In the matter of Skytraders Pty Ltd (No 2)

[2024] NSWSC 1039

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

In the matter of Skytraders Pty Ltd (No 2) [2024] NSWSC 1039

Hearing dates:

13 August 2024

Date of orders:

20 August 2024

Decision date:

20 August 2024

Jurisdiction:

Equity - Corporations List

Before:

Nixon J

Decision:

See [88]

Catchwords:

PRACTICE AND PROCEDURE – inspection of documents disclosed in proceedings – whether plaintiff and third defendant are associated with trade rivals of fifth defendant – whether there should be a restriction on inspection by plaintiff and third defendant of certain information in the documents

Legislation Cited:

Civil Procedure Act 2010 (Vic), ss 26-27

Court Suppression and Non-Publication Orders Act 2010 (NSW), s 7

Cases Cited:

Bidvest Australia Ltd v Auzcorp Pty Ltd (No 2) [2017] WASCA 23

Cargill Australia Ltd v Viterra Malt Pty Ltd (No 17) [2018] VSC 750

ICAP Australia Pty Ltd v Moebes [2010] NSWSC 738

Lenark Pty Ltd v TheChairmen 1 Pty Ltd (No 2) [2012] NSWSC 415

Mobil Oil Australia Ltd & McDonalds Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34

Skyscanner Ltd v Hotels Combined Pty Ltd (No 2) [2016] NSWSC 326

Unilever Australia Ltd v Revlon Australia Pty Ltd (No 3) [2014] FCA 1005

Category:

Procedural rulings

Parties:

Thenford Consulting Pty Ltd (Plaintiff)
Norman Farquhar Mackay (First Defendant)
Scarp Nominees Pty Limited (Second Defendant)
Premier Aviation Holdings Pty Ltd (Third Defendant)
Heilands Investments Pty Ltd (Fourth Defendant)
Skytraders Pty Ltd (Fifth Defendant)

Representation:

Counsel:
ND Oreb (Plaintiff)
S Robertson SC w JR Anderson (First, Second and Fourth Defendants)
S Rubenstein w R Harvey (Third Defendant/ Cross-Claimant)

Solicitors:
Arnold Bloch Leibler (Plaintiff)
Johnson Winter Slattery (First, Second and Fourth Defendants)
Clayton Utz (Third Defendant)

File Number(s):

2024/184124

Publication restriction:

Nil

JUDGMENT

1. By an Interlocutory Process filed on 7 August 2024, the First, Second and Fourth Defendants (the JWS Defendants) seek a suppression order pursuant to section 7 of the Court Suppression and Non-Publication Orders Act 2010 (NSW) (the CSNPO Act) in respect of the 11 documents which are identified in the Annexure to the application (the Relevant Documents).

2. The JWS Defendants contended that the Relevant Documents are commercially sensitive and proposed that the Relevant Documents be provided to the Plaintiff (Thenford) and the Third Defendant/Cross-Claimant (Premier) in a redacted form. At the hearing of this application, the JWS Defendants provided the Court with their proposed redactions to those documents. The JWS Defendants proposed that the disclosure of the Relevant Documents in an unredacted form should be limited to these parties’ legal representatives and expert witnesses.

3. In the substantive proceedings, each of Thenford and, by its cross claim, Premier claims that the affairs of the Fifth Defendant (Skytraders) have been conducted in an oppressive manner.

4. Thenford holds a 17.44% interest and Premier holds a 30.77% interest in the issued share capital in Skytraders. The First Defendant (Mr Mackay) is the Chairman and Chief Executive Officer of Skytraders and the Second Defendant (Scarp) is trustee of the Mackay Family Trust. Mr Mackay and Scarp together own 51.79% of the issued ordinary share capital of Skytraders. The Fourth Defendant (Hielands) is a shareholder in Skytraders. Hielands’ sole director and shareholder is Mr Mackay’s son, who is an executive of Skytraders.

5. Skytraders is engaged in the business of providing specialist air charter services, primarily to government entities. It has filed a submitting appearance, except as to costs.

6. The Relevant Documents relate to the affairs of Skytraders. The JWS Defendants’ application is premised on the following propositions:

1. first, the principals of each of Thenford and Premier are closely associated with entities which are trade rivals of Skytraders; and

2. secondly, each of the Relevant Documents contains sensitive commercial information of Skytraders (namely, the information proposed to be redacted) which, if it were disclosed to a trade rival, would be to the disadvantage of Skytraders and/or to the advantage of that rival.

7. Thenford and Premier disputed each of those propositions and contended that, even if these propositions were established, the Harman undertaking provided sufficient protection to Skytraders. They submitted that each of the Relevant Documents should be disclosed to them in an unredacted form.

The proper framework for considering the application

8. As noted above, the JWS Defendants sought a suppression order under section 7 of the CSNPO Act. However, as the JWS Defendants acknowledged in their opening remarks at the hearing of this application, that was not the correct framework for considering the confidentiality issue that arises at this stage of the proceedings.

9. Pursuant to section 7(b) of the CSNPO Act, the Court has power to make a suppression order in respect of “information that comprises evidence, or information about evidence, given in proceedings before the court”. At present, no evidence has been filed in the proceedings (other than on interlocutory applications).

10. The Relevant Documents have been provided by the JWS Defendants as a result of certain procedures requiring disclosure of documents.

11. Three of the Relevant Documents were referred to in a defence filed by the JWS Defendants. Subsequently, the JWS Defendants were served with a Notice to Produce, seeking production of those documents.

12. The other eight Relevant Documents were produced pursuant to section 26 of the Civil Procedure Act 2010 (Vic) (CPA Vic). These proceedings were commenced in the Supreme Court of Victoria, and subsequently transferred to this Court. Section 26 relevantly provides that a person to whom the overarching obligations in that Act apply must disclose, to each other party:

the existence of all documents that are, or have been, in that person’s possession, custody or control –

(a)   of which the person is aware; and

(b)   which the person considers, or ought reasonably consider, are critical to the resolution of the dispute.

13. These eight Relevant Documents were identified by the JWS Defendants as “critical to the resolution of the dispute” in these proceedings, and were accordingly disclosed.

14. Section 27 of the CPA Vic imposes a specific statutory obligation in respect of any documents disclosed pursuant to s 26, which is additional to the usual Harman obligation. It provides as follows:

(1) A person who receives any information or documents provided by another person involved in the civil proceeding as a result of disclosure in compliance with the overarching obligation in section 26 is subject to an obligation not to use the information or documents, or permit the information or documents to be used, for a purpose other than in connection with the civil proceeding.

(2)   The obligation under subsection (1) is taken to be an obligation to the court, contravention of which constitutes contempt of court.

…

(5)   Nothing in this section limits any other undertaking to a court (implied or specific) whether at common law or otherwise, in relation to information or documents disclosed or discovered in a civil proceeding.

15. When these eleven Relevant Documents were disclosed, an interim regime was agreed which involved, in broad terms, disclosure to the legal representatives and experts of Thenford and Premier, pending the resolution of any dispute as to the confidentiality of the material.

16. Accordingly, the issue which arises on the present application is not an issue as to whether material which is in evidence should be subject to a suppression order under the CSNPO Act (which would raise considerations of open justice), but instead an issue as to whether Thenford and Premier should be able to inspect unredacted versions of the Relevant Documents, or whether, having regard to the commercial sensitivity of certain information in those documents, inspection of the unredacted versions should be, at this stage, limited to their legal representatives and experts.

17. Ordinarily, the fact that discovered documents are confidential will not be a sufficient reason to deny inspection, as the implied undertakings that the documents will be used only for the purpose of the litigation will provide sufficient protection: Bidvest Australia Ltd v Auzcorp Pty Ltd (No 2) [2017] WASCA 23 at [41] (Martin CJ, Newnes and Murphy JJA). As noted above, there is also in this case the statutory obligation in s 27 of the CPA Vic. However, one circumstance where it has been recognised that the implied undertaking may provide insufficient protection, and where the court may impose restrictions on inspection, is where the parties are trade rivals and the documents disclosed by one party contain confidential information of use to the other party in that trade rivalry: Bidvest at [42].

18. Each of the parties referred to the following passage of the decision of Hayne JA (with whom Winneke P and Phillips JA agreed) in Mobil Oil Australia Ltd & McDonalds Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34 at 38, as being the leading statement of principle on this question:

“While it may readily be accepted that a party is ordinarily entitled to discovery and inspection of all discoverable documents in the possession or control of the opposite party (save those for which a valid claim for privilege from production is claimed) it is important to bear steadily in mind that discovery is but a tool to be used in the pursuit of justice and that the right to discovery and inspection is not without its limits. The first and most obvious limit is that a party does not have a right to inspect documents that are discovered if there is a valid claim to privilege from production (as eg on the grounds of legal professional privilege). Secondly, because the law recognises that the assertion of compulsive power requiring production must be balanced against the needs of justice, a party inspecting the documents of the opposite party may not use them except for the purposes of the action in which discovery is made.

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 been 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. Is that necessary for the attainment of justice in the particular case?”

19. In relying on this statement of principle, the JWS Defendants accepted that it was a necessary predicate for their application to limit inspection of the Relevant Documents that each of Thenford and Premier was a trade rival of Skytraders and that, if this was not established, the application would fail.

20. Further, the JWS Defendants accepted that it was also necessary for them to identify, with specificity, the information in the Relevant Documents which is said to be commercially sensitive and to establish that it does in fact have current commercial sensitivity. In that regard, I was provided with unredacted copies of the Relevant Documents, with the material which was said to be commercially sensitive identified by highlighting, in order that the parties were able to make submissions on the commercial sensitivity of that material.

21. Finally, the JWS Defendants acknowledged that, even if they established that Thenford and Premier are, or are closely associated with, trade rivals of Skytraders and that the material in issue is commercially sensitive, a balancing exercise must be undertaken. It is necessary to have regard not only to the risks to Skytraders if the information in question is disclosed to Thenford or Premier, but also the impact that any non-disclosure of that information will have on the ability of Thenford and Premier to give instructions in relation to the proceedings and thereby to prosecute their claims against the JWS Defendants.

22. In that regard, it is significant that each of Thenford and Premier is a company associated essentially with a single individual. Mr John Sharp is the sole director and shareholder of Thenford. Mr Terrence Vickers is the sole shareholder and director of Premier.

23. It follows that Thenford and Premier are not organisations of the type which might be able to quarantine the persons giving instructions on behalf of the company from those making operational decisions. Mr Sharp is the only person able to give instructions on behalf of Thenford, and Mr Vickers is the only person able to give instructions on behalf of Premier.

24. In that context, the following observations of Ball J in ICAP Australia Pty Ltd v Moebes [2010] NSWSC 738 at [11] are particularly important:

“Each case will depend on its own facts. However, in my opinion, it will rarely be the case that a regime that limits access to external solicitors and counsel will meet the requirement of reasonableness. That is because those solicitors and counsel must act on the instructions of someone; and normally the person or persons giving those instructions should be entitled to see all the documents available to their advisors so that they can understand the basis of any advice given to them.”

25. This statement of principle has often been cited in subsequent decisions: see, for example, Lenark Pty Ltd v TheChairmen 1 Pty Ltd (No 2) [2012] NSWSC 415 at [14] (per Black J), Unilever Australia Ltd v Revlon Australia Pty Ltd (No 3) [2014] FCA 1005 at [19] (per Gleeson J) and Skyscanner Ltd v Hotels Combined Pty Ltd (No 2) [2016] NSWSC 326 at [7] (per Slattery J).

26. Finally, the JWS Defendants accepted that, if an order were to be made restricting inspection of the unredacted versions of the Relevant Documents to legal representatives and experts of Thenford and/or Premier, such an order would only remain in place “until further order”. In making this submission, the JWS Defendants acknowledged that, while they might succeed in establishing at this stage of the proceedings that the balance is in favour of making such a restriction on inspection, it may be necessary, at a later stage of the proceedings, for any such restriction to be removed or modified (for example, for the purpose of seeking instructions on a certain matter, or for the purpose of putting on evidence).

Is Mr Sharp associated with a trade rival of Skytraders?

27. The JWS Defendants did not assert that Thenford is a trade rival of Skytraders.

28. Instead, the JWS Defendants relied on the fact that the sole director and shareholder of Thenford, Mr Sharp, is also the Non-Executive Chairman of Regional Express Holdings Ltd (administrators appointed) (Rex), and submitted that Rex is a trade rival of Skytraders. In particular, the JWS Defendants submitted that Rex has engaged, or is engaging, in competition with Skytraders in respect of contracts to provide air charter services to government bodies including the Australian Antarctic Division (AAD) and the Australian Border Force (ABF); in respect of the provision of “fly in, fly out” (FIFO) services; and in respect of the provision of aeromedical services.

29. Thenford disputed that Rex is a competitor of Skytraders in respect of any of those types of services; submitted that the businesses of the two entities are very different; and pointed out that, in any event, Rex has been in administration since 30 July 2024 and Mr Sharp’s powers as a director have been, and remain, suspended.

30. Mr Sharp was appointed as Non-Executive Chairman of Rex on 5 June 2024, after having previously served as its Vice Chairman for a period of 20 years.

31. Rex is the holding company of a group of companies providing various services in the aviation industry. The media release of 5 June 2024, which announced Mr Sharp’s appointment as Chairman, stated as follows:

“Rex is Australia’s largest independent regional and domestic airline operating a fleet of Boeing 737-800NG aircraft to 56 destinations throughout all states in Australia. In addition to the airline Rex, the Rex Group comprises wholly owned subsidiaries Pel-Air Aviation (air freight, aeromedical and charter operator), the Australian Airline Pilot Academy with campuses in Wagga Wagga and Ballarat, and propeller maintenance organisation, Australian Aerospace Propeller Maintenance. Rex is also a 50 per cent shareholder of National Jet Express (NJE), a premier Fly-In-Fly-Out (FIFO), charter and freight operator.”

32. Until 4 April 2024, Mr Sharp was also the Chairman of Pel Air Aviation Pty Ltd (Pel Air).

33. The evidence establishes the following matters.

1. AAD – Skytraders had a contract with the AAD to provide aviation services. This contract expired on 30 June 2024. Skytraders is competing in a tender for a new contract with the AAD. In July and August 2023, Rex issued a number of media releases in which it stated that it intended to obtain the contract to provide services to the AAD. For example, on 11 July 2023, Rex issued a media release, headed “Rex intends to be aerial operator for Australian Antarctic Division”. This media release referred to Rex having submitted a response to the Request for Information issued by the AAD in a bid to secure this work. However, Rex did not ultimately tender for that work prior to going into administration.

2. ABF – Skytraders had a contract with the ABF to provide air transport services, which expired on 17 December 2023. This was Skytraders’ largest contract, constituting approximately 60% of its total revenue in the 2023 financial year. On 4 September 2023, the ABF released a restricted request for quote (RFQ). Skytraders issued a proposal on 3 October 2023 in response to the RFQ. The successful parties in that procurement process obtained contracts that are due to expire in December 2024. Skytraders intends to bid for any replacement contract to provide air transport services to the ABF. On 29 February 2024, Rex published a presentation on its half-year financial results in which it stated that it had “submitted a response to the Request for Expression of Interest (REOI) issued by the Department of Home Affairs for the Provision of Aerial Surveillance Services for the [ABF]”.

3. FIFO – Skytraders provides FIFO services. For example, it has a current contract (entered in January 2024) to provide twice-weekly return flights for Mineral Resources Ltd between Brisbane Airport and two mine sites in Western Australia. It has also provided FIFO services for other mining companies, such as BHP and Fortescue, in the past year. In an article published in the Australian Financial Review on 15 July 2022, Mr Sharp was quoted as saying: “Rex has continued to advance and move into the domestic market space and now into this fly in, fly out business”. On 30 September 2022, Rex purchased National Jet Express, which primarily carries out FIFO activities. In the media release announcing this acquisition, Rex stated that “it had bold plans to grow and transform its latest acquisition into Australia’s premier Fly-In-Fly-Out (FIFO) operator”. Rex proposed to do so by overlaying its “financial and operational prowess on NJE’s core strengths”. The JWS Defendants allege in their Defence that from around May 2022, Mr Sharp made comments to the directors and employees of Skytraders to the effect that he intended to facilitate Rex Group and Pel-Air competing successfully against Skytraders in order to secure business away from Skytraders in the future.

1. Aeromedical services – During 2022, Skytraders and Rex’s subsidiary, Pel-Air, competed for a number of aeromedical contracts, which were ultimately awarded to Pel-Air. Rex issued media releases announcing that these contracts had been awarded to Pel-Air, which described Pel-Air as part of the Rex Group. Mr Sharp was quoted in these media releases (as Pel-Air Chairman).

34. I am satisfied that these materials show that Rex and the Rex Group (of which Rex is the holding company) have competed in the recent past with Skytraders for various contracts for services. Although Rex ultimately decided not to submit a tender for the AAD or the ABF contracts, the evidence referred to above establishes that Rex has had, in the past year, an interest in competing with Skytraders for substantial contracts to provide aerial services to government departments or agencies. Further, the Rex Group has been, through Pel-Air and NJE, competing with Skytraders for other contracts for FIFO and aeromedical services.

35. Thenford pointed to evidence that the businesses of Rex and Skytraders are different in various respects. For example, Rex has a far greater number of aircraft and employees, and far higher revenue, and carries on a regional public transport business (while Skytraders does not). However, as the JWS Defendants submitted, the difference in scale is not decisive. For example, while Qantas is much larger than Rex and offers services which Rex does not (such as international flights), Qantas is in competition with Rex for certain services.

36. Thenford also relied on the following matters:

1. in July 2024, Rex decided that it no longer wanted to pursue specialist government aviation service contracts (including the AAD and ABF contracts), and instead decided to focus on its core business;

2. on 30 July 2024, the board of Rex appointed voluntary administrators and, as a result, the powers of the directors (including Mr Sharp) have been suspended and the Administrators have control of the company’s business, property and affairs under section 437A of the Corporations Act 2001 (Cth); and

3. prior to the appointment of Administrators, a shareholder of Rex had requisitioned an extraordinary general meeting of the members of Rex seeking resolutions to replace the board of Rex, including Mr Sharp, and orders have been made by the Federal Court deferring that meeting to a date that is 20 business days after the date of the second meeting of creditors of Rex.

37. Those matters give rise to a significant degree of uncertainty regarding Rex’s future operations and management. For example (and without expressing any view, or having any basis to express any view, on the likelihood of any such outcomes), it may be that Rex exits administration and subsequently provides services of a different scope to those provided prior to administration, which may or may not include the pursuit of specialist government aviation service contracts, or the provision of FIFO or aeromedical services; and it may be that Mr Sharp is removed as a director of Rex.

38. However, this application must be considered on the basis that Mr Sharp currently is a director of Rex, that Rex is the holding company of a group which does provide aeromedical and FIFO services, and that Rex has in the recent past expressed interest in acquiring specialist government aviation service contracts. Those matters are sufficient, in my view, to establish that Mr Sharp is associated with a trade rival. Needless to say, if the position changes, and Mr Sharp ceases to have an association with Rex, or the Rex Group ceases to provide services of the type also provided by Skytraders, then the question whether there is any basis for a restriction on Mr Sharp’s access to documents would need to be revisited.

Is Premier / Mr Vickers associated with a trade rival of Skytraders?

39. The JWS Defendants do not assert that Premier is a trade rival of Skytraders.

40. Instead, the JWS Defendants rely on the fact that Mr Vickers, who is the sole director and shareholder of Premier, carries on a business as a consultant to the airline industry. In particular, the JWS Defendants relied on the following statement on Mr Vickers’ LinkedIn profile:

"As an aviation business consultant at Premier International, I work with clients on a range of projects, such as feasibility studies, business plans, market analysis, risk management, contract negotiations, and regulatory compliance. I also share my expertise and insights on flights, aircraft, and aviation trends and best practices through publications, presentations, and workshops. I have successfully delivered multiple projects for companies through my involvement in Australia and internationally, such as Skytraders, Kestrel Aviation, and Flight Simulators International. I use my skills in aircraft, flights, and aviation to provide high-quality and tailored solutions for each client and company we are directly involved in.”

41. Mr Vickers accepted that this is an accurate statement of his working endeavours.

42. In addition to referring to Premier and Skytraders, the statement quoted above refers to two other companies with which Mr Vickers has been involved. The first is Kestrel Aviation Pty Ltd. This company was established in around 1986, with Mr Vickers as a shareholder and director. It provides specialist helicopter aviation services. Kestrel is not a competitor of Skytraders, and Mr Vickers does not, in any case, have any continuing involvement with, and does not provide consultancy services to, Kestrel. The second is Flight Simulators International Pty Ltd. Mr Vickers founded this company in around 1996, for the purpose of purchasing and operating a Boeing 727 simulator on behalf of three freighter operators, to support the training needs of these companies. The simulator was retired from service in 2014, and Flight Simulators ceased to operate at that time and has now been deregistered. In any case, Skytraders has never been involved in operating flight simulators as a commercial venture.

43. There was also evidence that in August 2023, Mr Vickers became a director of and shareholder in Aviation Survey Group Pty Ltd, which focuses on the provision of highly modified aircraft to service the aerial survey industry using high-performance LiDAR (light detection and ranging) and Optical sensors. This company is not engaged in the business of providing specialist air charter services, and Skytraders is not in the business of providing modified aircraft to the aerial survey industry.

44. Ultimately, the JWS Defendants relied on the proposition that Mr Vickers was, through his LinkedIn profile, offering to provide consultancy services to entities in the aviation industry on a range of projects, including “business plans”, “market analysis” and “contract negotiations”, and therefore might have been retained, or might be retained, to provide such services to a trade rival of Skytraders.

45. There was no evidence that Mr Vickers has ever provided consultancy services to a trade rival of Skytraders; or is currently providing such services to a trade rival of Skytraders; or has taken any steps (other than by publishing the above statement on his LinkedIn page) to seek to provide such services to a trade rival of Skytraders.

46. Premier referred to the observations of Elliott J in Cargill Australia Ltd v Viterra Malt Pty Ltd (No 17) [2018] VSC 750 at [163]-[164]. His Honour there said that the term “trade rivalry” was “very general”, and continued as follows:

“It may refer to ‘fierce trade rivals’ or rivals who compete in a far less combative manner. It encompasses many possibilities. The term might apply to the whole of a rival’s business or only a very small part of it. Further, it may involve direct, immediate competition with respect to a specific business opportunity or the respective businesses of the rivals more generally to, at the other end of the spectrum, only the real possibility of competition in the future.”

47. Having regard to the matters outlined above, there is, on the evidence, no more than a potential for Mr Vickers, at some time which is unknown, to provide consultancy services of a scope which is unknown, to a business whose identity is unknown, which competes with Skytraders in respects which are unknown.

48. I do not consider that, in these circumstances, the risk of sensitive commercial information coming into the hands of a trade rival is sufficient so as to justify preventing Premier (and through Premier, Mr Vickers) from inspecting the information in the Relevant Documents which is said to be commercially sensitive. That is particularly so in circumstances where Premier is subject to the Harman undertaking in respect of all of the Relevant Documents and where Premier is also subject to the statutory obligation under s 27 of the CPA Vic in respect of the eight documents which have been disclosed pursuant to s 26 of that Act. In addition, Mr Vickers has indicated that, to the extent that any of the information in the Relevant Documents is found to be commercially sensitive, he is prepared to give an undertaking not to disclose this information to any third party.

49. Having regard to the matters outlined above, Premier should be given access to the unredacted Relevant Documents, that access being conditional on Mr Vickers personally providing an undertaking that he will not disclose any of the information which I have determined to be commercially sensitive to any third party. I turn now to deal with the commercial sensitivity of the information in the Relevant Documents.

Is the redacted information commercially sensitive?

50. For the purposes of considering the commercial sensitivity of the material in the Relevant Documents which the JWS Defendants seek to redact, I inspected unredacted copies of those documents, in which the proposed redactions were highlighted. Each of the parties provided written and oral submissions on the individual documents and the highlighted text. Without disclosing the content of any of the information said to be commercial sensitive, my conclusions in respect of the relevant information in each of the 11 Relevant Documents are set out below. In reaching these views, I have considered, and balanced, both the sensitivity of the information and the extent to which it is necessary, as matters currently stand, to have access to the information in order to provide instructions regarding the conduct of these proceedings.

Document 1 – General Ledger entries: Leasehold Improvement Costs

51. The first document is an entry from Skytraders’ General Ledger showing Leasehold Improvement Costs. This document was disclosed pursuant to s 26 of the CPA Vic because it is relevant to allegations concerning office renovation costs. The JWS Defendants proposed to redact three line items on the basis that those items are irrelevant to the allegations concerning office renovation costs, and instead reveal the price paid by Skytraders for modifications made to an aircraft which it still leases and uses for charter work. It was said that these prices were the subject of significant negotiation and disclosure of them would give rivals a competitive advantage by allowing them “not just to negotiate with suppliers for price matching but to be able to more accurately estimate the nature and cost of these alteration works when competing against Skytraders for tender submission purposes”.

52. I am not satisfied that this information has ongoing commercial sensitivity. The three entries all bear dates in 2019. It is not apparent why the revelation to a trade rival of prices paid for modifications to an aircraft (the nature of which is not specified in those line items), some five years ago, would place that rival at an advantage or place Skytraders at a disadvantage. Further, I accept the submission that it may be necessary to seek instructions as to whether, and in what way, these line items bear any relationship to the ledger entry in which they appear.

53. For those reasons, I conclude that the balance is in favour of this document being provided to Thenford and Premier for inspection in an unredacted form.

Documents 2 and 6 – General Ledger Entries: Administrative Expenses

54. Documents 2 and 6 can be considered together, as they are similar documents for consecutive financial years (ending, respectively, 30 June 2022 and 30 June 2023). These documents are entries from Skytraders’ General Ledger in respect of administrative expenses. These documents together comprise around 140 pages. The only material said to be commercially sensitive is a handful of line items in each document. Those line items relate to unrealised currency gains on aircraft leases. They were said to be commercially sensitive to Skytraders “because they may allow a competitor to calculate the leasing costs incurred by Skytraders in relation to specific aircraft” (which were identified in those line items). There was evidence before the Court that aircraft leasing costs are one of the largest, if not the largest, cost element in Skytraders’ aircraft services contracts; that lease rates vary significantly in the industry; that Skytraders has had a number of aircraft for a long time, with monthly lease costs well below new contact rates, which provides it with a competitive advantage; and that if competitors are aware of costs paid by other airlines, they could use that information in their own leasing negotiations.

55. On the basis of this evidence, I am satisfied that the information proposed to be redacted has commercial sensitivity, and could advantage a trade rival (noting that there was evidence that Rex leases aircraft).

56. Further, I do not consider that the redaction of the specific line items identified by the JWS Defendants will hamper the ability of Thenford’s legal representatives to obtain instructions, since the JWS Defendants do not propose to redact the “totals” shown in respect of unrealised currency gains in each of the two documents, but only the breakdown of the individual amounts in respect of specific leases which are included in that total.

57. The JWS Defendants have established a basis for providing Documents 2 and 6 to Thenford for inspection in a form which has this information redacted. The documents should be provided to Vickers in an unredacted form, provided that Mr Vickers personally gives a confidentiality undertaking in respect of the relevant information (that is, the specific line items).

Documents 3 and 4 – Directors’ resolution and email

58. Documents 3 and 4 can be considered together, since they raise a similar issue. Document 3 is a sole director’s resolution, signed by Mr Mackay and dated 19 September 2022. Document 4 is an email from the Director of Finance at Skytraders dated 21 September 2022. Skytraders proposed redacting a limited amount of the text of each document on the basis that the redacted material contained “commercially sensitive information regarding the manner in which Skytraders remunerates its senior employees, which may assist a competitor to poach a member of the Executive Team”.

59. I have reviewed the material. I am not satisfied, having regard to the fact that it is some two years old and having regard to the general terms in which it is expressed, that the information has such commercial sensitivity as to warrant restricting the ability of the other parties to inspect this material. Further, the documents are relevant to a key issue in dispute in the proceedings, regarding the promotion and remuneration of Mr Mackay’s children.

60. In those circumstances, and having regard to the protection already afforded to the JWS Defendants and Skytraders by the Harman obligation and the statutory obligation under s 27 of the CPA Vic, I consider that the documents should be provided to each of Thenford and Premier for inspection in an unredacted form.

Documents 5 and 7 – Memoranda prepared by Titan Partners

61. Documents 5 and 7 can be considered together, since they are similar documents, prepared in consecutive years. Document 5 is a memorandum prepared by Titan Partners to the directors of Skytraders dated 26 October 2022. The memorandum states that it was prepared in response to a request to perform financial analysis on the performance of Skytraders to determine a reasonable dividend that the Company can declare. Document 7 is a similar memorandum prepared by Titan dated 1 November 2023.

62. These documents are relevant to a central issue in the oppression proceedings, namely, Skytraders’ decision not to pay a dividend in each of the financial years ending 30 June 2022 (FY2022) and 30 June 2023 (FY2023).

63. There were several specific categories of information which the JWS Defendants proposed to redact.

64. First, they proposed to redact a number of statements in each memorandum which disclose the terms of contracts which have been negotiated between Skytraders and its key government clients, including the AAD. In the event that I determined the “trade rival” issue adversely to Thenford (as I have done), Thenford did not oppose the redaction of this material.

65. Secondly, the JWS Defendants sought to redact information which was said to be in the nature of “key metrics such as flying hours performed by Skytraders under each of those contracts [with its key government contracts]”. I have reviewed the material. I am not satisfied that information regarding variations in flying hours by particular aircraft, in periods going back to the first quarter of FY2022 (that is, July to September 2021) is of such ongoing commercial sensitivity that it should be withheld from Thenford. There should be no redaction of this material.

66. Thirdly, the JWS Defendants sought to redact financial information relating to revenue and expenses in respect of various contracts (which include the ABF and AAD contracts). The JWS Defendants pointed out that they did not seek to redact any of the financial analysis of Skytraders’ performance overall, but only the financial analysis in respect of the performance of individual contracts, on the basis that “a number of [these contracts] are still ongoing”.

67. The difficulty with evidence in this form is that it obscures which contracts are still ongoing. It appears to be implicit that a number of the contracts are not ongoing. It is not apparent why there would be any current commercial sensitivity in, for example, the revenue and costs in FY2022 in respect of a contract which ended two or more years ago.

68. In addition, for contracts which remain on foot, it is not apparent why certain individual line items regarding costs on particular contracts in FY2022 (such as fuel costs in the period 1 July 2021 to 30 June 2022 in respect of a contract which may, or may not, remain on foot) are of ongoing commercial sensitivity.

69. Finally, there is some forecast information in the memoranda, but this forecast information regarding contracts appears mainly to relate to periods which are now completed. For example, the Titan Partners’ memorandum of October 2022 contains a “variable cost forecast for FY2023 based on flight activity” in respect of particular contracts. It is difficult to see the commercial sensitivity of a forecast for FY2023, which may or may not have been realised, in respect of a contract which may or may not remain on foot. The information in such a forecast would not appear to have any ongoing currency.

70. In the evidence led by the JWS Defendants regarding the sensitivity of the information redacted in these memoranda, the only contracts which are specifically named as having particular sensitivity are the AAD contract and the ABF contract. The JWS Defendants’ solicitor deposed as follows:

[In relation to the October 2022 memorandum]

“One of the major contracts considered in the memorandum is Skytraders’ contract with the AAD, which I am instructed is currently up for tender. As set out in detail at paragraph X above, Rex Group has expressly stated its intention to compete for this contract.”

[In relation to the November 2023 memorandum of affidavit of Easton of 7 August]

“As with the FY22 TP Memorandum, I am instructed and believe that the FY23 TP Memorandum again contains a significant amount of information in relation to Skytraders' servicing of the AAD contract, such as the costs incurred by Skytraders in servicing that contract, flying hours performed and terms agreed. Rex Group has recently expressed its intention to compete with Skytraders for the upcoming AAD tender (as referred to in paragraph ## above), and access to this information is likely to provide it with a commercial advantage in that process.”

71. In addition, in a passage treated as submission, the JWS Defendants’ solicitor stated in a reply affidavit that the two memoranda contain financial analysis “for major contracts that Skytraders currently holds (or held until recently) that may be the subject of an RFT in the near future, such as the AAD Contract and ABF Contract”.

72. The JWS Defendants did not identify any particular contracts which are the subject of individual analysis in the two memoranda (other than the AAD Contract and the ABF Contract) which were said to have ongoing commercial sensitivity.

73. I am mindful that these two memoranda are documents which have been identified by the JWS Defendants as of critical relevance to one of the key issues in the oppression proceedings brought by Thenford and Premier. I accept that the legal representatives of Premier and Thenford will need instructions in respect of the information in these two memoranda in order to test the appropriateness of Skytraders’ refusal to pay a dividend in respect of each of FY2022 and FY2023. Mr Sharp and Mr Vickers are well placed to provide those instructions having regard to their knowledge of and experience in the airline industry, and their long association and familiarity with Skytraders’ business. For example, Thenford’s solicitor gave evidence that:

“The dividend analyses prepared by Titan Partners include various assumptions, forecasts and industry predictions about which I believe it will be necessary to obtain instructions from Mr Sharp as he has formerly been a director and consultant to Skytraders and can understand and assess the reasonableness of those forecasts, predictions or analyses”.

74. I am satisfied that there is sufficient commercial sensitivity in three categories of information to justify a restriction on the inspection of that material, namely:

1. any text which discloses the terms of contracts which have been negotiated between Skytraders and its key government clients (including the AAD);

2. any information which records, or which could be used to calculate, the financial performance in respect of the AAD and ABF contracts; and

3. (consistently with the conclusion I have reached in relation to Documents 2 and 6) any information that discloses lease costs.

75. Otherwise, I consider that the balance of the documents should be provided to Thenford for inspection in an unredacted form, and the whole of the documents should be provided to Premier in an unredacted form (provided that Mr Vickers personally gives a confidentiality undertaking in respect of the material that is redacted in the Thenford version).

Document 8 – Minutes of Board Meeting of 1 November 2023

76. Document 8 (which is the last of the documents disclosed under s 26 of the CPA Vic) is the minutes of a meeting of the directors of Skytraders held on 1 November 2023.

77. Skytraders seeks to redact only one line of this document, which discloses the lease costs for two aircraft. I do not consider that this will hamper the ability of Thenford to provide instructions in relation to this document.

78. Consistently with the view I have reached in relation to Documents 2 and 6, the JWS Defendants would be justified in redacting that information in the version provided to Thenford for inspection. The document should be provided to Premier in an unredacted form (provided that Mr Vickers personally gives a confidentiality undertaking in respect of the material that is redacted in the Thenford version).

Documents 9 to 11 – Notice to Produce

79. Documents 9 to 11 were not disclosed pursuant to s 26 of the CPA Vic, but in response to a Notice to Produce in these proceedings.

80. Document 9 is Skytraders’ contract with the AAD. Document 10 is Skytraders’ contract with the ABF. Document 11 is Skytraders’ proposal dated 3 October 2023 in response to the RFQ issued by the ABF for air charter services.

81. The JWS Defendants did not propose redactions in respect of specific information in these three documents. Rather, they submitted that the none of these documents should be disclosed to Thenford and Premier for inspection, and instead each should only be disclosed for inspection to their respective legal representatives and experts.

82. In the event that I determined the “trade rival” issue adversely to Thenford (as I have done), Thenford did not oppose this course, and did not submit that this would hamper Thenford’s ability to give instructions at this stage of the proceedings.

83. I am satisfied that these three documents have sufficient commercial sensitivity that, so far as Thenford is concerned, their inspection should be limited in the manner proposed by the JWS Defendants.

84. So far as Premier is concerned, each of Documents 9-11 should be provided for inspection, provided that Mr Vickers personally gives a confidentiality undertaking in respect of those documents.

CONCLUSION and ORDERS

85. The JWS Defendants substantially failed in their application so far as Premier is concerned. I have accepted the submission that there should be no restriction on Premier’s ability to inspect to the Relevant Documents, provided that Mr Vickers personally provides a confidentiality undertaking in respect of the material that I have found to be commercially sensitive (which Mr Vickers had offered to do prior to the hearing). Accordingly, the JWS Defendants should pay Mr Vickers’ costs of their application.

86. As between the JWS Defendants and Thenford, there has been mixed success. I have accepted the JWS Defendants’ submission that there is a basis for restricting the ability of Thenford to inspect commercially sensitive information in the Relevant Documents, but I have found that the extent of the commercially sensitive information was narrower than that for which the JWS Defendants contended. In those circumstances, it is appropriate that there be no order as to the costs of the application as between the JWS Defendants and Thenford.

87. The parties should bring in short minutes of order to give effect to these reasons for judgment, including costs. Those orders should make clear that the regime in respect of inspection of these documents is one that lasts until further order, with liberty to apply. As I have already noted, if circumstances change so far as the issue of trade rivalry is concerned, or if the continuation of the regime is affecting Thenford’s ability properly to conduct these proceedings, then the regime will be able to be revisited.

88. Accordingly, I make the following orders. The Court:

1. Directs the parties to provide to the Associate to Nixon J, by 4pm on 23 August 2024, short minutes of order to give effect to these reasons for judgment.

2. Directs that, if the parties are unable to agree on orders to give effect to these reasons for judgment, the parties are to notify the Associate to Nixon J, by 4pm on 23 August 2024, and are to provide, at that time, the competing forms of orders.

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Amendments

20 August 2024 - Updated case name

Decision last updated: 20 August 2024