A recent High Court of Australia decision, involving actor Paul Hogan, confirmed that private financial and taxation documents disclosed in connection with a court proceeding can be accessed by third parties, including the media.
This approach may well be imported into New Zealand’s confidentiality regime. This Brief Counsel briefly reviews the law and considers implications for business.
Hogan v Australian Crime Commission  HCR 21
In 2005 an Australian accounting firm (the Firm) received a notice from the Australian Crime Commission (the ACC) requiring the Firm to produce documents relating to many of its clients, including Mr Hogan. This was in connection with “Operation Wickenby” – a large-scale investigation into the use of offshore tax havens by wealthy Australians. The Firm duly produced to the ACC documents relating to Mr Hogan.
In 2006, Mr Hogan applied (initially through an agent) for an order that the ACC not use or disseminate Mr Hogan’s documents on the grounds that they were legally privileged. The ACC responded that the documents were not legally privileged because, amongst other reasons, they were created in furtherance of a crime or fraud. Mr Hogan applied for discovery from the ACC in support of its case that the crime or fraud exception to privilege applied. As part of his application, Mr Hogan’s solicitor swore an affidavit which exhibited new documents, including file notes and accounting advices (the New Documents), which purported to show that the privilege was not, as the ACC contended, defeated by the crime or fraud exception. This, it turned out, was a critical decision.
The ACC subsequently abandoned its reliance on the crime or fraud exception and requested the court to relist the proceeding. The privileged documents were returned to Mr Hogan. For completeness, Mr Hogan sought and was granted continuation of a confidentiality order under s 50 Federal Court of Australia Act 1976 (the Federal Act), which order prevented the publication of any evidence in the proceeding.
In 2008, News and Fairfax media companies filed motions seeking vacation of the s 50 order and leave to inspect the court files of the proceeding, including the New Documents. This was granted at first instance, then reversed on appeal to the Full Federal Court. The Full Federal Court considered the legitimate interest of the public in the full disclosure of Mr Hogan’s evidence, including the New Documents, was marginal. On the other hand, public disclosure would involve intrusion into Mr Hogan’s confidential financial affairs through the release of detailed private financial and taxation advices.
The High Court of Australia restored the first instance decision. Its reasoning turned on the wording of s 50 of the Federal Act which permits the court to make suppression orders where this appears “necessary in order to prevent prejudice to the administration of justice or the security of the Commonwealth”. The High Court of Australia held that this language does not invite a balancing exercise: “‘necessary’ is a strong word”. The High Court concluded that a balancing exercise was equally not required in considering whether access should be permitted to the court file: if a suppression order was not necessary, then the principle of open justice required that third parties should ordinarily be granted leave to access such evidence.
The High Court concluded its judgment with some words of advice to litigants:
The placing of material in evidence, even on the faith of what for the time being would be a restriction imposed by a s 50 order, is a matter of forensic decision. The price of such a decision may be subsequent disclosure, as is often the case in litigation, of embarrassing publicity. It is no sufficient answer to brandish the term ‘inherently confidential’....
The law of confidentiality
There are essentially four ways in which confidential information may, in the context of general civil litigation, be protected in New Zealand:
the information may be subject to a substantive duty of confidentiality arising under a contract, statute or the common law, such that the party seeking to rely on the information cannot properly so do so
the court may issue a direction, in accordance with s 69 of the Evidence Act 2006, that information not be disclosed to the court if the public interest in disclosure is outweighed by the public interest in preventing harm to relationships or circumstances involving confidentiality
the court may, in reliance upon its inherent jurisdiction, make an order forbidding or restricting the publication of any evidence in order to prevent prejudice to the administration of justice, and
the court may, pursuant to Part 3 of the High Court Rules, make an order restricting access to the court file.
The first ground is not related to legal proceedings as such but arises in any case where the proposed use of information is in breach of an applicable duty of confidentiality. In addition to specific contractual and statutory constraints, a common law duty will attach to information of a nature and obtained in circumstances such that any reasonable person in the position of the recipient ought to recognise it should be treated as confidential: see Napier v Pressdram Ltd  1 WLR 934 (CA), 948-9.
The second ground protects disclosure in court proceedings of information which might harm established relationships of trust and confidence – such as doctor/patient – although s 69 expressly extends beyond such relationships to any situation where there is a genuine public interest in protecting confidentiality.
The third ground has a general statutory basis in Australia (s 50 of the Federal Act), but not in New Zealand. Here, there are specific suppression provisions relating to criminal, family and taxation proceedings, but not for general civil litigation. Thus, where suppression orders have been sought to prevent the media publishing evidence given in general civil proceedings, the court has decided according to its inherent jurisdiction to protect the administration of justice. In most cases, the policy has been to encourage open justice.
Accordingly, in a recent High Court decision (Peters & Ors v Birnie & Ors, CIV-2009-404-8119, 19 March 2010), Asher J confirmed that the principle of open justice is given the same priority in civil proceedings as it is in criminal proceedings. His Honour acknowledged that the court had the inherent power to make a confidentiality order as an exception to the open justice principle, but required the identification of a compelling public interest and exceptional adverse consequences. In words redolent of Hogan, Asher J rejected the confidentiality application on the grounds that while it is “generally embarrassing and unwelcome for any person to have their financial circumstances exposed to the public, particularly when they are under financial pressure...this is a feature of the litigation process”.
This robust approach is likely to gain further heart from the decision in Hogan. That is, New Zealand courts may well use Hogan to inform the scope of the inherent power to make confidentiality orders. It is therefore likely to become even more difficult to prevent the reporting of private aspects of a commercial dispute, no matter how embarrassing, tawdry or marginal the information in question.
The fourth ground is governed in New Zealand by Part 3 of the High Court Rules, which were amended in 2009. The new regime permits third parties to request access to any documents on the court file, including all affidavits, depositions, documents admitted into evidence and court transcripts. Although the process for requesting access differs depending on when the request is made, the Judge or Registrar considering the request must take into account the following matters:
the orderly and fair administration of justice
the protection of confidentiality and privacy interests (including those of children and other vulnerable members of the community) and any privilege held by, or available to any person
the principle of open justice, namely, encouraging fair and accurate reporting of, and comment on, court hearings and decisions, and
the freedom to seek, receive, and impart information.
This is a balancing test, which differs from the necessity standard in s 50 of the Federal Act in Hogan. Still, it remains to be seen how the balancing process will be weighted – and in particular, whether it will be influenced by the Australian High Court’s heavy emphasis on open justice over confidentiality interests.
How to protect your confidential information
The main lesson Hogan teaches is to be careful about disclosing confidential information to third parties, whether in litigation or otherwise. In general, only do so under express confidentiality agreements. In litigation, where possible, seek to agree a confidentiality arrangement or apply for a confidentiality order prior to disclosing any confidential but non-privileged documents. Alternatively, where appropriate, consider recourse to commercial arbitration where confidentiality is a typical feature of the process.
Our thanks to Daniel Kalderimis for writing this Brief Counsel. For further information, please contact the lawyers featured.