Secretary, Department of Employment, Workplace Relations and Small Business v The Staff Development and Training Centre Pty Ltd
[2001] FCA 382
•4 APRIL 2001
FEDERAL COURT OF AUSTRALIA
Secretary, Department of Employment, Workplace Relations & Small Business v The Staff Development & Training Centre Pty Ltd [2001] FCA 382
FREEDOM OF INFORMATION - documents relating to criteria used in the tendering process for assessing the financial viability of tenderers for the award of employment service contracts in the Commonwealth’s “Job Network” program - documents used by a Department in the process of supplying government services cannot be said to contain “trade secrets” of or have “commercial value” for the Department so as to be exempt documents under ss 43(1)(a) and 43(1)(b) the Freedom of Information Act 1982 (Cth)
ADMINISTRATIVE LAW - Administrative Appeals Tribunal - whether Tribunal finding made without evidence - evidence before Tribunal, albeit slight, was enough to support its findings on which it based its conclusions that the exemption of documents under Freedom of Information Act 1982 (Cth) was not in the public interest
Administrative Appeals Tribunal Act 1975 (Cth) s 44
Freedom of Information Act 1982 (Cth) ss 36, 39, 40(1)(a), 40(1)(b), 40(1)(d), 43(1)(a), 43(1)(b), 43(1)(c), Part IVTHIS IS THE EDITED VERSION OF THE REASONS FOR DECISION. THE COURT ORDERED THAT THE FULL REASONS NOT BE PUBLISHED BEFORE 26 APRIL 2001.
THE COURT FURTHER ORDERED ON 24 APRIL 2001 THAT THE FULL REASONS NOT BE PUBLISHED UNTIL THE HEARING AND DETERMINATION OF THE APPEAL OR UNTIL FURTHER ORDER.
Minister for Immigration and Multicultural Affairs v Epeabaka (1999) 84 FCR 411 referred to
Collins v Minister for Immigration and Ethnic Affairs (1981) 58 FLR 407 referred to
Seguin Moreau, Australia v Chief Executive Officer of Customs (1997) 77 FCR 410 applied
Searle Australia Pty Ltd v Public Interest Advocacy Centre (1992) 36 FCR 111 applied
Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 distinguished
JS McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 applied
Team Employment & Training Network Pty Ltd v Secretary, Department of Employment, Workplace Relations and Small Business [1999] FCA 1792 applied
The Queen v Cohen; Ex parte Motor Accidents Insurance Board (1979) 141 CLR 577 distinguished
Loughnan (Principal Registrar, Family Court of Australia) v Altman (1992) 111 ALR 445 referred toSECRETARY, DEPARTMENT OF EMPLOYMENT, WORKPLACE RELATIONS AND SMALL BUSINESS v THE STAFF DEVELOPMENT AND TRAINING CENTRE PTY LTD
Q 17 OF 2000DRUMMOND J
4 APRIL 2001
BRISBANE
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
Q 17 OF 2000
ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL
BETWEEN:
SECRETARY, DEPARTMENT OF EMPLOYMENT, WORKPLACE RELATIONS AND SMALL BUSINESS
APPELLANTAND:
THE STAFF DEVELOPMENT AND TRAINING
CENTRE PTY LTD
RESPONDENT
JUDGE:
DRUMMOND J
DATE OF ORDER:
4 APRIL 2001
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
1.The appeal be dismissed with costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
Q 17 OF 2000
ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL
BETWEEN:
SECRETARY, DEPARTMENT OF EMPLOYMENT, WORKPLACE RELATIONS AND SMALL BUSINESS
APPELLANTAND:
THE STAFF DEVELOPMENT AND TRAINING
CENTRE PTY LTD
RESPONDENT
JUDGE:
DRUMMOND J
DATE:
4 APRIL 2001
PLACE:
BRISBANE
REASONS FOR JUDGMENT
This is an appeal under s 44 the Administrative Appeals Tribunal Act 1975 (Cth) by the Secretary of the Department of Employment, Workplace Relations and Small Business (“DEWRSB”) against a decision of a Deputy President of the Administrative Appeals Tribunal which, in effect, declared that certain documents in three of the Department’s files were not exempt documents within the meaning of the Freedom of Information Act 1982 (Cth). (The acronym for the Department as it was organised throughout most of the period of present relevance was “DEETYA”.)
The documents fall into two categories: firstly, extracts from the Tender Assessment Operations Manual prepared by the Department for use by its officers responsible for assessing the financial viability of tenderers seeking contracts with the Department to supply employment services to it under the new “Job Network” Scheme (part of file 98/06890) and, secondly, documents created for the purpose of assessing the respondent’s financial viability by reference to the procedures set out in the Operations Manual, it having tendered for a number of contracts, (parts of file 97/00401). All the respondent’s tenders were unsuccessful. Counsel for the appellant said that it did not pass the financial viability assessment and its tenders were not further considered.
The Deputy President accepted the uncontroversial statements of Mr and Mrs Van Putten, the principals of the respondent, which they made from the bar table and made the following findings:
“29. Up until April, 1998, Staff Development had been engaged in providing commercial training and consultancy services for the previous fourteen years. It has offices in five locations with a separate administration office in a sixth location. Each of the five offices had a trained manager and support staff and Staff Development owned all of its fixtures and fittings. For the last nine years, [it] has been a contractor with DEETYA. Staff Development had been trading profitably with an annual turnover of approximately $900,000.00. It had no debts and had access to bank overdraft facilities of $80,000.00 which was secured by a mortgage.
30. Some 95% of its work has been as a result of various contracts with DEETYA and there is no reason to question that it had a good record in fulfilling those contracts. As a result of failing to secure a contract under the Job Network programme, Staff Development has been unable to continue to employ its staff. Half were engaged by a Job Network provider and the remainder were left without employment.”
The appellant contended that the Tribunal’s decision that the extracts from the Operations Manual were not exempt documents within various provisions of Part IV of the Act was flawed with certain errors of law. The appellant did not advance any arguments that there was further error of law in the Tribunal’s decision that the documents recording the Department’s assessment of the financial viability of the respondent’s own tenders were exempt documents. The appellant’s approach was that, if the Tribunal was in error in holding that the extracts from the Manual were not exempt documents, it necessarily followed that the Tribunal’s decision with respect to the documents recording the Department’s assessment of the respondent’s own tenders could not stand either because, if those documents were disclosed, they would reveal the information in the relevant extracts from the Manual.
The case arises out of the radical changes made in the latter half of the 1990s by the Commonwealth government to the system of provision of benefits and services to unemployed persons which the Commonwealth had operated for half a century. The Deputy President took the detailed description of the new system and its genesis, which is set out in pars 6 to 27 of her reasons, from the evidence of the Department’s witness, Mr Campbell, which was all uncontroversial. The new system, which has replaced the service long provided by the Commonwealth Employment Service (an arm of the Executive Government) and the transitional services provided by the Commonwealth government in the mid 90s with partial reliance on private sector organisations, is known as “Job Network”. It commenced on 1 May 1998. It involved what was described in the Department’s evidence as the establishment by the Federal Government of a competitive market for the provision of employment services to the unemployed. Under the “Job Network” Scheme, private business organisations (and some non-profit organisations) interested in becoming providers of such services to the Commonwealth submitted tenders to the Department in an endeavour to win contracts awarded by the Department for the provision of designated employment services to unemployed persons. Under the Scheme, Australia is divided into twenty-nine labour market regions. The Department decided to have five such service providers in each region to give job seekers a choice of provider. It is these service provider organisations who compete with each other firstly, for the award of contracts by the Department for the provision of employment services and, secondly, for the custom of unemployed persons seeking those services. There is nothing in the evidence to suggest that the Department itself is in competition either directly, or indirectly through its contracted services providers, with anyone for the provision of employment placement services to unemployed persons eligible to participate in the new scheme.
In August 1997, the Department publicly invited organisations to tender for the provision of designated employment services in particular regions and also in respect of designated categories of employment services. Tenders were initially called in respect of the award of services provider contracts to run for the period from 1 May 1998 to 30 November 1999. When tenders closed in September 1997, 1,016 organisations had submitted more than 5,300 bids. In February 1998, the Minister announced the award of service provider contracts within the “Job Network” Scheme to over three hundred organisations and, on 1 May 1998, 1,400 “Job Network” sites opened for business. In December 1998, the government extended the duration of the first round of service provider contracts from 30 November 1999 to 27 February 2000. The Department called tenders for the second round of service provider contracts in June 1999 for the award of three year contracts which would run from 28 February 2000. The Tribunal’s judgment was given in February 2000, after tenders for the second round of contracts had closed.
Extensive planning to establish the new system was undertaken by a unit within the Department called the “Employment Services Market Group” (“ESMG”), which was headed by the witness, Mr Campbell. This planning included modifying the tender arrangements relating to the then existing legislation (which made limited provision for involvement by private employment services in the Commonwealth’s system with respect to unemployed persons) drafting the new Request for Tender documentation and preparing a comprehensive communications strategy to inform prospective tenderers and members of the public of the Request for Tender requirements and the implications of the reforms. Planning also included establishing Regional Employment and Purchasing Units in the regional offices of DEETYA to ensure that there was appropriate local expertise regarding the Request for Tender and the tender assessment process and the training and recruiting staff. Finally, ESMG engaged an independent probity adviser to monitor procedural integrity throughout the tender process. Mr Campbell said:
“A major goal of the employment services reforms was to help put unemployed people, especially the long term unemployed, into sustainable employment by providing employment services which were flexible and tailored to the individual needs of jobseekers. The key objective was to pay for results, that is placements in jobs rather than paying for the processes of placing people in jobs or for administering short term programmes. A basic premise of the new arrangements is that organisations selected to provide these services will have the financial infrastructure in place to sustain their operations until they receive payment for placing people into jobs.”
The Department’s publicly available “Employment Services Request for Tender 1997 Overview” document contained information on the tender process. It recorded that the Department had appointed an external “Probity Adviser” who was to select and manage an independent quality assurance team to oversee the tender evaluation process. This team’s task was to “observe each part of the tender process to ensure that agreed processes and procedures are followed”. Tenderers were told that this team would “also adopt quality control techniques to ensure objective and consistent assessment of the tenders”. A Probity Plan and the Inter-Departmental Protocol prepared for use by Ministers and Ministerial and Departmental staff “to deal with requests for information and representations from organisations which submit tenders” was included in the Overview document. The purpose of the Plan was stated to be “to ensure that each tenderer is treated equitably and that no party receives an unfair advantage”.
The tender assessment process described in the Overview document included the following sequential steps:
(a) Receipt and registration of all tenders
(b) Check of conformance to tender conditions
(c) Check of financial viability
(d) Assessment of tender against relevant selection criteria
(e) Ranking of tenders against relevant selection criteria
(f) Ranking of tenders within each region for each service
(g) Preliminary allocation of contracted level
(h) Review of assessments, rankings and allocations
(i)Confirmation with potential service providers that they are remaining in the market
(j) Final decisions by DEETYA Secretary
(k) Advice to tenderers of outcomes
(l) Execution of contracts.
“Financial viability” was the subject of two sections in a publicly available booklet issued by the Department, “Employment Services Request for Tender 1997 Tendering Conditions and Draft Contract”:
“1.5.1.2 Financial viability
All tenderers submitting an application in accordance with the foregoing conditions will be assessed for their financial viability – that is, their financial capacity to deliver the service requirements and meet contractual obligations over the contract period. In addition to taking into account information provided on the application form, DEETYA may undertake other checks to satisfy itself as to the financial viability of the tenderer. …
Tenderers who are assessed as financially viable will receive further consideration. Tenderers who are assessed as not viable will have their tenders rejected. …
1.7 Financial viability
The onus is on you to satisfy DEETYA of your organisation’s financial viability to meet the service requirements outlined in the yellow-covered publication Service Requirements for the Employment Services Request for Tender.
You should not proceed with this tender if your organisation is unable to provide acceptable evidence of your organisation’s financial viability.
If your organisation is being established specifically to tender, you will need to seek independent supporting evidence of your capacity to operate given the nature of outcome payments for most employment services. This evidence may be in the form of financial statements, references or other documentation – perhaps from your accountant – that independently verifies the financial resources of your organisation.
It is important that you make realistic assumptions about your organisation’s possible cash flow when assessing the likely viability of your business. Your business levels will be subject to client choice, and the services offered will depend on client needs. In some services, outcomes – hence payments – will not be achieved for many months.”
The information that each tenderer was required to submit included financial details, summarised by the Tribunal as follows:
“Part C [of the tender form] required each tenderer to supply financial details. Among the material to be forwarded to DEETYA were the latest financial statements for (if possible) the previous three years. Included in those statements were to be profit and loss sheets, balance sheets, statement of cash flow, notes to the accounts and the name, qualifications and address of the auditor. Other financial information was acceptable if audited accounts were not available. Each tenderer was required to give information regarding the business failure of any person having a direct or indirect interest in the organisation. Information was also required regarding matters such as government investigations of the organisation or collections by debt collection agencies on behalf of creditors.”
The processes followed within the Department in assessing these tenders are summarised at pars 37 to 44 of the Deputy President’s reasons. The Deputy President said that, in assessing the financial viability of tenderers, specially trained staff examined historical financial information, projected cash flows and qualitative information submitted by each tenderer. That information was used in the assessment of tenders, together with information from internal Departmental records and records from organisations such as the Credit Reference Association of Australia, Dun & Bradstreet and the Australian Securities and Investments Commission.
Mr Campbell said that the aim of the financial viability assessment of each tenderer to which the documents in issue relate “was to minimise risk (financial and probity) to the Commonwealth, rather than to measure the profitability of tenderers or to gauge their success in the new market. An essential goal was to ensure that organisations have the capacity to survive in the initial start up period of the market before the outcome payments were earned and paid.” It was this delayed payment element that was emphasised as making the assessment of financial viability so critical. Tenderers were told that these payments would take the form of “upfront service fee and additional outcome fees” in respect of job placements achieved by the particular contracted service provider. For example, the “Yellow Book” provided to tenderers included the following:
“2.14.2 Payable outcomes
“Service providers will generally receive payments based on progress made in assisting, placing and sustaining referred job seekers into employment. The payments will consist of an up-front service fee and outcome fees.
…
2.14.2.1Primary outcomes
The maximum combination of fees payable to you is for the placement of a job seeker into paid employment that results in the total cessation of the basic rate of NSA [New Start Allowance] or YTA [Youth Training Allowance] for a continuous 26 week period.
…
2.14.2.2Secondary outcomes
A secondary outcome is defined as the placement of a job seeker into paid employment … that results in an average reduction in receipt of the basic rate of NSA or YTA of at least 70 per cent. A secondary interim outcome occurs after a consecutive 13 week period of income support reduction averaging 70 per cent or more, and a secondary final outcome occurs after a further consecutive 13 week period.”
The Deputy President quoted the following evidence from Mr Campbell:
“The integrity of the next tender process would be compromised if DEWRSB were to disclose the financial viability model used to assess details of the financial viability of tenderers; to do so could enable tenderers to restructure their tender in an artificial way so that they appeared to meet the criteria. This could result in the selection of tenderers who would otherwise be rejected. This in turn could increase the risk of failure by organisations to deliver high quality services to job seekers and employers – the central goal of the Government’s reforms. …
…
… Job Network is a radical departure to the way the Government delivers employment assistance to job seekers and employers. … It has evolved through the commitment of successive governments to improve the quality of services available to job seekers through involving organisations from the private, public and community sectors. In this new framework, the principles of competitive tendering must operate if Job Network is to flourish. The integrity of Job Network would be compromised by the release of documents which may undermine the confidential tendering process.”
Mr Campbell elaborated on the detrimental consequences for job-seekers, employers, the Commonwealth and Commonwealth taxpayers of the collapse of a contracted service provider. Counsel said that the need to keep the information in the documents in question confidential to the Department arises exclusively out of the Department’s intention to call tenders for the award of employment service contracts for periods subsequent to the first round, and its concern to minimise the risk that tenderers might manipulate their financial information to the disadvantage to the Commonwealth if the Department were to disclose its criteria for the assessment of tenderer’s financial viability.
As to the documents in contention, one of the extracts in file 98/06890 is a three page document headed “Chapter 6: Financial Viability Teams”. The first sheet of this document (folio 158) was among those disclosed by the Department to the respondent subsequent to the Tribunal’s decision. It contains an overview of the procedures and processes required to be applied by the relevant Departmental staff in assessing the financial viability of each tendering organisation. In folio 158, the following appears:
“The primary objective of financial viability assessment is to minimise risk (financial and probity) to the Department. Tendering entities are assessed on their historic financial and qualitative information (where available) and their business plan (as reflected by the entity’s projected future cash flows).
…
The tender application form requires each entity to provide, where available, certain information from historical financial records (balance sheets and profit and loss statements). This quantitative and financial information, together with qualitative information and cash flows projected by the tenderers, will be entered into two computer models which (together) will be used by the assessor to determine an overall weighting. No single individual weighting will prove/disprove an entity’s viability.”
As appears from folio 158, the “qualitative information” includes information obtained from the databases of external sources, including the Australian Securities Commission and credit reference agencies. The information of critical importance contained in this three page document, identified as such by counsel for the appellant, is that set out at folio 156, which identifies the two “Computer Models” to be used in the assessment of financial viability.
[
] Though Mr Campbell spoke about the importance of keeping confidential the criteria applied by the Department for assessing financial viability, he did not suggest that the criteria and associated information would enable the Commonwealth to detect whether a tenderer was providing false data in the hope of getting a contract when it was not truly financially viable over the period of the hoped-for contract. Counsel expressly disavowed any notion that the criteria were capable of identifying false data; he said:
“It is not part of our case that the test is designed to detect those who manipulate … Its function is simply to distinguish between those who according to the data supplied are financially viable and those who are not.”
In large part, the remainder of the extracts from file 98/06890 appears to consist of detailed instructions for implementing the assessment of financial viability described in the overview in the three page document consisting of folios 158 to 156. Folios 141 to 138 in file 98/06890 give an overview of the role to be played by the quality assurance team members in the process of assessing the financial viability of tenderers carried out by the financial viability teams. This document indicates that the function of the quality assurance team members was to ensure that the established procedures for assessing financial viability were correctly adhered to by those charged with making that assessment. There is nothing in the document to suggest that it was part of the role of the quality assurance teams (or, for that matter, the teams actually making the financial viability assessments) to identify false information in any tender documentation. The evidence was that that was no part of the role of either team.
The extracts from file 97/00401 that are in issue appear to comprise the record of the application of this procedure for assessing financial viability to the respondent’s tenders.
The Tribunal rejected the appellant’s contentions that the documents in question were exempt from disclosure by force of a number of the provisions of Part IV of the Act. At the hearing before me, counsel pointed out that these provisions fell into two groups, the first comprising ss 36, 39, 40(1)(a), (b) and (d) and 43(1)(c): all require the appellant to satisfy the Tribunal that certain specific exemption criteria are satisfied and that, in addition, disclosure would nevertheless not be in the public interest. The appellant accepted, in relation to s 43(1)(c) that that was the effect of the requirement to show that disclosure would “unreasonably affect” the Department in respect of its business, commercial or financial affairs. The second group of provisions relied on comprises ss 43(1)(a) and (b), which do not place any public interest hurdle in the path of a claim that documents are exempt by force of those particular provisions.
Senior counsel for the appellant confined his attack on the Tribunal decision that none of the documents in question is an exempt document under any of the first group of provisions to the conclusions of the Tribunal on the public interest issue. The theme which the appellant contends runs through the Tribunal’s decision in holding that none of the exemptions which contains a public interest element applies to any of the documents is the Tribunal’s finding, repeatedly expressed, of which its statement at par 94 (in relation to s 39) is typical:
“Even without a knowledge of the criteria and processes by which tenderers will be assessed, it is open to a tenderer to manipulate the information he or she is required to give and it can be manipulated to show its current and projected financial situation in the best light.”
It was submitted: “What the Tribunal is saying is that without knowledge of the contents of the test, a tenderer can manipulate its financial data to establish financial viability. And we say that can’t be the case because the manipulation can only be effective if it is done in order to meet the criteria.” Counsel acknowledged that the appellant had to show error of law in this finding relating to s 39 (and the similarly expressed findings of facts with respect to the other provisions in the first group).
Neither in oral or written argument did the appellant challenge any other aspect of the Tribunal’s decisions that the documents were not exempt under any of the provisions of this first group save that, in written argument, the appellant did briefly record, but did not develop, an argument that there was a separate error of law in the Tribunal’s refusal to find that the documents were exempt by force of s 36. But, in his closing oral submissions, senior counsel expressly confined his attack on the Tribunal’s decision in relation to s 36 to the way the Tribunal dealt with the public interest issue common to the Tribunal’s decisions in relation to all the other provisions in this first group. It is therefore unnecessary to consider the separate argument raised in relation to s 36. As to s 43(1)(c), the Tribunal held that disclosure of the criteria could not affect anything that could be described as the business or commercial affairs of the Department, but it held that disclosure would involve disclosure of information concerning the financial affairs of the Department. The only written submission made about the Tribunal’s failure to hold that the documents were exempt within s 43(1)(c)(i), given its finding that disclosure would disclose information concerning the financial affairs of the Department, was that its conclusions in relation to the expressions “business affairs” and “commercial affairs”, said to be erroneous, were material to its decision that the documents were not exempt though they related to the Department’s financial affairs, because those conclusions “affected the Tribunal’s reasoning on the issue whether disclosure of the information ‘would, or could reasonably be expected to, unreasonably affect that … undertaking in respect of its lawful business, commercial or financial affairs’”. This Delphic written submission was not developed in oral argument. It is sufficient to dispose of it to say that, for reasons set out below in respect of ss 43(1)(a) and (b), the Tribunal’s conclusion that no business or commercial affairs of the Department would be affected by disclosure was free of legal error. But counsel stated in oral submissions that the only other challenge to the Tribunal’s decision in relation to s 43(1)(c) that it intended to pursue was the error of law constituted by the allegedly erroneous finding of fact on the public interest requirement of the sub-section. I reject the attack made on this finding of fact based as it is on the assertion that there was no evidence to support it.
Counsel began by submitting that the conclusion on the public interest issue by the Tribunal in par 94 was illogical. But, recognising that mere illogicality does not constitute error of law, he submitted that that nevertheless “[m]ay sound a warning note to put one on inquiry”. Cf Minister for Immigration and Multicultural Affairs v Epeabaka (1999) 84 FCR 411 at 422. Counsel submitted that the necessary inquiry was to ask: “where is the evidence that would support this finding that an ignorant tenderer could achieve … effectively the same result as a tenderer who knew what the criteria were”. He submitted there was no evidence to support such a finding. It was said that the only evidence on the issue of possible manipulation of data came from Mr Campbell.
To establish that a decision of the Tribunal is flawed with error of law because of an absence of evidence is a difficult task. In Collins v Minister for Immigration and Ethnic Affairs (1981) 58 FLR 407, the Full Court said, at 410 - 411, in an appeal against a decision of the Tribunal brought pursuant to s 44 of the Administrative Appeals Tribunal Act 1975:
“An appellant who attacks a conclusion of the Tribunal because of deficiency of proof said to amount to error of law must show, if he is to succeed, that there was no material before the Tribunal upon which the conclusion could properly be based.”
In Seguin Moreau, Australia v Chief Executive Officer of Customs (1997) 77 FCR 410, on a similarly grounded appeal against a decision of the Tribunal, I took the view that, so long as there was more than a scintilla of evidence, a Tribunal decision was immune from attack on the “no evidence” ground. This, I think, is the correct approach because otherwise it would be easy for the Court when dealing with a “no evidence” challenge to findings of fact made by the Tribunal to fall into the trap of overturning those findings because they were against the weight of evidence. Such an error in fact finding is not an error of law: see Collins at 410.
There was evidence before the Tribunal that tenderers were not wholly ignorant of the kind of information that would be likely to produce a favourable assessment of financial viability, although there was no evidence that any particular tenderer was in fact aware of the specific tests applied by the Department in that regard.
I have already set out a passage from Mr Campbell’s evidence quoted in the Tribunal’s decision about how the integrity of future tender processes would be compromised if the Department were to disclose the financial viability model. In that part of the hearing conducted in confidence, ie, in the absence of Mr and Mrs Van Putten, Mr Campbell gave evidence to the same effect about how the Commonwealth feared that financial data might be manipulated to the advantage of particular tenderers if they knew the details of such matters as the particular financial ratios that the Department was using to assess financial viability. However, he acknowledged in his confidential evidence that a tenderer could get “a feel for the criteria that were taken into account which, perhaps, can be drawn from the tender document … and the tender summary” and that while tenderers do not have access to the precise ratios used in the financial viability assessment exercise, a careful perusal of the tender information would, as a matter of common sense, cause tenderers to expect that calculations of the kind made would be performed in that assessment. The evidence also shows that tenderers were put on explicit notice of the need to demonstrate to the Department’s satisfaction their financial viability in the context of a contractual scheme providing for deferred, and sometimes long deferred, payments. Mr Campbell acknowledged that a careful reading of the material made available to tenderers would direct their attention to the need to provide information with respect to the kind of matters factored into the calculations made by the Department’s assessors in deriving the ratios for particular tenderers which were compared against the relevant confidential indicators. It can fairly be assumed that not every tenderer was an ignorant layman, that some, if not many, would be established businesses with sophisticated skills of their own as well as access to sophisticated accounting advice when they came to prepare their tenders. To adopt Mr Campbell’s words, it “might even be common sense” to expect such tenderers to present in the most favourable manner financial information relevant to the issues identifiable from the tender documentation as those of particular interest to the Department in assessing financial viability.
In the circumstances of this case, the Tribunal was, I think, entitled to find that a person minded to manipulate the financial data it provided in its tender might well focus on misleading the Department as to the issues so identifiable as of likely relevance to the Department’s announced intention to assess each tenderer’s financial viability under this deferred payment regime.
The evidence before the Tribunal supportive of its critical finding was fairly slight. If there had been clear evidence from the Department establishing a real risk of manipulation if the documents in question were made publicly available then, according to the quality of the proofs offered by the Department on that matter, this evidence might, in the context of the case, be so slight as to be properly described as providing nothing more than a scintilla of evidentiary support that would be insufficient to protect the Tribunal’s conclusion from challenge on the “no evidence” ground. But, in dealing with the attack based on error of law constituted by no evidence to support the critical finding, it is, in my opinion, relevant to have regard to the paucity of proof as to the existence of a real risk of manipulation, if the documents were disclosed, in evaluating whether the albeit slight evidence was nevertheless enough support for the Tribunal’s decision to prevent it being said that the critical finding was not made in the absence of evidence. In determining whether slight evidence, in a particular context, is nevertheless sufficient to prevent it being said that a finding of fact constitutes an error of law for want of any evidentiary support, some evaluation has to be made of the probative value of such evidence as there may be to support the challenged finding in the context of the particular case. To do that is not to stray into the area of assessing the weight of conflicting bodies of evidence because, in deciding whether there is no evidence to support a finding, it is not merely a mechanical task of going through the record, marking anything that might be said to be supportive of the finding under attack, and if anything can be found, automatically concluding that there is no error of law. An evaluative judgment still has to be made in the particular case, where there is some evidence said to support the determination, to assess whether it should be ignored because it does not rise above the de minimis level of probative effect.
Mr Campbell placed much emphasis on the Department’s concern to ensure that tenderers did not have the opportunity of structuring their financial information in a way which might create a false picture of their financial viability, an opportunity that Mr Campbell said would be provided by access to the material in contention in this case. But his evidence did not go beyond asserting that there was such a risk. The existence of such a risk was at the very core of the Department’s case for keeping the documents in question immune from disclosure. Yet the Department did not put any evidence before the Tribunal to suggest that this was a real risk, either on the basis of past governmental experience, including experience by the Department in letting contracts to private employment service providers during the transitional period, or on any other basis. Instead, the Department asked the Tribunal to assume, apparently on the basis of a general view of human nature, that a significant risk in fact existed. The Department was not without relevant experience. Mr Campbell said, of the transitional scheme in place in the mid 1990s that led up to implementation of “Job Network”, that about two-thirds of all labour market services provided by the Commonwealth were delivered through the Commonwealth Employment Service, with the remaining third provided by private sector organisations, including the respondent, under contracts to a Commonwealth government agency. He said that deferred payments to contracted service providers was a feature of the transitional scheme, just as it was of the “Job Network” Scheme. He said that payment in respect of some services was deferred for thirteen weeks after a person had been placed in employment, as is the case with some of the services was provided under the “Job Network” contracts. The major difference between transitional period contracts and “Job Network” contracts is that, in the case of the latter, full payment for job placements is deferred, in respect of placements of some persons, for up to twenty-six weeks. In the transitional period, Mr Campbell said private service providers were recruited through a tendering process, though it was “quite decentralised and diffuse across the country” and under that tendering process the assessment of financial viability of tenderers did not have “a particular … high priority” compared to some other issues. In answer to a question by the Department’s counsel about whether the assessment of financial viability under the transitional period tendering process had been effective, Mr Campbell said:
“Was it effective, that assessment?---Probably answer that in two ways. Given that most of the funding was paid in advance, and indeed very little was paid by the way of outcome payments which is quite different to what happens in Job Network, it was effective in the sense that the money was paid over, but we weren’t paying for outcome. So if we were waiting for outcomes I’m not sure of the effectiveness. But also we did have some notable problem areas and I suppose for those who are Queenslanders might remember that in 1997 we had a very bad issue up here in our office up here with regard to over 2 million dollars being paid to a shipping company of which the Commonwealth are still pursuing some of those funds. It - there is no doubt that the experience of the decentralised nature, lack of, if you like, consistency across the country allied with circumstances, so that the ship did influence the way we have structured our financial viability assessments since then.”
Mr Campbell’s answer appears to be directed to explaining how the experience with the shipping company in Queensland influenced the Department’s decision to establish a centralised, rather than a decentralised, tender process, not, as I read his evidence, that the experience with the shipping company led to the Department establishing the elaborate system for the assessment of financial viability based on confidential criteria that is central to this case. Counsel for the Department acknowledged in supplementary submissions, that there was no specific evidence of past difficulties through manipulation of financial data by a tenderer for a government contract before the Tribunal, though he did refer to this answer by Mr Campbell. The Department’s case that disclosure of the information would be likely to harm the Department’s legitimate interests thus rested on assertion only.
It is also noteworthy that Part D of the tender form, which in other parts, requires provision to the Department of detailed financial and related information, takes the form of a statutory declaration in which the person taking responsibility for the tender confirms that all the tender information is “complete and correct” and authorises the Department:
“to undertake the necessary steps to assess the financial viability of the organisation by checking information contained within this tender with, or obtaining additional information from:
·Other Commonwealth agencies such as the Australian Taxation Office, Australian Securities Commission;
·State or Territory agencies;
·law enforcement agencies;
·credit reference agencies;
·Courts or Tribunals; or
·any other appropriate organisation or person reasonably required as part of these checks.”
The signatory of the tender form is also reminded that a person who wilfully makes a false statement in a statutory declaration is guilty of an offence, the punishment for which is imprisonment for a term of up to four years. This to some extent also tells against the likelihood that the Department would have false data given to it if it has to disclose the documents in issue.
The lack of any evidence from the Department, as opposed to Mr Campbell’s assertion, of the existence of a risk of the provision of false information relevant to the financial viability of tenderers, despite the range of verifiable tender information required and given particularly the Department’s specific experience with awarding contracts to private organisations for the provision of employment services during a period of some years immediately prior to the establishment of the “Job Network” Scheme has significance when the evidence supporting the Tribunal’s critical findings of fact comes to be evaluated in determining whether it is of such slight probative value that it should be ignored because it does not rise above the de minimis level.
Counsel pointed out that Mr Van Putten said at the Tribunal hearing that if he had known there was structured criteria for assessing financial viability prior to tendering, “we could have met the criteria”. He says that demonstrates the risk of manipulation if the assessment criteria are made public. I do not accept that Mr Van Putten’s not surprising expression of confidence in the ability of his established and apparently successful business to demonstrate its financial viability if only he had had the opportunity of directing his tender specifically to those criteria provides any evidence that some tenderers might, with access to such information, falsify data in order to win contracts.
The appellant also relied on s 43(1)(a) and (b) to show that the documents were exempt, provisions which do not require any public interest criterion to be satisfied. It was said the Tribunal’s decisions in respect of these provisions were erroneous in law.
SECTION 43(1)(a) - TRADE SECRETS
The Tribunal held that the information in the relevant extracts from the Department’s Operations Manual did not contain “trade secrets” within the meaning of this term in this provision because:
“DEWRSB is not engaged in any trade, business or commercial activity but in the provision of government services through the agency of others. It cannot be said to have competitors in that endeavour although those through whom it may potentially provide those services will be in competition with each other. As DEWRSB is not using its Operations Manual in a trade, business or commercial activity, it does not have competitors in its activities and so cannot be caused harm by disclosure of the Operations Manual to a competitor.”
In submitting that the Tribunal fell into error in not holding that the assessment criteria constituted a trade secret within s 43(1)(a), senior counsel for the Department did not submit that that material was a trade secret of the private sector organisation that developed the key criteria used by the Department from which it appears the Department purchased the right to use that information. The argument focused solely on the proposition that the assessment criteria was a trade secret of the Department’s.
In Searle Australia Pty Ltd v Public Interest Advocacy Centre (1992) 36 FCR 111, the Full Court, at 119, said of the expression “trade secrets” in s 43(1)(a):
“… the term has come to be an ordinary term of the English language. Thus, the Oxford English Dictionary gives ‘trade secret’ the meaning ‘a device or technique used in a particular trade or (trans) occupation and giving an advantage not generally known’. …
… At least in the context of the FOI Act, we think that the term does not have a technical legal meaning but is an ordinary term of the English language, though used perhaps more commonly in legal judgments and legal writings than elsewhere.”
Essential to the ordinary English meaning of trade secret is the notion of information possessed by one trader which, while the information remains not generally known, gives that trader an advantage over its competitors. The Full Court in Searle drew a distinction at 121, in the context of s 43(1)(a), between a trade secret and confidential information, emphasising that the information, to be a trade secret, must be able to be put to advantageous use by someone involved in an identifiable trade:
“An aspect of the concept of ‘trade secrets’ which was not discussed by the Tribunal is that the secrets must be used in or useable in the trade. A trade secret is an asset of the trade. Past history and even current information, such as mere financial particulars, may be confidential. The law may protect the disclosure of such information by a person who has obtained it in the course of a relationship which requires confidentiality, such as that of employee, solicitor or accountant. But such information may not be a trade secret.”
The appellant made various submissions, all designed, in my opinion, to extend the ordinary meaning of the term. The appellant submitted that the tender process engaged in by the Department could properly be characterised as an activity in trade and commerce. Reference was made to authority, including Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151. There, the Civil Aviation Authority was held to have infringed s 52 the Trade Practices Act 1974 (Cth) by making representations about the tender process it would follow in relation to the award by it of a procurement contract. By s 2A the Trade Practices Act, it was declared that that Act binds the Commonwealth “in so far as the Crown in right of the Commonwealth carries on a business”. It appears to have been common ground that the Authority was carrying on a business and that its calling of the relevant tender was an activity in trade or commerce. In my opinion, this case provides no authority for the proposition that the assessment criteria here in question constituted a trade secret of the Department within the meaning of that term in s 43(1)(a) the Freedom of Information Act 1982 (Cth). The Department has no competitors who, if they were to have access to the criteria it wishes to keep confidential, would result in the Department being deprived of some commercial advantage. Or at least the Department never attempted to make out such a case.
Reference was also made to JS McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337. Emmett J there held that the Commonwealth was not liable in respect of an alleged contravention of s 52 the Trade Practices Act. Emmett J (p 349) held that the Commonwealth had, in connection with its invitation to tenderers interested in purchasing the assets and the commercial operations of the Australian Government Publishing Service (AGPS), engaged in misleading conduct by providing certain information to McMillans with respect to the tender process that had caused McMillans’ loss. The decision turned on whether the Commonwealth, in inviting these tenders, was carrying on a business within s 2A the Trade Practices Act. The Department of Administrative Services called tenders for the purchase of the assets of AGPS in a one-off sale transaction and tenders for the purchase of the commercial operations of AGPS. The latter tenders included package 3, which was a request for tenders for the rights to provide printing and related services to Commonwealth Departments. At 355, Emmett J said, specifically with reference to the package 3 tender:
“… The assets, including the goodwill of the activities carried on by the Commonwealth, are being offered to private enterprise for purchase so that private enterprise may provide to the Commonwealth the same services which the Department of Administrative Services had been providing under the guise of AGPS.”
Emmett J drew a distinction between the provision by AGPS on a regular and systematic basis of printing services to other Commonwealth Departments and agencies, on the one hand, and the utilisation by the Commonwealth in the guise of the various Departments and agencies of those services provided by AGPS. His Honour held that, while AGPS could be regarded as carrying on a business, utilisation by the various Commonwealth Departments of those services, whether they were provided by AGPS or a commercial provider after privatisation of AGPS’ activities, did not involve any of those Departments in carrying on a business, but rather “in the carrying out of governmental functions”. His Honour added, at 355:
“… It could not be said that the Commonwealth in those guises is carrying on a business. It is acquiring the services systematically and regularly, but only for the purpose of governing.”
Neither in respect of the one-off sale by the Commonwealth of the plant and equipment of AGPS nor in respect of the sale to private organisations of the rights to provide printing services to government Departments in an ongoing trading relationship between those private organisations and those Departments was the Commonwealth carrying on any business. Once it is recognised that the “Job Network” Scheme involves the Commonwealth in providing governmental services to the unemployed through the medium of contracted private sector organisations, it is apparent that the Commonwealth cannot be carrying on any business; and it does not become involved in carrying on a business because it provides those governmental services in a sequence of contractual arrangements with the private service providers, each of which operates only for a limited period.
In Team Employment & Training Network Pty Ltd v Secretary, Department of Employment, Workplace Relations and Small Business [1999] FCA 1792, unreported, Cooper J refused an interlocutory injunction in proceedings brought by an unsuccessful tenderer for one of the “Job Network” contracts in the same round of tenders in which the present respondent participated for review under the ADJR Act of the decision of the Department to reject the appellant’s tender. His Honour held that the appellant did not have an arguable case on the critical issue whether the decision was a reviewable one, ie, whether it was a decision made under an enactment. He said:
“20 There is no evidence that the Commonwealth of Australia was acting under an enactment at all when determining to call for tenders for the provision of employment related services. Rather, the material prima facie purports to be an exercise by the Commonwealth of Australia of its executive power to make contracts, made in the normal course of administration of the affairs of government, which does not require express authorisation by statute.”
It appears that at the hearing the appellant also claimed interlocutory relief on the basis that it could, by amendment, raise a case of contravention of s 52 the Trade Practices Act by the Commonwealth in respect of its rejection of the appellant’s tender. His Honour held that again, the appellant could not show an arguable case for relief on that basis. His Honour agreed with the reasoning of Emmett J in the McMillan case and held that the appellant could not show, to the minimal level required for interlocutory relief, that the Commonwealth, by issuing the request for tenders and in dealing with prospective tenderers, was engaged in carrying on the business of providing employment-related services: “[t]he conduct of the Commonwealth … was no more than an exercise of executive power in respect of employment”.
Cooper J, correctly in my respectful submission, recognised that there is distinction between government functions and trading or commercial functions and that distinction holds true even though government may deliver its governmental functions to interested members of the public in a commercial format, eg, by outsourcing them to private service providers. If it adopts that method of governmental service delivery, it is still engaged in a function of government, not in a business or trade activity. Repeatedly outsourcing the delivery of government services does not change the character of what the Department does from a governmental to a business or commercial function.
“Job Network” may well involve the privatisation of the provision of services to the unemployed that have traditionally been the province of government as one of its welfare or social security functions. But so describing the process of transferring, under contracts with the Department, the immediate responsibility for delivery of such services to the unemployed from a government Department to private organisations does not mean that the Department, in letting those contracts, is any the less engaged in governmental, ie, non-commercial, functions than was the case when it provided those services directly to the unemployed via its own public servants. That a government Department may procure goods or services from private suppliers as a means of performing a government function does not necessarily mean that procurement becomes a commercial activity of the Department even though the sale and purchase of similar goods or services are the subject of trade among private sector suppliers and consumers.
It was submitted that the Tribunal, in concluding that the documents were not exempt under s 43(1)(a) (and also under s 43(1)(b) and (c)), wrongly focused on the “Job Network” program as a whole, rather than on the tender process engaged in by the Department. But, unlike the position in The Queen v Cohen; Ex parte Motor Accidents Insurance Board (1979) 141 CLR 577 where it was held that the Tasmanian Motor Accidents Insurance Board carried on two discrete activities, the one of a business character, the other of a governmental character, the tender process is but one element of the “Job Network” Scheme. The Tribunal was correct in not examining the tender process divorced from the Scheme of which it was but part in determining whether the Department’s tendering activities had a commercial or business character. The fallacy in the argument is that it would be enough to exempt government documents from disclosure under the Freedom of Information Act, as containing trade secrets of the government agency concerned, if the particular circumstances in which the documents were brought into existence by the agency, divorced entirely from the process in which that occurred, could be said to look like an activity carried on somewhere in the commercial sector. So far as Commonwealth undertakings within s 43(3) are concerned, it is only the trade secrets of those undertakings that are exempt from disclosure under s 43(1)(a), not information sought to be kept confidential by a government agency of the kind that may be the subject of a trade secret in a different context.
Counsel also submitted that there was a competitive aspect to the information in the hands of the Department. It was said that “the competitive aspect lies in the relationship between the Commonwealth as a potential contractor and the tenderers. That is, the objective of the Commonwealth is to get the best value for its money from the tenderers, from those contractors whom it accepts”. It might be thought that this has been the constant motivation of every Commonwealth officer who has called tenders for the supply of goods and services to the Commonwealth since an officer of the Commonwealth, acting on the directions of the first Auditor-General appointed in 1901 under the Audit Act, Act No 4 of 1901, first called tenders for the supply of stationery for use by clerks in the newly established Auditor-General’s office. Such a motivation by a Commonwealth procurement officer does not make processes for assessing tenders, even processes kept confidential to the Commonwealth, trade secrets of the Commonwealth.
In my opinion, it matters not in determining whether the assessment criteria is a trade secret of the Department that commercial organisations from whom tenders were sought by the Department were not captive to the Department in the sense that they might be able to ignore the Department and themselves trade in competition with other organisations in providing employment placement services to persons not eligible or not interested in participating in schemes run by or for the Commonwealth Government. That those organisations might trade with others and have their own trade secrets is, in my opinion, irrelevant to the question whether the assessment criteria is a trade secret of the Department: the Department was not a participant in any such area of trade, though it may have been involved in the provision of employment services indirectly through “Job Network” contracted service providers similar to those provided by private sector organisations to persons seeking employment outside the scope of the Commonwealth’s area of activity. The Department no more gets a relevant advantage, ie, an advantage vis-à-vis those private sector organisations involved in the non-governmental provision of employment and personal services, by keeping secret from those tendering for employment service contracts with it than it would if it were to keep confidential quality criteria for assessing tenders for the supply to the Department of equipment for use by Departmental officers.
SECTION 43(1)(b)
The Tribunal concluded that the information in question was not “any other information having a commercial value” within this provision for the following reason:
“… the information, which is the subject of the exemption, is that information which would have some worth, either in monetary or some other form, when exchanged between those engaged in a transaction for the sale or exchange of that information. The essence of the meaning of “commercial value” is that the information must have a worth to a person other than the agency which possesses the information. To have “commercial value” in the sense in which it is used in paragraph 43(1)(b), it is not enough that the information in the document enables an agency to make, for example, sound economic or commercial decisions. Such information may be concerned with the proper and efficient operations of an agency. That is properly the subject of a claim for exemption under section 40. Paragraph 43(1)(b) is not concerned with protecting from disclosure that which would, or could reasonably be expected to affect the proper and efficient operations of an agency. It is concerned with protecting from disclosure that information for which the agency could obtain some worth were it to exchange it with another. It is concerned with commercial value and not with the internal operations or management of an agency.”
It went on to find that the information in question did not have any commercial value in this particular sense.
In reaching this conclusion, that, for information to have “a commercial value” within s 43(1)(b), it must be information for which the agency could obtain some worth were it to seek to sell or otherwise exchange it, the Tribunal relied on the exemption provided for by s 40 to show that s 43(1)(b) could not be concerned with information the possession of which enabled the relevant government agency to obtain value for money expended by it in carrying on its functions. It was submitted that the Tribunal fell into error of law by adopting this construction of the sub-section. In so far as the Tribunal found support for its interpretation on the presence of the exemption in s 40, it appears to have infringed s 32 the Freedom of Information Act. But it was said by the appellant that, properly construed, the expression “commercial value” in s 43(1)(b) refers to information that has a commercial value if it can be turned to commercial advantage by the owner of the information so that its focus is on the value and utility of the information to its owner rather than on the potential of the information for sale or exchange.
It can be accepted that the expression “commercial value” in the context of s 43 is not a technical legal expression, but has its ordinary English meaning. Appellant’s counsel submits that the introductory words of the sub-section “any other information” suggests that it is an extension of the class of information contained in s 43(1)(a), ie, trade secrets. I accept this submission, in so far as it suggests that s 43(1)(b) is designed to extend exemption from disclosure to information having commercial value but which does not qualify as a trade secret. The possible distinction here relevant is adverted to in Searle at 121. But, to attract the exemption here in question, the information must not merely have value to the Department, that value must be able to be described as commercial in character. That and the fact that this exemption is an extension of the exemption provided for in respect of trade secrets suggests that the information must have value to the Department in respect of those of its activities which can be said to bear a commercial, as opposed to an administrative or governmental character. I therefore do not think that the Tribunal was correct in finding in the words of this provision a requirement that the information have exchange value. Information could, I think, have a commercial value within the sub-section though it might not be capable of being exchanged for money or money’s worth if it was still of use to the government agency in activities of the agency that were of a commercial, as distinct from a governmental character.
But for the reasons given for holding that the information, in so far as it may qualify as secret nevertheless cannot qualify as a trade secret, this information, whatever value it may have to the Department, cannot be said to have a value commercial in character.
On the proper construction of this provision, the only conclusion open on the material before the Tribunal, there being no disputed facts, is that the information in question did not have any commercial value to the Department because it was of use only in respect of the performance by the Department of its governmental functions. Though the Tribunal erroneously construed the sub-section, the error does not warrant remitter of the case to the Tribunal. See Loughnan (Principal Registrar, Family Court of Australia) v Altman (1992) 111 ALR 445 at 451.
The attacks made on the Tribunal’s decision fail.
Though the appellant has now disclosed to the respondent some of the documents the subject of the Tribunal’s decision, which are listed in Exhibit 1, it is appropriate to order that the appeal be dismissed with costs.
I certify that the preceding sixty-two (62) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Drummond. Associate:
Dated: 4 April 2001
Counsel for the Appellant: PJ Hanks QC and M Moshinsky Solicitor for the Appellant: Australian Government Solicitor Counsel for the Respondent: K Feeley Solicitor for the Respondent: Drakopoulos Black Solicitors Date of Hearing: 14 June 2000 Date of Judgment: 4 April 2001
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