capacity and, during the course of that process, to define the Existing Capacity. Without limiting the generality of the foregoing, the evaluation must:
(a)be prepared, in accordance with best industry practice, by an organisation recognised in the mining industry in Australia as having the necessary qualifications and experience;
(b)include all information and analyses customarily required by a lender in determining whether to make debt funding available for projects of comparable size and scope on the basis that the lender is satisfied (having regard to the information and analyses which a lender would customarily require including: capital and operating costs (including the cost of consumables); environmental constraints; water and fuel supplies; waste disposal facilities; engineering but not detailed) drawings; projected rates of return; and marketing strategies and opportunities) that the project has a value greater than the capital cost of implementing it;
(c)without limiting the generality of paragraph (b), include details of all grades, throughput rates, recoveries, capital and operating costs and sale prices defined to such a degree of accuracy and reliability that the probability of any such parameter varying to a less favourable outcome than that presented in the evaluation is less than 25%;
(d)quantify the parameters listed in paragraph (c) using methodology and practices which are generally recognised and accepted in the mining, metallurgical and engineering industries (as the case may be (in Australia; and
(e)be prepared having regard to the absolute requirement to ensure that the cash flow and operations of the current Cawse Project are not, to the detriment of Centaur, interfered with by the proposed expansion or the construction thereof does not place Centaur in default or material risk of default under the trust indenture dated 4 December 1997."
The preliminary agreement defined (clause 2.2) the "Pre‑Feasibility Study" as "a study dealing in broad terms with the same subject matter as the Feasibility Study, but only in such detail as will enable Anaconda and Centaur to conclude whether or not it is desirable to proceed to conduct the Feasibility Study". The agreement referred throughout to a "Joint Venture Agreement". The preliminary agreement defined the Joint Venture Agreement (clauses 2.2, 4.6(a) and 5) as being an agreement " … for an unincorporated joint venture of a type customarily used in the mining industry in Australia". The Joint Venture Agreement was to be effected in the terms of a draft agreement annexed to the preliminary agreement.
Finally, the preliminary agreement dealt with the matter of confidentiality (clause 6). It provided:
"The parties agree to make a joint announcement to Australian Stock Exchange Limited and the press in relation to this Agreement. That announcement and any other announcement must be in a form agreed by the parties. In all other respects, the subject matter of this Agreement and of the Pre‑Feasibility Study and of the Feasibility Study must be maintained confidential."
The Terms of the Joint Venture Agreement
In essence, the proposed Joint Venture Agreement document provided for Anaconda and a subsidiary together with Centaur to enter into a joint venture for the conduct of Cawse Stage II and the development of that project. The agreement provided for a term, levels of participating interest, rights of transfer, the appointment of a committee to supervise operations under the Joint Venture Agreement and the procedures to govern that committee. The agreement set out, also, the role of Anaconda. The Joint Venture Agreement document provided (clause 5.10) that all property held or acquired by Anaconda as operator in satisfying its obligations under the agreement were to be beneficially owned by the participants to the agreement, that is, Anaconda, its subsidiary and Centaur. The agreement contemplated assignment by a party of the whole or a fractional part of an interest of such party in the Joint Venture Agreement (clause 10.2). Clause 13.3 dealt with confidentiality, as follows:
"13.3 Confidentiality
Unless written consent is obtained from all Participants, the Joint Venture Documents together with all data and interpretations collected and made by the Operator and all reports distributed to the Participants are, except to the extent specified in clause 13.4, confidential as between the Parties and no Party may disclose such data and interpretations to any person or persons other than:
(a)as may be required by applicable law or by the rules of any Stock Exchange on which the shares of a Party or any of its Affiliates are for the time being listed for quotation;
(b)its Affiliates; or
(c)to a proposed Assignee of a Participating Interest, or to a proposed lender to a Participant on the security of its Participating Interest, but only if the proposed Assignee or lender has first undertaken to maintain the data and interpretations confidential."
Clause 13.4 provided that the confidentiality arrangement in clause 13.3 did not apply to data or interpretations available to the public generally, that a party is required to disclose by law, where disclosure was necessary for the purpose of obtaining any relevant approval from the Government, where disclosure was required for taxation or fiscal purposes, where disclosure was made on a confidential basis to professional advisers for the purposes of obtaining professional advice in relation to the agreement or for the purpose of discovery of documents in legal proceedings. Clause 13.5 provided that the confidentiality obligation under clause 13.3 was a continuing one that remained in force as to the parties to the agreement and any successors in title for a period of five years.
The Intentions of the Receivers of Centaur
On 14 March 2001 David Laurence McEvoy and Allan John Watson were appointed by Perpetual Trustee Company Limited ("Perpetual") as joint and several receiver and manager of Centaur and Centaur Nickel pursuant to a deed of security dated 4 December 1997. The appointment by Perpetual was made on behalf of holders of US$225M secured bonds in issue to Centaur in December 1997. The appointment followed an event of default by Centaur on 31 December 2000. There were additional sums secured under the deed of security being an amount of AUS$14,824,133.68 due to SG Australia Limited, an amount of AUS$11,453,524.75 due to J. Aron & Company and an amount of approximately AUS$134,770,585 due to Chase Manhattan Bank. In an affidavit Mr McEvoy deposed that in order to recover the amounts owing to secure the creditors he proposed to divest the assets of the Centaur Group secured by the deed of security and sell the nickel mining business as a going concern. He listed the assets as including Cawse.
The receiver formed the view that in order to maximise the best possible return to secure the creditors it was crucial that the nickel mining business of Centaur be sold as soon as possible and that delay in the sale tender process was undesirable. As a result, in order to facilitate the sale of the nickel mining business of Centaur the receiver and administrator wishes to make available for inspection to prospective purchasers, among other matters, information contained in or derived from the Pre‑Feasibility Study produced by Anaconda pursuant to the preliminary agreement. Mr McEvoy deposed in an affidavit as to his belief that the Pre‑Feasibility Study includes information regarding the geological surveys of Cawse and detailed engineering studies for the expansion of Cawse Stage II. He believes that the engineering studies include detailed mine plans, engineering studies of the proposed extended plant and costing information together with information and conclusions as to the feasibility of expanding Cawse Stage II. Ultimately the receiver and administrator believes that enabling a prospective purchaser to consider the Pre‑Feasibility Study will assist him in obtaining the best possible price for the nickel mining business of Centaur thereby maximising the amount available to be repaid to secured creditors.
An issue arose as to the intentions of Anaconda and the purchase of the interest of Centaur in Cawse Stage II. The receiver and manager of Centaur stated that he was informed by Anaconda that it is "interested" in acquiring the business of Centaur's nickel tenements. As events transpired the Pre‑Feasibility Study was prepared by Anaconda. The study was carried out under the supervision and direction of Martin Ooms, Senior Projects Manager at Anaconda. Mr Ooms has qualifications in mechanical engineering and experience in mining. The Pre‑Feasibility Study was carried out during July, August and September 2000. The body of the report was prepared by Anaconda and submitted to Centaur on 7 August 2000 including a detailed financial analysis. An executive summary, written by Mr Ooms, was submitted to Centaur in late August or early September 2000. In an affidavit Mr Ooms deposed that preliminary work the Pre‑Feasibility Study commenced as early as April 2000. The study engaged employees of Anaconda involved in geology and mining, water resources, metallurgy, engineering, tailings waste and infrastructure, environmental, tenements and finance. In the course of carrying out the Pre‑Feasibility Study, Mr Ooms gave evidence that, Anaconda carried out a comprehensive review of the operations of Cawse as then operated by Centaur. He deposed that Anaconda considered the performance and any problems of the Cawse operations, reviewed flow sheets, data and expenditure and considered the technical equipment used by Centaur at Cawse. In particular, Mr Ooms deposed that the information used by Anaconda was not publicly available and was treated by both Centaur and Anaconda as confidential to the Cawse operation. One aspect of the Pre‑Feasibility Study adopted by Anaconda was to assess the weaknesses, if any, in the Cawse operations and consider the application of technology and experience acquired by Anaconda. Mr Ooms gave evidence that he believed Anaconda had its own specialist industry knowledge and technology acquired from its operations at Murrin Murrin not known to the competitors of Anaconda. Furthermore, Mr Ooms gave evidence that Anaconda for the purposes of the Pre‑Feasibility Study developed a number of mine plans for Cawse using particular techniques and knowledge of Anaconda unknown to its competitors in relation to the mining of ore.
In his evidence Mr Ooms set out in reasonable detail a broad description of the work performed for the purposes of the Pre‑Feasibility Study. The affidavits sworn by Mr Ooms and filed on behalf of the defendant were the subject of a confidentiality order by the court at the behest of the defendant. Further, the evidence and cross‑examination of Mr Ooms and the subsequent addresses to the court were heard in camera.
In his evidence Mr Ooms described aspects of the Pre‑Feasibility Study, disclosure of which he believed, would assist the competitors of Anaconda. He believed that the disclosure would enable competitors to achieve an accurate prediction of upgrade and mass recovery. Hence, the acquisition of such knowledge would enable competitors to save millions of dollars in cost efficiencies, design of equipment and operating parameters. Furthermore, the disclosure would enable the competitors of Anaconda to take advantage of information, technology, skill and knowledge acquired at little or no cost to the competitor and which information had been acquired by Anaconda at considerable cost. The subject matter of the evidence of Mr Ooms fell within the ambit of the claim for confidentiality by Anaconda. As a consequence it is inappropriate to describe and analyse the subject matter asserted by Mr Ooms to be confidential even where that confidentiality is the subject of a dispute on the part of Centaur.
In order to facilitate his selling intentions the receiver and administrator of Centaur resolved to make the Pre‑Feasibility Study available to prospective purchasers subject to a condition of confidentiality. It was his intention to require all prospective purchasers to execute an agreement including a term not to disclose the study to any person, save for officers and employees of the purchaser and experts or advisers engaged by that purchaser to assist in the tender process, and not to otherwise use the information contained in the Pre‑Feasibility Study in any way. A form of proposed confidentiality agreement to be required of prospective purchasers was prepared and formed part of the evidence.
Anaconda relied upon clause 4.1 of the preliminary agreement and opposed the release in part or whole of the Pre‑Feasibility Study to prospective purchasers. A dispute ensued in the month of April 2001 between the solicitors for Centaur and the solicitors for Anaconda as to the subject matter that was the subject of the claim for confidentiality by Anaconda. It rejected the requirement of a confidentiality agreement being a pre-condition to any prospective purchaser receiving access to the Pre‑Feasibility Study. The correspondence between solicitors culminated in the commencement of the present proceeding pursuant to s.424 of the Corporations Law.
Section 424 of the Corporations Law
Section 424(1) of the Corporations Law provides:
"424(1) [Court directions as to performance of functions and powers]
A controller of property of a corporation may apply to the court for directions in relation to any matter arising in connection with the performance or exercise of any of the controller's functions and powers as controller."
In reliance on s.424 the receiver and administrator sought directions from the court that the Pre‑Feasibility Study could be released in whole or in part as proposed to prospective purchasers of the interest of Centaur in Cawse. The release of any part of the Pre‑Feasibility Study was opposed by Anaconda.
In essence, it was the case of Centaur that it could effect disclosure of the Pre‑Feasibility Study to prospective purchasers on a confidential basis thereby preserving the confidentiality of the material. Furthermore, it was said that by imposing a pre-condition of confidentiality on any prospective purchaser Centaur would comply with the confidentiality term of the preliminary agreement. In any event, it was the further position of Centaur that none of the material said to be confidential was in fact confidential and that, accordingly, the court ought direct the receiver and manager to proceed with the course proposed. Anaconda, on the other hand, opposed all disclosure on the ground that to do so would constitute a breach of the confidentiality term of the preliminary agreement. . Further, it was the case of Anaconda, that even if a pre-condition of confidentiality was imposed upon prospective purchasers as contemplated by Centaur it nevertheless would not keep "confidential" the Pre‑Feasibility Study and its contents to those parties. In any event, it was the case of Anaconda that all of the Pre‑Feasibility Study was confidential because notwithstanding the fact that there were excerpts of the document that were not sensitive nevertheless the report had to be read as a whole. It was argued that it necessarily followed that confidential information was inextricably interwoven throughout the document. Furthermore, it was the case of Anaconda that if prospective purchasers had access to the Pre‑Feasibility Study the information could be shown to competitors of Anaconda who would be able to derive aspects of the information for their own purposes. In the words of Mr Ooms, prospective purchasers would retain experts who would go through the Pre‑Feasibility Study with a fine toothed comb, who would know exactly what they were looking for and would be able to derive conclusions and confidential information from the documents. So much was rebutted and challenged by Centaur.
At the outset, during the interlocutory stages, the proceeding was contemplated as a straightforward case under s.424 of the Corporations Law whereby the court would give directions as to whether the release of the Pre‑Feasibility Study would constitute a breach of the terms of the preliminary agreement. On that basis Centaur filed material, in particular that of Mr McEvoy setting out the history of the matter and exhibiting the relevant documents. The whole direction of the case changed upon the filing of affidavits by Mr Ooms. The affidavits raised, allegedly for the first time, detailed assertions of confidentiality and in particular confidential aspects of the Pre‑Feasibility Study. In order to rebut and challenge the evidence of Mr Ooms, Centaur introduced the evidence of Mr James Morris Stewart, the resident manager of Cawse. Mr Stewart holds qualifications in mechanical engineering and experience in mining. In summary, Mr Stewart refuted the assertion of confidentiality attached by Mr Ooms to the Pre‑Feasibility Study. There was no request on the part of Anaconda that Mr Stewart's affidavit be regarded as confidential notwithstanding that it purported to comment in particular detail on the subject matter of the evidence of Mr Ooms.
When the matter came on for trial the proceeding was adjourned due to the late filing on the part of Anaconda of the initial affidavit of Mr Ooms. As a consequence, the trial was adjourned for a short time to enable the plaintiff to put answering material before the court. The affidavit of Mr Stewart was filed in response to Mr Ooms' affidavit. When the matter finally came on for trial Mr G. Nettle QC appeared with Mr P. Collinson for Centaur. They tendered on behalf of the plaintiff affidavits of Mr McEvoy, the receiver and manager of Centaur, an affidavit of Peter Lyle McCarthy, an expert in the valuation of mining and exploration projects, and the affidavit already referred to of Mr Stewart. There was no cross‑examination of any of the deponents of the plaintiffs' affidavits.
After the plaintiff closed its case the defendant raised a preliminary matter, namely, whether the question of the confidentiality of the Pre‑Feasibility Study should be the subject of a hearing under s.424 of the Corporations Law. Mr R. Garrett QC who appeared with Mr I. Stewart for Anaconda submitted that the matter was inappropriate for an application under the section. Rather, it was urged, the plaintiff should be required to deliver pleadings and a fully ventilated trial including the canvassing of expert evidence should be conducted in the usual way. This course was resisted by the plaintiff. Mr Garrett took me to a number of authorities where the view has been expressed that s.424 (and its predecessor) has been considered inappropriate where matters of fact are in contention.[2]
[2]Re G.B. Nathan and Co Pty Ltd (in liq) (1991) 24 NSWLR 674; Re Magic Aust Pty Ltd (in liq) (1992) 7 ACSR 742; Re J.W. Murphy & P.C. Allen; Re BPTC Limited (in liq) (1996) 19 ACSR 569; Editions Tom Thompson Pty Ltd v Pilley (1997) 77 FCR 141; Ryan (rec and mgr) of Homfray Carpets Australia Pty Ltd (in liq) and Anor v Textile Clothing and Footwear Union Australia and Ors (1994) 14 ACSR 495.
Mr Garrett argued that as a clear issue of confidentiality was in dispute between Centaur and Anaconda this was a matter that needed to be determined by way of pleadings and full ventilation of expert evidence at a trial on the subject matter. After hearing argument I declined to dispose of the proceeding on the basis of determining the preliminary question. It seemed to me at that point to be premature to do so as it was unclear as to whether or not the assertion of confidentiality had in fact been borne out. At the stage the application was made by Mr Garrett on behalf of Anaconda the plaintiff had closed its case and the defendant was yet to tender its evidence. The defendant had been placed on notice of the intention of Centaur to cross-examine the primary witness for the defendant, Mr Ooms. It will be recalled that Mr Ooms was the witness relied upon by Anaconda to demonstrate confidentiality with respect to the Pre‑Feasibility Study. For the purposes of determining the matter on a preliminary basis I formed the view that it was entirely inappropriate indeed impossible to determine the matter one way or the other given that on one side there was the assertion of Mr Ooms of confidentiality and sensitivity with respect to the Pre‑Feasibility Study and Mr Stewart on the other side who asserted almost the exact opposite. For these reasons I declined to determine the matter on a preliminary basis. It nevertheless remained open to Anaconda in the course of submissions to re-state the argument that it was inappropriate for the dispute to be determined by way of a proceeding seeking directions under s.424 of the Corporations Law.
The Issues
It was contended for Centaur that it was appropriate for the receiver and manager to release a copy of the Pre‑Feasibility Study to prospective purchasers on three grounds. First, that upon a proper construction of the preliminary agreement, Centaur was permitted to disclose the information contained in the Pre‑Feasibility Study. Secondly, no detriment or prejudice would be suffered by Anaconda were the information contained in the Pre‑Feasibility Study to be disclosed subject to the pre-condition of the proposed confidentiality agreement. Thirdly, the rights of Anaconda arising under copyright law or by reason of an equitable obligation of confidence are in any event subject to the terms of the preliminary agreement. I turn then to consider each of the grounds relied upon by Centaur.
Construction of the Preliminary Agreement
Mr McEvoy stated in his evidence that it was the intention of the receivers to offer for sale both the Cawse Nickel Mine and ancillary facilities and the Nickel Tenements and also the rights of Centaur in and to the preliminary agreement. It was emphasised that it was not the intention of the receivers to sell only the existing Cawse project. It was argued, therefore, that if a prospective purchaser intended to proceed with the acquisition of Centaur's rights under the preliminary agreement it may be reasonably anticipated that the parties would enter into a deed of novation whereby the prospective purchaser would assume all of the rights and obligations of Centaur under the preliminary agreement. Of course, whilst the plaintiff asserted that such course may be reasonably anticipated there is no certainty that that will be the case. It was asserted that it would be commercially unrealistic to suggest that given the assignment provisions contained in the preliminary agreement any party would be prohibited from disclosing information contained in the Pre‑Feasibility Study to potential assignees. It was submitted that if the parties were to be so restricted there would be a practical prohibition upon the capacity of a party to assign its rights under the preliminary agreement. Hence, it was said, that given the preliminary agreement was a commercial document it should be construed in a manner that was consistent with commercial reality and business common sense.
The submissions on behalf of the plaintiff considered discrete clauses in the preliminary agreement, namely, clauses 4.4(b), 4.6(b), 4.10 and 6. The argument further considered and analysed the obligations arising under the terms of disclosure contained in the preliminary agreement, and furthermore, relevant aspects of the proposed joint venture agreement.
(1) Clause 4.4(b)
The plaintiff submitted that the provisions of Clause 4.4(b) of the Preliminary Agreement are inconsistent with the idea that Centaur may not disclose the information to third parties. It provides expressly for Centaur to use the information as it chooses if Anaconda ceases to be involved:
"(b)Anaconda may withdraw from this agreement at any time after completion of the Pre‑Feasibility Study by not less than 30 days' notice to Centaur and within that day period must provide Centaur with all information in its possession, in whatever form it exists, in relation to the Pre‑Feasibility Study and the Feasibility Study. 75% of the costs incurred by Anaconda in performing the Pre‑Feasibility Study and the Feasibility Study up to the date of its withdrawal will be repayable to Anaconda by Centaur but only out of finance procured by Centaur for the Expansion and the Expansion is commenced within 54 months after withdrawal by Anaconda."
In my view the submission of the plaintiff is not to the point. The fact remains that there is a confidentiality term contained in clause 6 of the Preliminary Agreement. It is that matter that must be addressed at the outset. The fact that clause 4.4(b) permits disclosure on a qualified basis is quite different from the disclosure contemplated by the receiver in the present instance. The receiver seeks to disclose information that is the subject of a confidentiality term to parties who are potential commercial rivals of Anaconda. If, pursuant to clause 4.4(b) Anaconda elected to withdraw from the agreement then so be it. However, the fact is that at this point in time Anaconda does not intend to withdraw from the agreement.
(2) Clause 4.6(b) and 4.10 of Preliminary Agreement
The plaintiff submitted, further, that clause 4.1 of the Preliminary Agreement states that property in the Pre‑Feasibility Study (and the Feasibility Study) is "equally owned by Anaconda and Centaur". Thus, it was said that does not mean that each of Anaconda and Centaur Mining are prohibited from disclosing any information contained in those studies to third parties except with the consent of the other party. On the contrary, the plaintiff urged that it means that each is free to disclose to third parties on a confidential basis, for the purposes for which the information was brought into existence. So much it was said is also made clear by other terms contained in the Preliminary Agreement. The plaintiff relied on Murray v Yorkshire Fund Managers Ltd[3].
[3](1998) 2 All ER 1015 at 1025.
Contrary to the plaintiff's submissions, Murray v Yorkshire Fund Managers does not stand for the proposition that each party is free to disclose confidential information to third parties even on a confidential basis, for the purposes for which the information was brought into existence. Schiemann LJ at 1020 said:
"Mr Murray's case, as advanced by Mr Shannon … is that … Mr Hartley was therefore not entitled to disclose the information to anyone else nor to use it for any other purpose; he did use it for another purpose …
In my opinion, Mr Shannon's submissions are correct to this extent. The confidential information was disclosed to Mr Hartley so that it could be used, and used only, for the purpose of deciding whether YFM should invest in the business venture. The consequence of that was that Mr Hartley was not entitled to disclose the information to any third party. Clearly, it did not mean that he was not entitled to disclose it to the other members of the team, who had equal rights in it with Mr Murray and who, in any event, must be taken to have known it already. So his approach to them was not a breach of the obligation not to use the information for some other purpose."
Thus the court in Murray was clearly of the view that a disclosure of the confidential information to a third party would breach the obligation of confidence. The decision is inapplicable to the present case. However, it is in direct conflict with the remarks of the Court of Appeal in Mobil Oil Australia Ltd v Guina Development Pty Ltd.[4]
[4][1996] 2 VR 34, 37 (also see para 66 below).
In any event I consider Murray is distinguishable from the present facts for four reasons. First, there was no contractual provision requiring confidential information be maintained confidential or the uses to which the information could be put and this was the reason for the plaintiff's lack of remedy. Secondly, the issue was whether as against one co-owner of confidential information, the other co-owners could use it for their original purposes, and not whether one of them could disclose the information to a competitor. Thirdly, the plaintiff had not made any investment in the project, and the court compared the situation with a management buy-out. Fourthly, it did not involve, as the present case does, separate categories of confidential information: confidential information brought into existence for the purpose of the Preliminary Agreement; Anaconda's confidential information disclosed to Centaur solely for the purposes of the preparation of the Pre‑Feasibility Study; confidential information disclosed by third parties to Anaconda for the purposes of its participation in the Pre‑Feasibility Study.
The plaintiff submitted also that clause 4.6(b) permits Centaur in certain circumstances to proceed with the Expansion and Joint Venture with a third party subject to the condition that "Anaconda will have a pre-emptive right (exercisable within 30 days) to match the terms agreed to by the third party". It is implicit in this provision that Centaur Mining must be permitted to disclose all relevant information prepared pursuant to the Preliminary agreement to the third party purchaser. Otherwise Centaur could not reach an agreement with such a third party. Clause 4.6(b) provided:
"(b)If the Committee decides against proceeding with the Expansion it must meet at least 6 monthly to reconsider the decision. If at the first such meeting at which the decision is not to proceed was made, or at any subsequent meeting, the decision of the Committee not to proceed is affirmed, but Centaur was in favour of proceeding, then Centaur may at any time within 90 days of the relevant meeting elect to proceed with the Expansion on a sole risk basis by giving notice to Anaconda to that effect and, with that notice, paying Anaconda 25% of the costs incurred by it in connection with the Pre‑Feasibility Study and the Feasibility Study. However, an election by Centaur to proceed with the Expansion on a sole risk basis will constitute an offer to Anaconda to participate. That offer will be open for acceptance within 30 days. If the offer is not accepted, Centaur may proceed with the Expansion alone and must in that case immediately reimburse Anaconda an additional 50% of the costs incurred by Anaconda in connection with the Pre‑Feasibility Study and the Feasibility Study. Centaur will have the right also to elect to proceed with the Expansion and Joint Venture with a third party, but in that case Anaconda will have a pre‑emptive right (exercisable within 30 days) to match the terms agreed to by the third party, except that its percentage interest under the Joint Venture Agreement may not be less than 50%. If Centaur elects to proceed with the Expansion on a sole risk basis and Anaconda does not exercise its pre-emptive right but Centaur subsequently (but before commissioning of the Expansion is complete) receives a bona fide third interest to Anaconda on a pre‑emptive basis with a period of 30 days within which to accept the offer. If Anaconda accepts any of the three offers which may be made under this clause, it must reimburse Centaur with the amount paid to it by Centaur in reimbursement of its 25% of the costs of the Pre‑Feasibility Study and of the Feasibility Study."
In addition, the plaintiff urged that equally, clause 4.6(b) confers a further pre-emptive right upon Anaconda if Centaur Mining "subsequently (but before commissioning of the Expansion is complete) receives a bona fide third party offer to purchase an interest in the Cawse Project". Such a bona fide third party offer could only be made it was said in the event that the third party had prior access to the Pre‑Feasibility Study or the Feasibility Study if the latter document had been prepared.
Contrary to the plaintiff's submission, the subject matter of clause 4.6(b) is not the Preliminary Agreement nor the Pre‑Feasibility Study. It is concerned with the situation once the Feasibility Study has been completed. Whatever may be the position once the Feasibility Study has been completed, it does not contemplate the disclosure of the Pre‑Feasibility Study.
Again, it was said, clause 4.10 of the Preliminary Agreement contemplates that in differing circumstances each of Anaconda and Centaur Mining will attempt to procure project finance for the Expansion. Necessarily, information derived from the Feasibility Study must be disclosed to potential financiers. Yet clause 4.10 makes no mention of this matter. It must have been contemplated that as part of the process of obtaining project finance each of Anaconda and Centaur Mining would be entitled to make full disclosure of all information gathered as part of the Pre‑Feasibility Study and the Feasibility Study.
Clause 4.10 provided:
"4.10 (a) Anaconda and Centaur intend to procure traditional
project finance for the Expansion on the basis that recourse be limited to the Expansion, the equity component of the finance be minimal, each party's borrowings be several and that Centaur's available tax losses be utilised (and for which appropriate adjustment to the benefits of Centaur will be made by Anaconda). Anaconda will use its best endeavours to procure finance for itself and Centaur on this basis and, if it does so, Centaur may not reject any offer of finance which meets the criteria outlined above, unless the offer requires an equity component of more than 30%. Centaur undertakes to act in good faith in all matters relating to the procuring and finalising of finance for the Expansion.
(b)If within 12 months after making an expansion decision, Anaconda has made no material progress towards securing finance on the preferred criteria, or in any event within 24 months, then Centaur may itself seek to procure finance for itself and Anaconda or proceed with the Expansion on a sole risk basis or with a third party (but in either such case Anaconda will have a pre‑emptive right (exercisable within 30 days) to match the terms agreed to by the third party, except that its percentage interest under the Joint Venture Agreement may not be less than 50%). This matching right will expire 36 months after the making of an expansion decision.
(c)Centaur may require Anaconda to fund all or part of Centaur's equity component of the cost of the Expansion. In such case, Centaur's interest in the Expansion will be diluted by that percentage which equals the shortfall percentage (the shortfall percentage being the amount of the shortfall expressed as a percentage of the total cost of the Expansion.)"
In my view, clause 4.10 of the Preliminary Agreement does not contemplate disclosure of confidential information. So much is made clear from clause 6 itself. It is evident from the Preliminary Agreement and the proposed Joint Venture Agreement that finance was only contemplated once the Feasibility Study had been completed and the parties had decided to proceed with the Expansion.
(3) Clause 6 of the Preliminary Agreement
Mr Nettle for the plaintiff conceded that it is true that Clause 6 requires that "… the subject matter of … the Pre‑Feasibility Study and of the Feasibility Study must be maintained confidential". However, he submitted that it is clear that the parties could not have intended that clause 6 operate as a complete prohibition on the disclosure of the studies to any third party in any circumstances. Clauses 4.6(b) and 4.10 proceed upon the premise that disclosure to third parties and financiers respectively is permitted. Mr Nettle submitted that, the proper construction of clause 6 is that it only operates as a restraint upon the parties from making general disclosure to the public at large of the contents of the Pre‑Feasibility Study or the Feasibility Study. This construction it was urged is supported by the first sentence of the clause. There is no express prohibition on disclosure to others; nor does it provide for any of the exceptions for which provision would have to be made, if it were intended to present confidential disclosure to others.
It is instructive to consider the meaning of the expression in clause 6 of the Preliminary Agreement "confidential". The Shorter Oxford English Dictionary defines "confidential" as meaning "Indicating private intimacy; inclined to impart confidences, confiding. Spoken or written in confidence; not intended for public knowledge. Enjoying another's confidence; entrusted with secrets; charged with a secret task". On the plain and ordinary meaning of the expression "confidential" in my view it is apparent that pursuant to clause 6 of the Preliminary Agreement the parties intended that the information they shared was not intended for public knowledge, was written or spoken in confidence and that they entrusted each other with the information and intended that information to be treated as a secret. In my view it is common sense that information will not remain a "secret" or removed from "public knowledge" if it is disclosed to third parties even if those parties themselves are committed to confidential terms. Mr Nettle on behalf of Centaur made much of the fact that any potential purchaser who committed itself to confidentiality would be committing itself to the same confidential obligation as Centaur and Anaconda did pursuant to clause 6 of the Preliminary Agreement. In my view such submission misconstrues the plain and ordinary meaning of "confidential".
The plaintiff's submissions overlook the fact that if any disclosure of confidential information were required for the purpose of obtaining finance, this disclosure could only proceed on the basis that both parties consented to disclosure. Further, proposed financiers ought not be compared with potential competitors of Anaconda. The first sentence of clause 6 does not support the plaintiff's argument. It merely contemplates the making of a joint announcement to the ASX and the press "in relation to this Agreement". The implicit suggestion that the parties would in such an announcement disclose confidential information is preposterous.
(4) Terms of Disclosure
The plaintiff argued also that the disclosure now proposed by the receivers is analogous to the disclosures to third party purchasers and financiers contemplated by clauses 4.6 and 4.10. It was said that there is no restriction on an assignment or novation of rights under the Preliminary Agreement. Nor is any restriction imposed upon Centaur Mining in respect of the sale of the Nickel Tenements or other assets forming part of the Cawse Project. Transactions of the kind permitted by the Preliminary Agreement may only occur if all relevant information is disclosed to the third party assignee or purchaser. For the reasons already stated and further developed below the submission is not accepted.
(5) Joint Venture Agreement
Submissions turned to the joint venture agreement. Further support for this construction it was submitted by the plaintiff is found in the provisions of the proposed form of Joint Venture Agreement annexed to the Preliminary Agreement.
Mr Nettle argued that clause 10 permits assignment of a Participating Interest subject to the exercise of pre‑emptive rights by the other Participants. He also relied on clause 13.3.
Clause 13.3 then provides:
"13.3 Confidentiality
Unless written consent is obtained from all Participants, the Joint Venture Documents together with all data and interpretations collected and made by the Operator and all reports distributed to the Participant are, except to the extent specified in clause 13.4, confidential as between the Parties and no Party may disclose such data and interpretations to any person or persons other than:
(a)as may be required by applicable law or by the rules of any Stock Exchange on which the shares of a Party or any of its Affiliates are for the time being listed for quotation;
(b)its Affiliates; or
(c)to a proposed Assignee of a Participating Interest, or to a proposed lender to a Participant on the security of its Participating Interest, but only if the proposed Assignee or lender has first undertaken to maintain the data and interpretations confidential."
Hence, it was said that if a decision to proceed with the expansion is made and the parties have entered into the Joint Venture Agreement, then either party may disclose information contained in the Pre‑Feasibility Study, the Feasibility Study or other confidential documents to proposed assignees. However, so the construction must hold, if the parties have not yet reached a decision to proceed such disclosure is prohibited in circumstances where a party wishes to assign its rights under the Preliminary Agreement (including the right to enter into the Joint Venture Agreement). Accordingly, the plaintiff submitted that upon Anaconda's construction, the right of disclosure must vary according to how far the parties are advanced with the development of the Expansion contemplated by the Preliminary Agreement.
The plaintiff's submissions overlook the fact that the court is construing the Preliminary Agreement, not the Joint Venture Agreement. It does not follow that the matters the parties have provided for in the Joint Venture Agreement (namely the disclosure of confidential information to a proposed assignee of a participating interest or to a lender) is relevant to the construction of the Preliminary Agreement. Plainly, different considerations arise at different stages of a project and that is no doubt the reason why the parties contemplated entering into a Joint Venture Agreement at the later stage when the Feasibility Study had been completed and the parties had decided to proceed with the Expansion. It is significant in this regard that clause 4.10 provides relevantly -
"Anaconda and Centaur intend to procure traditional project finance for the Expansion on the basis that recourse be limited to the Expansion … Anaconda will use its best endeavours to procure finance for itself and Centaur on this basis … "
Thus, finance was contemplated for the Expansion (a step which only arises after the Feasibility Study has been completed), not for the conduct of the Pre‑Feasibility Study. In any event, it was contemplated that Anaconda, not Centaur, would procure finance.
(6) Memorandum of Understanding
The plaintiff's submissions turned to the memorandum of understanding. Arising from a dispute between Centaur Mining and Anaconda prior to the appointment of the Receivers, Centaur Mining and Anaconda entered into a Memorandum of Understanding dated 4 March 2001, (the "Memorandum of Understanding").
Paragraph 4 of the Memorandum of Understanding states:
"4.Anaconda will remove the caveats lodged by it over all of the tenements listed in the Schedule to this Memorandum so as to permit Centaur to sell or dispose of those tenements [which fall within the definition of Gold Tenements in the latest draft of the Nickel Assets Agreement presently being negotiated by Centaur and Anaconda (the Sale Agreement)] subject only to the purchaser or dispose entering into a Deed of Covenant with Anaconda which will preserve all of Anaconda's proposed rights, title and interest in the Nickel Mineral Interests (as defined in the Sale Agreement) in the sold or disposed of tenements."
The plaintiff submitted that paragraph 4 contemplates the very event which has come to pass a sale by Centaur of the Nickel Tenements. It was said that the tenements only have so much value as is revealed by the resource date and other information contained in the Pre‑Feasibility Study. For the plaintiff it was said that it is difficult to suppose that, in entering into the Memorandum of Understanding, Anaconda contemplated that a purchaser of the nickel assets of Centaur Mining would not have access to this information. However, the Memorandum of Understanding does not contemplate disclosure of confidential information. In the absence of express provision permitting such disclosure, it cannot be presumed that Anaconda would have permitted or contemplated disclosure of confidential information.
In summary, in my view there was a contractual term between the parties to keep information confidential. I do not accept the contractual arguments of Centaur for present purposes.
The Confidential Information Argument
Centaur asserted that the information contained in the Pre‑Feasibility Study was not confidential. Anaconda disagreed. The issue of confidentiality was at the nub of the case. In order to determine that information is confidential I would need to be satisfied that the information has the necessary quality of confidence about it, that it was imparted in circumstances importing an obligation of confidence and that there has been an unauthorised use of that information to the detriment of the party communicating it or at the least such use as may be defined as unconscionable.[5]
[5]Commonwealth v John Fairfax & Sons Limited (1980) 147 CLR 39.
It was submitted on behalf of Centaur that there would be no breach of confidence in any event because the receivers would require all prospective purchasers to enter into a deed of confidentiality in order to protect the interests of both Centaur and Anaconda. Hence it was argued that the terms of the Pre‑Feasibility Study would remain in confidence (such confidence being shared with any prospective purchaser). There were particular terms of the proposed deed of confidentiality to be imposed by Centaur upon prospective purchasers including the following:
"(a)the Recipient must use the Confidential Information solely for the purpose of the Review and the formulation of any Submission and not for any other purpose and most not permit, assist or suffer a third party to make use of the Confidential information for any other purpose (Clause 2.2);
(b)the Recipient must take all steps and do all things necessary to safeguard the confidentiality of the Confidential Information (Clause 2.3);
(c)the Recipient must not make any copies or reproduce any Documents or extracts of Documents containing Confidential Information or in any way duplicate Confidential Information except as is necessary for the Review and the formulation of its Submission and, in all such cases, the Recipient must implement procedures to control the copying and distribution of the Confidential Information (Clause 2.4);
(d)the Recipient must not at any time, without the prior written consent of the Receivers, disclose or reveal any Confidential Information to any person other than representatives of the Recipient who satisfy strict conditions (Clause 2.5)."
Equity will restrain "the publication of confidential information improperly or surreptitiously obtained or of information imparted in confidence which ought not to be divulged".[6] Further, as a general proposition, a person who has received information in confidence, importing an obligation to treat the information as confidential, cannot take unfair advantage of the position and use the information to the prejudice of the party who provided it without consent.[7]
[6]Ashburton v Pope (1913) 2 Ch 469, 475; see also Commonwealth v John Fairfax & Sons Limited, supra, 50.
[7]Seger v Copydex (No. 1) (1967) 2 All ER 415, 417; Smith Kline & French Laboratories (Aust) Limited v Secretary, Department of Community Services and Health (1990) 22 FCR 73, 94; also, Meagher, Gummow & Lehane Equity Doctrines and Remedies (3rd ed.) para 4110.
It has been held that the necessary quality of confidentiality will be absent in a matter that is public property and public knowledge.[8] There is a further obligation upon a party alleging that information is confidential. The party must be able to adequately describe the subject confidential information.[9] Furthermore, it has been observed that the inability of a plaintiff to define with sufficient precision the information alleged to be confidential instigate the principle that a party should only be enjoined in terms that indicate precisely that which is forbidden to be done on pain of contempt.[10]
[8]Saltman Engineering Co v Campbell Engineering Co (1948) 65 RPC 203, 215.
[9]O'Brien v Komesaroff (1982) 150 CLR 310, 326-8.
[10]See Lawrence David Limited v Ashton (1991) 1 All ER 385, 393; Meagher, Gummow & Lehane Equity Doctrines and Remedies, 874 [4111].
Whether or not any of the information which the plaintiff proposes to disclose is protected by express contractual obligation, that information was provided by Anaconda to Centaur in circumstances imposing an equitable obligation of confidence in Centaur. It was provided for the purpose of the parties to the Preliminary Agreement deciding whether or not to proceed with the expansion of the Cawse project. In Collins (Engineers) Ltd v Roberts & Co Ltd[11], Ungoed‑Thomas J quoting Lord Green in Saltman Engineering Co Ltd v Campbell Engineering Co Ltd[12] said:
'If two parties make a contract, under which one of them obtains for the purpose of the contract or in connection with it, some confidential matter, than, even though the contract is silent on the matter of confidence the law will imply an obligation to treat that confidential matter in a confidential way, as one of the implied terms of the contract.'[13]
[11][1965] RPC at 429 at 431.
[12](1948) 65 RPC 203 at 211.
[13]See also Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167 at 193 per Fullagar J.
In Corrs Pavey Whiting & Bryen v Collector of Customs (Vic)[14] (1987) 14 FCR 434 at 443 Gummow J adopted the test of confidence laid down by Lord Greene in Saltman Engineering[15] Gummow J stated:
'It is now settled that in order to make out a case for protection in equity of allegedly confidential information, a plaintiff must satisfy certain criteria. The plaintiff: (i) must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question; and must also be able to show that (ii) the information has the necessary quality of confidence (and is not, for example, common or public knowledge); (iii) the information was received by the defendant in such circumstances as to import an obligation of confidence … '
[14](1987) 14 FCR 434 at 443.
[15]At 216.
In Coco v AN Clark (Engineers) Ltd[16] Megarry J stated that, in order for equity to provide protection, three elements are required. First, the information must have the necessary degree of confidence about it; secondly, it must have been imparted in circumstances importing an obligation of confidence. If the circumstances are such that any reasonable man standing in the shoes of the recipient of the information would have realised that upon reasonable grounds the information was being given to him in confidence, then this suffices to impose upon him the equitable obligation of confidence. Relevantly here, Megarry J stated at 48:
'In particular, where information of commercial or industrial value is given on a business-like basis and with some avowed common object in mind, such as a joint venture or the manufacture of articles by one party for the other, I would regard the recipient as carrying a heavy burden if he seeks to repel a contention that he was bound by an obligation of confidence'.
[16][1969] RPC 41 at 45-60.
Thirdly, there must be an unauthorised use of that information to the detriment of the party communicating it. The issue of detriment did not arise for decision in that case and Megarry J was evidently undecided about it.
In Australia there has been debate as to whether 'detriment' is an element of the cause of action for breach of confidence. In Smith Kline & French v Dep't Community Services (1990) 22 FCR 73 at 112, Gummow J stated:
'I share the views … that equity intervenes to uphold an obligation and not necessarily to prevent or to recover loss. The basis of the equitable jurisdiction to protect obligations of conscience lies, as the present case illustrates, in an obligation of conscience arising from the circumstances in or through which the information, the subject of the obligation, was communicated or obtained: Moorgate Tobacco Co Ltd v Phillip Morris Ltd (No 2) (1984) 156 CLR 414 at 438. The obligation of conscience is to respect the confidence, not merely to refrain from causing detriment to the plaintiff. The plaintiff comes to equity to vindicate his right to observance of the obligation, not necessarily to recover loss or to restrain infliction of apprehended loss. To look into a related field, when has equity said that the only breaches of trust to be restrained are those that would prove detrimental to the beneficiaries?'
In Smith Kline & French v Dep't Community Services at 87, Gummow J stated:
'A general formulation apt for the present case of an equitable obligation of confidence has four elements: (i) the plaintiff must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question, and must be able to show that; (ii) the information has the necessary quality of confidentiality (and is not, for example, common or public knowledge); (iii) the information was received by the defendant in such circumstances as to import an obligation of confidence, and (iv) there is actual or threatened misuse of that information, without the consent of the plaintiff.'
This decision was approved on appeal by the Full Federal Court (1991) 28 FCR 291.
The receiver's argument that Anaconda would not suffer detriment if the information were disclosed because recipients would be required to sign a confidentiality agreement prohibiting further disclosure or use of the information for any purpose, is difficult to make out. I have difficulty in accepting that Anaconda's competitors would not use that information, directly or indirectly, to the detriment of Anaconda. It can be readily understood that the very context of disclosure is to provide to Anaconda's trade rivals the prospect of developing the Cawse laterite nickel reserves, to the exclusion of Anaconda. Anaconda and Centaur entered into the Preliminary Agreement, the Pre‑Feasibility Study was undertaken and Anaconda provided confidential information to Centaur on the contractual condition and on the understanding that they would use that information to decide whether to proceed in a joint venture relationship with the Cawse expansion. The obligations of confidentiality were imposed by the parties to the Preliminary Agreement on each other to prevent the very type of disclosure that the receiver proposes to make.
The Victorian Court of Appeal, in Mobil Oil Australia Ltd v Guina Development Pty Ltd[17], recognised that undertakings of the sort proposed by the receiver do not protect confidentiality, and that loss of confidentiality will inevitably occur when confidential information is disclosed to trade rivals. Although that decision involved discovery of confidential documents, it is apposite here. At 37 Hayne JA (with whom Winneke P and Phillips JA agreed) stated:
'I consider that the learned judge erred when, not having first inspected the documents, he held that the fears of Mobil and McDonald's that a competitor would gain significant advantage from inspecting the documents in question were not sufficient to outweigh what he described as the strong competing interest of justice in full and proper disclosure of all relevant documents in the case.'
His Honour stated at 38:
'Where it is said that the documents are confidential, it may be accepted that the fact that the documents are confidential will not ordinarily be a sufficient reason to deny inspection by the opposite party. In most cases, the fact that the documents may not be used except for the purposes of the litigation concerned will be sufficient protection to the party producing them. But where, as here, the party obtaining discovery is a trade rival of the person whose secrets it is proposed should be revealed by discovery and inspection, other considerations arise.
Once the documents are inspected by the principals of the trade rival the information which is revealed is known to the trade rival and cannot be forgotten. Confidentiality is destroyed once and for all (at least so far as the particular trade rival is concerned). To say that the trade rival is bound not to use the documents except for the purposes of the action concerned is, in a case such as this, to impose upon that trade rival an obligation that is impossible of performance by him and impossible of enforcement by the party whose secrets have to be revealed. How is the trade rival to forget what internal rate of return the competitor seeks to achieve on a new investment of the kind in question? How is the party whose hurdle rate has been revealed to know whether the rival has used the information in framing a tender? Thus, if the trade rival may inspect the documents concerned, the confidentiality of the information in them is at once destroyed … '
[17]supra.
As matters stand it seems to me that there is at least a risk that if the Pre‑Feasibility Study, or confidential information derived from it, is disclosed to prospective purchasers of the Cawse business, it will necessarily be disclosed to senior officers of Anaconda's actual and potential competitors, and the confidentiality of Anaconda's information will be destroyed.
The principles in the authorities, particularly Mobil, lead me to the immediate question: does the Pre‑Feasibility Study contain confidential information? The study itself was tendered on behalf of the defendant together with two annexures. It was a substantial document containing extensive technical information. The plaintiff cross‑examined Mr Ooms at length. He was challenged as to his assertion in his affidavits that the Pre‑Feasibility Study and annexures contained confidential information. It became apparent to me during the course of that cross‑examination that there were aspects of the Pre‑Feasibility Study that were at least arguably confidential. Essentially the position of Mr Ooms was that it was not possible to extricate parts of the study because all of the material was interconnected. Furthermore, Mr Ooms remained strongly of the view that the two annexure volumes to the Pre‑Feasibility Study contained highly confidential information that a competitor could use to the disadvantage of Anaconda. Specifically, Anaconda submitted that the Pre‑Feasibility Study contains confidential information created for the purpose of that Study and Preliminary Agreement which is not known to competitors and has never been publicly disclosed. It also includes information and processes developed by Anaconda, not known to its competitors, never publicly disclosed, and provided to Centaur and included in the Pre‑Feasibility Study on the agreement and the understanding that they remain confidential. The Pre‑Feasibility Study also assumes the use of Anaconda's confidential technology and processes, not known to its competitors, to undertake the Cawse expansion. That information was provided to Centaur and/or disclosed in the Pre‑Feasibility Study in contemplation of a joint venture between Anaconda and Centaur.
Much was made by Mr Nettle of the fact that the expert evidence of Mr Stewart who purported to rebut the assertion of confidentiality by Mr Ooms was not cross‑examined. In my view the criticism in the circumstances of the present matter was unwarranted. It needs to be appreciated at the outset that the proceeding was not a trial in the strict sense. Rather, the application was brought under an advisory section of the Corporations Law somewhat akin to the advisory provisions of the Trustee Act 1958. It was not a matter where all issues as to access to and release of confidential information were ventilated fully before the court. As a consequence, I find myself in the position of being left with segments of cross‑examination of one expert, Mr Ooms, and the evidence of another expert, Mr Stewart, who was not the subject of any forensic testing in court. Furthermore, I am left with an extensive technical document being the Pre‑Feasibility Study and two annexure volumes and suggestion by counsel on both sides that I should examine the material for myself and draw my own conclusions. This was an entirely unsatisfactory state of affairs. It may be that if the study and the annexures were examined by a court through a proper forensic process with competing expert evidence the subject of testing in the ordinary course a conclusion would be reached that the material contained in the study and the annexures was wholly or in part confidential. On the other hand, a court, properly informed, may form the contrary view. It may be that the intentions of the receiver in expediting the sale of the interests of Centaur in Cawse are frustrated by the approach of Anaconda. Be that as it may I can only assess the matter as it comes before me.
At the outset the proceeding was one that lent itself to s.424 of the Corporations Law, that is a matter where a contractual construction matter needed to be determined and was properly the subject of directions from the court. However, the whole perspective of the case changed upon the filing of the affidavit of Mr Ooms. Once that material came before the court it was apparent that there was a clear factual dispute as to the matter of confidentiality. It is that matter that I find myself unable to determine. Indeed, the circumstances of the present matter are somewhat analogous to those encountered by Jenkinson J (then of this court) in Re Bismarck Australia Pty Ltd (Receivers and Managers Appointed); Sicree & Another v The Deputy Commissioner of Taxation[18] where his Honour considered that the evidence left him in a position where the facts were so uncertain that he declined to make any order or give any directions with respect to the subject matter about which the particular receiver sought advice under an equivalent statutory provision.
[18](1980) 4 ACLR 962, 971.
There were other matters canvassed by the parties with respect to assignment and copyright. However, in light of the view I have taken with respect to the Preliminary Agreement and confidentiality it is unnecessary to determine those matters at this time.
For these reasons, I decline to make any orders or directions facilitating the release of the Pre‑Feasibility Study as proposed by the receiver to prospective purchasers.
I will hear the parties as to appropriate orders and directions and, also, whether there should be a further hearing on the discrete issue of confidentiality.
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