Crown Resorts case re contractual confidentiality of staff members

Appeal from orders of primary judge relieving former employees of contractual obligations of confidentiality – Whether primary judge applied the proper approach in determining whether former employees were, or ought to be, relieved – Relevance of ‘overarching purpose’ provisions – Appeal allowed, and orders set aside.

This proceeding is a securities class action arising from allegedly criminal activities undertaken by the respondent (Crown) and its employees in the People’s Republic of China. In this judgment the Court determined an appeal from the decision of Murphy J in Zantran Pty Ltd v Crown Resorts Ltd (2019) 370 ALR 516; [2019] FCA 641, in which his Honour made orders relieving certain former employees of Crown from express contractual obligations of confidentiality which they owed to Crown, so as to permit them to confer with the applicant’s solicitors in order to  provide, for example, witness statements concerning, and documents relating to, the alleged criminal activities.

In arriving at his decision, the primary judge had adopted the approach taken by J Forrest J in AS v Minister for Immigration and Border Protection (Ruling No 6) (2016) 53 VR 631; [2016] VSC 774 (AS). That approach was heavily reliant on the case management powers of the Court, and particularly the Victorian equivalent of the Federal Court’s ‘overarching purpose’ provisions, and essentially involved the Court undertaking a balancing exercise between, on the one hand, enforcing the confidentiality obligations and, on the other hand, permitting the persons concerned to be relieved of those obligations in the interests of the efficient case management of the proceeding, with that balancing exercise to be undertaken by reference to several factors (which are reproduced at [22] of the judgment of Allsop CJ and [115] of the judgment of Lee J).

In this matter Lee J wrote a lengthy judgment. Although Allsop CJ agreed generally with the reasons of Lee J, he nevertheless wrote a separate judgment. White J also agreed with the reasons of Lee J, but indicated that he ‘specifically agreed’ with the reasons of Allsop CJ.

The Chief Justice indicated (at [2]) that AS was wrongly decided, and therefore that the primary judge had erred in finding that “the Court possessed power, discretionary in character, to relieve a person of a subsisting and otherwise enforceable obligation of confidence owed to a party to the litigation if to do so, on balance, was in the interests of the more convenient running of the litigation and so in the administration of justice”.

As noted above, the decision in AS was largely based on the Court’s powers under the ‘overarching purpose’ provisions. His Honour emphasised the width and strength of those provisions, but stressed (at [4]) that such recognition “should not, however, distort the reach of that procedural power into some false warrant of authority to set aside, revoke or suspend substantive rights of parties to litigation”.

In other words, his Honour found that the Court does not possess some freestanding, discretionary power to relieve a person of an otherwise enforceable obligation (whether contractual or otherwise) of confidentiality in order to further the administration of justice.

However, that does not mean that such obligations are a complete barrier to obtaining information that is relevant to litigation. For example, such information may be compelled by the Court in other ways, for example by way of a subpoena or preliminary discovery, or by having the obligation of confidentiality held void and unenforceable upon various grounds at common law based upon public policy (including, for example, upon the principle that no confidence can exist in an ‘iniquity’) (see at [6]-[7], [27]ff). However, as none of those courses were pursued in this case, relying instead on the supposed discretionary power of the Court erroneously found in AS to exist, the primary judge’s orders could not stand.

His Honour summarised the position (at [51]):

A reading of [84]–[87] [of Beazley JA’s judgment in Richards v Kadian (2005) 64 NSWLR 204; [2005] NSWCA 328] would lead to a rejection of any proposition that the enforceability of a confidentiality clause in the context of pre-trial preparation of civil litigation is to be decided upon by reference to discretionary considerations involving a balancing exercise in which weight is given to the efficient preparation of litigation. What must be found for a clause to be unenforceable is that it is contrary to a found public policy. There is no basis to consider that her Honour expressed the view that a clause which has the effect of impeding or affecting the efficient preparation of litigation is against public policy; the expression of reasons at [84]–[87] is to the contrary of any such proposition…

and (at [60]):[The ‘overarching purpose’ provisions] do not, however, form an adequate foundation for a conclusion that it is against public policy for a party in litigation to seek to enforce a valid contractual confidentiality clause when to do so would or might impede the conduct of private civil litigation. This is especially so when there are pre-trial interlocutory procedures that may be availed of to extract the information from prospective witnesses prior to, or at an early and separate stage of, the trial…

As noted above, White J (at [64]) agreed ‘generally’ with the reasons of Lee J, but expressed ‘specific agreement’ with the reasons of Allsop CJ.

The reasons given by Lee J were, in broad terms, similar to those given by Allsop CJ. Further, his Honour:

  • identified other alternative avenues available to the applicant to elicit the information in question, including interrogatories, or having the relevant witness(es) examined before trial in a US-style deposition procedure (at [82]), or seeking a declaration that the clauses in question were void or unenforceable (at [83]ff) (and although the applicant sought leave to file a notice of contention in the Full Court in order to seek relief of the latter kind (in the alternative to the relief sought before the primary judge), such leave was refused on the basis that the relief was different to that sought before, and granted by, the primary judge, and also that all of the necessary evidence to consider that claim was not before the Court (see [149]-[154])); and
  • stated that there is no “freestanding discretionary judgment (informed by all the circumstances of the case) as to whether the obligation ought to be overridden to achieve an end perceived as being desirable” (at [104]).

His Honour concluded (at [135]) that:… the relevant legal task is forming an evaluative judgment as to whether, having regard to public interest considerations, including competing considerations, the obligation actually interferes adversely with the administration of justice so as to render the obligation void or unenforceable at law. The difficulty with AS, is that it perceived the task as a discretionary decision as to whether the obligation should be set to one side so as to achieve efficiencies in litigation. [emphasis in original]

In the end the Court unanimously allowed the appeal and set aside the orders of the primary judge.

Case details

Crown Resorts Ltd v Zantran Pty Ltd [2020] FCA 2193

  • Federal Court of Australia, Allsop CJ, White and Lee JJ,
  • 22nd of January, 2020
  • Applicant’s Solicitors: Minter Ellison;
  • Respondents’ Solicitors: Maurice Blackburn;
  • Respondent’s Funder: N/A

Read more about this case on Austlii: Crown Resorts Ltd v Zantran Pty Ltd [2020] FCA 2193

Share

Andrew Watson

National Head of Class Actions, Class actions, Melbourne

"I'm an experienced litigator in class actions, particularly for shareholders who have been victims of corporate misconduct."

Ben Slade

State Managing Principal, Office Leader, Class actions, Sydney

"I am driven to give a voice to those who would otherwise have to suffer because those who have done them wrong are all too powerful."

Kimi Nishimura

Principal Lawyer, Class actions, Melbourne

"I'm committed to fighting for the rights of victims of corporate misconduct as well as pursuing compensation on behalf of my clients."

Rebecca Gilsenan

Executive Director, Principal Lawyer, Class actions, Sydney

"I have extensive experience in running complex and novel litigation, including class actions in the areas of price fixing, failed investment schemes, product liability and securities."

Miranda Nagy

Principal Lawyer, Class actions, Sydney

"I have a strong conviction that the community should be able to expect our governments and the companies we deal with to comply with the law."

Julian Schimmel

Principal Lawyer, Class actions, Sydney

"Class actions are a unique legal mechanism that have helped hundreds of thousands of people receive compensation after mistreatment at the hands of powerful companies, and it’s gratifying to help people get access to justice when otherwise it would’ve been difficult for them."

Vavaa Mawuli

Principal, Class actions, Brisbane

"The most rewarding thing about my work is the change in scale of what we are able to accomplish."

It doesn’t cost you anything to know where you stand

Can we help?
back
Find an office near you
Your local office

Let us contact you

It doesn’t cost you anything to know where you stand

We take calls 24/7

Call us now
1800 305 568

Free Call

Find an office near you
Your local office

Let us contact you