FEDERAL COURT OF AUSTRALIA

Secretary, Dept of Workplace Relations & Small Business v The Staff Development & Training Centre Pty Ltd [2001] FCA 1375

ADMINISTRATIVE LAW – freedom of information – where appellant publicly invited organisations to tender for provision of certain employment services – where respondent participated in tender process – where respondent’s tenders were unsuccessful – where respondent sought access to documents of the appellant under Freedom of Information Act 1982 – where the documents related to operations manual used to assess financial viability of tenderers or created to assess respondent’s financial viability by reference to operations manual – where Administrative Appeals Tribunal held that ss 36, 39, 40, 43 of Freedom of Information Act 1982 did not apply to make information exempt from disclosure – whether Administrative Appeals Tribunal based decision on a fact which did not exist

Freedom of Information Act 1982 (Cth) ss 36, 39, 40, 43

Administrative Appeals Tribunal Act 1975 (Cth) s 44

SECRETARY, DEPARTMENT OF WORKPLACE RELATIONS AND SMALL BUSINESS v THE STAFF DEVELOPMENT AND TRAINING CENTRE PTY LTD

Q81 OF 2001

TAMBERLIN, MANSFIELD & EMMETT JJ

28 SEPTEMBER 2001

BRISBANE

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

THE COURT ORDERS THAT:

1.      The appeal be allowed. 

2.      The order made by the primary judge be set aside.

3.      In lieu thereof, the decision of the Administrative Appeals Tribunal dated 8 February 2000 be set aside.

4.      The matter be remitted to the Administrative Appeals Tribunal for decision according to law and in accordance with these reasons. 

5.      The respondent pay the appellant’s costs of the appeal.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

REASONS FOR JUDGMENT

THE COURT:

1                     The appellant (“the Secretary”) is the Secretary of the Department of Workplace Relations and Small Business (“the Department”).  The Secretary is charged with the administration of the “Job Network” scheme on behalf of the Commonwealth.  The respondent, The Staff Development and Training Centre Pty Ltd (“the Company”), sought access to certain documents of the Department under the Freedom of Information Act 1982 (Cth) (“the Act”).  On 27 May 1998, a delegate of the Secretary decided to refuse access to certain of the documents.  That decision was affirmed by another delegate on 31 July 1998.  On 3 September 1998, the Company lodged an application to the Administrative Appeals Tribunal (“the Tribunal”) to review that decision. 

2                     On 8 February 2000, the Tribunal made a decision setting aside the decision of the Secretary’s delegate and substituting a decision that certain documents were not exempt documents within the meaning of the Act.  The Secretary appealed from the decision of the Tribunal to the Federal Court under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth).  On 4 April 2001, a judge of the Court ordered that that appeal be dismissed.  The Secretary now appeals to the Full Court from the order of the primary judge.

STATUTORY FRAMEWORK

3                     Section 11(1) of the Act provides that, subject to the Act, every person has a legally enforceable right to obtain access, in accordance with the Act, to a document of an agency, other than an “exempt document”.  “Agency” is defined in s 4(1) as including a department.  Under the same section, “exempt document” means, inter alia, a document that, by virtue of a provision of Part IV, is an exempt document.  Part IV contains several provisions that define what are exempt documents. 

4                     The relevant provisions are ss 36, 39, 40 and 43.  Those provisions relevantly provide as follows:

“36      Internal working documents

(1)        Subject to this section, a document is an exempt document if it is a document the disclosure of which under this Act:

(a)       would disclose matter in the nature of, or relating to, opinion, advice or recommendation obtained, prepared or recorded, or consultation or deliberation that has taken place, in the course of, or for the purposes of, the deliberative processes involved in the functions of an agency or Minister or of the Government of the Commonwealth; and

(b)        would be contrary to the public interest.

(2)       In the case of a document of the kind referred to in subsection 9(1), the matter referred to in paragraph (1)(a) of this section does not include matter that is used or to be used for the purpose of the making of decisions or recommendations referred to in subsection 9(1).

39        Documents affecting financial or property interests of the Commonwealth

(1)        Subject to subsection (2), a document is an exempt document if its disclosure under this Act would have a substantial adverse effect on the financial or property interests of the Commonwealth or of an agency.

(2)        This section does not apply to a document in respect of matter in the document the disclosure of which under this Act would, on balance, be in the public interest.

40        Documents concerning certain operations of agencies

(1)        Subject to subsection (2), a document is an exempt document if its disclosure under this Act would, or could reasonably be expected to:

(a)        prejudice the effectiveness of procedures or methods for the conduct of tests, examinations or audits by an agency;

(b)        prejudice the attainment of the objects of particular tests, examinations or audits conducted or to be conducted by an agency;

(c)        have a substantial adverse effect on the management or assessment of personnel by the Commonwealth or by an agency;

(d)        have a substantial adverse effect on the proper and efficient conduct of the operations of an agency; or

(e)        have a substantial adverse effect on the conduct by or on behalf of the Commonwealth or an agency of industrial relations.

(2)        This section does not apply to a document in respect of matter in the document the disclosure of which under this Act would, on balance, be in the public interest.

………………………………

43        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.”

THE tribunal’s decision

5                     The proceeding arises out of 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.  The new system, called Job Network, involved the establishment by the Federal Government of a competitive market for the provision of employment services to the unemployed.  Those private business organisations, and some non-profit organisations, that were interested in becoming providers of such services to the Commonwealth were to be invited to submit tenders to the Department for the award of contracts for the provision of designated employment services to unemployed persons.  Under the new system, Australia was to be divided into 29 labour market regions.  The Department decided to have five such service providers in each region.  Such service provider organisations compete with each other for the award of contracts by the Department for the provision of employment services and for the custom of unemployed persons seeking those services.

6                     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.  The Department made available to the public a document containing information on the tender process entitled “Employment Services Request for Tender 1997 Overview” (“the Overview”).  The Overview recorded that an independent quality assurance team was to be selected to oversee the tender evaluation process.  A probity plan to deal with requests for information and representations from organisations that submit tenders was included in the Overview. The purpose of the probity plan was “to ensure that each tenderer is treated equitably and that no party receives an unfair advantage”.

7                     The tender assessment process described in the Overview included a number of sequential steps, one of which was “Check of the financial viability”.  “Financial Viability” was the subject of two sections in another booklet issued by the Department, which was publicly available, entitled “Employment Services Request for Tender 1997 Tendering Conditions and Draft Contract” (“the Conditions”).  The Conditions included a section on financial viability in the following terms:

“All tenders submitting an application in accordance with the foregoing conditions will be assessed for the 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, [the Department] 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.”

8                     The information that each tenderer was required to submit included financial statements for, if possible, the previous three years.  Those statements were to include profit and loss sheets, balance sheets, statements of cash flow and notes to accounts together with the name, qualifications and address of the auditor.  Other financial information was acceptable if auditors’ 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 other matters such as government investigations of the organisation or collections by debt collection agencies on behalf of creditors.

9                     The principal witness on behalf of the Secretary in the proceeding before the Tribunal was Mr R.I. Campbell.  Mr Campbell said that the aim of the financial viability assessment of each tenderer was to minimise risk to the Commonwealth, rather than to measure the profitability of tenderers or to gauge their success in the new market. Tenderers were told that such payments would take the form of “upfront service fee and additional outcome fees” in respect of job placements achieved by the particular contract service provider.  Mr Campbell said that an essential goal was to ensure that organisations had the capacity to survive in the initial start up period of the market before the outcome payments were earned and paid.  That delayed payment element was emphasised as making the assessment of financial viability critical.

10                  The documents in respect of which the Secretary claimed exemption fell into two categories.  The first consisted of extracts from the Tender Assessment Operations Manual (“the Operations Manual”) prepared by the Department for use by those of its officers responsible for assessing the financial viability of tenderers.  The second category consisted of documents created for the purpose of assessing the Company’s financial viability, by reference to procedures set out in the Operations Manual.  The Company tendered for a number of contracts but all of its tenders were unsuccessful.  It did not pass the financial viability assessment and its tenders were not further considered.

11                  The Secretary claimed that both categories of documents were exempt on the following grounds:

·        disclosure of the documents would have a substantial adverse affect on the financial interests of the Department – s 39(1);

·        disclosure of the documents would:

-         prejudice the effectiveness of procedures or methods for the conduct of tests, examinations or audits by the Department – s 40(1)(a);

-         prejudice the attainment of the objects of particular, tests, examinations or audits conducted or to be conducted by the Department – s 40(1)(b);

-         have a substantial adverse effect on the proper and efficient conduct of the operations of the Department – s 40(1)(d);

·        disclosure of the documents would disclose information concerning the business, commercial or financial affairs of the Department being information, the disclosure of which would unreasonably affect the Department in respect of its lawful business, commercial or financial affairs – s 43(1)(c)(i).

12                  The Secretary’s case in relation to those grounds was that:

·        the aim of the financial viability assessment was to ensure that organisations awarded contracts to provide services had the financial capacity to survive in the initial start up period of the market before outcome payments due under those contracts were earned and paid, so that the delivery of services under the Job Network scheme would not be interrupted;

·        the Department intended to call tenders for the award of employment service contracts for periods subsequent to the first round;

·        the Department was concerned to minimise the risk that tenderers might manipulate their financial information to the disadvantage of the Commonwealth;

·        that risk would be heightened if the Department were to disclose the criteria used for the assessment of tenderers financial viability.

13                  The Tribunal made two critical findings of fact that formed the basis of its conclusions in relation to ss 39(1), 40(1) and 43(1)(c)(i) that the documents were not exempt.  The findings were as follows:

“Even without a knowledge of the criteria and processes by which tenders will be assessed, it is open to a tenderer to manipulate the information he or she is required to give.  It can be manipulated to show its current and projected financial situation in the best light.”

“On the evidence that is available, I am satisfied that, if the criteria and processes were known by the tenderers, [the Department] would, and could reasonably be expected to, continue to have the same opportunities to identify any attempt to manipulate information to fit any criteria revealed in the operations manual.”

The Secretary complains that there was no evidence or other material before the Tribunal to support those findings.  No evidence was led on behalf of the Company.  The only evidence on the question of manipulation of financial data before the Tribunal was that given by Mr Campbell.  The findings concerning identification of attempts to manipulate were contrary to Mr Campbell’s evidence.

14                  In addition, the Secretary claimed that the documents were exempt because disclosure of the documents would disclose:

·        trade secrets – s 43(1)(a);

·        other information having a commercial value that would be, or could reasonably be expected to be, destroyed or diminished if the information were disclosed – s 43(1)(b).

The Tribunal concluded that neither of those exemptions was made out in respect of any of the documents in question.  The Tribunal held that the documents did not disclose a trade secret because they did not contain information that was used in a particular trade or business and that gave the Department an advantage in that particular trade or business.  The Tribunal also concluded that the exemption for any other information having a commercial value did not apply, because the information in question did not have some worth, either in monetary or some other form, when exchanged between those engaged in a transaction for the sale or exchange of the information.  The Tribunal held that the essence of the meaning of “commercial value” was that the information must have a worth to a person other than the agency which possesses the information.  The Secretary contended that the Tribunal erred in those conclusions.

15                  Finally, the Secretary claimed that the documents were exempt because the disclosure of the documents would disclose matter in the nature of or relating to opinion, advice or recommendation obtained, prepared or recorded, or consultation or deliberation that has taken place, in the course of, or for the purpose of the deliberative processes involved in the functions of the Department and would be contrary to the public interest – s 36(1).

16                  The Tribunal concluded that s 36(1)(a) was not satisfied and, accordingly, did not consider s 36(1)(b) in relation to any of the documents.  However, although the Tribunal considered whether the disclosure would disclose matter “in the nature of” opinion, recommendation or advice etc, the Tribunal failed to consider whether disclosure would disclose matter “relating to” opinion, advice or recommendation or consultation or deliberation that has taken place, in the course of, or for the purposes of, the deliberative processes involved in the functions of an agency or Minister or of the Government of the Commonwealth.  The Secretary contended, therefore, that the Tribunal failed to turn its mind to a relevant question.

THE decision of the primary judge

17                  The Secretary contended before the primary judge that there was no evidence to support the findings referred to in paragraph [13] above.  As indicated above, no evidence was led on behalf of the Company and the only evidence on the question of manipulation of financial data was the evidence of Mr Campbell, which was contrary to the Tribunal’s findings.  The primary judge concluded, nevertheless, that there was some evidence upon which the Tribunal could have based the findings in question.

18                  His Honour held that there was evidence before the Tribunal that tenderers were not wholly ignorant of the current of information that would be likely to produce a favourable assessment of financial viability.  However, his Honour did not identify that evidence.  No attempt was made on behalf of the Company to identify such evidence on the hearing of the appeal. 

19                  The critical passage from the primary judge’s reasons is as follows:

“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.”

20                  Thus, the primary judge attributed evidence to Mr Campbell 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”.  However, those words, despite being in quotation marks in the reasons, were in fact not spoken by Mr Campbell but by the Deputy President of the Tribunal.  Indeed, the quoted words are contrary to the whole thrust of Mr Campbell’s evidence.

21                  The primary judge also says in that passage that the evidence showed that tenderers were put on explicit notice of a 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.  The Secretary conceded that that is correct.  However, that evidence is not logically probative of the findings in question.

22                  The primary judge also said in the passage set out above that 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.  However, Mr Campbell’s evidence does not contain such an acknowledgment.  Even if it did, that evidence would not be logically probative of the findings in question.

23                  The Tribunal’s conclusions in relation to the application of ss 39(1), 40(1) and 43(1)(c)(i) are dependent upon the findings set out in paragraph [13] above.  In its reasons, after a series of paragraphs in which those findings are to be found, repeated verbatim in some instances, the Tribunal concluded that it was not satisfied as to the matters referred to in the respective sections.  The evidence referred to by the primary judge, upon which his Honour considered that the Tribunal was entitled to make the findings, does not support those findings.  The Company referred to no other evidence.  Thus, the challenge to the findings in question before the primary judge should have succeeded. 

24                  It follows that the Tribunal’s conclusions that none of ss 39(1), 40(1) and 43(1)(c) was satisfied was the result of an error of law.  The question of whether those paragraphs are satisfied in relation to the documents should be remitted to the Tribunal for further consideration.  No submissions were directed by the parties as to whether that further consideration should be limited to the evidence already before the Tribunal.  Accordingly, the Court expresses no view as to whether further evidence should be admitted. 

25                  The primary judge was of the view that the Tribunal made no error in rejecting the application of ss 43(1)(a) and (b).  His Honour considered that, once it was recognised that the Job Network scheme involved the Commonwealth in providing governmental services to the unemployed through the medium of contracted private sector organisations, it is apparent that the Commonwealth could not be regarded as carrying on any business.  It does not become involved in carrying on business merely 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.

26                  His Honour considered that there is a distinction between government functions and trading or commercial functions and that that distinction holds true even though government may deliver its governmental functions to interested members of the public in a commercial format, for example, by “out-sourcing” them to private service providers.  If it adopts that method of governmental service delivery, it is still engaged in the function of government, not in the business of trade activity. 

27                  His Honour concluded that the Department, in letting contracts as described above, is none the less engaged in governmental, that is, non-commercial, functions.  That a government department may procure goods or services from private suppliers as a means of performing 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.  His Honour concluded that disclosure of the documents would not entail the disclosure of trade secrets.

28                  Section 43(1)(b) is designed to extend exemption from disclosure to information having commercial value that does not qualify as a trade secret.  His Honour considered that, to attract the exemption provided by s 43(1)(b), the information must not merely have value to the Department.  That value must also be able to be described as commercial in character.  The fact that the exemption is an extension of the exemption provided for in respect of trade secrets indicates 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.  His Honour concluded, therefore, that the Tribunal was incorrect in finding in the words of s 43(1)(b) requirement that the information have exchange value.  However, 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, the information, whatever value it may have to the Department, cannot be said to have a value “commercial” in character.

29                  For the reasons advanced by his Honour, the exemptions contained in s 43(1)(a) and s 43(1)(b) have no application to the documents in question. 

30                  Section 36(1)(a) contains two limbs.  In failing to consider whether or not disclosure of the documents would disclose matter relating to, as distinct from matter in the nature of,opinion, advice or recommendation or consultation or deliberation as referred to in s 36(1)(a), the Tribunal erred.  If, after reconsideration of the application of ss 39(1), 40(1) and 43(1)(c), the Tribunal concludes that the documents in question are not exempt, it would also be necessary for the Tribunal to consider whether disclosure of the documents would disclose matter relating to opinion, advice or recommendation or consultation or deliberation as referred to in s 26(1)(a).  If the Tribunal concludes that it would, it would then be necessary to consider the application of s 36(1)(b).  That is to say, a document will not be exempt under s 36(1), even if it satisfies s 36(1)(a), unless it also dissatisfies s 36(1)(b). 

CONCLUSION

31                  The appeal should be upheld.  The order made by the primary judge should be set aside.  In lieu thereof, there should be orders upholding the appeal from the Tribunal, setting aside the decision of the Tribunal and remitting the matter to the Tribunal for decision according to law and in accordance with these reasons.  The Company should pay the Secretary’s costs of the appeal.

Associate:

Dated:              27 September 2001