The case of Alcoa of Australia Ltd v Apache Energy Ltd [2014] WASCA 148 provides the latest guidance on a court’s power to impose a confidentiality regime on the inspection of discovered documents.

Facts

Alcoa of Australia Ltd (Alcoa) and Apache Energy Ltd, Apache Northwest Pty, Harriet (Onyx) Pty Ltd and Kupfec Australia Pty Ltd (Apache) had entered into two long-term agreements for the supply of gas from facilities on Varanus Island in Western Australia (Agreements).

On 3 June 2008 a high pressure gas pipeline, which had been critically weakened by a region of external corrosion, ruptured and exploded on Varanus Island almost immediately causing further pipeline explosions and ultimately resulting in $60 million in damage to the Apache gas plant. This resulted in the curtailment of about 30% of Western Australia’s gas supply for two months.

Alcoa brought an action against Apache claiming negligence and breach of contract. Alcoa claimed that Apache had failed to prevent the rupture of the pipeline which caused it economic loss. Economic loss was expressed as the cost to Alcoa of having to acquire alternative energy supplies at a price exceeding that payable pursuant to the Agreements. In addition, Alcoa asserted breach of contract on the basis that Apache had failed to supply gas under the Agreements.     

Commercially sensitive information

The contentious issue in this decision was whether the court had power and discretion to impose a confidentiality regime on inspection of commercially sensitive documents. Of the 2,689 documents discovered by Apache, it claimed that 2,608 should be subject to a confidentiality regime. Apache argued that the documents were of a commercially sensitive nature as they contained information relating to:

  1. operations and design of the gas processing plant and facilities on Varanus Island and offshore operations, which were a
  2. product of Apache’s ‘know how’ obtained over several years; 
  3. operating conditions which were not publicly known and would be valuable information for a competitor of Apache;
  4. production and processing operations, in particular information of the precise capacity that the facilities have to produce
  5. gas which may assist Apache’s competitors or customers;
  6. other valuable ‘know how’ which could give a competitor a competitive advantage; and
  7. safety and security procedures developed by Apache over a number of years and which, if compromised, would
  8. fundamentally affect the ability of Apache to operate the gas field.

Supreme Court Of Western Australia Decision

At first instance1, Le Miere J held that the court has power and discretion under O 26 r 9, O 26 r 11, O 1 r 4A and O 1 r 4B of the Rules of the Supreme Court 1971 (WA) (RSC) to tailor make orders restricting access to documents. Le Miere J held that in the circumstances of the case, the imposition of a confidentiality regime would advance the objects of positive case flow management in O 1 r 4B(1)(a) to (d) RSC.

The primary judge held that a confidentiality regime was justified in these circumstances as it was substantial litigation, there were a large number of documents involved, a substantial number of documents contained confidential or commercially sensitive information and discovery was to be in stages. The primary judge left the scope and terms of the confidentiality regime to the parties. 

Court of Appeal decision

On appeal, the central issue was Alcoa’s claim that the primary judge did not have jurisdiction to implement a confidentiality regime concerning Apache’s discovered documents. In a unanimous decision, the appeal was dismissed.

The court held that on the proper construction of O 26 r 9(1) RSC the court has discretion and power to impose restrictions or conditions on any order for production or inspection. This construction gives the court flexibility and control over its processes, procedures and limited resources which are essential to achieving positive case flow management and permits a court to protect the efficacy of the implied undertaking of confidentiality where the implied undertaking may offer insufficient protection.

Implied undertaking of confidentiality

It is an established principle that parties to litigation are subject to an implied undertaking to use and disclose documents and information obtained in discovery only for the purpose of proceedings, unless the court grants leave or the material has been received in evidence in the proceedings. This implied undertaking is recognised as a substantive legal requirement. A breach of this substantive obligation amounts to contempt of court.

The court identified that in the circumstances of the case, the implied obligation was insufficient as a result of the following factors: 

  1. the discovered documents were relevant to a trade rivalry between the parties;
  2. given the size, scope and complexity of the litigation the discovered documents were likely to be widely distributed within
  3. Alcoa, its solicitors and multiple insurers, which would create a significant risk that recipients would not be aware of the
  4. status of the documents and restrictions that would apply to their use;
  5. the information contained in the documents could be used by Alcoa’s solicitors and insurers to further the interests of
  6. plaintiffs they represent in other actions;
  7. there would be no effective remedy against Alcoa’s insurers who were not registered foreign companies in Australia; and 
  8. the information in the documents may be used to advance Alcoa’s interest in disputes that may arise in the future. 

Consequently, the court upheld that a confidentiality regime was appropriate in this case and that the details of the regime should be left to the parties.  

Implications

This case is important for its confirmation that the Supreme Court of Western Australia has power to impose confidentiality regimes on documents produced in litigation.

This power of the court is clearer in New South Wales and South Australia where the relevant rules explicitly confer power and discretion on courts to make orders restricting the inspection of documents. The Uniform Civil Procedure Rules 2005 (NSW) Part 21 r 7 states that the court has power to make an order restricting the disclosure or use of any document, whether or not received into evidence. Pursuant to the Supreme Court Civil Rules 2006 (SA) r 144 the court may make orders to protect the confidentiality of documents that are to be disclosed or produced.  

Similar to Western Australia, legislation in each of the other states empowers the court to make general orders regarding production of documents. Therefore, it is likely that the outcome arrived at in this case would be consistent across all jurisdictions in Australia.