Re Mangan and the Treasury
[2005] AATA 898
•15 September 2005
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2005] AATA 898
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2005/150
GENERAL ADMINISTRATIVE DIVISION ) Re Michael Mangan Applicant
And
The Treasury
Respondent
DECISION
Tribunal Professor GD Walker, Deputy President Date15 September 2005
PlaceSydney
Decision The decision under review is affirmed.
..............................................
Professor GD Walker
Deputy President
CATCHWORDS
FREEDOM OF INFORMATION – Freedom of Information Act 1982 – request for information on foreign ownership of News Corporation – examination of the government’s Foreign Investment Policy on media ownership – whether information sought is of a commercial or financial nature and that disclosure would adversely affect the relevant company’s business affairs – whether disclosure of information sought would be against the public interest – whether the information sought would prejudice the future supply of information to the Foreign Investment Review Board – whether disclosure of the information sought would be in breach of the obligation of confidence owed to the relevant company by the respondent – held that all the grounds for exemption were made out in respect of both documents – decision under review is affirmed.
Freedom of Information Act 1982 ss 22, 43(1)(b), 43(1)(c)(i), 43(1)(c)(ii), 45
Foreign Takeovers and Acquisitions Act 1975 s 26
INP Consortium Limited, Independent Newspapers PLC and Anthony John Francis O’Reilly v John Fairfax Holdings Limited (formerly Tourang Limited), Desmond Livingstone Nicholl and Keith William Skinner, Ord Minnett Securities Limited, Baring Brothers Burrows and Co Limited and Mark Burrows (1994) No 466/94
Re Cockroft and Attorney-General’s Department and Australian Iron and Steel Pty Ltd (party joined) (1985) 12 ALD 462
Re Kamminga andAustralian National University (1992) 26 ALD 585
Re Telstra Australia Limited and Australian Competition andConsumer Commission (2000) AATA 71
Searle Australia Pty Ltd v Public Interest Advocacy Centreand Another (1992) 36 FCR 111
Secretary, Department of Employment, Workplace Relations and Small Business v Staff Development and Training Centre Pty Ltd (2001) 66 ALD 514
REASONS FOR DECISION
15 September 2005 Professor GD Walker, Deputy President Summary
1. The applicant, Michael Mangan, as Director of Media, Deutsche Bank AG, applied to the respondent, The Treasury, for the release of information under the Freedom of Information Act (FoI) 1982 (Cth) relating to whether Liberty Media USA (“Liberty”), the third party in these proceedings, or its representative had made an application to the Foreign Investment Review Board (“FIRB”) for clarification of any corporate ownership restrictions on News Corporation and its ownership of Australian newspapers with the last two years.
2. A delegate of the Treasury refused to allow the applicant access to two documents that fell within the scope of his request on the grounds that release of the two documents would have an adverse impact on Liberty Media USA in respect of its lawful business, commercial and financial affairs and would reveal confidential material provided in confidence to the Foreign Investment Review Board. That is the decision to be reviewed by the tribunal.
Background
3. Mr Michael Mangan, is the Director of Media for Deutsche Bank AG. On 30 July 2004, Deutsche Bank made a request to the respondent under the Freedom of Information Act 1982 (“FoI Act”) for information about (1) the list of applicants who have made enquiries regarding foreign ownership of News Corporation Limited over the last 10 years; (2) copies of applications and supporting documents by these applicants; and (3) copies of FIRB decisions and supporting documents relating to foreign ownership of News Corp (T3). On 12 August 2004, the respondent notified the applicant of the estimated processing charge in relation to its request (T6).
4. On 13 August 2004, Mr Mangan and the manager of the Tertiary Industries Unit, Foreign Investment Policy Division, discussed the scope of the FoI request and on 16 August 2004, Mr Mangan emailed the manager of the tertiary industries unit and requested that he be given a quotation for providing information on “whether Liberty Media USA or its representative has made an application to FIRB for clarification of any corporate foreign ownership restrictions on NCP & its ownership of Australian newspapers in the last 2 years” (T8 p17). On 19 August 2004, the respondent advised the applicant of the charges in respect of his amended request (T12) which the applicant accepted on 25 August 2005 (T p28).
5. In processing the applicant’s request, the respondent identified two letters falling within the scope of the applicant’s request relating to the business affairs of Liberty Media Corporation. The first, known as “Document 1” was a letter dated 3 December 2002 from Clayton Utz, lawyers for Liberty Media, to the executive member of FIRB. The second, “Document 2” was a letter dated 18 September 2003 from Clayton Utz to Mr Chris Legg of Treasury’s Foreign Investment Policy Division. The respondent then wrote to Clayton Utz, seeking their comments on whether disclosure would reveal trade secrets, reveal information of a commercial value, and have an adverse effect on the business activities of Liberty including whether it would unreasonably affect the company’s lawful business, commercial or financial affairs or would prejudice the future supply of information to the Commonwealth (T13 p31).
6. On 17 September 2004, Clayton Utz made submissions to the respondent as to why disclosure of the two letters should be exempt from disclosure pursuant to s 43 of the FoI Act.
7. On 13 October 2004, a delegate of the Tertiary Industries Unit of the Treasury recommended that the two documents should not be released on the ground that they are exempt under s 43 of the FoI Act. That recommendation was accepted by the Foreign Investment Policy Division and on 25 October 2004 (Deutsche having paid the balance of the processing fees), an FOI decision-maker from the Foreign Investment Policy Division informed the applicant that two documents had been identified as being within the scope of his FOI request which would not be released to him on the grounds that they were exempt under s 43(1)(b) and (c) of the FoI Act (T18 p50). Both documents were described as a letter from Clayton Utz on behalf of Liberty to the Foreign Investment Review Board and that release of these letters would, inter alia, “have an adverse impact on Liberty in respect of its lawful business, commercial and financial affairs. … Consequently, its release could reasonably be expected to affect the willingness of future applicants to provide the full information required to properly assess applications for foreign investment approval” (T p51). The letter also informed the applicant of his rights of review.
8. On 26 October 2004, Mr Mangan wrote to the respondent seeking internal review of the decision and paying the required application fee (T19 p54). In lodging the application, he made the following points in his covering letter:
Firstly our request related to whether “Liberty or its representatives have made an application …” We did not specifically ask for the release of any letters from Liberty or its representatives. Our relatively simple question ie did they make an application, surely facilitates a relatively simple answer.
Secondly we would at least like to know the dates of Liberty’s application to FIRB.
Finally we would like to appeal Treasuries decision on two grounds. With Australian ownership of about A$14bn worth of News Corp we think it is in the national interest that such information be available to these shareholders.
It is also in the interest’s [sic] of a fully informed Australian share market to know what FIRB applications if any a foreign company (Liberty) has made in regard to Australia’s largest listed company ie News Corporation. This is particularly so given that Liberty has now emerged with a potentially hostile 17% voting interest in News Corp.
9. On 18 November 2004, an internal review of the decision time affirmed that the two documents are commercially sensitive and should remain exempt under s 43 of the FoI Act (T22). This decision was communicated to Mr Mangan by letter dated 10 December 2004, the letter also advising him of his appeal rights to the Administrative Appeals Tribunal (T23 p63). On 3 February 2005, the applicant lodged an application with the tribunal for a review of that decision.
10. At the hearing, the applicant appeared in person and the respondent was represented by Madeline Campbell, senior executive lawyer, Australian Government Solicitor’s office, Canberra. The documents provided to the tribunal comprised the documents produced pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (“the T Documents”), together with the evidence provided to the tribunal at the hearing. The respondent also lodged with the tribunal prior to the hearing, portions of the T documents over which it sought a s 35(2) confidentiality order under the AAT Act, such confidentiality order being granted by Senior Member Allen on 11 April 2005. At the hearing, the applicant gave oral evidence in person. He called no other witnesses. Two witnesses gave oral evidence in person for the respondent, Michael Rosser and Michael Parshall.
Relevant Legislation
11. The relevant legislation in this matter is the Freedom of Information Act 1982. Section 43 provides:
Documents relating to business affairs etc.(1) A document is an exempt document if its disclosure under this Act would disclose:
(a) trade secrets;
(b) any other information having a commercial value that would be, or could reasonably be expected to be, destroyed or diminished if the information were disclosed; or
(c)information (other than trade secrets or information to which paragraph (b) applies) concerning a person in respect of his or her business or professional affairs or concerning the business, commercial or financial affairs of an organization or undertaking, being information:
(i) the disclosure of which would, or could reasonably be expected to, unreasonably affect that person adversely in respect of his or her lawful business or professional affairs or that organization or undertaking in respect of its lawful business, commercial or financial affairs; or
(ii) the disclosure of which under this Act could reasonably be expected to prejudice the future supply of information to the Commonwealth or an agency for the purpose of the administration of a law of the Commonwealth or of a Territory or the administration of matters administered by an agency.
(2) The provisions of subsection (1) do not have effect in relation to a request by a person for access to a document:
(a) by reason only of the inclusion in the document of information concerning that person in respect of his or her business or professional affairs;
(b) by reason only of the inclusion in the document of information concerning the business, commercial or financial affairs of an undertaking where the person making the request is the proprietor of the undertaking or a person acting on behalf of the proprietor; or
(c) by reason only of the inclusion in the document of information concerning the business, commercial or financial affairs of an organization where the person making the request is the organization or a person acting on behalf of the organization.
(3) A reference in this section to an undertaking includes a reference to an undertaking that is carried on by, or by an authority of, the Commonwealth or a State or by a local government authority.
(4) For the purposes of paragraph (1)(c), information is not taken to concern a person in respect of the person's professional affairs merely because it is information concerning the person's status as a member of a profession.
12. Section 45 of the FoI Act provides:
Documents containing material obtained in confidence
(1) A document is an exempt document if its disclosure under this Act would found an action, by a person (other than an agency or the Commonwealth), for breach of confidence.(2) Subsection (1) does not apply to any document to the disclosure of which paragraph 36(1)(a) applies or would apply, but for the operation of subsection 36(2), (5) or (6), being a document prepared by a Minister, a member of the staff of a Minister, or an officer or employee of an agency, in the course of his or her duties, or by a prescribed authority in the performance of its functions, for purposes relating to the affairs of an agency or a Department of State unless the disclosure would constitute a breach of confidence owed to a person or body other than:
(a) a person in the capacity of Minister, member of the staff of a Minister or officer of an agency; or
(b) an agency or the Commonwealth.
13. Section 22 of the FoI Act allows for partial disclosure:
Deletion of exempt matter or irrelevant material
(1) Where:
(a) an agency or Minister decides:
(i) not to grant a request for access to a document on the ground that it is an exempt document; or
(ii) that to grant a request for access to a document would disclose information that would reasonably be regarded as irrelevant to that request; and
(b) it is possible for the agency or Minister to make a copy of the document with such deletions that the copy:
(i) would not be an exempt document; and
(ii) would not disclose such information; and
(c) it is reasonably practicable for the agency or Minister, having regard to the nature and extent of the work involved in deciding on and making those deletions and the resources available for that work, to make such a copy;
the agency or Minister shall, unless it is apparent from the request or as a result of consultation by the agency or Minister with the applicant, that the applicant would not wish to have access to such a copy, make, and grant access to, such a copy.
(2) Where access is granted to a copy of a document in accordance with subsection (1):
(a) the applicant must be informed:
(i) that it is such a copy; and
(ii) of the ground for the deletions; and
(iii) if any matter deleted is exempt matter because of a provision of this Act—that the matter deleted is exempt matter because of that provision; and
(b) section 26 does not apply to the decision that the applicant is not entitled to access to the whole of the document unless the applicant requests the agency or Minister to furnish to him or her a notice in writing in accordance with that section.
Background on the Foreign Investment Policy on Media Ownership
14. The relevant policy on which the decision was made is the Foreign Investment Policy on media ownership. Under this policy, foreign investment in mass circulation national, metropolitan, suburban and provincial newspapers is restricted. The maximum permitted aggregate foreign direct (ie non-portfolio) investment in national and metropolitan newspapers is 30 per cent, with any single foreign shareholder limited to a maximum interest of 25 per cent (the Treasury issued a press release to that effect on 20 April 1993 (T p25)).
15. At the time the policy was established in 1992, the level of foreign investment in The News Corporation Limited (TNCL), which publishes a range of major metropolitan newspapers, was 39 per cent. That foreign ownership level was allowed to continue as an ongoing overall cap and a sell down was not sought. The current direct foreign ownership level in TNCL stands at around 33 per cent, held by Liberty Media and interests associated with Mr Rupert Murdoch, a United States citizen. These shareholdings comprise a mix of ordinary (voting) and preference (non-voting) shares: Liberty holds a greater proportion of the latter and the Murdoch interests a greater proportion of the former. The 39 per cent cap remains in place, with each party required to hold foreign investment approval for acquisitions and avoid actions that would result in its breach. Applications for approval of acquisitions are made by notice under s 26 of the Foreign Takeovers and Acquisitions Act 1975 (FATA).
Issue
16. The issue for the tribunal to determine in this case is, therefore, whether the documents are exempt, in whole or in part, from disclosure to Mr Mangan by reason of the provisions of ss 43(1)(b), 43(1)(c)(i), 43(1)(c)(ii) or s 45 of the FoI Act.
Evidence of the respondent
17. Mr Michael Rosser gave evidence for the respondent. He is the manager of the Tertiary Industries Unit, Foreign Investment and Trade Policy division of the federal Treasury. Before taking up this position, he was the manager of the unit now known as the Investor Protection Unit in the Corporations and Financial Services division of the Treasury.
18. Mr Rosser directed his evidence to each of the three claims for exemption in turn, starting with s 43(1)(c)(i). The documents, he said, contained information that would disclose certain elements of the business affairs of Liberty as they applied to TNCL. In particular, they contained information about the operation of the Government’s foreign investment policy in relation to the media sector, and specifically as it applies to TNCL. The policy it applies on TNCL is a company-specific foreign ownership limitation of 39 per cent, as against the general limitation of 25 per cent that applies to other foreign companies owning metropolitan newspapers.
19. While the policy is publicly known, the intentions of the particular parties to which it applies are not. How the policy operates in relation to particular foreign persons owning or wishing to acquire or dispose of TNCL shares would be of commercial interest and potential value to financial market participants and commentators. The documents in issue contain information that could be subject to interpretation as giving some insight into Liberty’s intentions. Releasing the documents could give rise to inferences or speculation about the parties’ future intentions, thereby effecting price changes for the relevant securities that would not otherwise occur. Liberty held the largest single block of TNCL shares but had no voting rights, while the other major shareholder had those rights and an executive role. Liberty paid $600,000,000 to obtain securities that would give it voting rights and that gave the information a particular degree of sensitivity.
20. There are few circumstances, Mr Rosser said, in which the results of an application to FIRB are disclosed. Normally only the fact of the decision is made public. The reasons and the other matters of commercial detail are communicated only to the applicant. He concluded that releasing the information would be reasonably likely to have an unreasonable adverse impact on the business affairs of both Liberty and TNCL. That state of affairs was likely to continue for the foreseeable future.
21. As regards the s 43(1)(c)(ii) exemption, Mr Rosser pointed out that the information formally required of a foreign person by the FIRB comprised particulars of the purchaser and the target entity, and details of the proposal, such as the number and class of shares to be acquired. The regulations do not prescribe or specify in precise detail all the information that the Treasurer might require to make a decision on each individual proposal. Applicants are permitted and encouraged to supply additional information, describing for example the proposed share acquisition, takeover, merger or corporate reorganisation as well as explaining its commercial or other purpose and rationale. Applicants ordinarily provide supporting information voluntary, but if they do not, the special procedures in place provide for possible rejection of the application if the additional information required is not forthcoming.
22. The FIRB relies on applicants’ willingness to provide the required information voluntarily. In turn, applicants have come to rely on the well-established and publicly stated practice of the board of protecting the confidentiality of commercially sensitive information or other private information it receives. Mr Rosser believes the board has developed a reputation in the business community for protecting the confidentiality of such information. Where information held by the board is subpoenaed, it is provided to the court, but usually subject to a confidentiality agreement binding the parties not to release it and only to use it in the court proceedings.
23. The board’s public website explains that aspect of the government’s foreign investment policy in the following terms:
The Government recognises the commercial-in-confidence sensitivity of much of the information provided to the Board. The Government respects this confidential status and ensures that appropriate security is given to it. Where third parties outside of Government seek to obtain access to confidential information held by the Government, subject to the operation of applicable legislation, it will not be made available without the permission of the applicant, except upon the order of a court of competent jurisdiction. In this respect, the Government will pursue the defence of this policy through the judicial system.
24. The FIRB’s confidentiality policy is intended to give applicants the confidence needed to provide voluntarily information that they would otherwise closely protect. Protecting the confidentiality of sensitive information is vital, Mr Rosser said, to upholding FIRB’s reputation and maintaining a relationship of trust and confidence in the board. Any erosion of that confidence would adversely affect the amount and quality of information that applicants provide to FIRB. If applicants expected that a member of the public could gain access to their application through an FoI Act request, applications to FIRB could become more guarded and provide less information. As some of the data needed to assess the information can come only from the parties, FIRB would have no other means of obtaining it. That would severely compromise and weaken the effectiveness of FIRB, Mr Rosser said, by diminishing the capacity to make well informed judgements, recommendations and decisions. That would detract from the Treasurer’s capacity to properly discharge his statutory role, a result that would not be in the public interest.
25. In relation to the claim for exemption under s 45, Mr Rosser said that the information in Documents 1 and 2 related to Liberty’s business and commercial affairs and had been provided to Treasury in a relationship of confidence. On the dates on which Liberty provided Documents 1 and 2 to FIRB, the Government’s stated policy on the security of confidential information, while generally similar to the one quoted above, was materially different in that it did not contain the words “subject to the operation of applicable legislation”.
26. Mr Rosser believed that disclosing Documents 1 and 2 to the applicant would breach Treasury’s obligation of confidence to Liberty. He understood that Liberty provided information in those documents for the sole purpose of enabling the respondent to process Liberty’s application to FIRB, on the basis that the information would be disclosed only in the circumstances set out in the quoted policy. Those circumstances did not include disclosure to an FoI applicant. Mr Rosser was not aware of any facts that could give rise to a public policy defence to a breach of confidence action by Liberty if the respondent were to disclose the information in Documents 1 and 2 to the applicant.
Evidence for the third party
27. Mr Michael Parshall is a solicitor and partner of the law firm of Clayton Utz in Sydney. He practices in the area of mergers and acquisitions law. He has been acting for Liberty, as the responsible partner in Clayton Utz, since 1999. Like Mr Rosser, Mr Parshall explained that applicants to FIRB may include with their application information known only to them, but which is additional to the mandatory information required. It relates to such matters as the target entity’s preferred exchange (if it is listed on more than one exchange), the means the applicant may use to acquire the shares, other ways in which the applicant could achieve the desired share acquisition, associated transactions which the applicant may wish to pursue in conjunction with the acquisition (such as hedges, securities lending transactions and swaps), the identity of the applicant’s main competitors for the purchase of the shares in the Australian operation, the time frame for the acquisition and the history of any previous acquisitions or applications by the applicant.
28. Applicants regard such information as highly confidential because of its considerable value to the applicant’s business and consequently to its competitors. Keeping its potential acquisition and its strategy confidential enables applicants to maximise their ability to acquire the number of shares they want, in the manner and the terms that they seek, and minimises the risk that the applicant’s legitimate commercial aims will be thwarted by competitors, countermoves, share price gyrations or other factors. In his experience, foreign corporations rely on FIRB’s confidentiality policy in deciding whether to apply for FIRB approval and the extent to which they will supply non-mandatory information in support of their application. In the absence of the confidentiality undertaking, Mr Parshall said, applicants would at least be very circumspect about disclosing information and might well refuse to do so, given the substantial detriment their commercial interests might suffer as a result of inadvertent or voluntary disclosure of that information by FIRB.
29. The information in Document 1 about Liberty’s strategy for maintaining and increasing its interest in TNCL was not publicly available and had been provided to FIRB in reliance on the confidentiality undertaking. The letter was marked “confidential – commercial in confidence” and specifically claimed confidentiality for the whole of its contents. The information it contained would be of value to any person or entity holding shares in either Liberty or TNCL, and in particular any person competing with Liberty to buy additional shares in TNCL. For example, the extent to which Liberty’s strategy was implemented in full, in part or not at all, might give an indication about possible activity or inactivity. Disclosing Document 1 would undermine the competitive advantage Liberty could obtain by using that or a similar strategy in the future for acquiring TNCL shares, as its disclosure to TNCL and Liberty’s competitors for the purchase of those shares would substantially reduce its effectiveness. It would also disclose the extent to which that or a similar strategy had been implemented, from which might be inferred an intention regarding future corporate activity.
30. Disclosure would also limit the flow of information that Liberty was willing to provide voluntarily to FIRB with respect to future applications. It would unreasonably restrict Liberty’s ability to conduct its business affairs and might make it more difficult for Liberty to obtain FIRB approval for future acquisitions in Australian corporations.
31. Document 2, Mr Parshall said, is part of a chain of correspondence between Clayton Utz, on behalf of Liberty, and FIRB regarding the proposed acquisition of TNCL shares. It was marked “Confidential – commercial in confidence” and was written in reliance on the confidentiality undertaking. Its disclosure would have adverse consequences similar to those set out in relation to Document 1. Because of that reliance, his client was unwilling to release even a redacted version of the letters, even though the respondent no longer claims exemption for some parts of the letters.
32. In November 2004, the TNCL board announced the adoption of a stockholder’s rights plan which would be triggered in a number of circumstances, including if Liberty acquires a further one per cent or more of the voting interests in TNCL. When the plan is activated, holders of the requisite rights are able to purchase additional TNCL stock at a discounted price, thereby diluting the ownership interests of existing TNCL stockholders. The plan is of a type known as a “poison pill” which is designed to prevent hostile takeovers by making a company’s stock less attractive to a potential acquirer. The plan was due to expire in November 2005, but the TNCL board has extended it for another two years.
33. In response to Mr Mangan’s suggestion that the commercial value of the two documents had expired because the poison pill effectively blocked Liberty’s takeover plans, Mr Parshall replied that Liberty might be interested in pursuing other transactions in relation to TNCL shares. Further, institutional investors were not in favour of poison pill plans and, without claiming expert knowledge of Delaware corporations law, he could not be sure the plan could be extended indefinitely. He could not predict when Documents 1 and 2 would cease to be confidential, but that could happen if Liberty should cease to be a TNCL shareholder. Otherwise, the information would not go stale and was provided on the basis that the whole of it would remain confidential. If the current application were to result in disclosure, there would be significant publicly expressed concern in the business, banking and legal communities in Australia and overseas about the absence of meaningful protection of confidential information supplied by applicants to FIRB.
34. Mr Mangan adduced no evidence.
Application of the Law and Findings of Fact
35. As stated above, the issue for the tribunal to decide is whether the information contained in the two letters identified is protected from disclosure, either in full or in part, pursuant to ss 43(1)(b), 43(1)(c)(i), 43(1)(c)(ii) and 45 of the FoI Act.
36. The exemption in s 43(1)(b) requires, first, that the information has commercial value. That does not mean that it should necessarily be capable of being sold or exchanged, in the manner of a trade secret, but simply that has a value capable of being described as commercial in character (Secretary, Department of Employment, Workplace Relations and Small Business v Staff Development and Training Centre Pty Ltd (2001) 66 ALD 514, 518-519). The evidence of both witnesses is that the information has value to Liberty in carrying on its activities in the media industry. It would also have commercial use for a competing buyer in TNCL or for TNCL itself, which could use it to block or hinder any further attempt by Liberty to increase its shareholding in that company. The value of that information to Liberty could reasonably be expected to be destroyed or compromised if it were disclosed to a third party without conditions on its use. Liberty’s strategy would become known to its competitors or TNCL, who could use it to find ways of neutralising Liberty’s approach.
37. The second ingredient of this exemption is that disclosure could reasonably be expected to destroy or diminish the information’s value. The evidence outlined above relates to that ingredient also. There is no public interest test for this exemption.
38. Mr Mangan contended that any commercial value possessed by the information Liberty had supplied to FIRB no longer exists. In part that was due to the effluxion of time, the letters being now over 18 and 30 months old respectively. In part also it was because the “poison pill” meant that for practical purposes Liberty is unable to purchase any more voting shares in TNCL, as that would result in a dramatic dilution of its shareholding in the company. It would thus make no commercial sense for Liberty to purchase voting shares in TNCL. The information sought by the applicant, he said, is therefore now of historical interest only and no longer has any commercial value to anyone, including Liberty. Consequently, the commercial value of the information contained in the two letters would not be diminished or destroyed by their publication, because that value had already been destroyed by the passing of time and the introduction and extension of the poison pill scheme.
39. As was mentioned above, the evidence of Mr Parshall was that Liberty might be interested in pursuing other transactions in relation to TNCL shares in the future. Further, institutional investors were not in favour of poison pill plans, and he understood that ASIC was investigating aspects of the plan adopted by TNCL. Consequently one could not assume that the plan would remain in force, and if it did not, Liberty’s share acquisition strategy and as detailed in Documents 1 and 2 would remain relevant. Mr Mangan adduced no evidence to the contrary and I therefore conclude that the grounds required by s 43(1)(b) are made out.
40. The s 43(1)(c)(i) exemption depends on demonstrating that disclosure would have an unreasonable adverse effect on Liberty’s business affairs. There is no express public interest test applicable to this exemption either, but public interest is a factor to be taken into account in deciding whether the person would be unreasonably effected by the disclosure (Searle Australia Pty Ltd v Public Interest Advocacy Centreand Another (1992) 36 FCR 111, 125). By “business affairs” is meant:
the totality of the money-making affairs of an organisation or an undertaking as distinct from its private or internal affairs (Re Cockroft and Attorney-General’s Department and Australian Iron and Steel Pty Ltd (party joined) (1985) 12 ALD 462, 464).
41. Liberty’s interest in enlarging its shareholding in TNCL relates directly to its business as a media conglomerate. Mr Parshall’s evidence showed that disclosure of Documents 1 and 2 would undermine the competitive advantage that Liberty could obtain by using the strategy disclosed in the documents, or a similar strategy, in the future for acquiring TNCL shares, as its disclosure to TNCL and Liberty’s competitors for the purchase of those shares would substantially reduce its effectiveness and provide the basis for counter-strategies to be adopted against Liberty in the future. Further, disclosure would limit the flow and quality of information that Liberty would be willing to provide voluntarily to FIRB on future occasions, thereby restricting Liberty’s ability to conduct its lawful business affairs. There is a strong public interest in businesses being able to pursue their lawful commercial activities in competitive markets.
42. The applicant contended that publishing the letters would make a valuable contribution to the public debate surrounding the Liberty shareholding in TNCL. That is particularly so, he argued, given the large remaining shareholding in TNCL, estimated at about 300 million shares or A$6,000,000,000. That is certainly a possible line of argument, but Mr Mangan adduced no evidence in support of it or to contradict the third party’s evidence that the public interest in this case favours enabling businesses to pursue their lawful activities. The operation of high-level commercial and financial markets is a matter of some complexity and involves substantial amounts of technical knowledge. It would not be prudent to draw inferences at large on such matters. I therefore accept the third party’s evidence in relation to the public interest element of the s 43(1)(c)(i) exemption.
43. Under s 43(1)(c)(ii), the phrase “could reasonably be expected” has the same meaning as in the other parts of s 43(1). It requires “a judgment to be made by the decision-maker as to whether it is reasonable, as distinct from something that is irrational, absurd or ridiculous, to expect that those who would otherwise supply information of the prescribed kind to the Commonwealth or any agency would decline to do so if the document in question were disclosed under the Act”. “It is undesirable to attempt any paraphrase of these words” (Searle, supra, p122). “The degree of dependence placed on this information greatly assists in determining that its absence will present a real likelihood of prejudice. … The section is concerned not only with information from sources named in the documents in dispute, but also with all other sources in the future.” (Re Telstra Australia Limited and Australian Competition andConsumer Commission (2000) AATA 71 paragraph 24). The diminution can be either in the quantity or in the quality of business information flowing from the private sector to the Commonwealth, regardless of whether the supplier has an obligation to supply it (Re Cockroft, supra, at p466).
44. Mr Rosser pointed out in his evidence that the Act contains no compulsory information gathering powers and that all data beyond the factual matter specified in the regulations is provided on a voluntary basis. FIRB relies on applicants’ willingness to provide the required information voluntary. In turn, applicants have come to rely on the well-established and publicly-stated practice of the board of protecting the confidentiality of commercially sensitive or otherwise private information. He had no doubt that eroding the relationship of trust and confidence between FIRB and those supplying information to it would adversely impact on the amount and quality of information applicants would provide to the board.
45. Mr Parshall’s evidence, given from the perspective of a lawyer specialising in the mergers and acquisitions/corporate advisory law area, was to the same effect. If applicants could not rely on FIRB’s confidentiality undertaking, they would at least be very circumspect about disclosing confidential information because of the substantial detriment they might suffer as a result of inadvertent or voluntary disclosure. Such an outcome, he said, would deprive FIRB of valuable information in deciding whether or not to object to the proposed transaction. In my view that evidence satisfies the ingredients of that exemption.
46. Mr Mangan also submitted that the argument that the application would constrain future information disclosures to FIRB implied that Liberty is doing FIRB a favour by asking FIRB for a foreign ownership ruling. He contended that it is FIRB that it is doing Liberty (and other potential persons) “a favour” by providing judgments on foreign investment when requested. In the future, if FIRB were unhappy with the information provided to it, FIRB could always provide a negative ruling.
47. To the extent that Mr Mangan’s argument means that Liberty and other applicants have an incentive to provide FIRB with full information about what they see as the advantages of the acquisition proposal, it is undoubtedly correct. But it is also true that the strongest reasons in favour of a course of action, or the best means of implementing it, are sometimes the most confidential, and lack of assured confidentiality could act as an incentive in the opposite direction, towards greater reticence. Further, the fallback option of FIRB’s giving a negative ruling is not wholly satisfactory, given that the objective of its investigations is to produce the best possible decision in the circumstances, not merely to clear its list of applications.
48. There is no unreasonableness test in this exemption, nor is public interest a factor.
49. In the context of s 43(1)(c)(ii), it is appropriate to consider whether a redacted version of Documents 1 and 2 could be supplied to the applicant, invoking s 22 of the FoI Act. The respondent indicated at the hearing that the supply of a redacted version would not be opposed, but Mr Parshall in his evidence stressed that his client would oppose that course of action because the documents had been submitted in reliance on confidentiality undertaking and confidentiality had been claimed for each document in its entirety. As I have pointed out above, the confidentiality policy promulgated as part of the government’s foreign investment policy was more broadly worded at the time the documents were supplied to the respondent than it is now. It did not reserve the right to disclose information supplied in confidence if required by “applicable legislation”, a phrase that seems wide enough to include the release of information pursuant to an FoI application. The evidence of Mr Rosser implied even that a partial release of confidential documents might give rise to interpretations or speculations that might or might not be correct.
50. A more persuasive ground for not applying s 22, however, stems from the possible effect of the future supply of information to the Commonwealth of changing the confidentiality policy with retrospective effect. Applying grounds for the release of information additional to those that applied when the information was supplied is likely to be a particularly strong deterrent to the furnishing of confidential information by all informed applicants in the future. The risk of what may be seen as arbitrary conduct by government in the future would generate a sovereign risk factor that applicants and others would need to build into their future plans and calculations. Thus, as one commentator has put it,
One way of minimising the potential for unfairness to third parties is to ensure that they, as far as possible, were made aware before providing information …., of the extent to which any information provided may be subject to disclosure (M Paterson, Freedom of Information and Privacy in Australia (2005) p 260).
51. Section 45 establishes an exemption of a different character. It applies where disclosure would found an action by a person other than the Commonwealth, for breach of confidence.
52. The criteria applied by the tribunal under s 45 were laid down in Re Kamminga andAustralian National University (1992) 26 ALD 585, 592. The first criterion stated is that the person claiming the exemption must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question. In this case the claim relates to two identified letters, Documents 1 and 2, containing specific information about Liberty’s strategy for maintaining or increasing, or both, its interest in TNCL.
53. The second criterion is that the information has the necessary quality of confidentiality and is not, for example, common or public knowledge. The information in Documents 1 and 2 was clearly never intended to enter the public domain, nor has it. It is information of considerable practical importance and it would be of concern to Liberty if it were made public.
54. The third criterion is that the information was received in such circumstances as to import an obligation of confidence. It is not sufficient for that purpose to mark the document “confidential”. The respondent must show that at the time of the communication, there was a mutual understanding that the information had been given and received in confidence. The evidence in this case shows that there was an established usage in the industry, well understood by both Liberty and the respondent, that material forwarded in confidence would be accepted on that basis. Liberty expressed its intention to communicate the information in confidence, as is apparent from the notation on both documents, “Confidential – commercial in confidence”. That the documents would be received in confidence is clear from the respondent’s stated policy applicable at that time. The Federal Court recognised the fact of FIRB’s confidentiality policy and its purposes in INP Consortium Limited, Independent Newspapers PLC and Anthony John Francis O’Reilly v John Fairfax Holdings Limited (formerly Tourang Limited), Desmond Livingstone Nicholl and Keith William Skinner, Ord Minnett Securities Limited, Baring Brothers Burrows and Co Limited and Mark Burrows (1994) No 466/94 paragraph 5.
55. The fourth ingredient laid down in Re Kamminga (supra) is that there is actual or threatened misuse of the information or, to put it another way, that disclosure would constitute an unauthorised use. Liberty has never given express authorisation for the disclosure of the information, nor can it be taken to have given any implied authorisation in connection with the official announcement of the Treasurer’s decision. In fact, no official announcement was made of the approval given to Liberty. Such announcements are rare, and when they are made, as Mr Rosser explained, very little information is disclosed beyond the fact of the approval. There is no public policy defence to an action for breach of confidence.
56. I conclude, therefore, that in relation to the whole of Documents 1 and 2 all the grounds of exemption claimed are made out. The decision under review is affirmed.
I certify that the 56 preceding paragraphs are a true copy of the reasons for the decision herein of Professor GD Walker, Deputy President
Signed: .....................................................................................
AssociateDate of Hearing 29 August 2005
Date of Decision 15 September 2005
Representative for the Applicant Self-representedRepresentative for the Respondent Ms M Campbell, Australian Government Solicitor's office
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