[View without highlighting]
[Printable RTF version]
[Buy ICLR report:  PTSR 185]
||Neutral Citation Number:  EWCA Civ 1214
||Case No: C1/2009/2300
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH, ADMINISTRATIVE COURT
MR JUSTICE CRANSTON
||Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE RIX
LORD JUSTICE ETHERTON
LORD JUSTICE JACKSON
|| Veolia ES Nottinghamshire Limited
||Claimant / Appellant
||- and -
||Nottinghamshire County Council
||Defendant / Respondent
||(1) Shlomo Dowen
(2) The Audit Commission for Local Authorities and the National Health Service for England
Mr Philip Coppel QC (instructed by Reynolds Porter Chamberlain Llp) for the Claimant / Appellant
Mr Clive Lewis QC and Mr Ian Rogers (instructed by Nottinghamshire County Council) for the Defendant / Respondent
Mr Timothy Pitt-Payne QC (instructed by Friends of the Earth Rights and Justice Centre) for the First Interested Party
Mr Peter Oldham QC (instructed by Audit Commission In-house solicitors) for the Second Interested Party
Hearing dates : Monday 5th & 6th July 2010
HTML VERSION OF JUDGMENT
Crown Copyright ©
Lord Justice Rix :
- This appeal is concerned with the inspection rights provided to "persons interested" pursuant to section 15(1) of the Audit Commission Act 1998 (the "ACA 1998"), which provides as follows:
"At each audit under this Act, other than an audit of accounts of a health service body, any persons interested may –
(a) inspect the accounts to be audited and all books, deeds, contracts, bills, vouchers and receipts relating to them…"
- The principal issue canvassed on this appeal is whether commercial confidential information contained in a waste management PFI contract made between Veolia ES Nottinghamshire Limited ("Veolia") and Nottinghamshire County Council (the "Council") and in invoices submitted pursuant to that contract, if such documents are within section 15(1) and therefore open to inspection, a question which is in itself disputed, can nevertheless be protected against disclosure. There is practically no case law on such a question.
- The person interested in the present case is Mr Shlomo Dowen, an elector within the local government area of the Council. It is common ground that, as such an elector, he qualifies as a "person interested". On 29 June 2009 he applied to the Council to inspect and make copies of the contract and its invoices pursuant to section 15(1). Veolia objected, on the ground of the confidential information contained in them, but consented to the disclosure of such documents or parts of them as were already in the public domain with Veolia's consent in response to freedom of information requests in the past. Indeed, Mr Dowen had previously sought such material pursuant to the Environmental Information Regulations (the "EIR") and section 50 of the Freedom of Information Act 2000 (the "FIA 2000") (see below).
- On 4 July 2009 the Council wrote to Veolia to inform it that it proposed to make available Schedules 6A, 6B, 6C and 7 of the contract, the monthly invoices submitted to the Council in the financial year to 31 March 2009, and the documents appended to the invoices which set out the individual items under the contract for which payment was demanded, as well as the rates, quantities and totals for such items. Schedule 6A sets out the various formulae according to which payments under the contract are made. Schedule 6B provides for deductions payable in the event of default by Veolia. Schedule 6C is a performance scorecard. Schedule 7 sets out the key performance indicators by reference to which some deductions are made. In effect these documents showed what Veolia had charged and the Council had paid during the relevant year, and the contractual mechanisms for calculating such payments (the "first disputed documents").
- On the same day, 3 July 2009, Veolia obtained an interim injunction to preserve the position, stating that it had no objection to Mr Dowen seeing any part of the contract other than the confidential information contained in it. That confidential information was defined by the contract's own clause 123.2 referring to Schedule 45 of the contract which listed "Commercially Sensitive Contract Provisions". On 13 July 2009 Veolia served its Statement of Facts and Grounds seeking judicial review of the Council's decision dated 3 July 2009 on the basis that section 15(1) did not permit the disclosure of the confidential information. Its proceedings were served on Mr Dowen and the Audit Commission for Local Authorities and the National Health Service in England (the "Audit Commission"), respectively the first and second interested parties to the proceedings and this appeal.
- Although the purpose and function of these proceedings are to preserve the confidentiality of the first disputed documents, the legal means by which Veolia sought to achieve that end were not on the basis of such confidentiality, but on what I might describe as the technical ground that neither the contract nor the invoices as documents fell within the statutory words "contracts…bills, vouchers…relating to them", ie relating to the "accounts to be audited". Veolia accepted that the documents were contracts, bills and/or vouchers, but submitted that the documents did not relate to the accounts to be audited because (a) the accounts in question were not accounts to be found in the Council's general books of accounts, but rather the high level summarised accounts to be found in the Council's annual statement of accounts; and (b) the documents in question were not referred to in those high level summarised accounts, and the words "relating to" required some such express reference. The judge, Mr Justice Cranston, considered those submissions carefully, but rejected them. In the final analysis, he considered that it was obvious that, whatever the accounts in question were, the disputed documents related to them.
- Those submissions are renewed by Veolia on this appeal. I will call them Veolia's first or principal ground of appeal. However, they are supplemented by two alternative submissions. One is that section 15(1) has to be read down in order to preserve the confidentiality of confidential information by reason of either (i) English common law, and/or (ii) the provisions of article 8, and/or article 1 of the First Protocol, of the European Convention of Human Rights (the "ECHR"), and/or (iii) the provisions of article 6 of the Directive 2004/18/EC (and in domestic legislation regulation 43 of the Public Contracts Regulations 2006), which deals with the procurement of public contracts as a matter of European law (the "2004 Directive"). The other alternative submission is that the public inspection provisions of the ACA 1998 only permit use of the disclosed information for the purposes of the Act itself and not otherwise, so that even if inspection has to be granted, the obligation of confidence remains and is preserved outside the audit itself. The first of those submissions, at any rate so far as article 8 of the ECHR was concerned, was canvassed by the Council in its acknowledgment of service, and at any rate as far as the Directive was concerned, was canvassed by the Audit Commission in its acknowledgment of service: but these suggestions were not adopted by Veolia below. They have now been formally raised by Veolia in its notice of appeal in the three-fold aspect referred to above, viz English common law, ECHR and the 2004 Directive. The second of those submissions, which logically is prior, for it arises out of a consideration of the ACA 1998 itself, was developed in the course of the submissions on appeal. It was adverted to in Veolia's skeleton argument, but there said (in footnote 2) not to be an issue presently before the court. However, in the course of the appeal, it became an issue and was addressed by all the parties. I will refer to these post-judgment alternative submissions as respectively Veolia's second and third grounds of appeal.
- Despite the novelty of these arguments, even to these proceedings, there has been no objection to their deployment. All parties recognise that, because these arguments have been deployed late, it may not be possible to give definitive rulings on them in relation to the documents in question in this court: nevertheless, all parties are anxious for the court to give as much guidance as it feels able to.
- For similar reasons, to assist the parties to resolve as much of their dispute as possible, the court has also been asked to consider the position of a second range of disputed material. These are further schedules to the contract, namely Schedules 33, 38 and 40. These are also specified in the contract's Schedule 45 as containing commercially sensitive and therefore confidential information (the "second disputed documents"). It only emerged subsequently to the judgment below that Mr Dowen was not satisfied with access to the first disputed documents, and was now pressing to be given these further schedules. He says that he had originally asked to inspect the contract as a whole, and had reserved his position in the light of the Council's 3 July 2009 decision as to what he could have access to. It is not clear to me whether the Council had already implicitly rejected Mr Dowen's request in respect of these documents by its decision only to release for inspection the first disputed documents. Certainly in the context of Mr Dowen's application under FIA 2000 and the EIR, the Council has considered all aspects of the requested documents' confidentiality, and its decision not to disclose those parts embracing the first and second disputed documents has been upheld by the decision dated 30 June 2010 of the Information Commissioner. Nor is it clear to me, conceptually speaking, on what basis the Council has decided that section 15(1) requires Mr Dowen to be given access to the first disputed documents but not to other parts of the contract embracing the second disputed documents. Be that as it may, the Council has told the court that it would decide about the second disputed documents in the light of this court's guidance.
- As it is, it appears that had it not been for Mr Dowen's request for access to the second disputed documents, Veolia would not have appealed against the judgment below. That is what Mr Benjamin Lambert, general commercial counsel for Veolia Environmental Services (UK) Plc, said in his witness statement dated 14 December 2009, in support of Veolia's application for permission to appeal. He said:
"Although all of the disputed documents constituted commercial confidential material that Veolia would have preferred did not find its way into a competitor or individual's hands, Veolia took the view that the damage from their disclosure was capable of being contained. Veolia's initial reaction was to accept the judgment of Mr Justice Cranston, but on the understanding that disclosure was to be limited to what had been called "the [first] disputed documents"…"
- As for Schedules 33, 38 and 40 these contain Veolia's "Financial Model and Profit Margin". Mr Lambert says that –
"The harm from disclosure of Veolia's Financial Model and Profit Margin is very considerable indeed. It eclipses the harm from disclosure of the "[first] disputed documents"."
Mr Lambert also went on to explain that the second disputed documents "do not determine or influence amounts payable under the Contract. They are there to enable [the Council] to make predictions which help it to determine the evolution of the Contract". This is apparently because, due to the extremely long nature of PFI contracts (many decades), they need to include certain information to enable the parties to them to manage and price risks which may or may not occur over their life. Normally contracts do not reveal a contractor's profit margin or financial model. However, a local authority needs these highly sensitive pieces of information in case it wants to vary the contract to include or exclude elements from it. Using the financial model and the profit margin, the contractor can show the local authority how such a change would affect its operational costs for the remainder of the contractual term. Thus the local authority can satisfy itself that the contractor's profit margin stays the same and the contract is not rendered uneconomic by a proposed change. Such information is "of such sensitivity that [it] is never revealed to anyone other than the contracting authority". That is what Mr Lambert says about the second disputed documents.
- I can well understand a submission, based on such evidence, to the effect that, for reasons quite different from those which have been argued here or before Cranston J, such information contained in the second disputed documents do not relate to the Council's accounts in a historic year, whatever "accounts" and "relating to" mean. I can also visualise a counter-submission that a profit margin must, or may, always be relevant to amounts paid under a contract, both historically as well as in the future. However, all such arguments have not been made as yet to the Council, and have not been considered by this court either. For this reason alone, no definitive decision could be made as to the second disputed documents – unless all confidential information is at least capable of being protected from access as a matter of principle.
- I will have to set out, in outline or specific citation, numerous parts of the ACA 1998 and the regulations and code which have been produced to go with it. However, it is worth giving prominence at the outset to two provisions of section 15 itself, which complicate the arguments.
- The first is that section 15(1) is written in terms of "persons interested", not in terms of "electors". It is common ground that the concept of "persons interested" includes electors but extends beyond them. Section 15(2), on the other hand, gives "electors" (rather than the broader category of "persons interested") the right to question the auditor about the accounts, and section 16 gives electors (but, again, not persons interested) the right to make objections to the auditor about defined matters. Both these elector rights are plainly related to the audit itself, and it is natural to think that when an elector, qua a person interested, inspects the audit material pursuant to section 15(1), he (or she) does so for the purpose of informing himself about such material in case he wishes to question the auditor or raise an objection. For what purpose, however, does a person interested who is not also an elector inspect? Mr Dowen submits that there is no obvious or any answer to that question, and that therefore it is impossible to limit in any way at all the right to use material to which persons interested gain access under section 15(1). He has the support of some authority to that effect, for instance in Regina (HTV Ltd) v. Bristol City Council  EWHC 1219 (Admin),  1 WLR 2717 (Elias J).
- The second aspect of ACA 1998 that I would highlight in these preliminary observations is that section 15(3) (with its related provisions in subsections (3A), (4) and (5)) grants a specific exception to the section 15(1) right of inspection so far as any document "contains personal information". "Personal information" is closely defined and cannot extend to commercial confidential information of the kind in issue in these proceedings. These provisions were inserted in two stages: first, what is now section 15(3) was inserted, by means of section 11 of the Local Government and Housing Act 1989, into the predecessor section 17 of the Local Government Finance Act 1982, following and in order to reverse the decision in Oliver v. Northampton Borough Council  151 JP 44 (Divisional Court); and secondly, section 15 of the ACA 1998 was amended by section 160 of the Local Government and Public Involvement in Health Act 2007 to introduce section 15(3A), so as to take account of the Data Protection Act 1998. The argument is made (based on the principle of expressio unius exclusio alterius) that the express exception made in favour of personal information prevents any consideration of a further exception in favour of confidential information. In this connection, however, it is also relevant to observe that section 6 of the ACA 1998 gives an auditor access at all reasonable times "to every document relating to a body subject to audit", and section 48 makes detailed provision for access by the Audit Commission (or a person authorised by it) to "all such information as the Commission or that person may reasonably require for the discharge of the functions under this Act" as well as to the "accounts concerned; and such other documents as might reasonably be required"; while section 49 makes detailed provision for restrictions on onward disclosure of information obtained by the Commission or an auditor in the course of an audit (albeit not specifically by reference to confidentiality). It would prima facie be odd if information obtained under section 15(1), by a "person interested", in connection with an audit (as section 15(1) says: "At each audit under this Act") could be disclosed whatever its ramifications and consequences, to all the world, whereas the documents obtained by the Audit Commission or an auditor could only be disclosed onwards under the express provisions of the Act.
The broad structure of the parties' submissions
- It is in these circumstances that the issues raised on this appeal fall to be determined. Veolia's submissions fall into two halves. The first is its renewal of the technical argument which failed before the judge. Whether it is correct or not would not depend in the slightest on whether or not the documents concerned contained confidential information (even if the possibility of such confidential information existing in documents subject to the right of inspection might be a reason for construing the wording of section 15(1) narrowly rather than widely). The second half makes the more purposive argument that the provision for access to accounting documents in the context of an audit cannot be construed as an open sesame for the destruction of valuable confidential information. Could a person interested obtain confidential information and sell it to a commercial rival of its owner?
- Although the claimant and defendant in these proceedings are Veolia and the Council, Veolia's real opponent in interest is the first interested party, Mr Dowen. Mr Dowen's interest is in obtaining the disputed documents. It is not clear that he wishes to do so for reasons connected with the audit of the Council's accounts for the year ending 31 March 2009 (or any year), as distinct from more general environmental reasons. Of particular interest, it seems, were the Council's plans, pursuant to the contract, for an energy recovery facility, often referred to as an incinerator. These proposals encountered significant opposition from a residents' group, which included Mr Dowen, known as PAIN (People against Incineration). Thus his interest in the documents began with an application to the Council for copies of the contract and related information as early as 29 April 2006, even before the contract was concluded. Repeated requests were made under FIA 2000 and the EIR. On 10 June 2008 the Council disclosed redacted versions of the contract and other documents, while relying on the confidential commercial information exception in regulation 12(5)(e) of the EIR. That decision was taken by the public interest panel of the Council. Mr Dowen complained to the Information Commissioner on 7 October 2008. It was in the course of this complaint that Mr Dowen made his separate request to the Council for inspection of the contract and related documents under section 15(1) of ACA 1998. The Information Commissioner's decision was published on 30 June 2010, well after Mr Justice Cranston's judgment herein dated 1 October 2009. The Commissioner's decision was by and large to uphold the Council's decision not to disclose the confidential information contained in the contract.
- Thus the litigation arising out of section 15(1) has been conducted in full knowledge of the fact that the Council recognises Veolia's claim to protect confidential information contained in the contract. While Mr Dowen's interest is in obtaining, by one means or another, the material he seeks for his own purposes, the Council's interest is in observing its statutory duties for the purpose of the ACA 1998.
- In Mr Dowen's skeleton argument for this appeal, he responded by his counsel, Mr Timothy Pitt-Payne QC, to Veolia's first argument, relating to what is meant by documents "relating to" the "accounts" to be audited, upholding the judge's reasons for his judgment in his favour. As for Veolia's new arguments for reading down section 15(1), Mr Dowen was "content to adopt what is said by the Council in its skeleton argument". As for Veolia's other new ground, relating to the use to which material to which access is permitted under section 15(1) can be put, Mr Dowen responded in his skeleton argument, even though the point was not at that time a live issue, to say that the person interested under section 15(1) who obtained access to documents "can use the information for any lawful purpose", relying on the HTV case. In a sense that begs the question of what is a lawful purpose: however, the intent of the submission was that Mr Dowen was free to deploy the confidential information outside the purposes of the audit itself.
- In the Council's skeleton argument, it too sought to uphold the judge's reasons for answering the first, technical, ground against Veolia's position. However, as for Veolia's second ground, relating to the reading down of section 15(1), the Council was prepared to assume that the ECHR might be engaged, either through article 8 or through article 1 of the First Protocol, but it submitted that access would be justified. However, it disputed that article 6 of the 2004 Directive could be relevant at a post-procurement stage, but in any event there too disclosure would be justified. As for Veolia's third ground, as it became, relating to the use to which documents accessed under section 15(1), this was understandably not addressed in the Council's skeleton argument.
- In the Audit Commission's skeleton argument, it too supported the judge's conclusion regarding the technical first ground as to the meaning of "accounts" and "relating to". However, as for Veolia's new reliance on the ECHR and the 2004 Directive, it accepted that in principle these were mechanisms by which confidential information could be protected from access by persons interested, without inconsistency with section 15(1), although an actual decision on either ground would rest on a balancing process to be conducted by the Council itself, which (as it understood the matter, but it may be wrong about this) it had not yet performed, a fortiori with respect to the second disputed documents. It too, again understandably, did not in its skeleton address Veolia's third ground relating to the use to which documents accessed under section 15(1) could be put.
- Thus, at the stage of the skeleton arguments, all the parties except for Veolia agreed with the judge's solution on Veolia's primary, technical, ground. The Audit Commission saw potential merit in the ability of the ECHR and/or the 2004 Directive to protect confidential information, but said it was a matter for the Council to evaluate a decision whether to withhold the information or justify its disclosure, which the Council had not yet done. The Council did not take a view as to the applicability of the ECHR, but rejected the applicability of the 2004 Directive, and in any event submitted that disclosure would be justified. Mr Dowen went along with the Council's position.
- At the hearing itself, these positions underwent a certain change. As for Veolia, it now developed its third ground relating to the limited use to which accessed information could be put, and the other parties responded to this new issue with detailed submissions. Veolia was represented by Mr Philip Coppel QC.
- It was then Mr Peter Oldham QC, on behalf of the Audit Commission, who went first in response to Veolia's appeal. This made good sense, for he was instructed by a party who had the greatest interest in the workings of the ACA 1998. Thus he was particularly concerned to submit that the narrow reading of the expressions "accounts" and "relating to" espoused by Veolia would have driven a coach and horses through the Audit Commission's understanding and practice of its and auditors' responsibilities under the Act. However, as for Veolia's second ground, he supported, albeit in principle only and therefore somewhat tentatively, Veolia's submissions regarding the ECHR and the 2004 Directive. He submitted that these provisions would give a local authority under audit full range to have proper and balanced regard, either by reference to access to inspection itself, and/or by reference to the use to which persons interested might wish to put such accessed documents, to the legitimate claims of the applicant and the owner of the confidential information respectively: as he accepted occurs in relation to FIA 2000 and the EIR. As for Veolia's third ground relating to the use to which accessed documents might be put, he supported it in principle, submitting that the HTV case should either be understood as not dealing with confidential information, or as wrongly decided. To that extent, which was perhaps limited to confidential information, but may have extended generally, he accepted, or was influenced by, Veolia's reliance on a common law exception for confidential information. In his submission, the person interested who obtains access to confidential information under section 15(1) can only use it for the purposes of the Act. That limitation was not subject to any balancing exercise, but extended to any confidential information.
- Thus the Audit Commission in the end went far towards accepting the essential burden of Veolia's new submissions.
- Mr Clive Lewis QC went next on behalf of the Council. He stressed that the Council was "piggy in the middle". Its interest was in getting its responsibilities right, particularly in the case of any balancing exercise. However, ultimately the responsibility for such balancing was for the court. Presumably under the influence of Mr Oldham's submissions on behalf of the Audit Commission, he now appeared to have become somewhat more accommodating to Veolia's new submissions. Thus he wavered concerning the validity of Veolia's third ground. He observed that a distinction could be made between there being no limitation on access and accepting the possibility that use of accessed material could be restricted to the purposes of the ACA 1998. However, that was an issue between Veolia and Mr Dowen on which the Council took no formal position, for it was not something which it fell to the Council to police. If, however, use of confidential information could be restricted, there would be no need to read down section 15(1) to take account of article 8 and/or article 1 of the First Protocol in protection of confidential information. In principle, however, he acknowledged that in particular article 8 could, depending on the particular situation, protect highly personal or medical information; and he referred to para 67 in the HTV case itself as supporting the relevance of article 8 in permitting the redaction of documents otherwise within section 15(1). As for the 2004 Directive, however, he continued to submit that it was inapplicable outside the procurement process itself.
- Mr Pitt-Payne was the last to make his submissions, on behalf of Mr Dowen. He was now the only party to submit that Veolia's third ground, relating to the use to which accessed material might be put, was wrong, having been rejected in HTV. It would be an awkward limitation to apply, and there was nothing comparable to section 49 to limit the consequences of access under section 15(1). As for Veolia's second ground, he adopted Mr Lewis's submissions on behalf of the Council.
- Thus at the end of the day, the only party to say that the judge was wrong on the primary ground of this appeal was the appellant, Veolia, itself. There was widespread support, however, for Veolia's third ground of appeal, relating to the use to which accessed confidential information could be put, for only Mr Dowen actively rejected that submission. There was also widespread or even universal support for a possible reading-down of section 15(1) by reason of the ECHR, although the Council, supported by Mr Dowen, disputed the ultimate decision at which this court ought even then to arrive in this case with reference to confidential information. As for a common law exception for confidential information, there was it seems some support from the Audit Commission.
The contract and confidentiality
- The contract between Veolia and the Council is entitled "Waste Management PFI. Project Agreement. Contract A." It is dated 26 June 2006. Its recitals record that local authorities have targets for recycling and landfill obligations; that the Council wished to procure the services of a private contractor to provide waste management functions to enable it to meet its targets and fulfil its obligations; that the Council tendered the contract in accordance with the Public Services Contracts Regulations 1993 (the forerunner of the Public Contracts Regulations 2006, and made pursuant to Directive 93/36/EEC, the forerunner of the 2004 Directive); and that the Council had selected Veolia "as the most economically advantageous tenderer to provide the services".
- There is no evidence which directly states that the confidential information contained in the contract in general, or in the first or second disputed documents in particular, was provided in the course of the tendering process itself or was then designated as confidential. However, it is quite realistic to suppose that it was, in the light of the contract's recital E – "The Authority has tendered this Contract in accordance with the Public Services Contracts Regulations 1993…".
- Clause 123 of the contract, headed "Freedom of Information and Confidentiality" contains inter alia the following provisions:
"123.1 The parties agree that the provisions of this Contract and each Project Document or Ancillary Document shall, subject to Clause 123.3 below, not be treated as Confidential Information and may be disclosed without restriction.
123.2 Clause 123.1 above shall not apply to provisions of this Contract or a Project Document or Ancillary Document designated as Commercially Sensitive Information in Schedule 45 (Commercially Sensitive Contract Provisions) to this Contract which shall, subject to Clause 123.4 below, be kept confidential for the periods specified in that Schedule.
123.3 The parties shall keep confidential all Confidential Information received by one party from the other party and shall use all reasonable endeavours to prevent their employees and agents from making any disclosure to any person of any such Confidential Information.
123.4 Clause 123.2 and 123.3, shall not apply to:
123.4.4. Any disclosure which is required pursuant to any statutory, legal (including any order of a court of competent jurisdiction) or Parliamentary obligation placed upon the party making the disclosure…
123.4.10. any disclosure for the purpose of:
126.96.36.199. the examination and certification of the Authority's or the Contractor's accounts;…
188.8.131.52. (without prejudice to the generality of Clause 123.4.4 above) compliance with the FOIA and/or the Environmental Information Regulations,
provided that, for the avoidance of doubt, neither Clause 184.108.40.206 nor Clause 123.4.4 above shall permit disclosure of Confidential Information otherwise prohibited by Clause 123.3 above where the information is exempt from disclosure under section 41 of the FOIA."
- These are complex provisions and have led to a submission from Mr Lewis on behalf of the Council to the effect that there is in any event no confidentiality to preserve under the contract itself in the case of the 2004 Directive (or presumably the 1993 Directive) because of the provisions of Clause 123.4.4 taken together with section 15(1) of ACA 1998.
- If that is a good argument, then I do not see why it is not also a good argument in the case of the provisions of the ECHR, but Mr Lewis did not submit to that effect; nor do I see why Mr Lewis did not rely on section 220.127.116.11. In my judgment, however, it is not a good argument, for it mistakes the chicken and the egg. If any statute or EU directive upon its true interpretation protects confidential information, then there is no case of "disclosure which is required pursuant to" any statutory obligation. The proviso to clause 123.4.10 itself emphasises that neither clause 123.4.4 nor clause 18.104.22.168 is intended to excuse the disclosure of information which is not required under the specified legislation. As for clause 22.214.171.124, there was no submission from Mr Lewis, for example that the disclosure sought was "for the purpose of:…the examination and certification of the Authority's…accounts": although I can see both that there might perhaps have been, and also that there might have been a counter-submission. However, be that as it may, if, upon the true construction of section 15(1), access and/or onwards disclosure of the disputed documents, qua confidential information, are not required or permitted, then in my judgment the confidential information designated and protected by clause 123.2 and clause 123.3 does not cease to be protected as confidential information. To argue otherwise is a petitio principii, or, as the vernacular would put it, a bootstraps argument.
- It is not otherwise submitted that the disputed documents do not contain confidential information: save that it is said on behalf of Mr Dowen that the first disputed documents have already lost their confidentiality as a result of his obtaining access to them following Cranston J's judgment. Subject to that submission, the evidence is that the disputed documents are confidential. Since the judgment under appeal, the Council's own decision to treat the disputed documents as confidential for the purposes of FIA 2000 and the EIR has been by and large upheld by the decision of the Information Commissioner's Office ("ICO").
The legislative history of section 15(1)
- The judge traced the legislative history of section 15(1) back to the Poor Law Act 1844, which dealt with the financial accountability of parishes, section 33 of which gave "every person liable to be rated to the relief of the Poor" a right to inspect the parish books of accounts, and to make objections to the accounts before the auditor. However, at that stage ratepayers had no right to inspect the documents underlying the accounts which were available to the auditor.
- The concept of "persons interested" was introduced by the Public Health Act 1848, section 122 of which provided that accounts of local boards of health should, prior to audit, be made available for inspection by persons interested. As in the case of the Poor Law Act 1844, the right was to inspect and copy accounts, but no access was given to the underlying documents which were available to the auditor.
- It was the Public Health Act 1875 which extended the right of access to documents beyond the accounts themselves, and was described by the judge as the source from which section 15(1) derived. Section 247(4) of the 1875 Act provided:
"A copy of the accounts duly made up and balanced, together with all rate books account books deeds contracts accounts vouchers and receipts mentioned or referred to in such accounts, shall be deposited in the office of such authority, and be open, during office hours thereat, to the inspection of all persons interested for seven clear days before the audit, and all such persons shall be at liberty to take copies or extracts from the same, without fee or reward."
- Section 224(1) of the Local Government Act 1933 reproduced such provisions in similar but not identical terms, and introduced the concept of documents "relating to the accounts". The 1875 Act had used the concept of documents "mentioned or referred to in such accounts". Section 224(1) provided:
"A copy of every account which is subject to audit by a district auditor, duly made up and balanced, and all rate books, account books, deeds, contracts, accounts, vouchers and receipts relating to the accounts, shall be deposited in the appropriate office of the authority, and shall for seven clear days before the audit be open at all reasonable hours to the inspection of all persons interested, and any such person shall be at liberty to make copies of or extracts from the deposited documents, without payment."
Section 226 of the 1933 Act also conferred a right upon a local government elector to make objection to the account (see now section 16 of ACA 1998).
- The Local Government Act 1972 (the "LGA 1972") and the Local Government Finance Act 1982 contained similar provisions.
- Section 148 of the LGA 1972, as amended, is still relevant today, for it addresses the accounts of county councils. It provides:
"(2) The council of each county shall keep a fund to be known as the county fund…
(4) All receipts of a county council shall be carried to the county fund, and all liabilities falling to be discharged by that council shall be discharged out of that fund.
(5) Accounts shall be kept of receipts carried to, and payments made out of, -
(a) the county fund…
and any account kept in respect of general expenses only of a principal area shall be called the general account of that area and any account kept in respect of any class of special expenses only of any such area shall be called a special account of that area."
No party on this appeal has questioned this history, as set out by the judge.
Audit Commission Act 1998
- ACA 1998 (in this section of my judgment, the "Act") is a consolidation statute. For present purposes the essence of the Act is in section 2(1)(b) which requires the accounts of public bodies to be audited by an auditor appointed by the Audit Commission. Section 2 provides:
"(1) The accounts to which this section applies –
(a) shall be made up each year to 31st March or such other date as the Secretary of State may generally or in any special case direct, and
(b) shall be audited in accordance with this Act by an auditor or auditors appointed by the Commission.
(2) This section applies to the accounts mentioned in Schedule 2.
- Schedule 2 states that "Section 2 applies to all accounts of – (a) a local authority…". Thus the appointed auditor must audit all the Council's accounts, which have to be made up to 31 March in any year. As section 148 of the LGA 1972, cited in the previous paragraph, demonstrates, the Council's basic accounts, which have to be "kept", will be a running ledger of income and expenditure. We were informed by Mr Oldham on behalf of the Audit Commission, and I accept, that making up such accounts involves drawing a line under them at the end of any year, adjusting them as may be necessary for the purpose of such annual making up, and totalling them. Veolia complains that there is no evidence before us, or at any rate no evidence that the judge accepted as being before him, of either such raw or made up accounts. So be it. However, I would accept Mr Oldham's description, on instructions, as accurately restating the effect of what the Act describes as a "made up" account.
- Section 5 states the general duties of auditors and section 6 states the auditors' rights to documents and information for the purpose of carrying out those duties. Section 5 provides:
"(1) In auditing accounts required to be audited in accordance with this Act, an auditor shall by examination of the accounts and otherwise satisfy himself –
(b)…that they are prepared in accordance with regulations under section 27;…
(e) that the body whose accounts are being audited has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources.
(2) The auditor shall comply with the code of audit practice applicable to the accounts being audited as that code is for the time being in force."
- I will refer to the regulations made under section 27, and to the code of audit practice made under section 5(2), below. Section 27 provides that the Secretary of State may make provision by regulation with respect to "(a) the keeping of accounts; (b) the form, preparation and certification of accounts and of statements of accounts…(d) the publication of information relating to accounts and the publication of statements of accounts". This is one of a number of places where a distinction is drawn between "accounts" and "statements of accounts".
- Section 6 provides:
"(1) An auditor has a right of access at all reasonable times to every document relating to a body subject to audit which appears to him to be necessary for the purposes of his functions under this Act."
This is a wide provision, albeit expressly subjected to the purposes of the auditor's statutory functions. Subject to that restriction, the documents to which the auditor is entitled to access, at all reasonable times, only have to relate to the body subject to audit and not to the accounts themselves. Moreover, it is clear that the expression "relating to" in the phrase "relating to a body" cannot be given the narrow meaning of "expressed in" or "referred to in" which Veolia wishes to give to the expression "relating to" in section 15(1).
- Sections 8 and 9 deal with reports by an auditor. Section 8 places on an auditor the duty to consider in the course of his audit "whether, in the public interest, he should make a report…in order for it to be considered by the body concerned or brought to the attention of the public". Such a report might be made either immediately or at the conclusion of the audit, but it is the auditor's view of the public interest which is determinative. Section 9 provides that at the conclusion of the audit the auditor is to enter on the statement of accounts (or, where no such statement is prepared, on the accounts themselves) his certificate of completion and his opinion on the statement (or, as the case may be, on the accounts). Here again the distinction is drawn between accounts and statements of account. It is plain that, where there is no statement of accounts, then the auditor's certificate and opinion are to be entered on the "accounts", which are plainly not to be found within any statement of accounts, since ex hypothesi in such a situation there is no statement of accounts.
- Section 14 introduces a series of sections headed "Public inspection etc and action by auditor". They provide as follows:
"14.- (1) A local government elector for the area of a body subject to audit, other than a health service body, may –
(a) inspect and make copies of any statement of accounts prepared by the body pursuant to regulations under section 27;
(b) inspect and make copies of any report, other than an immediate report, made to the body by an auditor; and
(c) require copies of any such statement or report to be delivered to him on payment of a reasonable sum for each copy.
(2) A document which a person is entitled to inspect under this section may be inspected by him at all reasonable times and without payment.
This right, given to an elector, would not avail Mr Dowen to obtain the documents he seeks in this case. It is limited to inspection of statements of accounts, and reports. It is not framed in terms of accounts or their underlying documents.
- Section 15, the first subsection of which is the critical provision, provides in relevant part as follows:
"(1) At each audit under this Act, other than an audit of accounts of a health service body, any persons interested may –
(a) inspect the accounts to be audited and all books, deeds, contracts, bills, vouchers and receipts relating to them, and
(b) make copies of all or any part of the accounts and those other documents.
(2) At the request of a local government elector for any area to which the accounts relate, the auditor shall give the elector, or any representative of his, an opportunity to question the auditor about the accounts.
(3) Nothing in this section entitles a person –
(a) to inspect so much of the accounts as contains personal information within the meaning of subsection (3A) or (4); or
(b) to require such information to be disclosed in answer of any question.
(3A) Information is personal information if –
(a) it identifies a particular individual or enables a particular individual to be identified; and
(b) the auditor considers that it should not be inspected or disclosed.
(4) Information is personal information if it is information about a member of the staff of the body whose accounts are being audited which relates specifically to a particular individual and is available to the body for reasons connected with the fact –
(a) that the individual holds or has held an office or employment under that body; or
(b) that payments or other benefits in respect of an office or employment under any other person are or have been made or provided to that individual by that body.
(5) For the purposes of subsection (4)(b), payments made or benefits provided to an individual in respect of an office or employment include any payment made or benefit provided to him in respect of ceasing to hold the office or employment.
- Section 16 provides that "At each audit of accounts under this Act", essentially the same phrase as begins section 15(1), electors may make objections to the auditor as to any matter in respect of which the auditor could take action under section 17 (which concerns declarations that an item of account is unlawful, see below) and as to any matter in respect of which an auditor could make a report under section 8 (see above). Thus under section 15(2) an elector can question the auditor about the accounts and under section 16 an elector can make objections to the auditor as to the legality of any item of account. It is plain that an elector's right of access to accounts and documents relating to them under section 15(1) "At each audit under this Act" is to inform the elector's rights of questioning and objection. It is not clear what the function of access extending to "persons interested" beyond electors is: but it would not I suppose be difficult for persons interested who are not electors to engage the assistance of an elector for the purpose of questioning or objecting; and although it may not be a right sanctioned by statute, there would I suppose be nothing to prevent a person interested contacting the auditor with any concerns which might arise out of his inspection of the accounts and documents relating to them. All that a person interested who is not an elector would lack, if he failed to engage the assistance of an elector, is the additional right formally to question an auditor or to make an objection. It would seem therefore that the historic extension of the right of inspection to persons interested was in aid of enlisting assistance in the process of audit to all persons who might have a legitimate interest in the accounts.
- The right of objection given to an elector is a significant right, for section 17 provides (a) that an auditor may apply to the court for a declaration that an item of account is "contrary to law", if it appears to him that it is; and (b) that an elector who has made an objection under section 16 and is "aggrieved by a decision of an auditor not to apply for a declaration" may require the auditor to state the reasons for his decision and "appeal against the decision to the court". The elector has to require the auditor to state his reasons within six weeks of being notified of the decision not to apply for a declaration. Thus the elector's right of objection ultimately brings with it a right, if necessary, for the elector himself to initiate proceedings in which he can question, subject to an auditor's decision, the legality of any item of account. It is clear that the questioning of an auditor is itself a tool which an elector can use to prompt an auditor into action under sections 8 or 17; or indeed, as I would assume, to take action as an auditor in some more general way.
- Sections 33 and 34 contain provisions requiring the Audit Commission itself to undertake and promote comparative and other studies for improving economy, efficiency and effectiveness and the financial or other management of bodies subject to audit; and to undertake and promote reports on the operation of statutory provisions or of directions or guidance given by any minister.
- Section 48 contains provisions to assist the Audit Commission, in addition to an auditor appointed by it for the purposes of any particular audit, to act as a watchdog of the audit process. Thus the Commission is given broad rights of access to the accounts and documents of any body subject to audit. That body or any officer or member of it may be required to provide the Commission or a person authorised by it "with all such information as the Commission or that person may reasonably require for the discharge of the functions under this Act of the Commission or that person", including, for the purpose of maintaining proper standards, "the accounts concerned; and…such other documents relating to the body as might reasonably be required by an auditor for the purpose of the audit". Such wording tracks or reflects the wording of section 6 which gives similar rights of access to the auditor.
- Section 49, headed "Restriction on disclosure of information", is a general prohibition on the disclosure of information obtained by the Commission or an auditor, or persons acting on behalf of either, in the course of any audit or study save as specifically authorised under various subsections: such as "with the consent of the body or person to whom the information relates", or "for the purposes of any functions of the Commission or an auditor", or "for the purposes of any criminal proceedings" (subsection (1)(a), (b) and (f)). There are specific provisions relating to FIA 2000 (section 49(2A), (2B) and (2C)). A person who discloses information in contravention of section 49 is guilty of an offence.
The Accounts and Audit Regulations 2003
- These regulations (the "2003 Regulations") were made pursuant to section 27 of ACA 1998, in succession to earlier regulations. They throw further light on the provisions of the statute.
- Regulation 5 ("Accounting records and control systems") puts the control of a relevant body's "accounting records, including the form of accounts and supporting accounting records" and "accounting control systems" in the hands of its responsible financial officer. Regulation 5(2) provides:
"(2) The accounting records determined by the responsible financial officer on behalf of the relevant body in accordance with paragraph (1)(a) shall be sufficient to show the body's transactions and to enable the responsible financial officer to ensure that any statement of accounts, income and expenditure account, statement of balances or record of receipt and payments and additional information to be provided by way of notes to the accounts as the case may be, which are prepared under these regulations, comply with these Regulations."
- Regulation 5(3) goes on to provide that the "accounting records" shall contain
"(a) entries from day to day of all sums of money received and expended by the body and the matters to which the income and expenditure or receipt and payments relate;
(b) a record of the assets and liabilities of the body…"
- Regulation 5 in my judgment is only consistent with, or at least strongly supports, the thesis of all parties other than Veolia that "accounts" are different from the "statement of accounts" and are more general than a reference limited to high level summaries of accounts contained in the statement of accounts (even if such high level summaries might also fall within the generic meaning of accounts). "Accounts" are plainly the essential basic accounting material of "accounting records" and contain running entries of all sums received and expended. This is consistent with section 148 of LGA 1972, and with the concept that such running accounts are "made up" to a certain date each year. The "entries" in such running accounts must in turn embrace "the matters to which the income and expenditure or receipt and payments relate". Here again, the word "relate" describes a more general connection than that of express reference. The entries must refer to the matters to which the items of income and expenditure relate: which shows that the items of income and expenditure would relate to the matters they record even if the entries of those items did not expressly refer to the matters to which they relate.
- It is regulation 7 which is concerned with the statement of accounts. It provides –
"(1) A relevant body which is not a smaller relevant body shall prepare, in accordance with proper practices in relation to accounts, a statement of accounts for each year, which shall include such of the following accounting statements as are relevant to the functions of the relevant body -
(a) housing revenue account;
(b) collection fund;
(c) firefighters' pension fund;
(d) any other statements relating to each and every fund in relation to which the body is required by any statutory provision to keep a separate account."
- It appears from this provision, to my mind, that "statement of accounts" is used in the sense of the overall document produced each year which sets out a body's report on its financial position, whereas "accounting statements" is used to describe the high level summaries of accounts included in the statement of accounts. Thus whether or not such high level summaries are in themselves accounts, they are properly referred to as accounting statements. It might be said therefore that the statement of accounts (the overall document) contains (among other things which are not in themselves accounts, such as a foreword, or reports) a series of statements of individual accounts. Those individual accounts of which statements are contained in the statement of account are the made up running accounts which are the basic material of the body's accounting records.
- Regulation 10 concerns the signing and approval of the statement of accounts. It provides (1) that the relevant body is responsible for ensuring that the statement of accounts is prepared in accordance with the regulations; (2) that the responsible financial officer shall sign and date the statement of accounts and certify that it "presents a true and fair view of the financial position of the relevant body at the end of the year to which it relates" and of that body's income and expenditure for that year; and (3) that the statement of accounts shall then be considered and approved by a committee of the relevant body, by at latest 30 June following the end of the year, and then signed and dated by the person presiding at that committee.
- Regulations 13, 14, and 18 are concerned with providing electors and persons interested with the opportunity to assist in the audit vouchsafed to them by sections 14, 15 and 16 of ACA 1998. Thus regulation 13 requires the auditor to notify the body concerned of a date appointed by the auditor after which electors can exercise their rights under section 15(2) and 16(1). Then regulation 14 requires the body to "make the accounts and other documents mentioned in section 15 of ACA 1998 available for public inspection for 20 working days" before the day so appointed by the auditor. The use of the expression "accounts and other documents" in the context of regulations which distinguish between accounts, statements of account and accounting statements, strongly supports the submission made by all the parties other than Veolia that the "accounts" referred to in section 15 and regulation 14 are not the accounts contained in the statement of accounts. It is of course recognised that the 2003 Regulations cannot control the correct interpretation of ACA 1998 itself, nevertheless they are an influential pointer towards a proper understanding of it.
- It is to be noted, moreover, that the inspection under section 15(1), as well as the right to question under section 15(2) and the right to object under section 16(1), are all bound up in a timetable which begins with the appointment and notification by the auditor of a day on which questioning and objections may be made and a period of 20 working days before that in which inspection under section 15(1) may be made. This all occurs during the audit process, before it has been completed by the auditor's certificate that it has been completed, which discharges him of his auditing functions.
- Regulation 16 makes provision for notice to the public, ie to electors and persons interested, of their rights. That notice to the public, by advertisement, must be given at least 14 days before the commencement of the 20 working day period leading up to the day appointed by the auditor (regulation 16(1)). The notice must set out the following matters (regulation 16(2)):
"(a) the period during which the accounts and other documents referred to in paragraph (1) will be available for inspection in accordance with regulation 14;
(b) the place at which, and the hours during which, they will be so available;
(c) the name and address of the auditor;
(d) the provisions contained in section 15 and section 16 of the 1998 Act; and
(e) the date appointed under regulation 13."
- Thus again the matters of which the public are to be notified, for the purposes of section 15, are the "accounts and other documents", reflecting the language of section 15(1)'s "the accounts to be audited and all books" etc "relating to them". Since the name and address of the auditor are to be advertised, there is no difficulty in thinking that persons interested who are not electors (and thus cannot themselves question the auditor or make objections to him or appeal his decision not to seek a declaration that an item of account is unlawful) can write to him with any observations that they care to make. In this way, persons interested, including electors, are involved as "gadflies", as Mr Oldham accepted on behalf of the Audit Commission, and a local authority subject to audit under ACA 1998 is rendered accountable not only to the auditor appointed by the Audit Commission, and to the Commission itself, but also to a form of democratic accountability in aid of that audit process.
- It is then only after the conclusion of the audit that the right to inspect the "statement of accounts" is given to electors, pursuant to section 14: as regulation 18 makes clear, for it provides that –
"(1) As soon as reasonably possible after conclusion of an audit, a relevant body…shall give notice by advertisement stating that the audit has been concluded and that the statement of accounts is available for inspection by local government electors and including –
(a) a statement of the rights conferred on local government electors by section 14 of the 1998 Act…"
- These regulations, together with ACA 1998 itself, thus distinguish between accounts, statements of account, and accounting statements within such a statement of accounts. The statement of accounts is certified, considered, approved, signed and dated on behalf of the body subject to audit, but it is the accounts and documents relating to them which are subject to inspection by persons interested, in the run-up to the completion of the audit, and it is only after the completion of an audit that there is a right to inspect the statement of accounts. In such circumstances, it makes no sense to suggest that the "accounts" referred to in the statement of accounts which are subject to inspection pursuant to section 15(1) are the high level summaries in the statement of accounts, rather than the running accounts "kept" by the local authority and "made up" each year for the purpose of being audited.
The Code of Practice 2008
- The Code of Practice, prepared pursuant to ACA 1998, was laid before Parliament. A full description of it given by Cranston J at paras 34/37 of his judgment has not been questioned on appeal. The Code demonstrates both that the auditor's audit responsibilities go well beyond the local authority's statement of accounts, in particular in being required to satisfy himself that the relevant body has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources, and also that the audit embraces what are there called the "financial statements" (ie what the 2003 Regulations call the "accounting statements" to be found in the statement of accounts). Such financial statements are also described in the Code as "the published accounts of the audited body". It would seem from Part 2 of the Code ("Auditing the financial statements") that the audit of such financial statements is a central part of the audit as a whole, but not that the audit is confined to such statements nor that section 15(1)'s "accounts to be audited" are confined to such statements (see, in general, Part 1's "General principles").
- That also reflects the Audit Commission's evidence in the form of a witness statement of Mr Stephen Warren, who is head of professional standards at the Audit Commission, and the submissions for the Audit Commission made by Mr Oldham. Thus Mr Warren writes:
"8. Whilst the term 'accounts' is sometimes used to refer to the 'statement of accounts', it has a wider meaning, and the 1998 Act distinguishes between the two. The 'accounts' of a local government body include the 'general ledger', which is the main record of transactions, assets and liabilities of a body of which the 'statement of accounts' is a summary. It includes subsidiary accounts that feed into the 'general ledger', such as payroll accounts or council tax accounts."
Mr Warren also states:
"13. An audit is not a substitute for the arrangements an authority puts in place itself. Auditors cannot and do not review or check every transaction reflected in the authority's accounts or every element of the authority's arrangements for securing economy, efficiency and effectiveness. The Code of Audit Practice requires auditors to adopt a risk-based approach, targeting resources appropriately in the context of the particular circumstances of the body. In seeking to obtain reasonable assurance that the accounts have not been materially misstated, auditing standards allow for auditors to employ sampling techniques to test the details of transactions in the accounts and the effectiveness of the operation of financial controls."
- However, as it seems to me, if the only accounts which the auditor was required to audit were the high level summaries in the statement of accounts, sampling techniques would be of no assistance, for the auditor would never be dealing with the details of individual transactions, but only with large numbers which amalgamated the product of innumerable transactions.
- Section 15 of ACA 1998 is itself covered in Part 5 of the Code, which highlights inter alia the function "1. To give electors the opportunity to raise questions about the accounts and consider and decide upon objections received in relation to the accounts". Although the Code is not particularly clear as to what constitutes such "accounts", Part 5 does not use the language of "financial statements". Moreover, the following paragraphs within Part 5 are relevant:
"54. Where any representations are made or information is provided that is relevant to the audit, or matters relevant to the audit otherwise come to their attention, auditors should consider whether the matter needs investigation and action under their specific powers or whether it can be considered more effectively within planned work programmes and audit reporting arrangements under their general audit powers.
55. In considering whether to exercise any of their specific powers under the Act, auditors should apply a balanced and proportionate approach in determining the time and resources to be spent on dealing with matters that come to their attention. They should consider:
• the significance of the subject matter;
• whether there is a wider public interest in the issues raised;
• the costs of dealing with the matter, bearing in mind that these fall directly on the taxpayer;
• in the case of objections, the rights of both those subject to objection and the objector.
56. Auditors should reject objections that disclose no reasonable cause for action, are frivolous or vexatious, or are otherwise an abuse of the audit process."
- Also relevant to the wider issues raised in Veolia's new submissions is paragraph 12, under Part 1 ("General Principles"):
12 Auditors should take all reasonable steps to ensure that they and their staff comply with relevant statutory and other requirements relating to the holding and disclosure of information received or obtained during the audit."
Information rights legislation
- It is noticeable that neither the 2003 Regulations nor the Code of Practice contain any suggestions as to how a body under audit should itself deal with a request for inspection pursuant to section 15(1). The impression given by regulation 16 is simply that persons interested may turn up at the place advertised during the period and hours advertised to browse among the documents mentioned in section 15(1), which will be available for inspection. However, it seems that a system has grown up, possibly under the influence of FIA 2000, whereby electors or other persons interested may give notice to the Council of a desire to inspect and obtain copies of specified documents.
- The judge briefly discussed information rights legislation. The main purpose of FIA 2000 is to confer a right of access to recorded information held by public authorities like the Council, upon written request (section 1). A number of conditions must be fulfilled before a public authority is obliged to comply with a request (section 8). A public body must state its reasons for refusing a request (section 17). Appeals can be taken to the Information Commissioner and thence to the First-Tier or Upper Tribunal. There is an unqualified exemption from the obligations under the statute, in favour of confidential information (section 41).
- The EIR were made pursuant to the EU Directive on Public Access to Environmental Information 2003/4/EC. A person requesting information under these regulations may enforce his right to obtain it under section 50 of FIA 2000 by application to the Information Commissioner. Regulation 12 sets out exceptions to the duty to disclose. Regulation 12(5)(e) protects confidential information in the following terms:
"(5)…a public authority may refuse to disclose information to the extent that its disclosure would adversely affect - …
(e) the confidentiality of commercial or industrial information where such confidentiality is provided by law to protect a legitimate economic interest…"
- On 30 June 2010 the Information Commissioner rendered its decision notice in respect of Mr Dowen's complaint (on behalf of PAIN) against the Council's decision not to allow him access to parts of the contract which embrace at least the schedules included in both the first and second disputed documents. It appears from the Information Commissioner's decision that Mr Dowen's interest in obtaining the full contract under FIA 2000 and the EIR goes back to April 2006 (even before the contract was concluded) and solicitors had been retained by him by July 2008. The decision refers to the judgment of Cranston J in these proceedings (at para 21). The decision upheld (to a very large extent) the Council's decision not to allow access to the disputed parts of the contract.
- Relevant passages in the decision are as follows:
"22. On 6 January 2010, NCC confirmed to the Commissioner that it continued to rely on the exception contained in Regulation 12(5)(e) and that, while schedules 6A, 6B, 6C and 7 had been disclosed to the complainant, they had not been made public…
28. The Commissioner's decision is that the relevant information falls within the definition of environmental information provided in EIR Regulation 2(1)(c)…
33. The PFI contracts were signed on 26 June 2006 and NCC made a redacted version of them available to the general public on 12 June 2008…
38. NCC told the Commissioner that the Regulation 12(5)(e) exception could only be relied upon where it was satisfied that releasing the information would have an adverse effect. NCC was satisfied, for the information to which it had applied the exception, that Veolia would be disadvantaged in the marketplace because the effectiveness of its tenders would thereby be reduced, in turn this would affect the quality of tenders received by public authorities including itself…
43. The Commissioner considers that "provided by law" will include confidentiality imposed on any person under the common law of confidence, contractual obligation, or statute. In this matter he has seen evidence that it was the intention of the parties, during the negotiations and as provided in the contract, for some defined parts of the information exchanged by them not to be disclosed. The Commissioner is satisfied that some of the relevant information has been imparted to NCC in circumstances which gave rise to an obligation of confidence. He also considered whether the information had the necessary 'quality' of confidence. He is satisfied that some of it did as some of the information still being withheld is not trivial and is not available from other sources…
49. NCC said that it recognised that there were arguments in favour of disclosing all of the relevant information and that under the legislation there is a presumption in favour of disclosure. NCC said that waste management was a core function of public authorities and that the public had a right to know that the contract was for an appropriate price, for the provision of appropriate services, with adequate safeguards. It was important for NCC to demonstrate transparency and accountability in the spending of public money. Disclosure of operational information would: give an overview of what had been agreed by NCC; allow a detailed understanding of the process; and, help to demonstrate that value for money had been achieved. Generally the more information that was in the public domain, NCC said, the greater the scope for public debate and understanding of the reasons for its decisions…
51. NCC told the Commissioner that only information of the utmost commercial sensitivity had been considered by the public interest panel and subsequently withheld from the complainant because NCC and Veolia had already agreed to release a large amount of information in accordance with the spirit of the Act…
53. In summary NCC said, it had decided that the majority of the information could be disclosed but that Veolia and NCC officers had correctly objected to the release of detailed financial modelling information and information that would affect their future negotiating positions. NCC therefore had decided that the technical and detailed information requested would not add significantly to the public debate but would significantly harm the commercial interests of Veolia and itself; it should therefore be withheld.
Balance of the public interest arguments
54. In reaching his decision, the Commissioner has taken full account of the arguments put to him by the parties. Through his staff, he has reviewed all of the information being withheld and taken full account of its content. He has also followed the principles set out in the decisions in the lead cases. In summary he decided that the public interest in maintaining the exceptions outweighed the public interest in disclosure for information about: specific systems and technical matters; the costs and profits of contractors including the relevant financial models; the claw back of costs e.g. from the sale of by-products; and technical manual matters. Information other than these categories fell to be disclosed.
55. The Commissioner has prepared a detailed decision schedule…"
- The schedule shows that: schedules 6A, 6B and 7 should be disclosed but redacting identified paragraphs and that Schedule 6C should be disclosed in full; and that schedules 33, 38 and 40 should be redacted in full. An appeal is available from the Information Commissioner's decision to the First-tier Tribunal (Information Rights). I do not know if Mr Dowen (or the Council) has appealed.
- I have cited fully from the Information Commissioner's decision because, although he was considering different statutory material, not ACA 1998, nevertheless the submissions before him and his reasoning demonstrate that the issues which have to be gone into for the purpose of achieving a proportionate balance between private rights and public interests under the justification provisions of the ECHR, if one gets that far (see below), are almost entirely identical with the issues balanced in his decision; and also because we in this court have been treated to only a fraction of the material and the argument which he had to consider for the purpose of his decision.
The Council's statement of accounts
- The Council's statement of accounts for 2008/09 was approved by the Council on 25 June 2009 and signed and dated with that date. At that time the auditor's certificate and report, and the completion of the audit itself, had not of course yet been completed. In the meantime, even before the approval of its statement of accounts, the Council had given notice by advertisement of the right to inspect its "accounts…for the year ended 31st March 2009, together with all books, deeds, contracts, bills, vouchers and receipts relating to them" from 29 June to 24 July 2009.
- The title page of the statement of accounts – but not the body of the document – refers to headings of the main constituents of its contents as being "County Council Accounts", "Pension Fund Accounts", "Admission Agreement etc Pension Fund" and "Glossary of Terms". Under the title page heading of "County Council Accounts" there are a number of items, most of which are not in themselves accounts or accounting statements, such as "Explanatory Foreword", the auditor's reports (left blank until completion), "Statement of Approval by Chairman", "Statement of Accounting Policies" and such like. There are also "Notes to the Statement of Accounts". The kernel accounts or accounting statements, however, are "Income & Expenditure Account" and "Balance Sheet" (and possibly "Summary Revenue Accounts of Trading Undertakings"). There are also subsidiary financial statements, such as the "Cash Flow Statement" and "Statement of Total Recognised Gains and Losses".
- The income and expenditure account and balance sheet are high level summaries: each is only a single page. The income and expenditure account lists income and expenditure for eleven "Continuing County Council Services", one of which is "Environmental Services", in respect of which there is stated a net expenditure of £30,573,000. Other lines reflect more general sources of income and expenditure, such as interest, and, the largest figures of all, "Precept Income" and "National Non-domestic Rates Redistribution".
- The notes to the statement of accounts cover many pages and give more detailed information about the Council's financial activities including its income and expenditure account. Note 29 is headed "Private Finance Initiative (PFI)". There is no reference to note 29 in the one page income and expenditure account (although there are a few references there to other notes). Note 29 gives details of a number of PFI contracts entered into by the Council. The final paragraph of note 29 is headed "Waste Recycling". It is this paragraph which refers to the Veolia contract, in the following terms:
"The Authority has received Government support for a Nottinghamshire Waste PFI scheme which involves the commissioning of Materials Recycling Facilities and an Energy Recovery Facility. The contract was signed on 26 June 2006 and the main facilities are expected to become operational over the next five years. The charge to the County Council in 2008/09 was £21.2 million (£19.5 million in 2007/08). The first main new facility became operational in January 2009, the Materials Recycling Facility (MRF). The MRF site is subject to a rental agreement with NCC, 50 years, which is then recharged to Veolia at the same rates. The residual value of the facility as at 31/03/2033 is assessed at £6.87m."
- The Veolia contract is there identified by reference to its date, although Veolia is mentioned only incidentally in the penultimate sentence of that passage. Note 36 ("Revenue Reserves") also refers to a "Waste PFI Reserve" at £15,344,000. Moreover, a heading within the Explanatory Foreword, "Capital Expenditure and Financing", also states at paragraph 14 that "The Authority has entered into private Finance Initiative (PFI) partnerships. The major schemes are as follows…Waste recycling and energy recovery facilities. Further details of PFI contracts are set out in Note 29 to the Accounts."
The first ground: documents "relating to" the "accounts to be audited"
- Veolia's submission is that the "accounts to be audited" are the high level summaries contained in the Council's statement of accounts, and that the contract and invoices sought to be inspected (and some of which, ie the first disputed documents, have already been inspected and copied by or for Mr Dowen) in any event do not relate to those summaries because neither the documents nor the accounts refer to each other. Although note 29 refers to the contract, the notes in the statement of accounts are not part of the accounts. On the question whether "relating to" should bear a wide or narrow meaning, Mr Coppel submits that it should bear a narrow meaning, in order to assist to protect confidential information. He submits that "relating to" can and should bear a narrow meaning in reliance on an Australian case, Tooheys Ltd v. Commissioner of Stamp Duties (NSW) (1961) 105 CLR 602 (Tooheys). In essence Mr Coppel's submission is that to come within the section 15(1) right of inspection, documents have to be mentioned or referred to in the lines of the income and expenditure account to be found in the Council's statement of accounts (or any other similar account found there). It submits that any other interpretation would make the right of inspection unreasonably wide, and would be irreconcilable with the protection to the still wider category of documents available to the auditor (see sections 6, 48 and 49 of ACA 1998) and therefore should not be adopted. Moreover, there was no evidence before the judge of any accounts in the broader sense espoused by the other parties.
- The other parties agree with the judge, who held that both "accounts to be audited" and "relating to" should be given a broad meaning: the former referring to and/or embracing the underlying record of financial movements kept as a running record but made up for each financial year, and the latter requiring only a factual connection between the accounts and the documents in question, and not an express reference or mention. On that basis, as the judge said, the factual connection is obvious and is not in dispute. Indeed, the parties responding to this appeal submit that, even on Veolia's own interpretation of the narrow meaning to be given to "accounts to be audited", that connection is obvious. No one denies, they submit, that the invoiced amounts have been expended pursuant to the contract in the financial year in question and entered as items within the summarised income and expenditure account to be found in the statement of accounts itself: as note 29 evidences, although unnecessarily.
- I agree with the submissions of the respondents on this issue, and with the reasons given by the judge, at any rate in so far as those reasons do not extend to preferring a wider meaning of those phrases on the purposive basis that section 15(1) was intended to embrace even confidential information, and was intended to provide a right of access irrespective of the use to which the documents in question would be put (see paras 78/81 of his judgment). It seems to me that those broader questions now have to be considered by reference to the new issues raised on this appeal by Veolia and which were not before the judge.
- Having set out the large amount of material which has to be considered, with the assistance of the judge's reasons I can express my conclusions on this ground quite succinctly.
- As for "accounts to be audited", it is true that there is no specific definition of that phrase, and also that there is a certain increasing emphasis, as one works through to the Code of Practice, on the auditing of the financial statements (the heading of Part 2 of that Code being "Auditing the financial statements"); also that those statements, contained in the Council's statement of accounts, are referred to there as the "County Council Accounts". However, it seems to me that it is almost inevitable that a certain looseness enters at times into the use of the expression "accounts" in circumstances where the term can cover everything from the Council's most basic books and ledgers to the high level summaries to be found in the statement of accounts, and where in one way or another the auditor is responsible for considering, even if only on a sampling basis, all of the Council's accounting records, as both the statutory material and the Audit Commission's evidence and/or submissions make clear. Indeed the statement of accounts is itself referred to in the Code of Practice as the "published accounts of the audited body", for entirely understandable reasons. This looseness of language can be found in the Council's statement of accounts, for instance, in the fact that the "Notes to the Statement of Accounts" are called as such, but the foreword to the statement of accounts refers to those Notes as notes "to the Accounts" (at its para 14 cited above). Therefore, it has to be acknowledged that the "accounts to be audited" could in theory be a reference to the accounts contained in the statement of accounts.
- On the other hand, there are a variety of reasons for concluding that the expression in section 15(1) is to be given the wider meaning espoused by the respondent parties and accepted by the judge.
- First, there is what comes closest to a definition of "accounts to be audited" to be found in section 2 itself of ACA 1998, which states both that the "accounts to which this section applies…shall be audited in accordance with this Act" and that section 2 applies "to the accounts mentioned in Schedule 2". Schedule 2 in terms states that section 2 applies to "all accounts" of a local authority. If Mr Coppel was right, one would expect to find section 2 referring directly to the accounts (or financial statements) to be contained in the statement of accounts. Moreover, if "accounts to be audited" were to be given Mr Coppel's limited meaning, it could hardly be true that it extended to "all" accounts. It would indeed be false.
- Secondly, the language of section 2, as so understood, fits with the provisions of section 148 of LGA 1972 which says that accounts "shall be kept" of all receipts carried to and payments out of the county fund. This is a reference to a running account. Accounts in a statement of accounts are not "kept", they are high level abstractions or summaries. It is because accounts to be audited are running accounts which are "kept" that they require to be "made up" to a date at the end of a financial year, as also specified by section 2(1)(a).
- Thirdly, the language of section 2, as so understood, fits with the provisions of sections 5 and 27 and the regulations made under section 27. Thus section 5 says that an auditor must satisfy himself "by examination…and otherwise" that the "accounts required to be audited" (the critical phrase under discussion) are "prepared in accordance with regulations under section 27". Section 27 in turn provides for regulations on the "keeping of accounts", which is inconsistent with accounts which are not kept but are abstractions or summaries, and also on the "preparation and certification of…statements of accounts", which are distinguished from accounts (even if they may contain forms of accounts). The distinction is also drawn in section 9. Moreover the 2003 Regulations themselves, by regulation 5(3), require that "accounting records" (which are effectively described as the records which underpin the statement of accounts and its contents) should contain "entries from day to day of all sums received and expended…", which again ties in with my understanding of section 2 of ACA 1998 and section 148 of LGA 1972: see para 39 above.
- Fourthly, a statement of accounts (sometimes, as I have observed itself referred to, loosely or perhaps elliptically, as "accounts") and its contents are themselves dealt with separately in the 2003 Regulations: but the high level summaries contained in the statement of accounts are not referred to as accounts, which they would be if the "accounts to be audited" were contained in the statement of accounts, but as "accounting statements": see regulation 7. The Code of Practice refers in this context to "financial statements", therefore finding its own term for such statements and avoiding describing them as though they were the "accounts to be audited".
- Fifthly, the section 14 right of an elector to inspect the statement of accounts is limited under the 2003 Regulations to a right which postdates the completion of the audit: see regulation 18. This is puzzling, as one might have expected that the statement of accounts could be inspected as soon as it had been approved by a local authority, and before the audit had been completed by the auditor's opinion on the statement of accounts and his certificate on it to the effect that he had completed his audit. After all, it seems clear that the major purpose of the section 15(1) right of inspection is to enable electors and other persons interested either to assist the auditor in his audit, in advance of its completion, or to exercise a form of participatory democratic accountability through the right to question and/or object. On the basis that there was no right to inspect the accounting statements contained in the statement of accounts prior to the completion of the audit, it would necessarily follow that the "accounts to be audited", which could be inspected in advance of the completion of audit, could not include the accounting statements within the statement of accounts. However, it may be, as Mr Oldham submitted, that because the accounting statements contained in the statement of accounts are included within the section 15(1) right of inspection qua "accounts to be audited", an elector, or indeed all persons interested, can inspect accounting statements under the section 15(1) right in advance of the completion of the audit. On this basis the accounting statements within the statement of accounts are part of, but not the exclusive province of, the "accounts to be audited". This makes perfectly good sense, for there is no doubt that a principal duty of the auditor is to audit the accounting statements to be found within the statement of accounts: but it is, however, an untidy aspect of the terminology used in the material under discussion. However, what this consideration does not justify is a conclusion that the "accounts to be audited" are limited to such accounting statements. In any event, it makes perfectly good sense for the finalised statement of accounts to be available for inspection, after the completion of the audit, as section 14(2) puts it "at all reasonable times": ie the section 14 right of inspection is not limited to the twenty days to which the section 15(1) right of inspection, pending completion of the audit, is necessarily limited.
- Sixthly, the language of section 15(1) itself – "the accounts to be audited and all books, deeds, contracts, bills, vouchers and receipts relating to them" – is very wide (admittedly subject to Veolia's submission to limit the meaning of "relating to"). The statute refers to "all" books etc. This only makes sense on the basis that all the Council's accounting records and all its vouchers and receipts, as well as the contracts which give rise to them, should be available to be inspected.
- Seventhly, section 17 of ACA 1998 allows an objection by an elector that "an item of account" is contrary to law. However, if the only relevant accounts which could be inspected were the high level summaries contained in the statement of accounts, there could hardly ever be any objection to an "item of account". This language supports the views expressed above that what the auditor has to audit has if necessary to condescend to individual ledger items. In this connection the Code of Practice at paragraphs 55/56 emphasise that the auditor's response to an objection should be balanced and proportionate and that a frivolous objection should be rejected. It would be difficult to see how an objection made on the basis of Veolia's understanding of section 15(1) could ever be frivolous.
- Eighthly, to the extent that Veolia has submitted that the wider right of inspection is impracticable, or would impossibly open the floodgate, there has been no evidence of such consequences, even though the approach to section 15(1) which the respondent parties have been advocating has been the traditional approach.
- I pass to the concept of "relating to". My reasons for agreeing with the judge are as follows. First, the primary authority relied on by Veolia (Tooheys) is of no assistance. There the statutory wording which had to be interpreted was an exemption from stamp duty for "All instruments relating to the services of apprentices, clerks and servants". That exemption had to be interpreted against the background that various instruments were expressly stated to be subject to stamp duty, including any "Declaration of Trust". The instrument in issue was a deed providing for the establishment of a pension fund for ex-employees. The High Court of Australia held that the instrument was a declaration of trust and not within the exemption. Dixon CJ held that an instrument within the exemption meant primarily one "dealing with the relationship of master and apprentice…", which the deed did not do (at 614). Taylor J emphasised that an exempted instrument had to relate to the services of servants, which the deed did not do, and that it was irrelevant that the deed made a mere reference to the existence of a master and servant relationship (at 622/3). Windeyer J said that the deed did not in any way control or regulate the services of employees, and that benefits under it were only to be enjoyed when such services came to an end (625). None of that reasoning (of the three judges of the majority of the Court) is of any assistance to Veolia's submission. Ultimately Mr Coppel relied primarily on the observation of Taylor J that "the vital question is whether the instrument "relates" and not whether it may be "related" by an examination of extraneous circumstances" (at 622). However, in my respectful opinion that formulation merely restated the issue which that Court had to resolve.
- Secondly, in my judgment the words "relating to", where the relation is between one document and another, simply do not mean the same as "referring to". Of course, if one asks the question, as had to be done in Tooheys, whether a document relates to a concept or situation, then one has of course to read the document for what it says. Where, however, the question is whether an accounting document, such as "books, deeds, contracts, bills, vouchers and receipts" relate to a body's accounts, the relationship is established by the nature and function of the document as much as anything else. If a voucher, such as an invoice, has been paid and that payment is reflected in a body's accounts, whatever the nature of those accounts, why should one pick between one voucher and another, simply on the basis of whether the account refers expressly to the voucher (or, as is most unlikely, vice versa)? The same question may be asked in respect of a contract pursuant to which a payment is made or received.
- Thirdly, this meaning of "relating to" is to my mind supported by the internal semantics of ACA 1998 and the 2003 Regulations. Thus section 6 refers to "documents relating to a body subject to audit" where it would be extremely odd to require the relationship to depend on an express mention of the relevant body in each document. Similarly, regulation 5 provides that accounting records shall contain entries of the matters to which all items of income and expenditure of the body under audit relate: where the purpose of the regulation is to ensure that the entry should refer not only to an item of income and expenditure but also to the matters to which it relates, or in other words the matters with which the item is concerned, thus requiring reference in addition to the fact of the relationship.
- Fourthly, the judge was right to reject the submission that a narrow reading of "relating to" would better meet the purposes of the statute. Whether or not there is or should be an exception or allowance for confidential information is an issue which has to be resolved on a different basis from the question whether "relating to" is given a wider or narrower meaning. It would in truth be a merely serendipitous test for the right of inspection, from the point of view of preserving confidential information, merely to ask whether the accounts or the documents described in section 15(1) refer to one another. Moreover, the width of the words "all books, deeds, contracts, bills, vouchers and receipts" plainly looks to a wide, rather than a narrow, meaning for the relationship expressed by "relating to". I emphasise the word "all", and the nature, in connection with accounts to be audited, of documents such as books, contracts, bills, vouchers and receipts. Why, after all, limit the right only to some books, contracts, bills, vouchers and receipts?
- Fifthly, even if the "accounts to be audited" were given the narrow meaning espoused by Veolia, the contract and its invoices would plainly be within the scope of documents relating to such accounts. That is so whether or not the notes to the statement of accounts are part of such accounts. In my judgment however the notes to the statement of accounts are plainly part of the accounts contained in the statement of accounts. Those accounts cannot be understood without them. Be that as it may, however, it is simply obvious that the payments made pursuant to the contract and Veolia's invoices are embodied in the income and expenditure account which is the kernel of the Council's statement of accounts. Therefore in my judgment they "relate to" such accounts.
- For all these reasons I would uphold the decision of the judge concerning Veolia's first ground, which I have described as its technical ground. I go on to consider Veolia's new, second and third, grounds, which is where Veolia now seeks to make the purposive and functional points in favour of it being permitted to redact confidential parts of the relevant documents.
The second ground: limiting the right of inspection by reference to confidential information
- Veolia's second ground raises the question whether section 15(1) can be read down, as the modern expression goes, so as to protect confidential information, either by reason of principles of English common law, or by reason of the ECHR, or by reason of the 2004 Directive under EU law, or indeed by a combination of the three. As stated above, there is support from the Audit Commission in principle for the proposition that such protection is required by at any rate the ECHR.
- This second ground cannot ultimately be considered separately from Veolia's third ground, which raises the question whether section 15(1) access can be used only for the purposes of an audit under ACA 1998. If Veolia is correct in its submission under that third ground, then there may be less force in its submission that English common law, human rights law and/or EU law require what is effectively an exception for confidential information to be read into section 15(1). However, it is inconvenient and difficult to have to consider both grounds at once: so, I will start with the second ground, seek to reach a provisional conclusion on it, and then return to it after I have also considered the third ground.
- Common law. The argument that English common law protects confidential information is based on the House of Lords decision in Regina (Morgan Grenfell & Co Ltd) v. Special Commissioner of Income Tax  UKHL 21,  1 AC 563. The issue there was whether a notice for disclosure by a bank, pursuant to section 20(1) of the Taxes Management Act 1970, of documents covered by legal professional privilege (LPP) could require the disclosure of such documents. The House of Lords concluded that it could not, and quashed the notice. The headnote puts the decision succinctly:
"…legal professional privilege was a fundamental human right that could be overridden only by express words or necessary implication; that section 20(1) of the 1970 Act did not exclude it expressly; and that it was not a necessary implication from the structure of the 1970 Act as a whole that it was intended to be overridden…"
- Section 20(1) provides:
"an inspector may by notice in writing require a person to deliver to him such documents as are in the person's possession or power and as (in the inspector's reasonable opinion) contain, or may contain, information relevant to any tax liability to which the person is or may be subject, or the amount of any such liability."
- Other provisions of the 1970 Act appeared to make it difficult to argue that documents covered by LPP were outside the power to require disclosure. Thus the revenue pointed to the limited treatment of LPP elsewhere in the statute, as well as to other safeguards built into the section 20(1) notice procedure (see Lord Hoffmann's speech at  – ). In particular there were limitations on the enforcement of disclosure by notice to lawyers and tax accountants and express, but limited, reference to the protection of documents covered by LPP, in sections 20B(8) and 20C(3) of the 1970 Act. However, a distinction was irrational: Lord Hoffmann asked (at ): "Why should Parliament want to preserve LPP for documents in the hands of the lawyer but not for documents (which may well be copies or originals of the same documents) in the hands of the taxpayer?" This was not merely a rhetorical question, for Lord Hoffmann went on to suggest that the explanation might well lie in Parliament's reaction to Parry-Jones v. Law Society  1 Ch 1 where this court said that the true basis for the client's right to prevent his lawyer from disclosing documents concerned with obtaining legal advice to the tax authorities was a duty of confidence, rather than LPP: and Parliament may have wanted to emphasise that even in that case the protection lay in the latter concept (at ). Lord Hoffmann therefore concluded that the provisions on which the revenue relied were insufficient to create a necessary implication that LPP was intended to be excluded (at ). Mr Coppel submits that these considerations are materially relevant to answering the argument based on the maxim of expressio unius exclusio alterius put against Veolia in the present case by reference to section 15(3).
- There was therefore neither express nor necessarily implied support for the exclusion of LPP. On that basis, the doctrine applied by Lord Hoffmann was as follows:
" Two of the principles relevant to construction are not in dispute. First, LPP is a fundamental human right long established in the common law…It has been held by the European Court of Human Rights to be part of the right of privacy guaranteed by article 8…
 Secondly, the courts will ordinarily construe general words in a statute, although literally capable of having some startling or unreasonable consequence, such as overriding fundamental human rights, as not having been intended to do so. An intention to override such rights must be expressly stated or appear by necessary implication."
All their Lordships agreed with Lord Hoffmann.
- Furthermore, Lord Hobhouse of Woodborough, with the agreement of Lord Hope of Craighead, put the matter in this way. Having cited (at ) from Lord Hoffmann's speech in R v. Secretary of State for the Home Department, Ex p Simms  2 AC 115, 131 ("the principle of legality means that Parliament must squarely confront what it is doing and accept the political cost. Fundamental rights cannot be overridden by general or ambiguous words. This is because there is too great a risk that the full implications of their unqualified meaning may have passed unnoticed in the democratic process"), he continued:
"The context in which Lord Hoffmann was speaking was human rights but the principle of statutory construction is not new and has long been applied in relation to the question whether a statute is to be read as having overridden some basic tenet of the common law…
 …At best from the point of view of the revenue the legislation is equivocal. Left to myself I would incline to the view that the implication, if any, is that the legislature was intending to preserve the legal professional privilege of the taxpayer rather than abrogate it; otherwise, why preserve it in the hands of the adviser when the client has not consented to the waiver of the privilege?...
 The present appeal thus falls to be decided applying the well established principles of statutory construction to be found in English law. The appellants do not need the assistance of the Human Rights Act 1998 or the Convention…The judgments of the European Court of Human Rights…and the European Court of Justice…show a general recognition of the importance of legal professional privilege."
- In my judgment there is much to be said in favour of the application of this doctrine. Whether or not the protection of confidential information can be properly described as a "fundamental human right" or a "basic tenet of the common law" (to which Lord Hobhouse referred) is something which I will consider further below, after discussing the ECHR's article 8 and article 1 of the first protocol. However, confidential information is a well recognised species of property, protected by the common law, and recognised in other relevant statutes such as FIA 2000, as well as in EU law such as in the 2004 Directive. Commercial confidential information may well constitute the life blood of an enterprise.
- There are therefore parallels between the present case and Morgan Grenfell. There is no express abrogation in section 15(1) or elsewhere of the right to preserve confidential information. Section 49 states a general principle that neither the Audit Commission nor an auditor can disclose the still wider class of documents to which they have access under sections 6 and/or 48 save under an express provision of section 49 itself. That demonstrates that within the audit and in the possession of the Audit Commission or an auditor documents and information to which they have access do not, by reason of that access alone, lose the confidence to which the owner of those documents or information are entitled. That is expressly recognised in paragraph 14 of the Code of Practice under the heading of "General Principles" in its Part 1. It would be irrational if persons interested or electors were, by reason of their right of access for a much more limited period to a narrower class of documents, entitled thereby to breach the confidence which resides in documents or information to which they might obtain access under section 15(1). It is plain that electors are entitled to access so that they can exercise their rights of questioning or objection within the audit. That does not suggest that they are free to use the information in any way they want (although the HTV case which I consider below is relied on by Mr Dowen to suggest that he can). It is not clear what the function of access is so far as persons interested who are not electors are concerned: but it must in principle be either so that they can engage the help of an elector to question or object, or, more generally, so that they may make representations to the auditor. That is why access is granted for only a limited period in the run-up to the day appointed by the auditor for questioning or the notification of objections.
- However, whether or not the use of any information to which persons interested gain access is limited to use for the purpose of the audit, an issue which I consider below under Veolia's third ground, and even though I recognise that access for the purpose of the audit is not the same as access for any purpose whatsoever, nevertheless there is plainly a danger that once access is granted, even if only for the purposes of the audit, the security of any confidential information is threatened. Therefore the issue of initial access is potentially of great importance.
- As in the case of Morgan Grenfell, however, it is submitted that section 15(3) and the following subsections in support of that limitation in favour of personal information make it impossible to maintain an exception on the right of access to confidential information. Morgan Grenfell teaches, however, that the test is one of necessary implication. In my judgment, therefore, if the argument was no better than equivocal in that case, the position is not different here. The judge himself plainly regarded the argument from the maxim of expressio unius exclusio alterius only as an aid to construction, and recorded the Council's concession that that was so (at paras 78/79 of his judgment). Of course he was not concerned with the current ground of appeal.
- In my judgment, just as sections 20B(8) and 20C(3) of the Taxes Management Act 1970 were viewed by their Lordships as merely a piecemeal reaction to a particular decision of this court, so it is possible to view section 15(3) as Parliament's reaction to the particular decision in Oliver v. Northampton Borough Council  151 JP 44, a decision of the divisional court. The case concerned the predecessor of section 15(1) found in identical terms in section 17(1) of the Local Government Finance Act 1982. Mr Oliver sought inspection of a wages book of an entertainment centre provided by Northampton. The council gave him a summary, so as to avoid naming individual employees and revealing their tax affairs, but Mr Oliver wanted the book itself. The justices thought that the council had complied with the statute, however on appeal the Divisional Court (Watkins LJ and Mann J) disagreed. It seems to have been assumed, perhaps because the point was conceded, that there was no restriction of confidence on the information in the hands of a person interested, contrasting the position with the then equivalent of section 49. Mann J said:
"It may be said that the result is unfortunate in that the employees' private affairs are thereby likely to be revealed and revealed to persons who are under no obligation to respect confidentiality. That, if it be the case, is a matter for Parliamentary consideration."
Watkins LJ said:
"It seems to me that it might be as well if Parliament now looks at this provision, altogether sweeping, as my Lord has said it is, in section 17(1) having regard to the facts of this particular case and the implications of it which obviously allow of a local government elector inspecting a confidential matter and revealing its contents as he chooses."
- Parliament obviously took up this invitation and the result was section 15(3) of ACA 1998. The question is whether to regard Parliament's involvement as sanctifying the assumption in Oliver regarding the irrelevance and loss of confidentiality or as merely legislating for the particular case of personal information (what would now be regarded as personal data). In my judgment, it is unattractive and difficult to conclude that Parliament, which was here minded to protect the very class of information in question in Oliver, nevertheless considered that every other class of confidential information was to be ignored. It is preferable to regard section 15(3) as protecting a class of information which might otherwise not have been regarded as requiring protection in the public interest. It is more or less contemporaneous with the Data Protection Act 1998. In 2007 subsections (3) and (4) were amended and subsection (3A) was added, again concentrating on personal information. However, before any final conclusion about Veolia's submission under this heading is possible, it is necessary to consider its submissions by reference to the ECHR and EU law.
- The ECHR. Article 8 of the ECHR provides as follows:
"1. Everyone has the right to respect for his private and family life, his home and correspondence.
2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others."
- In Varec SA v. Belgium  2 CMLR 24, the European Court of Justice, in a judgment concerning the protection of confidential information in the context of public procurement under Directive 93/36/EEC (the forerunner of the 2004 Directive), cited jurisprudence of the European Court of Human Rights in support of the proposition that the use of confidential information in professional or commercial activities of even legal persons could be protected as an element of their "private life", subject to a question of justification: see at  – . One of those authorities is Niemietz v. Germany (1993) 16 EHRR 97, which might suggest that article 8 is a proper home for the issue of the legitimacy of state interference in access to private information, albeit its particular facts are more narrowly concerned with a state prosecutor's search of a lawyer's office.
- Article 1 of the first protocol provides as follows:
"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."
- The concept of "possessions" is broad and covers a wide range of things which have significant economic value. It extends to business goodwill and to various forms of intellectual property, including copyright, although there is apparently no case which expressly covers confidential information: see for instance Regina (Nickolds) v. Security Industry Authority  EWHC 1792 (Admin),  1 WLR 2067 at , citing Strasbourg authority for the concept to include shares, patents, planning permissions, leases and licences, social security and pensions, and choses in action, and at  touching on goodwill, the Strasbourg jurisprudence concerning which was discussed in R (Malik) v. Waltham Forest NHS Primary Care Trust  EWCA Civ 265,  1 WLR 2092.
- Although the parties were unable to cite any Strasbourg authority which expressly covers confidential information as a form of "possessions", no case was cited against that proposition. I can see no reason, in the light of the Strasbourg jurisprudence which does exist, why valuable commercial confidential information, such as the evidence in this case demonstrates is in question here, particularly with respect to the second disputed documents, cannot fall within the concept of "possessions". Of course, its protection is subject to the question of justification under the second paragraph of article 1 of the first protocol.
- In the circumstances, it is unnecessary to take a view about the engagement of article 8. Suffice it to say that none of the parties before us disputes that one or other of the two ECHR articles in question is potentially engaged; that unrestricted disclosure of the disputed documents amounts to an interference which would have to be justified; and that section 15(1) can be read down so as to exclude confidential information protected by the ECHR (as to which see further under para 159 below).
- The Council and Mr Dowen submit that such interference would be justified (and that in the case of the first disputed documents, access to which has already been granted to Mr Dowen no further question of protection arises).
- I assume for present purposes that the submission, ultimately opposed only on behalf of Mr Dowen, that accessed information could not be used by electors and persons interested for any purpose, ie Veolia's third ground of appeal, is wrong, and that therefore there is no other protection for Veolia's confidential information other than an implicit limitation on the right of access.
- What justification then would there be for unlimited access? There is of course a public interest in transparency, particularly where the dealings of public authorities and the use of public money is concerned. Built into the heart of ACA 1998 itself is the promotion of economy, efficiency and effectiveness in the use of resources. It is also clear from ACA 1998 that as a matter of democratic accountability, electors, who have to pay the bills as ratepayers, and other persons interested such as commercial ratepayers, who do not pay directly, but rather via central government grants, have a role to play in assisting the auditor in his audit, perhaps from their own special local knowledge of people and events, or as a gadfly for the promotion of further enquiry (by representations, questioning or objection). If the auditor is the custodian of the public interest, the electors and other persons interested are the custodians of the custodian (Sed quis custodiet ipsos custodes? Juvenal, Satires VI. 347) or at any rate his helpmates.
- On the other hand, it is plain that there is a strong public interest in the maintenance of valuable commercial confidential information, recognised repeatedly in our common law, in our statutes such as FIA 2000's section 41, and in EU law such as the 2004 Directive. If the penalty for contracting with public authorities were to be the potential loss of such confidential information, then public authorities and the public interest would be the losers, and the result would be potentially anti-competitive. Moreover, the public interest would remain protected by the auditor's right to access to all such documents (subject to the section 49 protection against further disclosure) combined together with the highlighting of a problem or potential problem by the representations of persons interested, or the questioning or objecting of electors, who come armed with their concerns and the identification of and access to the documents which they seek, even if these documents had to be redacted.
- Even the Council recognises some such considerations in its skeleton, where Mr Lewis and his junior Mr Ian Rogers write: "If information were genuinely confidential, and there were a high risk of serious harm to the company if that information was subject to inspection, consideration would have to be given as to whether it were possible to interpret section 15(1) in a way which did not require such inspection". However, the Council submits with reference to the first disputed documents that the public interest justification should succeed in circumstances where (a) there never was a claim to ECHR protection at first instance, even though the issue was flagged up in the respondent acknowledgment of service; (b) Veolia has by its own evidence since the first instance judgment indicated that it could live with the loss of confidentiality, and that it would not have appealed at all but for the threat which had emerged to the second disputed documents; and (c) access to the first disputed documents has already been granted. As for the second disputed documents, the Council accepts, however, that this court is not in a position to assess the situation, but the Council would appreciate as much guidance as possible. It has to be said that the Council has already decided to provide access, beyond those parts of the contract which they released for inspection at an early date, to the first disputed documents.
- In my judgment, it would be desirable if it were possible to state a bright-line test such that confidential information would always trump the public interest (or not), save possibly in exceptional circumstances such as those highlighted in the previous paragraph. However, that is not the way that the ECHR works, and the second paragraphs of those articles which allow for justification are well-known to require a fact-sensitive and nuanced approach to individual cases in which the private and public interests involved have to be balanced in the interests of proportionality.
- In these circumstances, and subject to the pending question of the common law's Morgan Grenfell approach, and to Veolia's third ground, I have concluded that the approach through the ECHR cannot avoid a decision on access which is rendered in the traditional way, on the facts of a particular case. Such an approach may lack an easy solution in advance to every similar problem, but it has become a well understood avenue. Public authorities have become familiar with the need to balance public and private interests in dealing with claims for both freedom and the protection of private information, in a number of different situations. There is, albeit in the context of FIA 2000 and the EIR, a decision of the Information Commissioner, by and large upholding the Council's decision with respect to the protection of the first and second disputed documents themselves.
- My provisional view therefore with respect to the first disputed documents is that if the Council had decided, on the basis that section 15(1) had to be read as though it contained an exception for confidential information protected by article 1 of the first protocol (or, perhaps, article 8), that those documents merited protection and that access to the contract and its invoices should be redacted, just as the Council did so decide for the purposes of Mr Dowen's request under FIA 2000 and the EIR, then, I do not see at present why it should not have been difficult for this court, especially on the comparatively meagre material and arguments presented to it, to say that the Council was wrong so to decide. That is especially the case in the light of the fact that the Information Commissioner decided that substantial parts of Schedules 6A and 6B should be redacted. As it is, the Council decided the question about the first disputed documents on the basis, apparently, that there was no implicit exception in favour of confidential information. In the event, however, the first disputed documents have been provided to Mr Dowen in full following the judgment below, and Veolia have stated that it can live with that result and would not have appealed but for the further issue which arose concerning the second disputed documents. In those exceptional circumstances, I would not now be minded to find that the granting of access to Mr Dowen of the first disputed documents could not be justified. In judicial review terms, the granting of access is now water under the bridge. There is in any event no claim before us by Veolia against the Council for a remedy for breach of the ECHR.
- The case of the second disputed documents is different, however. There I can at present see no reason why the Council could justify providing access to Mr Dowen of those documents, at any rate on the present basis that I am considering, which is that there is no limitation on the use to which Mr Dowen could then put those documents. The Information Commissioner's decision to protect Schedules 33, 38 and 40 to my mind strongly supports that conclusion in principle. So does, if my understanding is correct, the Council's own decision to grant Mr Dowen access to the contract without Schedules 33, 38 and 40: but if I have misunderstood that position, I need not take that matter into account in arriving at the provisional conclusion which I have just expressed.
- The 2004 Directive. Article 6 of the 2004 Directive ("on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts") provides as follows:
Without prejudice to the provisions of this Directive, in particular those concerning the obligations relating to the advertising of awarded contracts and to the information to candidates and tenderers set out in Articles 35(4) and 41, and in accordance with the national law to which the contracting authority is subject, the contracting authority shall not disclose information forwarded to it by economic operators which they have designated as confidential; such information includes, in particular, technical or trade secrets and the confidential aspects of tenders."
- The last paragraph of article 35(4) (which provides for the notification of the results of an award procedure) provides:
"Certain information on the contract award or the conclusion of the framework agreement may be withheld from publication where release of such information would impede enforcement or otherwise be contrary to the public interest, would harm the legitimate commercial interests of economic operators, public or private, or might prejudice fair competition between them."
Article 41(3) (article 41 is concerned with informing candidates and tenderers about the outcome of the procedure) provides for the possibility of withholding certain information in identical terms.
- The 2004 Directive replaced three earlier directives covering (in total) the same subject matter, viz Directives 92/50/EEC, 93/36/EEC, and 93/37/EEC. Articles 9(3) and 15(2) of Directive 93/36/EEC (the "1993 Directive", covering public supply contracts) provided that –
"9(3) Contracting authorities who have awarded a contract shall make known the result by means of a notice. However, certain information on the contract award may, in certain cases, not be published where release of such information would impede law enforcement or otherwise be contrary to the public interest, would prejudice the legitimate commercial interests of particular enterprises, public or private, or might prejudice fair competition between suppliers."
"15(2) The contracting authorities shall respect fully the confidential nature of any information furnished by the suppliers."
- The Veolia contract was awarded under the earlier 1993 Directive, and it is not clear to me whether it or the 2004 Directive would now prevail to regulate the confidentiality obligations of the Council. The parties have addressed their submissions by reference to the 2004 Directive. In any event, the leading case on these provisions in the European Court of Justice, which the parties in this appeal have relied on, is Varec SA v. Belgium  2 CMLR 24, and that seems to have regarded the 1993 Directive as the critical one, since it was in force at the time of the tender in the award procedure in question there (at ). The issue in Varec was whether the confidentiality provisions of the 1993 Directive affected the right to disclosure of confidential information in the course of an appeal against the award. One issue was whether the body conducting the review was bound by the obligations of confidentiality contained in the 1993 Directive. The ECJ held that it was. Another issue was how the confidentiality provisions could be reconciled with the obligations of disclosure between litigants in the appeal procedure. The Court said:
" The principal objective of the Community rules in that field is the opening-up of public procurement to undistorted competition in all the Member States…
 In order to attain that objective, it is important that the contracting authorities do not release information relating to contract-award procedures which could be used to distort competition, whether in an ongoing procurement procedure or in subsequent procedures.
 Furthermore, both by their nature and according to the scheme of Community legislation in that field, contract-award procedures are founded on a relationship of trust between the contracting authorities and participating economic operators. Those operators must be able to communicate any relevant information to the contracting authorities in the procurement process, without fear that the authorities will communicate to third parties items of information whose disclosure could be damaging to them…
 It follows that, in a review procedure in relation to the award of public contracts, the body responsible for that review procedure must be able to decide that the information in the file relating to such an award should not be communicated to the parties or their lawyers, if that is necessary in order to ensure the protection of fair competition or of the legitimate interests of the economic operators that is required by Community law."
- It was in this context that the Court had considered whether article 6 of the ECHR nevertheless required full adversarial disclosure, and had therefore looked at the requirements of article 8 concerning private life (see above at para 118). The Court reasoned as follows:
 It follows that, in the context of a review of a decision taken by a contracting authority in relation to a contract-award procedure, the adversarial principle does not mean that the parties are entitled to unlimited and absolute access to all of the information relating to the award procedure concerned which has been filed with the body responsible for the review. On the contrary, that right of access must be balanced against the right of other economic operators to the protection of their confidential information and their business secrets.
 The principle of the protection of confidential information and of business secrets must be observed in such a way as to reconcile it with the requirements of effective legal protection and the rights of defence of the parties to the dispute…
 Accordingly, the answer…must be that…the body responsible for the reviews…must ensure that confidentiality and business secrecy are safeguarded in respect of information contained in files communicated to that body by the parties to an action, particularly by the contracting authority, although it may apprise itself of such information and take it into consideration. It is for that body to decide to what extent and by what process it is appropriate to safeguard the confidentiality and secrecy of the that information, having regard to the requirements of effective legal protection and the rights of defence of the parties to the dispute…"
- In the present case, the Council submits that Veolia is not within article 6 of the 2004 Directive because: (a) there is no evidence that the disputed documents contained information which was "forwarded to [the Council]…by economic operators which they have designated as confidential", was supplied during the tender process itself (only that at the end of the day schedule 45 of the contract so designated the relevant information); (b) Varec was concerned with a challenge to the procurement process and thus was within the Court's language "in an ongoing procedure or in subsequent procedures", whereas the present case was concerned with an audit process which was quite different and separate; and (c) article 6's language "in accordance with the national law to which the contracting authority is subject" meant that in any event section 15(1) of ACA 1998 took precedence.
- As to (a), it may be true that there is no evidence before us as to what happened in the tender process itself: however, that is not surprising given that this ground of appeal has only arisen at this stage. There is a strong inherent possibility that the disputed schedules would have been supplied in the tender process itself. Of course, I am not finding that it was. In the circumstances, and given that the Council has either already decided not to grant inspection access to the second disputed documents or still has to consider the position of the second disputed documents anew, I would be reluctant to reject Veolia's ground on this basis alone. Moreover, article 6 may not be the relevant provision, as distinct from article 15 of the 1993 Directive (see Varec at para ). I recognise that it is possible that, outside the procurement process or any challenge to it, it is the current 2004 Directive that applies, but that seems to me on the whole unlikely.
- As to (b), it seems to me that this submission is reading what the ECJ said in Varec too narrowly. The logic of the Court's reasoning in that case suggests to me that once a contracting authority accepts confidential information in a procurement process, it cannot say that it is free of its obligation of confidence because the procurement process or any challenge to it has come to an end. Otherwise it could simply choose, when the procurement contract was all settled, to break its confidence. There seems to me no logic in that.
- As to (c), the language of article 6, if relevant at all, is "in accordance with", not "subject to". If article 6 were simply subject to national law which could provide otherwise, then national law would take precedence over EU law in a matter of inter-member state procurement, which makes no sense. In my judgment, this provision probably refers to ancillary provisions of national law which might regulate the obligation of confidence: for instance in the context of procedural rules for disclosure in litigation.
- In my judgment, it is unnecessary to make a decision about any of these matters because it is to my mind sufficient for present purposes that at least article 1 of the first protocol (and perhaps article 8) of the ECHR would in the circumstances of this case provide sufficient reason for needing to read down section 15(1) so as to make an exception for confidential information, subject to the question of justification.
- In any event, it would appear that any protection given by either Directive would involve a balancing consideration essentially similar to that which would arise under the ECHR.
- I would therefore provisionally conclude, subject to a consideration of Veolia's third ground of appeal, that the ECHR does provide Veolia with protection, even if the common law approach of Morgan Grenfell would not.
The third ground: limiting the use to which accessed information might be put.
- Veolia submits, with considerable support in principle from the other parties apart from Mr Dowen, that in any event, and even if, or where, section 15(1) grants unlimited access to persons interested, nevertheless such persons can only use the accessed information for the purposes of the audit: so that, subject to that permitted use, the information remains confidential in their hands.
- I have already cited Oliver, the 1986 case in the divisional court, which assumed that information accessed under the predecessor section retained no confidence. Watkins LJ deplored but acknowledged this consequence, although in that case it was only academic. He said:
"It is, in my judgment, unfortunate that it sires the opportunity to an elector, allowed to look at the books of the council, to use the information thereby gained for an improper purpose. That is not to say that Mr Oliver would avail himself of that. I do not believe for a moment that he would."
- Cranston J accepted that Regina (HTV Ltd) v. Bristol City Council (Elias J) was to similar effect. The issue there was as to the width of the meaning of "persons interested". The applicant for inspection in that case, HTV, was not an elector, but a non-domestic ratepayer. It wanted to obtain access to documents under section 15(1) for the purpose of making a television programme on current affairs. Bristol CC refused inspection on the two grounds that HTV was not a "person interested" and that, even if it was, it was seeking to exercise its right for an unlawful purpose.
- Elias J held that "persons interested" were not a self-constituting category of persons who brought themselves within the statute just because they were interested, but that the interest of a non-domestic ratepayer was sufficient to bring such persons within the statute. I am content with that conclusion. He also observed that because persons interested went wider than electors, but the right to question and object was confined to electors, therefore the use to which persons interested could put their inspection of documents went wider than the right of electors: although he was unable to suggest a rationale for that extension. He said:
" Third, I accept, as Mr Stilitz submits, that the structure of these provisions suggests that at least the major purpose of a right conferred by section 15 is to facilitate the right to ask questions under section 15(2) and to raise objections under section 16(2). That is supported by the fact that the right is limited to the accounts to be audited, but, consistently with this purpose, the information is only made available for a relatively short period each year in the run up to finalising the accounts. Also, the documents which can be scrutinised are limited to those needed to verify the accuracy and integrity of the accounts.
 However, whilst I would accept that on any view a major purpose of section 15(1) is to assist the local government elector who may wish to raise issues in the auditing process, were it solely limited to that purpose then there would be no point in conferring the right under that section beyond the electors themselves. I confess that I have found difficulty in discerning why that right has been conferred more widely. There does not appear to be any obvious rationale why Parliament has conferred different rights relating to the accounts on different categories of persons."
- Later in his judgment Elias J rejected a submission that documents accessed under section 15(1) could only be used for a proper purpose. He said:
" The premise here is that the provision requires the information to be used for a limited purpose or purposes. As I have indicated, I accept that Parliament probably did envisage that the information would be used primarily in order to enable electors to raise questions with the auditor and ultimately raise objections. But the fact that those who have access to the information extend beyond those who can make such a request, or raise such an objection, shows that it cannot be the only purpose.
 In any event there is no express limitation in the statute as to the use to which this information can be put. I see significant practical difficulties in confining the use of the material once it has been acquired."
- Elias J went on to derive assistance from a Scottish case, Roy Stirrat v. City of Edinburgh Council 1998 SCLR 973, where an elector sought access to documents under the similar legislation in Scotland, it was said not for the purposes of an audit but for his own professional purposes as a solicitor. The submission was understood as involving an enquiry into the applicant's motives, which Lord Eassie in the Outer House of the Court of Session concluded were irrelevant. He said (at 979):
"It is not hard to see that the existence of such an implied power to judge the genuineness, sufficiency, or admissibility of a tax payer's desire to inspect the local authority's accounts and supporting documentation could be used to impede or defeat the evident intention of the legislation that the transactions of the local authority should be transparent and open to proper scrutiny by at least those members of the public who embrace their tax payers. I do not consider that the intention of the legislature was that persons such as local tax payers with a legal interest arising from that relationship should be at risk of forfeiting their right to inspect the accounts and supporting documentation of the authority because the exercise of that right might privately be sought for some wider or other purpose than the lodging of a complaint with the auditor."
- Elias J agreed and said:
" I respectfully agree with that analysis. I think there are considerable difficulties in identifying the purpose for which the interested person can use the information in any event. There would be practical problems in enforcing the obligation. As I have said, the right of inspection cannot be limited to the purpose of participating in the audit process, since interested persons who are not government electors have no rights in the process.
 How are, to take an uncontentious example, members and officers who are not local government electors, to use this material if it can only be used in the audit process? Are they to be limited to making representations to the auditor even though they have no right, as such, to question him? Surely they must, at the very least, be able in an appropriate case, to mount a legal challenge if they think, as a result of their inspection, that something is amiss. It would be highly unsatisfactory to deny them the right to use the information for that purpose.
 If they wish to raise their grievance with a local newspaper, perhaps because it was a cheaper way of pursuing redress than going to court, would they be prevented from doing so? It would surely be inconsistent with the purpose behind the provision to prevent this. I think it then becomes very difficult to identify what would be the contours separating legitimate and illegitimate purposes."
- I confess, however, if I may respectfully say so, to finding these arguments lacking in cogency. No rationale can be discovered for a use for persons interested which goes beyond the electors' rights, for instance to question and object. Elias J acknowledges that representations can always be made to the auditor. If electors are only expressly given the right to question and object (and to appeal against a decision not to seek a declaration of illegality), why should persons interested who are not electors have further unstated rights? In any event persons interested include electors. In any event persons interested who are not electors can always make representations to an auditor or ask an elector to use an elector's rights. The section 15(1) right is to my mind to be viewed as an aid or spur within the audit to the auditor's rights, powers and duties, not as some completely independent and free-wheeling device. If an elector is only entitled to seek a declaration of illegality within the terms of section 17, I see no necessity to assume that some further right of legal challenge has to be permitted to exist, and to do so primarily for the sake of persons interested who are not electors.
- Moreover, the practical difficulties have been overstated. The question is not the private and subjective motive, but the objective use to which the accessed information is sought to be put. If the implicit rule is that it can be used only for the purposes of the audit, then that is a simple and clear rule. A private motive that goes beyond that use may not prevent the right of access, but that still leaves the question whether the accessed information can objectively be used for a purpose outside the audit process. Again, the question is not whether persons interested can use accrued information for a "proper" purpose, but whether they can use it otherwise than for the purposes of the audit.
- Moreover, a limitation on use is common in situations where our law compels private documents to be disclosed, and that limitation is not prevented by fear of practical difficulties. Thus documents which have to be disclosed for the purposes of litigation can only be used for the purposes of that litigation (although a judge may give permission for them to be used in other litigation): see Harman v. Secretary of State for the Home Department  AC 280. In Morgan Grenfell with respect to the statutory requirement of disclosure pursuant to section 20 of the Taxes Management Act 1970 Lord Hoffmann referred to the decision of the divisional court in R v. Inland Revenue Commissioners, Ex p Taylor (No 2)  3 All ER 353 at 360 where Glidewell LJ accepted the revenue's concession as correct that documents obtained from Mr Taylor could not, if subject to LPP, be used in connection with the tax liabilities of his clients (at 613D). Lord Hoffmann added (at 613E):
"It is not necessary to decide the point, but I do not think that the Inland Revenue were entitled to use any information supplied by Mr Taylor for another purpose. In consequence, I do not think that the disclosure of the documents by Mr Taylor in confidence for the limited purpose of determining his own tax liability infringed any LPP vested in his clients."
- Lord Hoffmann made the same point with respect to another statute and another authority, namely the statutory delegated legislation of the Law Society requiring a solicitor to produce documents relating to his practice and Parry-Jones v. Law Society  1 Ch 1. Lord Hoffmann said (at ):
"But I think that the true justification for the decision was not that Mr Parry-Jones's clients had no LPP, or that their LPP had been overridden by the Law Society's rules, but that the clients' LPP was not being infringed. The Law Society were not entitled to use information disclosed by the solicitor for any purpose other than the investigation. Otherwise the confidentiality of the clients had to be maintained. In my opinion, this limited disclosure did not breach the clients' LPP or, to the extent that it did, was authorised by the Law Society's statutory powers."
- The HTV case did not of course concern confidential information. Whatever the position in the absence of confidential information, and it is unnecessary for me to comment on such a case for it is not in issue, I can see no reason why, even if section 15(1) did require access to confidential information, there needs to be any greater disclosure or use of such information beyond the purposes of the audit. I do not see why persons interested should be entitled to obtain the confidential information of a contractor with a local authority in order to disclose it to the world, or sell it to its competitors. If that person brought the information to the attention of the auditor, the auditor would be subject to the limitations of section 49: why should the person interested have limitless freedom to use or abuse valuable confidential information? And that being the case, if an applicant were to make it clear in advance to the local authority (and I am not considering whether this is the case of Mr Dowen) that he does not seek to inspect confidential information for the purposes of the audit but for entirely other purposes, I do not see why the authority should not be entitled to say that the right of inspection does not extend for the purpose of such use outside the audit. It may well be said that once access has been granted, there is a practical danger that the information in question may become more generally public. However, that danger always exists: in litigation, in arbitration (which is confidential), and in audits. That is no reason for not seeking to protect confidential information as much as is compatible with the law. Given the protection afforded to confidential information by the ECHR (and also, at any rate in principle by the 1993 and/or 2004 Directives), it seems to me that, whatever may be the position more generally, access to confidential information should be at the very least restricted to use only for the purposes of an audit.
- Is it desirable to decide this third ground of appeal? It seems to me that it is. This is because, although Mr Dowen has already been given access to the first disputed documents, disclosure has not gone beyond him as yet (as confirmed in the Information Commissioner's decision). It might be said that this is an issue which lies only between Mr Dowen and Veolia, and not between Veolia and the Council. However, Mr Dowen is a party to this litigation as an interested party, and thus a respondent to this appeal. Moreover, this third ground of appeal has become an issue in this appeal. It would be wrong to condemn Veolia and Mr Dowen to a further round of litigation, if that can be avoided. In any event, the question is not whether Mr Dowen can put the information to uses A, B or C, proper or improper, a matter which may well not concern the Council, but whether he can use it for any purpose outside the purposes of the audit, something which he has indicated he is minded to do. That it seems to me does concern the Council as well as Veolia. In sum, the Council, Veolia and Mr Dowen are entitled to know, at any rate as a matter of principle, whether he can put the first disputed documents to a use outside the purposes of the audit, and, in my judgment, he can not. I am not, however, to be thought of as deciding that, in the particular circumstances which have taken place, Veolia could injunct Mr Dowen from further use of the first disputed documents. That, it seems to me, is not an issue which arises in these proceedings.
- A further consideration which makes it desirable to consider this third ground of appeal seriously, is that it is in theory possible that access to confidential information would be given, not because the information is not confidential, but because in a particular case the public interest in access being afforded (for the purposes of an audit) is greater than the private right to (or concomitant public interest in) confidentiality. Something similar to that possibility has arisen in this case in relation to the first disputed documents, because access has now been achieved although in theory the documents or some of them might have been protected nevertheless by confidentiality. The question still arises: but does access mean use for any purpose? In my judgment, no. Moreover, in this respect section 15(3), with its exception for access to personal information, is of no hindrance to this conclusion: for an exception to access tells one nothing as to the use to which information for which there is a right of access can or cannot be used.
- The final matter that has to be considered is whether the protection of confidential information should be regarded as absolute, as it would appear to be on the Morgan Grenfell principle, if that is properly applicable to section 15(1), or whether it is qualified by the opportunity to justify an interference on grounds of public interest, which is the approach of the ECHR and/or the 1993 and 2004 Directives in EU law.
- I am not entirely convinced that English common law has always regarded the preservation of confidential information as a fundamental human right, although I accept that it has been recognised and accepted by our common law. Nevertheless, in the light of at least article 1 of the first protocol, it can now be seen that it is a species of "possessions", with which the state cannot interfere without justification. In these circumstances, I do not think I would be willing to go as far as to say that all prohibition of access to it is necessarily implicit in ACA 1998. If it were, the question could arise whether the auditor himself or the Audit Commission could have access to it (which would be plainly justified under the ECHR). Nevertheless, I would accept that at least article 1 of the first protocol requires us to consider that confidential information is capable of being protected as "possessions". I see no difficulty in reading down section 15(1) accordingly, so as to provide an exception for confidential information, in part because I do not regard section 15(3) as implicitly and necessarily requiring that confidential information under the statute or section 15(1) in particular is to be unprotected or otherwise unprotected, and the structure of ACA 1998 as a whole shows a clear regard for the preservation of confidence, subject to the demands of a proper audit. In the circumstances, I consider such a reading down to be well within the jurisprudence of Ghaidan v. Godin-Mendoza  UKHL 30,  2 AC 557 and similar authorities, as an exercise in interpretation, not legislation.
- In my judgment, moreover, confidential information is not in the identical case with legal professional privilege. Where it applies, privilege is an absolute bar, and there is a wealth of common law principles to assist in its application. Confidential information, however, comes in all shapes and sizes, and there is also opportunity for parties by agreement to misuse its categorisation. Where therefore there is a public interest in transparency, and well formulated principles for balancing private and public concerns such as are found in the ECHR or in the Directives or in analogous domestic legislation such as the EIR, I do not consider that an absolute bar on access in any event provides the most apt solution. In my judgment, the proper and preferable approach is that of reading down the right of access by reference to the well developed principles for dealing with confidential information which exist in circumstances where there is a conflict between competing values.
- In conclusion, therefore, I would hold that the first disputed documents, which might in part, as illustrated by the Information Commissioner's decision, have been entitled to retain absolute confidentiality to the extent of being protected from inspection, have nevertheless passed that Rubicon, for Mr Dowen has already obtained access to them; but that Mr Dowen is still limited to using them for the purposes of the audit. As for the second disputed documents, I would hold that in principle, on the basis of the material put before this court and the limited argument addressed on this issue, the Council has failed to prove that interference with the confidentiality to which they are entitled would be justified, and that therefore access should at least in principle be refused. If, as I understand the matter, the Council has already decided not to allow access to the second disputed documents, I would conclude that Veolia has shown that it would be unlawful for the Council now to grant Mr Dowen access to them. If, however, I am mistaken in that understanding, so that a decision by the Council concerning the second disputed documents still lies in the future, then the Council will have to consider the position in the light of our judgments. However, in my opinion the Council would be in grave difficulties in being able to uphold a release of such documents to Mr Dowen as being justified in law. That would have the merit and logic of bringing its decision for the purposes of section 15(1) of ACA 1998 into line with the decision it has already reached for the purposes of FIA 2000 and the EIR.
Lord Justice Etherton :
- I agree with Rix LJ, for the reasons which he gives, that the decision of the Judge should be upheld in respect of Veolia's first ground (documents "relating to" the "accounts to be audited"). I also agree with Rix LJ, in relation to Veolia's second ground (limiting the right of inspection by reference to confidential information), that, for the reasons which he gives, section 15(1) should be read down so as to exclude confidential information protected by the ECHR.
- I respectfully disagree, however, that what Rix LJ describes as the third ground (limiting the use to which accessed information might be put) arises for decision on this appeal. These proceedings are for judicial review of the Council's decision to allow Mr Dowen to inspect and make copies of certain documents pursuant to section 15(1). By his order dated 21 October 2009 the Judge dismissed the claim. This is an appeal from that decision. These are not private law proceedings by Veolia for an injunction to restrain Mr Dowen from using the information in his possession or related relief.
- I prefer to express no view on the use to which Mr Dowen may put such information, or more generally as to the use to which any person may put information obtained pursuant to section 15(1). I am reluctant to do so for several reasons. This is a difficult and important issue, on which the weight of existing authority is against any implied statutory restriction. If section 15(1) is read down so as to exclude confidential information protected by the ECHR, the point is unlikely to arise in the future. The spelling out of such an implied statutory restriction is not clear or straightforward, bearing in mind, among other things, that the Act contains express restrictions on disclosure in section 49, with criminal sanctions for breach; even in the case of auditors, the restriction on publication is not comprehensive; and there is no general statutory restriction on disclosure by the Commission.
- Moreover, the meaning and effect of the restriction which is suggested - "for the purposes of the audit" – divorced from a specific factual context, is far from clear. The objects of the audit include the very broad one of securing "economy, efficiency and effectiveness in the use of …resources" by the body being audited (section 5(1)(e)). There are many ways in which an "interested person" who obtains information pursuant to section 15(1) might seek to deploy such information with that object in mind, and I am doubtful that it is helpful to consider the lawfulness of such conduct in the abstract by reference to a general implied formula rather than on the facts of a particular case in private law where the claimant seeks to restrain the use of the information. Further, the suggested implied statutory restriction has been considered by Rix LJ in the context only of confidential information. This leaves open the question whether there is any implied restriction in the case of non-confidential information. Again, that is likely to be best addressed in the context of a private law claim on particular facts where there may be a dispute about whether information is or is not confidential. Finally, the actual facts may be critical as to whether equitable relief, in the form of an injunction, will lie. In the present case, for example, Veolia did not apply for a stay, pending appeal, to prevent Mr Dowen inspecting and obtaining copies of schedules 6A, 6B, 6C and 7. That fact might be a material consideration in an action by Veolia for an injunction to restrain the use of the information by Mr. Dowen.
Lord Justice Jackson :
- I agree with Rix LJ that the decision of the judge should be upheld in respect of Veolia's first ground of appeal. In relation to the second ground of appeal, I agree that section 15 (1) of the Audit Commission Act 1998 should be read down so as to exclude confidential information protected by the European Convention for the Protection of Human Rights and Fundamental Freedoms. I agree with the reasons which Rix LJ gives for his conclusions on these matters.
- In relation to what is referred to as the third ground, I agree with Etherton LJ that, for the reasons which he gives, in this appeal we should not decide the use to which information accessed under section 15(1) should be put. On a proper interpretation of that section, Mr Dowen does not have a right of access to the documents which he seeks in this case. He is only in possession of schedules 6A, 6B, 6C and 7 because Veolia did not seek a stay following the judgment at first instance.
Copyright Policy |
Donate to BAILII