Dani Gardiner: Hobbit decision serves as warning to other companies

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Wingnut Films and New Line Productions argued that its documents on The Hobbit were commercially sensitive. Photo / Supplied
Wingnut Films and New Line Productions argued that its documents on The Hobbit were commercially sensitive. Photo / Supplied

The recent decision of Ombudsman David McGee concerning The Hobbit documents stands as a reminder to businesses to exercise care when disclosing commercially sensitive information to the Government.

The Ombudsman found that the Government was not entitled to withhold a range of documents in relation to the production of The Hobbit.

This included information provided by film industry companies in 2010 to the Minister for Economic Development and the Minister for Arts, Culture and Heritage. This decision followed a request by the New Zealand Council of Trade Unions and Radio New Zealand for release of the information under the Official Information Act 1982 (the OIA).

In response to that request the ministers had released some documents, but refused to disclose others.

Their grounds for refusal included that disclosure would prejudice the commercial position of the film companies, that the information was supplied to the ministers on a confidential basis and that its release would inhibit the free and frank expression of opinions necessary for the effective conduct of public affairs.

These are all valid grounds for withholding information under the OIA.

The Ombudsman rejected most of the arguments put forward by the ministers and the film companies (Wingnut Films and Warner Bros' New Line Productions) in support of non-disclosure.

McGee determined that only a very narrow class of commercially sensitive documents could be withheld.

This information comprised descriptions of potential studio development proposals, production costs and budgets, and financial information relating to applications for production grants. Most other commercial information had to be released.

This conclusion was reached despite strong arguments from the film companies and the ministers.

New Line Productions had argued that disclosure of its negotiations, strategic thinking and decisions, personal opinions, offers from third party governments and other private information could damage business relationships and impair its ability to effectively negotiate in the future.

Wingnut Films also alleged that disclosure would unreasonably prejudice its commercial position in the film community.

The Ombudsman acknowledged that while disclosure of some of the information at issue "may not be helpful to business relationships" this was not enough to justify withholding it from the public.

There had to be a serious risk of unreasonable prejudice to the commercial position of the business.

The film companies also asserted that they had supplied highly candid and sensitive commercial information on the understanding that it would be kept confidential by Government ministers.

The Ombudsman confirmed that companies wanting information to remain confidential needed to agree in advance with Government that the information was being provided and received on that basis.

Even then, only information that was intrinsically confidential in nature could attract an obligation of confidence that justified non-disclosure under the OIA.

The Ombudsman did not consider the information in question here was of that character. He concluded that this section of the OIA was not "intended to permit Ministers or departments to erect a barrier to the disclosure of general policy submissions made to them by third parties ..."

Nor did the Ombudsman accept that it was necessary to withhold the information to maintain the effective conduct of public affairs through the free and frank expression of opinions.

The Minister for Economic Development had stressed the value of business (and the wider community) being able to provide free and frank views and commercially sensitive information to Government.

The minister expressed concern that release of the information would compromise the Government's ability to acquire such information in the future and impede the willingness of business leaders to provide their views and information to the Government.

Wingnut Films concurred, saying that if the information was released, it would not be inclined to help the Government again by providing such a candid level of advice and opinion.

New Line Productions said that disclosure would act as a major disincentive to motion picture studios to use New Zealand as a location for future productions.

The Ombudsman was not convinced. He acknowledged that there may be circumstances in which persons may feel inhibited from making submissions by the prospect of those submissions being made public, but this was not so in this case.

He held that the submissions and comments were made in the film companies' own direct interests with a view to persuading the Government to take a policy stance that advantaged them commercially.

He considered that while parties with a commercial interest in making submissions might prefer that they not be released, it is unlikely they would be deterred from doing so by the prospect of release.

This decision confirms that the threshold for withholding commercially sensitive information under the OIA is very high.

Businesses need to be aware that when they disclose commercial information to the Government, it becomes subject to the OIA, and is therefore public property, unless very specific reasons for withholding it apply.

Dani Gardiner is a senior associate with law firm ChenPalmer.

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