The House Always Wins: Full Federal Court considers enforceability of confidentiality obligations

A recent decision of the Full Court of the Federal Court of Australia considered whether an express confidentiality clause in a contract should be enforced.

Crown Resorts Limited v Zantran Pty Ltd [2020] FCAFC 1 involved a shareholder class action brought against Crown. In preparing for trial Zantran sought to adduce evidence from various former employees of Crown, many of which owed Crown a contractual duty of confidentiality.

Zantran obtained orders in the Federal Court relieving the former employees of their obligations of confidence owed to Crown for the limited purpose of providing Zantran’s solicitors with witness statements and relevant documents. In securing such orders, it was argued, and accepted by the Court, that the confidentiality clauses impeded Zantran’s pre-trial preparation in a manner inconsistent with the ‘overarching purpose’ of civil litigation to facilitate the just resolution of disputes as “quickly, inexpensively and efficiently as possible”, thereby interfering with the administration of justice.

Crown appealed the decision in the Full Federal Court on the basis that the Court lacked discretionary authority to set aside valid contractual obligations.

Allsop CJ, White and Lee JJ unanimously allowed the appeal and overturned the Federal Court’s decision, holding that:

•   a contract should be seen as enforceable unless grounds for unenforceability are established;
•   it is well established that a contract, or part of a contract, can be held void or unenforceable as contrary to public policy;
•   the proposition that enforcement of a valid contractual confidentiality clause would or might impede the conduct of a proceeding is not contrary to public policy and, therefore, is not an adequate basis to find that an otherwise enforceable contractual obligation is void or unenforceable; and
•   in the present case, the relevant confidentiality clause was not shown to be void or unenforceable, therefore, the former employees are bound by the contractual confidentiality obligations.

The Court stated that Zantran could have obtained information from the former employees through other means, such as through pre-trial discovery.

This case illustrates the reluctance of the courts to interfere with the contractual rights and obligations agreed between parties, unless a party can properly demonstrate that the underlying contract (or part thereof) is void or unenforceable.

The full decision of Crown Resorts Limited v Zantran Pty Ltd [2020] FCAFC 1 can be found here.