Whether the Council was justified in its decision to refuse access to parts of a copy of a contract on the basis that the information is commercially sensitive and exempt under section 36 of the FOI Act

17/12/2018

Background

On 4 April 2018 the applicant made a request to the Council for records relating to the purchase and sale of St. Francis Abbey Brewery site.  Following discussions with the Council regarding a potential fee being incurred due to the number of records, the applicant refined his request on 17 April 2018 to seek a copy of the contract signed by Kilkenny County Council and Diageo.  As required by section 38 of the FOI Act, the Council consulted the third party, Diageo, as it had formed the view that sections 35 and 36 of the FOI Act applied to the record, but that it should be released in the public interest.  The third party consented to the release of the record, but subject to certain redactions that in its view contained commercially sensitive information.  On 29 May 2018, the Council granted the applicant's request in part and released a copy of the contract with certain parts of the record redacted on the basis of section 36(1)(b) of the FOI Act.  The applicant sought a review by this Office of that decision on the same date. 
I have decided to conclude this review by way of a formal binding decision. In conducting this review, I have had regard to correspondence between the applicant and the Council, to correspondence between the applicant, the Council, Diageo and this Office, to the contents of the record at issue and to the provisions of the FOI Act.

Scope of this Review

During the course of this review, and following discussions between this Office and the third party, Diageo withdrew objections to some of the redactions within the contract and so a further copy of the record was released to the applicant. 
This review is therefore concerned with whether or not the Council was justified in refusing access to parts of a Contract for Sale dated 28 August 2014 and made between Powtom 18 Limited (a wholly owned subsidiary of Diageo) on the one hand and Kilkenny County Council on the other, on the basis of section 36 of the FOI Act. 

Preliminary Matters

Before considering the exemptions claimed, I wish to make the following points.  Firstly, although I am obliged to give reasons for my decision, section 25(3) requires all reasonable precautions to be taken in the course of a review to prevent disclosure of information contained in an exempt record. This means that the description which I can give of the records at issue and the material that I can refer to in the analysis is limited. Under FOI records are released without any restriction as to how they may be used and thus, FOI release is regarded, in effect, as release to the world at large. 
Secondly, section 22(12)(b) of the FOI Act provides that a decision to refuse to grant an FOI request shall be presumed not to have been justified unless the head of the relevant public body shows to the Commissioner's satisfaction that its decision was justified. The FOI Act also gives potentially affected third parties a right to make submissions to this Office in cases such as this and their submissions must be taken into account before a decision is made that might affect their interests.
Finally, with certain limited exceptions, the FOI Act does not provide for the limiting of access to records to particular individuals only. When a record is released under the FOI Act, it effectively amounts to disclosure to "the world at large". The FOI Act places no restrictions on the type or extent of disclosure or the subsequent use to which the record may be put.

Analysis and Findings

Initially, the Council considered that sections 35 and 36 applied to the contract as a whole, but determined that it should nonetheless be released in the public interest.  Following consultation with Diageo under section 38 of the FOI Act, a decision was made to partially release the contract but to redact certain information on the basis of section 36(1)(b).  The redacted information consists of the following: (i) site requirements; (ii) environmental information; (iii) commercial information and (iv) information regarding uplift on disposal. 

This Office consulted both the Council and Diageo during the course of this review and both relied on section 36(1)(b) to justify refusal of the redacted portions of the contract.  In addition, Diageo also submitted that section 36(1)(c) applied to the withheld aspects of the record.  It seems to me that section 36(1)(c) is relevant in the particular circumstances of this case and so I will address that in the first instance. 

Section 36 - commercially sensitive information

Section 36(1) provides a mandatory exemption for commercially sensitive information. It applies to a record containing:
 (b) financial, commercial, scientific, or technical or other information the disclosure of  which could reasonably be expected to result in a material financial loss or gain to the person to whom it relates or could prejudice the competitive position of that person, or
 (c) information the disclosure of which could prejudice the conduct or outcome of negotiations of that person.
Section 36(2) provides for various exceptions to section 36(1). Section 36(3) provides that Section 36(1) is subject to a public interest balancing test.

Section 36(1)(c)

Under section 36(1)(c), access to a record must be refused where disclosure of information contained in the record could prejudice the conduct or outcome of contractual or other negotiations of the person to whom the information relates. The standard of proof required to meet this exemption is relatively low. Having said that, the Commissioner expects that a person seeking to rely on this exemption would be able to show that contractual or other negotiations were in train or were reasonably foreseen which might be affected by the disclosure and explain how exactly the disclosure could prejudice the conduct or the outcome of such negotiations.

In this case, Diageo identified negotiations with a number of undisclosed developers in relation to the redevelopment and sale of a significant portion of the St. James's Gate site.  It noted that negotiations concern contractual documentation and other considerations relevant to a large scale urban redevelopment and that there is a direct correlation between these negotiations and the sale of the St. Francis Abbey Brewery site.  Both these negotiations and that sale concern the sale of land upon which brewery operations have been conducted for a significant portion of time and therefore many of the same issues are relevant, including all of the redacted portions of the contract.  Diageo submits that any information in relation to the sale of a similar property would be highly advantageous to a counterparty and prejudicial to both the conduct and outcome of the current negotiations. 
The redacted information is said to have been the result of extensive commercial negotiation between Diageo and the Council over a long period of time. 

It was further stated that all of the issues contained within the four redacted portions have been discussed with prospective developers and that access to the specific clauses agreed by Diageo in a substantially similar transaction, such as the sale the subject of this review, would prejudice the conduct and outcome of these negotiations.  Release, it was submitted, would provide a prospective buyer / developer in this and any future transaction with a clear insight into Diageo-™s negotiating position on key commercial and financial terms that otherwise they would not have.  This could then be used to gain leverage in a negotiation and to understand where Diageo-™s negotiating strength and weaknesses may be, ultimately altering the course of the negotiations and final documentation.
As noted above, I am obliged to take all reasonable precautions to prevent disclosure of information contained in an exempt record and so the extent to which I can describe the redacted portions of the record is limited.  However, having examined the content of the records, I am satisfied that it discloses the result of commercial negotiations between Diageo and the Council and that release could prejudice the conduct and/or outcome of the current St. James's Gate negotiations.  I find therefore that section 36(1)(c) of the FOI Act applies to the redactions in the record. 
That is not the end of the matter however as section 36(1)(c) is subject to both section 36(2) and (3).

Section 36(2)

Section 36(2) provides for the release of information to which section 36(1) is found to apply in certain circumstances.  I am satisfied that none of the circumstances identified at section 36(2) arise in this case.

Section 36(3) The Public Interest

Section 36(3) provides that subsection (1) does not apply in relation to a case in which, in the opinion of the head concerned, the public interest would, on balance, be better served by granting than by refusing to grant the FOI request. Section 36(1) itself reflects the public interest in the protection of commercially sensitive information. The Commissioner accepts that there is a legitimate public interest in persons being able to conduct commercial transactions with public bodies without fear of suffering commercially as a result and it is this public interest which section 36(1) seeks to protect.
On the other hand, the Act also recognises, both in its long title and its individual provisions that there is a significant public interest in government being open and accountable. The Commissioner takes the view that in attempting to strike the balance between openness on the one hand and the need to protect commercially sensitive information on the other, it is legitimate to consider two things; the first is the positive public interest which is served by disclosure and the second is the harm that might be caused by disclosure.

Section 11(3) of the FOI Act requires public bodies to have regard to the need to achieve greater openness in their activities and inform scrutiny, discussion, comment and review by the public of their activities. It provides that FOI bodies shall, in performing any function under the Act, have regard to a number of matters including the need to achieve greater openness in the activities of FOI bodies and to promote adherence by them to the principles of transparency in government and public affairs. I note here, that what is at issue is a public interest which equates with "a true public interest recognised by means of a well known and established policy, adopted by the Oireachtas, or by law " as referred to by Macken J. in obiter comments made in Rotunda Hospital v Information Commissioner [2011] IESC 26.
The Council states that there is a public interest in relation to accountability, openness and transparency in the use of public funds and in decisions made by the Council.  It states that, during the process of purchasing the site and future development, the Council has been open and transparent in its operations through a detailed Masterplan that was adopted by the Elected Members of the Council to guide the development of the site and adjacent lands, which also involved a public consultation process. 
The applicant also asserts that the full contract should be released in the public interest, in particular any information that is considered environmental information.  He provided a substantial number of documents relating to the condition of the site and highlighted that this transaction involved considerable public expenditure.  Where records relate to the expenditure of public money, there is a strong public interest in openness and accountability in the use of public funds. Openness in respect of the expenditure of public funds is a significant aid in ensuring effective oversight of public expenditure, in ensuring that the public obtains value for money, and in preventing fraud, corruption and waste or misuse of public funds.  

Diageo recognises that there is a public interest in the transparency of such transactions but submits that complete transparency of the material terms of the contract has already been provided by releasing a redacted version.  It notes that the material terms of the sale have been released and that there is therefore clear visibility in the use of public funds.  It goes on to state that the purchase price; VAT applied; pre-conditions agreed and commercial structure of the sale; extent of land sold and the buildings/structures that would remain; details of title and ownership and explanatory site maps, among other things, have all been released.  What remains, according to Diageo, in the four redacted sections is commercially sensitive clauses specific to Diageo that are not relevant to how the Council conducts its operations or regulatory functions but is relevant to the commercial and financial business of Diageo. 
There is clearly a public interest in achieving, as far as possible, as much openness, transparency and accountability in government and public affairs.  Particularly in a case such as this which involves a substantial investment of public funds.  However, I recognise that there is a public interest in protecting the commercially sensitive information of third parties. I also accept that there is a legitimate public interest in persons being able to conduct commercial transactions with public bodies without fear of suffering commercially as a result.

In this instance, the majority of the contract the subject of this transaction has been released, including the purchase price and most of the conditions of the sale.  Further, the applicant provided a significant amount of reports and information that is already in the public domain in relation to the condition of the site.  It could be said that the public interest has therefore already been largely satisfied.  The question for me is whether or not the additional transparency that would be achieved by release of the redacted portions of the contract would outweigh the commercial prejudice that the third party would suffer as a result.  I find that the public interest in that additional transparency would not outweigh the commercial prejudice that the third party would suffer.  Consequently, I find that public interest lies in protecting this information and upholding the decision to refuse access to it on the basis of section 36(1)(c) of the FOI Act. 

Section 36(1)(b)

Having found above that section 36(1)(c) applies to the redactions and that the public interest favours refusal of access in this case, it is not necessary for me to go on to consider section 36(1)(b) in this instance.

Section 37 - personal information

Initially, two names were also redacted from the record on the basis that they comprised personal information, although specific submissions on this exemption were not provided by either the Council or Diageo.  Following discussions with this Office, it was noted that any objection to the redaction of the name of the company secretary was being withdrawn and this information can be released.  However, the redaction of the name and address of the director who signed a statutory declaration within the contract was maintained on the basis that this director is no longer associated with the company and Diageo submits that there is no public interest in releasing the director's details.  Section 37 of the FOI Act does prevent the disclosure of personal information, including information relating to employment history, and I am satisfied in this instance that the name and address of the director comprises personal information and is exempt from release by virtue of section 37(1).  I see no compelling public interest arguments for the release of this director's details and find that the redaction is justified on that basis.

Decision 

Having carried out a review under section 22(2) of the FOI Act, I find that the decision to refuse access to certain parts of the record under section 36(1)(c) of the FOI Act is justified. I affirm the decision accordingly. 

Right of Appeal

Section 24 of the FOI Act sets out detailed provisions for an appeal to the High Court by a party to a review, or any other person affected by the decision.  In summary, such an appeal, normally on a point of law, must be initiated not later than four weeks after notice of the decision was given to the person bringing the appeal.

Elizabeth Dolan
Senior Investigator