FEDERAL COURT OF AUSTRALIA

Qantas Airways Limited v Rolls-Royce PLC[2010] FCA 1481

THE COURT ORDERS THAT UNTIL FURTHER ORDER:

1.    Pursuant to s 50 of the Federal Court of Australia Act 1976 (Cth), the following parts of exhibit BRN1 to the affidavit of Beverley Newbold affirmed on 2 December 2010 be confidential, and access thereto be restricted to the parties and their legal advisors:

(a)    as regards tab 13 (Aircraft General Terms Agreement), in clause 5.1 (the name and account details of the Seller's Account), clauses 5.3.2, 5.3.3 and 5.3.5 (Payments – Predelivery Payments), 7.3.1 (Certification – Costs of SCN for Certification), 9.3.2 (Delivery – Fly Away), 10 (Excusable Delay), 11 (Non-Excusable Delay), 12 (Warranties and Service Life Policy), 14.4.1 (Technical Data and Documentation – Revision Service – General), 19 (Indemnification and Insurance), 20.3, the words between “within” and “after” in line 4 of 20.4, 20.5.4 (Termination), and 22.4 (Miscellaneous Provisions – Law and Jurisdiction);

(b)    as regards tab 14 (Purchase Agreement), clauses 3.1.1 (Basic Prices – A380-800 Airframe Basic Price), 3.2.1 and 3.2.2 (Basic Prices), and in 5.1 (Predelivery Payments – Seller’s Account) the name and details of the seller’s account;

(c)    as regards tab 15 (Letter Agreement No 1), clauses 2.1 and 2.2 (Guaranteed Performance), 3.1.1 to 3.1.7, 3.2 and 3.3 (Mission Guarantees), 4 (Usable Load), 5 (Noise and Emissions), 7 (Guarantee Compliance), 8 (Adjustment of Guarantees), 10 (Undertaking Remedies), 11 (Cruise Specific Range at Delivery) and the Schedule on page 13 of Letter Agreement No. 1;

(d)    as regards tab 16 (Letter Agreement No 11), the first two paragraphs at the top of page 2 of Letter Agreement No. 11, clauses 1 (Noise), all of that part of clause 2 which appears on 479 of Exhibit BRN 1, with the exception of the final paragraph (Payload Commitment), 3 (Airport Accessibility), 4 (Viability), 5 (Termination and Remedies), and 7 (Component Repairability);

2.    Pursuant to s 50 of the Federal Court of Australia Act 1976, the following parts of exhibit BRN1 to the affidavit of Beverley Newbold affirmed on 2 December 2010 be confidential, and access thereto be restricted to the parties and their legal advisors:

(a)    as regards tab 17 (Spare Engine Purchase Contract), clauses 2.2 (Sale of Engines), 3.2 to 3.7 (Specification), 7 (Interface Services), 11.1, 11.2 and in 11.6 (Payment and Invoice) the name and details of the bank account, 12.1 to 12.4 (Warranties), 13 (Insurance), 14 (Indemnity), 15 (Customer Support), 16 (Delay in Delivery Date), 18.4 and 18.5 (Termination), the words between “for” and the semi-column in 33.1(b) (Priority of Documents), Exhibit B.1, B.2 and B.3 (Engines Delivery, Prices and Escalation) and Exhibit C (Warranties);

(b)    as regards tab 18 (Side Agreement Number 1 to the Spare Engine Purchase Contract), clauses 1.5 (Introduction), 3 (Critical Issues and Milestones), 4 (Noise Restrictions), 5 (Payload), 6 (Airport Accessibility), 7 (A380 Aircraft Viability), 8 (Qantas Right to Terminate), 9 (Termination), and 10 (Remedies);

(c)    as regards tab 19 (Fleet Support Agreement), the definitions ‘Anniversary Date(s)’, ‘Failure’ and ‘Term of Guarantee’ in clause 1 (Definitions), clauses 2 (Scope of Agreement), 3 (Governing Conditions and Administration), 4 (Grant of Warranties and Limitation of Liability), the words between “effective” and “after” in the second line of 5.2, the words between “exceeding” and “following” in the second line of 5.4, and 5.4.1 to 5.4.5 (Events of Default and Termination), Exhibit A (Aircraft Delivery Schedule), Exhibit B (Operating Assumptions) and Exhibit C (various product guarantees);

(d)    as regards tab 20 (Fleet Incentives Agreement), the words in brackets after “Spare Engine Purchase Contract” in the third line of recital B, clauses 2 (Financial Assistance), 3 (Support), 4 (Engines up to 76,000 lbs take-off thrust rating), 5 (Flight certification engines), 6.1.1(a) and 6.1.1(b) (Termination), and Exhibit A (Aircraft Delivery Schedule);

(e)    as regards pages 587 to 590 of Exhibit BRN, those provisions identified in sub-paragraph (f) below;

(f)    as regards tab 21 (Side Agreement Number 1 in respect of the Fleet Incentives Agreement), the words in brackets at the conclusion of clause 1.2(iii), the words between “a” and “comprehensive” in 1.3 (Introduction), and the words between “for” and “(or…” in the second line of 4.1, and 4.2 to 4.10 (Engine Maintenance Agreement);

(g)    as regards tab 22 (Engine Maintenance Agreement), all words after “means” in the definition of ‘Lease Agreement’, the words between “time” in the first line and “thereafter” in the second line of the definition of ‘Period of Cover’, all words between "which" and the commencement of the last paragraph of the definition of ‘Qualified Event’, and all words after “means” in the definition of ‘Total Reconciliation Cost’ in the Definitions and Interpretation clause, 3 (Payment Terms), 4 (Warranties and Guarantees), 5 (Obligations of Qantas), 8 (Insurance), 10 (Delay), 11.2 to 11.7 (Termination), 14.3 (Liability), 17.2, 17.3 and 17.4 (Effective Date, Expiration and Extension), Schedule 1 (Covered Services), Schedule 2 (Charges), Schedule 3 (Line Maintenance Burden Guarantee), Schedule 4 (Delivery Schedule), Schedule 7 and Schedule 9 (Qualified Equipment);

(h)    as regards tab 25 (Side Agreement Number 1 to Fleet Support Agreement), clauses 4 (Operating Assumptions) and Exhibit A (Aircraft (Delivery Schedule);

(i)    as regards tab 26 (Side Agreement Number 2 to Fleet Incentive Agreement), clauses 3 (Initial Provisioning Spare Parts Credit), 4 (Tooling Credit), 5 (Escalation of Financial Assistance Credits), 6 (Support), and Exhibit A (Aircraft Delivery Schedule); and

(j)    as regards tab 27 (Side Agreement Number 2 to the Spare Engine Purchase Contract), clauses 5 (Number of Spare Engines), 7 (Payment and Invoice), Exhibit A (Aircraft Delivery Schedule), Exhibit B.1 (Engines Delivery, Prices and Escalation – Engines and Delivery Schedule) and Exhibit B.2 (Engines Delivery, Prices and Escalation – Base Price Escalation Formula).

3.    The Applicant provide a copy of these orders to a representative of Airbus S.A.S (Airbus) by electronic means (facsimile and/or email) prior to 5 pm on Friday, 17 December 2010.

4.    The orders in paragraph 1 above be stayed until 12 noon on Thursday, 23 December 2010.

5.    The orders in paragraph 1 take effect from 12 noon on Thursday, 23 December 2010 unless, before that time, Airbus files a notice of motion seeking further or varied orders under s 50 of the Federal Court of Australia Act 1976.

6.    Airbus be granted leave to file any such motion.

7.    The proceeding be stood over until 9.30 am on 2 February 2011 for further directions.

8.    There be liberty to apply.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

1    Qantas Airways Limited commenced these proceedings on 2 December 2010 against Rolls-Royce PLC. On that day, Moore J granted an ex parte injunction restraining Rolls-Royce from taking steps to commence any proceedings in the courts of the United Kingdom, or elsewhere, that seek to restrain the hearing of these proceedings, or to pre-empt, or otherwise, interfere with Qantas’ claims for relief in these proceedings. The injunction included a restraint on Rolls-Royce commencing proceedings for negative declaratory relief. In substance, the order amounted to an anti-anti-suit injunction. Journalists have requested access to evidence on which Qantas relied in support of the orders made by his Honour under O 46 r 6 of the Federal Court Rules 1979 (Cth).

2    His Honour also made a confidentiality order, in respect of the whole of four agreements entered into between Qantas and Airbus Industries SA. These related to the construction and provision of what is now known as the Airbus A380 aircraft, that Qantas had agreed to purchase from Airbus. In addition, Qantas, in its own right, and also at some urging from Rolls-Royce, has sought orders today under s 50 of the Federal Court of Australia Act 1976 (Cth) to maintain the earlier confidentiality order and to extend it to a considerable number of agreements made between Qantas and Rolls-Royce.

3    The proceedings have their genesis in the fact that on 4 November 2010, a Qantas A380-800 aircraft, powered by four Trent 900 engines manufactured by Rolls-Royce, suffered an in-air incident shortly after taking off from Singapore en route to Australia. That involved one of the Rolls-Royce engines suffering, what Qantas alleges, was an oil fire that led to the turbine overworking. In turn that allegedly caused a disk to rupture, next burst and then break through the engine’s covering and the aircraft’s wing. This incident caused the aircraft and its crew to experience a considerable amount of difficulty. Fortunately, it landed safely in Singapore without any casualty to its passengers, crew and cargo. The incident generated intense international publicity.

The anti-anti-suit injunction application

4    Qantas sought the anti-anti-suit injunction so that it would not be precluded from relying on its claims against Rolls-Royce, in these proceedings, based on what it alleges were contraventions of s 52 of the Trade Practices Act 1974 (Cth) that it says entitles it to ancillary relief and damages under ss 82 and 87.

5    Before Moore J Qantas filed and relied on its application commencing the proceedings, together with a statement of claim, and two affidavits in support of its application for interlocutory relief. One of the affidavits was by a solicitor acting for Qantas, Beverley Newbold, to which she exhibited two lever arch file volumes of detailed exhibits consisting principally of agreements between Qantas and either Airbus or Rolls-Royce. The second affidavit was by Professor Adrian Briggs, the well known English academic, concerning English law, which was the proper law of the contracts between Qantas and Rolls-Royce. He opined, in substance, that it was likely that the English courts would not give effect to any rights Qantas claimed under the Trade Practices Act in respect of its relationship with Rolls-Royce, either in contract or under that statute. Professor Briggs also opined that the English courts would be likely to enforce the English choice of law clause in the contracts between Qantas and Rolls-Royce to the exclusion of that Act.

6    Ms Newbold’s affidavit, among other things, summarised the critical facts which gave rise to Qantas’ claims in the proceeding, including for the anti-anti-suit injunction. Where a party applies for ex parte relief, there is an obligation of the utmost good faith to make full disclosure to the Court all relevant material including material that, had the other party been present, it may have referred to, in order to negate the claim to that ex parte relief: see Thomas A. Edison Ltd v Bullock (1912) 15 CLR 679 at 681-682 per Isaacs J; Garrard v Email Furniture Pty Ltd (1993) 32 NSWLR 662 at 678A-C per Mahoney A-P, with whom Clarke JA agreed.

7    Hence, a large number of commercial agreements between Qantas, Airbus and Rolls-Royce were placed before Moore J who considered them in the course of Qantas obtaining the relief it had sought on an urgent basis. The confidentiality order made by Moore J was not expressed as an interlocutory order, although his Honour plainly intended that it be so. It provided for confidentiality to be given to four agreements between Qantas and Airbus; namely, an aircraft general terms agreement made on 1 February 2001, a purchase agreement, a letter agreement number I, and a letter agreement number II also all made on the 6 March 2001. The proceedings came before me as docket judge on the return of Qantas’ motion on 8 December 2010.

8    A journalist employed by the daily newspaper, the Sydney Morning Herald, applied on 3 December 2010, to inspect all of the documents that were before Moore J, including the affidavits with exhibits, of Ms Newbold and Professor Briggs. Under O 46 r 6(3)(a) those affidavits and exhibits were not available to be inspected by a person who was not a party without leave of the Court or a judge. Qantas did not object to the contents of either affidavit being made available for public inspection and that occurred. When the matter was before me on 8 December, Qantas sought to extend the confidentiality order made by Moore J to many of the exhibits to Ms Newbold’s affidavit. Accordingly, I directed that Qantas file a motion to the extent it sought to have orders made under s 50(1) of the Federal Court of Australia Act, restricting access to any documents exhibited to Ms Newbold’s affidavit on the basis that they were confidential.

9    Despite Qantas having, apparently, served Rolls-Royce, it has not yet appeared. Indeed, in a letter its legal counsel wrote directly to an officer of Qantas on 13 December 2010, it acknowledged that it had not submitted to the jurisdiction of the Court in these proceedings. Nonetheless, Rolls-Royce’s lawyer proceeded to assert that Qantas should protect the agreements between them from publication in a manner commensurate with Qantas’ contractual obligations of confidence under the various agreements.

The Airbus agreements

10    When the motion for relief under s 50 was returned before me today, Qantas argued that the four Airbus agreements were the subject of a continuing order by Moore J and that no application had been made to vary or discharge it. Since 2 December 2010 two applications have been made by journalists to inspect the documents exhibited to Ms Newbold’s affidavit, one by Mr Matt O’Sullivan of the Sydney Morning Herald, and another by Ross Kelly of Dow Jones Inc. I am of opinion that these suffice as requests to vary the order for confidentiality.

11    During the course of argument, Qantas was not able to show that the whole of those agreements should not be made available for public inspection. It was only able to satisfy me that limited portions should be redacted from what did not appear to be of a confidential nature. However, Airbus had no notice of this hearing and may be affected if any other part of the four agreements to which it is a party are made available for public inspection. Accordingly, it seemed to me that before making those parts of the agreements, that at the present time I am not satisfied it is necessary to the administration of justice to be made confidential, Airbus should have an opportunity on or before 23 December 2010 to identify any reason why that conclusion should be displaced before the redacted versions of its agreements become available for inspection.

12    Qantas relied on the affidavit of Jane O’Connor, its senior legal counsel. Her responsibilities have included advisory roles for Qantas’ aircraft financing, procurement and trading departments. She has also had a legal advisory role, supporting Qantas’ general counsel directly on various strategic corporate projects engaged in by it. Before that, she had had a considerable amount of commercial experience involving debt finance and, in later years, provision of advice and assistance to Qantas of a legal nature. She has had experience advising and assisting Qantas in the financing and procurement of the Airbus A380 aircraft and other aircraft in its fleet.

13    Ms O’Connor reviewed the documents, for which claims for confidentiality were made by Qantas. She explained that it was a common requirement that the parties keep the agreements and their terms confidential because, among other things, of the significantly competitive nature of the industry, and the very large sums of money involved in such contracts. Ms O’Connor explained that, in her experience, both Airbus and its principal competitor, Boeing, closely guarded financial and commercial aspects of their offerings to aircraft operators. That precaution did not just include information concerning price, but also the terms and conditions that created events of default, matters that went to whether a delay was excusable, or not excusable, rights to terminate, the giving of warranties, indemnities, manufacturer support and maintenance. In particular, Ms O’Connor was not aware of the commercial terms that the aircraft manufacturers, or engine makers, offered to Qantas’ competitors. Nonetheless, from her experience, she was able to foresee that it would provide considerable leverage and assistance in Qantas’ own negotiations of such contracts were she to know the commercial terms that the suppliers were offering Qantas’ competitors in the market. As Ms O’Connor indicated, arrangements to purchase fleets of aircraft are complex and often robustly negotiated for several months. She said that they involve an enormous investment by aircraft operators with lengthy lead times before delivery. For example, as she said, the contracts for the Airbus A380 agreements were initially executed in early 2001, but the first delivery of those aircraft occurred, in Qantas’ case, in late 2008, and the balance of deliveries is still continuing.

14    Qantas initially pressed, on the basis of Ms O’Connor’s affidavit, a global claim that the four Airbus agreements and all of the Rolls-Royce agreements in evidence, were commercially confidential, and that none of their terms could be disclosed. I reject that argument. Most of the agreements contained clauses that were either of an ordinary and typical kind, or ones which had no apparent commercial sensitivity. Nonetheless, having regard to the matters to which Ms O’Connor has deposed, I accept, prima facie, a considerable number of clauses in the various agreements do attract a requirement that the Court protect the confidentiality of the information in them.

15    During the course of argument, Qantas accepted that, were I not to accede to a blanket claim for confidentiality, then redacted versions of the agreements could be made available for public inspection, while preserving those terms that were truly confidential. Ms O’Connor described those clauses as, first, provisions containing commercially sensitive terms that disclosed prices or otherwise contained information about pricing structures that were unique to Qantas, and were not, to the best of her knowledge, industry standard terms, and secondly, other terms that had been the subject of intense negotiations between Qantas and either Airbus or Rolls-Royce, the contents of which, were they to become public, might advantage either Qantas’ competitors or its suppliers’ competitors.

16    Ms O’Connor said that there were three key large manufacturers in the commercial aircraft engine market, being Rolls-Royce, Pratt & Whitney, and General Electric Company. She had experience in negotiating contracts involving each of them. She deposed as to having no doubt that Qantas’ competitors would be keenly interested in a number of clauses that she identified and for which Qantas sought confidentiality orders.

17    There was some refinement of the scope of these claims in argument. One issue that evolved today was whether cl 12.5 in the spare engine purchase contract entered into between Qantas and Rolls-Royce on 7 June 2006 should be made the subject of a confidentiality order. Ms Newbold described cl 12.5, in her affidavit, as purporting to deal with the inter-relationship between warranties and other rights in that agreement, and the exclusion of other rights and remedies of Qantas. She said that, in particular, it makes provision for the exclusion of all rights and remedies of Qantas, or obligations of Rolls-Royce to it, that might arise, or be implied, by statute. Similarly, as Ms Newbold pointed out, cl 28 specified English law as the governing law of that agreement, and provided for the parties’ irrevocable submission to the jurisdiction of the courts of England. And, cl 30 purported to exclude reliance by the parties on representations made prior to the execution of the agreement. Hence, these clauses provided the foundation for Professor Briggs’ opinion that led to Moore J granting the anti-suit injunction.

Confidentiality orders

18    Section 50(1) is an important provision and provides:

“50    Prohibition of publication of evidence etc.

(1)    The Court may, at any time during or after the hearing of a proceeding in the Court, make such order forbidding or restricting the publication of particular evidence, or the name of a party or witness, as appears to the Court to be necessary in order to prevent prejudice to the administration of justice or the security of the Commonwealth.”

19    The making of orders under s 50 is not a triviality. It is an interference with the principle of open justice that is an implicit incident in the exercise of the judicial power of the Commonwealth under Ch III of the Constitution. In Hogan v Australian Crime Commission (2010) 240 CLR 651 at 664 [31]-[33], French CJ and Gummow, Hayne, Heydon and Kiefel JJ discussed the principles that were applicable to the making, or continuation, of an order under s 50. They noted that it was insufficient that such an order appeared to the Court to be convenient, reasonable or sensible, or to serve some notion of public interest; still less, that it was the result of some balancing exercise. Critically, s 50 requires the Court to make an order forbidding or restricting the publication of particular evidence, relevantly, where it appears to be necessary in order to prevent prejudice to the administration of justice.

20    In these proceedings, the making of the anti-anti-suit injunction prevented Rolls-Royce from exercising, what appeared to be, its contractual right to rely on an exclusive jurisdiction clause in its agreement with Qantas, in order that Qantas could preserve, what it claimed were, its rights to rely upon the Trade Practices Act. The factual basis on which that injunction was granted, including the critical contractual provisions that were involved, formed an important and substantive part of the controversy between Qantas and Rolls-Royce.

21    The principle of open justice and the exercise of the Court’s powers under s 50 are able to accommodate the protection of trade secrets and other confidential information, including the prices at which valuable items are sold, terms on which a supplier of such items will provide warranties, and sometimes particular aspects of the offered services or goods. Indeed, I am satisfied, as Ms O’Connor’s evidence demonstrates, that a considerable number of clauses in the various agreements have this quality. Parties should not be deterred from coming to courts to enforce or protect their rights for fear that in doing so they will be forced to lose the very foundation of their commercial success, such as a secret formula or process, by having to reveal it to the world, or that they may lose some competitive advantage that derives from material that they rightly consider to be confidential or secret.

22    But the Court must make an assessment whether or not particular clauses of agreements, or some part of them, that have become part of the evidence before it, actually have the character that attracts the obligation of the court to make an order restricting the principle of open justice under s 50 or in the exercise of its inherent or implied jurisdiction: John Fairfax & Sons Ltd v Police Tribunal of New South Wales (1986) 5 NSWLR 465 at 476C-F per McHugh JA, Glass JA agreeing; Scott v Scott [1913] AC 417 at 437- 438 per Viscount Haldane LC. The court will only make such an order if it is satisfied that is necessary to protect the administration of justice. In general, that will occur because there is evidence or other material that the clauses or information have or has the character that enlivens the power and concomitant obligation to order confidentiality: see too Siam Polyethylene Co Ltd v Minister of State for Home Affairs (No 3) [2009] FCA 839; Australian Competition and Consumer Commission v Cement Australia Pty Limited (No 2) [2010] FCA 1082 at [13]-[14]; Dye v Commonwealth Securities Limited (No 2) [2010] FCAFC 118 at [120]-[123] per Marshall, Rares and Flick JJ.

23    In my opinion, cl 12.5 of the spare engine purchase contract, in substance, has been revealed in Ms Newbold’s affidavit. It was a foundation on which Professor Briggs gave his opinion. That clause is a very important aspect of the controversy. Its existence, in substance, justified, or was a feature justifying of the grant, of the anti-anti-suit injunction. Without the injunction restraining it, prima facie, Rolls-Royce would have had the right to approach the Courts of England and Wales for the very relief that the existing order currently prevents it seeking.

24    Moreover, there is no evidence to suggest that the provisions of cl 12.5 are unusual or unique. Rather, those provisions are in contracts that come before the Courts on a daily basis. The terms of cl 12.5 do not reveal the substance of any provision that are asserted to be commercially sensitive in itself. Clauses 12.5, 28 and 30 are the very kinds of exclusion and entire agreement clauses that well-advised parties to contracts will often negotiate for and agree to in their overall contractual arrangements. Whether or not those clauses are effective against statutory provisions is a different matter. However, I am unpersuaded that cl 12.5 has any characteristic about it of commercial confidence or that parties in the marketplaces in which Qantas, Rolls-Royce and their competitors operate, would find the use of that clause or its terms to reveal anything that could be regarded as a commercial secret. There was a similar clause (cl 4) in the fleet support agreement between Qantas and Rolls-Royce, and for the same reasons I do not consider that I should make any order prohibiting publication of it.

25    For these reasons, the other specific clauses about which Ms O’Connor gave evidence and which have been the subject of discussion today, ought to be protected by an order, until further order that they not be disclosed. I will direct Qantas to prepare a redacted version of the exhibits to Ms Newbold’s affidavit to conform which those parts that are not the subject of the order I will now make, so that the balance of the exhibits to Ms Newbold’s affidavit may be made available for public inspection.

Associate:

Dated:    7 January 2011