NOTE IN APPEAL BY NORTH LANARKSHIRE COUNCIL AGAINST STEWART AND SHIELDS LIMITED
OUTER HOUSE, COURT OF SESSION
[2017] CSOH 76
P179/17
NOTE OF LADY WOLFFE
In the appeal by
NORTH LANARKSHIRE COUNCIL
Petitioner
against
STEWART AND SHIELDS LIMITED
Respondent
Pursuer: Dunlop; Ledingham Chalmers LLP
Defender: Howie QC; TC Young LLP
5 May 2017
Motion under section 15 of the Arbitration (Scotland) Act 2010 (“the Act”)
[1] In this Arbitration application to the Court of Session (“these proceedings”) against the arbitrator’s part 5 award, the petitioner seeks an order prohibiting the disclosure of the identity of any party to these proceedings in terms of section 15 of the Arbitration (Scotland) Act 2010 (“the Act”) and Rule 100.9 of the Rules of the Court of Session (“the RoC”). The respondent opposes this motion on several grounds, including (i) the fact that reference has been made to this arbitration in the notes to the financial accounts of the petitioner, and (ii) that a prohibition on its being able to refer to the outcome of the arbitration would be prejudicial to its commercial interests.
[2] The parties were at issue as to the proper interpretation of, and interaction between, section 15 of the Act and rule 26 of the arbitration rules in Schedule 1 to the Act (“the Arbitration Rules”). It is not necessary to take the matter to avizandum and I produce this Note for purpose addressing the arguments I heard earlier this week.
Background
The ongoing Arbitration
[3] By way of background it should be noted that the petitioner, who is a public authority, and the respondent, a building company known as Stewart and Shields Limited, entered into a contract for certain construction works. The petitioner and respondent were, respectively, employer and contractor under that contract. After a period of time, the petitioner purported to terminate the parties’ contract. It did so on the basis that, it was said, the respondent had failed to proceed regularly and diligently with the works.
[4] The dispute was referred to arbitration (“the arbitration proceedings”). The outcome of the arbitration proceedings thus far has been in favour of the respondent. In particular, it was explained that by his part 1 award, the arbitrator found that the petitioner’s notices of termination were ineffective to terminate the contractor’s appointment and by his part 3 award, he had determined that on the merits the ground for termination (the asserted failure to proceed regularly and diligently with the works) was also ill-founded. The part 2 and 4 awards of the arbitrator relate to the expenses of the part 1 and 3 awards, respectively. Those awards were no longer challengeable, which is why the petitioner required to make due provision in its Annual Accounts (as after defined). The subject matter of these proceedings is the arbitrator’s part 5 award, which dealt with loss and quantification.
The information in the public domain
[5] As a public authority of a particular kind, namely a local authority, the petitioner is under a statutory obligation imposed by the Local Authority Accounts (Scotland) Regulations 2014 (SSI 2014/200) (“the SSI”) to publish to a website of the authority:
(i) a copy of its unaudited accounts submitted to the auditor, and that within a stipulated time after submission of the unaudited accounts to the auditor (as required by regulation 8 of the SSI), and
(ii) a copy of its signed audited accounts, within a stipulated time frame (as required by regulation 11 of the SSI).
The first obligation subsists only until the audited accounts are published to the authority’s website: regulation 8(8) of the SSI . The second obligation subsists for a period of five years: see regulation 11(2) of the SSI.
[6] In due course, the petitioner published its annual accounts (“the Annual Accounts”) for the period to which the early part of the arbitration proceedings related, being 2015/16, including the outcome of the part 1 award. By reason of the arbitrator’s findings that related to the period covered by the Annual Accounts, it was deemed necessary to make some provision for liability in them. Two passages in the Annual Accounts were highlighted in submissions. Mr Dunlop candidly accepted that the petitioner might proceed differently, in future, in respect of the amount of detail that should be disclosed in its statutory accounts about such disputes. The first passage referred to was the reference to note 20(3) under “Provisions” at page 44 in the Annual Accounts, which stated as follows:-
“Arbitration proceedings between the Council [ie the petitioner] and Stewart and Shields Limited [ie the respondent], for construction of the Antonine Day Care Centre which took place within the 2015/16 financial year found in favour of the contractor [ie the respondent] due to the Council not being entitled to terminate the contractor’s employment. The above provision has been made in the accounts on a best estimate basis for claims quantified to date by the above parties.”
It will be noted that the passage disclosed the name of the parties, including the respondent and the work to which the contract related. The second passage in the Annual Accounts was in note 36 in respect of “Contingent liabilities” at page 63. So far as material, it stated as follows:
“Arbitration proceedings between the Council and Stewart and Shields Limited, for construction of the Antonine Day Care Centre has found in favour of the contractor [ie the respondent] due to the Council [ie the petitioner] not being entitled to terminate the contractor’s employment. A provision has been made in the accounts on a best estimate basis for claims quantified to date by the above parties. Four heads of claim with regards sums that may be claimed are yet to be quantified. Due to the wide variety and nature of the claims and the uncertainty of any potential liability, no value has been attributed to these claims in the financial statements.”
There was no suggestion in submissions that these details were not sufficient to identify the parties and the contract works referred to. It was also explained that at the time of terminating the contract between the parties, the fact and basis of the petitioner’s termination of the contract had been reported in the newspaper. These disclosures all predated the raising of these proceedings.
Relevant statutory provisions governing the Motion
[7] The petitioner’s application is made in terms of section 15 of the Act. Reference was also made in submissions to rule 26 of the Arbitration Rules. The parties were sharply divided as to the interpretation and interrelationship of these provisions. It is necessary therefore to set out their terms. No reference was made to chapter 100 of the RoC and accordingly, no further reference need be made to it.
Section 15 of the Act
[8] Section 15 of the Act, headed “Anonymity in legal proceedings”, is in the following terms:
“15. Anonymity in legal proceedings
(1) A party to any civil proceedings relating to an arbitration (other than proceedings under section 12) may apply to the court for an order prohibiting the disclosure of the identity of a party to the arbitration in any report of the proceedings.
(2) On such an application, the court must grant the order unless satisfied that disclosure—
(a) is required—
(i) for the proper performance of the discloser's public functions, or
(ii) in order to enable any public body or office-holder to perform public functions properly,
(b) can reasonably be considered as being needed to protect a party's lawful interests,
(c) would be in the public interest, or
(d) would be necessary in the interests of justice.
(3) The court's determination of an application for an order is final.”
Rule 26 of the Arbitration Rules
[9] Furthermore, rule 26 of the Arbitration Rules is as follows:
“26 Confidentiality D
(1) Disclosure by the tribunal, any arbitrator or a party of confidential information relating to the arbitration is to be actionable as a breach of an obligation of confidence unless the disclosure—
(a) is authorised, expressly or impliedly, by the parties (or can reasonably be considered as having been so authorised),
(b) is required by the tribunal or is otherwise made to assist or enable the tribunal to conduct the arbitration,
(c) is required—
(i) in order to comply with any enactment or rule of law,
(ii) for the proper performance of the discloser's public functions, or
(iii) in order to enable any public body or office-holder to perform public functions properly,
(d) can reasonably be considered as being needed to protect a party's lawful interests,
(e) is in the public interest,
(f) is necessary in the interests of justice, or
(g) is made in circumstances in which the discloser would have absolute privilege had the disclosed information been defamatory.
(2) The tribunal and the parties must take reasonable steps to prevent unauthorised disclosure of confidential information by any third party involved in the conduct of the arbitration.
(3) The tribunal must, at the outset of the arbitration, inform the parties of the obligations which this rule imposes on them.
(4) ‘Confidential information’, in relation to an arbitration, means any information relating to—
(a) the dispute,
(b) the arbitral proceedings,
(c) the award, or
(d) any civil proceedings relating to the arbitration in respect of which an order has been granted under section 15 of this Act, which is not, and has never been, in the public domain.”
Submissions for the Respondent
First ground of opposition: the information was in the public domain
[10] While Mr Howie QC acceded to my request that he first lay out the ground of opposition to the motion, he resisted any suggestion that the onus rested with the respondent. Mr Howie began by noting that the power sought to be invoked by the petitioner’s motion was a narrow one, and was located solely in section 15 of the Act. Any power under common law or any other enactment was irrelevant. Section 15 contained what, in effect, was an interdict against disclosure of the identity of a party to the arbitration proceedings in any report of these proceedings.
[11] If this information was already in the public domain, no order could or should be granted under section 15 of the Act. Under reference to the two passages from the Annual Accounts, set out above, Mr Howie argued that relevant information sought to be protected was already in the public domain. By reason of its publication to the petitioner’s website, available as part of the World Wide Web, it had, as he put it, been published urbi et orbi. There had been total and complete publication, and by a means ensuring wider circulation than might have been achieved by publication in any conventional print newspaper.
[12] Turning to consider what had been disclosed, Mr Howie noted that disclosure had been made which revealed that the dispute concerned an arbitration; that identified both parties by name and that also identified by name the contract works. It mattered not that the disclosure related to an earlier award in the arbitration. The arbitration proceedings were a single set of ongoing proceedings and the arbitrator would be functus only upon issue of his final award. Accordingly, what the petitioner sought to interdict was already a completed act, one it had done in furtherance of the statutory duty incumbent upon it in terms of publication of the Annual Accounts. Any order now pronounced would be ineffectual; it was a brutum fulmen.
[13] Mr Howie then turned to consider the terms of rule 26 of the Arbitration Rules, sub-paragraphs (1)(c) to (f) of which mirrored the terms of section 15(2). He noted the definition of “confidential information” in sub-paragraph (4) of the rule 26, and the proviso that the information “is not, and never has been, in the public domain”. By reason of the disclosure in the Annual Accounts, there was no continuing confidentiality or scope for the application of rule 26.
[14] The petitioner accepted that it had disclosed this information. It had done so for reasons falling within rule 26(1)(c)(iii), which Mr Howie accepted. Therefore, there was no breach of rule 26. But, if the information was no longer confidential, rule 26 flew off and there was no other basis for granting a prohibition under section 15 of the Act. Mr Howie referred to his first observation: the only thing that an order under section 15 could protect was the disclosure of the identity of the parties in “any report of the proceedings”. While there might be an argument about the scope of that phrase, the fact that the information was already in the public domain sufficed for his first ground of opposition.
Second ground of opposition: disclosure was necessary under section 15(2)(b) or (c)
[15] Mr Howie had a fall-back position. If it was necessary for the respondent to identify one of the exceptions in section 15(2), it invoked either sub-paragraphs (b) or (c), and possibly (a). He explained that the obligation of confidentiality operated to the considerable commercial detriment of the respondent. The respondent was a contractor who regularly sought to be included in tender lists compiled by public authorities procuring public contracts. One question that was frequently included in pre-qualification questionnaires was whether the contractor had ever had a contract terminated by a public authority. By reason of the events arising from the parties’ dispute, the respondent would require to answer this question in the affirmative. That had the adverse effect of making it unlikely that the respondent would be entered onto a tender list. Furthermore, by reason of obligation of confidence in rule 26, the respondent was precluded from explaining that the termination had been wrongful or unfounded, or it was at least precluded from evidencing that by reference to the part 1 and 3 awards. It was in the public domain that the petitioner had terminated its contract with the respondent in relation to the works. The respondent therefore needed to be in a position to demonstrate to any sceptic that the respondent had been vindicated in the arbitration proceedings and to be able to appoint to the outcome of those proceedings. This sufficed for either sub-paragraphs (b) or (c). Sub-paragraph (a) was also potentially engaged, if a different public authority was not to be misled by the limited information that would be available to it in relation to the respondent if the motion were granted.
Submissions on behalf of the Petitioner
Response to the first ground of opposition
[16] Mr Dunlop argued that the motion should be granted. These proceedings were not within the public domain and could therefore still have the potential for confidentiality for the purposes of rule 26(4)(d). Rule 26 was a “default” rule, and parties had agreed that it should apply. He did not concede, as Mr Howie had contended, that there was no longer any confidential information to protect. The only matter that was in the public domain was that the petitioner had not been entitled to terminate the respondent’s appointment under the contract between the parties. No other awards of the arbitrator were in the public domain. The petitioner was entitled to keep this information confidential.
[17] Turning to the statutory provisions, Mr Dunlop accepted that certain features of section 15 were mirrored in rule 26. However, he noted that in section 15 of the Act there was no proviso that the information had never been in the public domain, as there was at the end of rule 26(4) of the Arbitration Rules. Had the drafter wished to provide for an additional exception in section 15(2), on the basis that the information was in the public domain, he could readily have done so as a further sub-paragraph in section 15(2). He hadn’t. The court should place no weight on the fact that the petitioner had put into the public domain the identity of the parties in the previous, and he argued separate, arbitration proceedings.
Response to the second ground of opposition
[18] In relation to the commercial disadvantage said to be suffered by the respondent, he argued that in most of the questionnaires referred to, there was an opportunity for the applicant contractor to supply additional information. In any event, if this was an issue, the answer was not to be found in section 15 of the Act, but any remedy had to be found in rule 26 of the Arbitration Rules. While he made no concession that disclosure by the respondent in these circumstances would not be actionable, he posited that the respondent could rely on rule 26(1)(f). Section 15 was only concerned with these proceedings, being proceedings before the Court of Session, not with any arbitration proceedings. Finally, he pointed to the fact that the respondent had not lodged any documentary evidence to vouch the disadvantage it founded upon.
Reply on behalf of the Respondent
[19] In reply, Mr Howie made the additional points:
(i) The petitioner had failed to consent to any disclosure sought by the respondent;
(ii) The definition of “any civil proceedings relating to the arbitration” in rule 26(4) extended to these proceedings and was not time-limited.
(iii) It was misconceived to suggest that what was to be protected under section 15 was that one was a party to civil proceedings per se; what is to be protected is that one is a party to an arbitration. In this respect, section 15 was the “handmaiden” to rule 26. What was meant to be protected, and which the petitioner had disclosed, was the arbitration and the identity of the parties qua parties to that arbitration. So, the whole question was in the public domain.
(iv) What was in the public domain for the purpose of rule 26 was impliedly in the public domain for the purposes of section 15 of the Act, and, as he had submitted already, there had been disclosure to the whole world of what should have remained confidential.
Discussion
The proper interpretation and interrelationship of section 15 of the Act and rule 26 of the Arbitration Rules
[20] Leaving aside the question of the effect of the information that has unarguably been put into the public domain, the sharp difference between the parties is their approach to the interrelationship between, and interpretation of, section 15 and rule 26. Mr Dunlop emphasises the differences in wording between section 15 and rule 26, and, in particular, the omission in section 15(2) of any exception for information in the public domain. Mr Howie argues that these two provisions should be read together.
[21] I note that rule 26 and section 15 are both found in the Act, and that there is accordingly no argument to the effect that the rule is subordinated to section 15, eg by reason of being located in secondary legislation. Rule 26 is one of the default rules. Parties may contract out of it. They did not do so here. It therefore seems to me appropriate first to consider the impact of rule 26 on arbitrations to which it is applied, before considering the proper scope of the power under section 15.
[22] The potential for preserving the confidentiality of parties’ disputes before arbitrators is one of the key benefits of the Act. Rule 26 gives effect to this if parties do not opt out of it. Turning to the terms of rule 26, what is sought to be protected is disclosure of “confidential information” which relates to “the arbitration”. Breach of such an obligation, which may be committed by the tribunal, by the arbitrator or by a party, is actionable unless disclosure can be brought with any of sub-paragraphs (a) to (g) of rule 26(1). All of the threshold elements of rule 26(1) must be met, if a breach is to be actionable (subject to the disclosing party satisfying one of the exceptions or defences in rule 26(1)(a) to (g)). If the disclosure is by a third party and not one of the potential actors, or if the information is not confidential or if it does not relate to the arbitration, the threshold for an actionable breach is not met.
[23] For present purposes, the critical element in rule 26(1) is that concerning “confidential information”. This term is defined in rule 26(4). The phrase “any information relating to” is a broad formulation. Sub-paragraphs (a) to (c) of rule 26(4) include the fact that there is a dispute, that it has been made the subject of arbitral proceedings and the outcome expressed in any award. Significantly, in my view, it also includes “any civil proceedings relating to the arbitration” in respect of which an order under section 15 has been granted. There is, accordingly, an express link between rule 26 and section 15. This militates against the kind of disjunctive reading between rule 26 and section 15 implicit in Mr Dunlop’s approach. The overriding proviso in the definition of “confidential information” is that this information “is not, and never has been, in the public domain” (“the proviso”). Any information falling within rule 26(4)(a) to (c) that has ever been in the public domain is not “confidential information” and, as a consequence, there is no duty of confidentiality in respect of what is, by definition, non-confidential information.
[24] In practical terms, the duty of confidentiality provided for in rule 26 will commence from the start of any arbitration proceedings and will subsist after they conclude. If there is no application or appeal to this court, then the rule 26(4)(d) does not come into play, in the sense that there are no civil proceedings in respect of which any order under section 15 can be granted.
[25] However, if, as here, there is resort to the Court of Session by one of the means provided for under the Act, then, in the conduct of those court proceedings, the immediate question is how and to what extent the subsisting obligation of confidentiality owed relative to the arbitration proceedings is to be preserved. Section 15 addresses that circumstance, but in a particular way. It does not seek to secure a wholesale preservation of the obligation of confidentiality in all the respects covered by rule 26. In particular, section 15 does not to seek to prevent disclosure of the dispute itself, the fact that it has gone to arbitration or its outcome. Section 15 is, as its rubric and its terms indicate, to secure the anonymity of the parties by prohibiting disclosure of their identity in any report of the court proceedings of the arbitration proceedings. It is correct, therefore, that the power available under section 15 is of very limited scope. That does not mean, however, that the exercise of that power is divorced from, or without regard to, the arbitration proceedings which lead to the court proceedings or the necessity of the preservation (or otherwise) of the confidentiality of those earlier arbitral proceedings. In other words, whether the obligation of confidentiality has been observed or breached in respect of the arbitration proceedings is, in my view, highly relevant to the exercise of the power under section 15 to grant anonymity in its own report of the court proceedings flowing from those arbitration proceedings.
[26] The matter can be tested this way: if the obligation of confidentiality has been observed in respect of the arbitration proceedings, it would be a disincentive for the aggrieved party to challenge any arbitral award if it necessarily meant that its anonymity would be lost. Hence the limited power in section 15 to preserve anonymity. In practice these courts are astute to ensure that, so far as is necessary to preserve the anonymity of the parties, other details in the judgement might also be rendered in general terms to preclude the inadvertent subversion of the anonymity order. See, for example, the comments of Lord Glennie at paragraph 22 in Arbitration Application No 2 of 2011 directed to achieving that very result.
[27] Conversely, if the obligation of confidentiality in the arbitration proceedings has been breached, that has two consequences. In the first place, any breach can be actionable under rule 26(1), unless one of the exceptions in rule 26(1)(a) to (g) applies. In this case, the respondent accepts that the breach of confidentiality in the instant case falls within one of the exceptions in rule 26(1)(c). However, there is a second consequence. As Mr Howie colourfully put it, a breach of confidentiality, like cracking an egg, can only be done once. Once confidential information is disclosed, it is no longer confidential. It cannot be undisclosed. This is put beyond doubt by the terms of the proviso, at the end of rule 26(4), that the confidential information “is not, and has never been, in the public domain”. Mr Howie is in my view correct that, in that circumstance, rule 26 flies off. It has no further application. On Mr Howie’s approach, this is determinative of any application under section 15. Mr Dunlop urges a disjunctive approach to the two provisions.
[28] It my view, and contrary to Mr Dunlop’s submission, it matters not that there is no like proviso at the end of section 15(2), as is contained at the end of rule 26(4). Structurally, it would be out of place at that point in section 15(2); functionally, it is not necessary. In terms of the structure of rule 26, the proviso is part of the threshold element of “confidential information” in rule 26(1), discussed above. The fact that information is in the public domain is not one of the defences, as it were, to an actionable breach. (The reasons for that are obvious.)
[29] Further, not all of the exceptions or defences in rule 26(1) are within the control of, justiciable before, the court: see rule 26(1)(a), (b) or (g). However, the remaining defences (in rule 26(1)(c) to (f)) find their exact parallel in sub-paragraphs (a) to (d) of section 15(2). In circumstances where there has in fact been disclosure, this also affects the exercise of the power under section 15. Of course, one result is that the information is no longer confidential information, for the purposes of rule 26. But such a disclosure is also problematic for any motion for an order under section 15. It is inept, to say the least, to seek an order from the court prohibiting disclosure of something that has already been disclosed to the world. Putting this in terms of section 15(1), where there has already been disclosure of the parties’ identities to the world, it is in my opinion a legal solecism to suggest that the court can ever be “satisfied” (for the purpose of section 15(2)) that disclosure is required or justified for one of the purposes in sub-paragraphs (a) to (d) of that subsection. It is in my view necessarily implicit to the exercise of the power in section 15(1), that there is still something that is disclosable to be protected, ie that the parties’ identities are still confidential and (for the purposes of section 15(1)) are still susceptible to annonymisation.
[30] It follows that I am with Mr Howie on his first submission that the information sought to be anonymised, being the identity of the parties, is already in the public domain. In terms of rule 26, this may be analysed either as a permissible breach of the duty of confidentiality or as meaning that the “confidential information” element of the threshold test in rule 26(1) can no longer be satisfied. Be that as it may, the additional consequence, at least in circumstances where there has been a permissible disclosure to the world, is that no order of the court under section 15 purporting to prohibit disclosure of the identities of the parties in the report of these proceedings can achieve the statutory purpose of anonymity.
[31] In respect of Mr Dunlop’s argument that the focus of what has been disclosed is the individual award, I do not accept this submission. Rule 26(1) refers to “the arbitration”. The elements of the definition of confidential information in rule 26(4)(a) to (c) are, in my view, equally intended to embrace all of these features of “the arbitration”. I accept Mr Howie’s submission that the arbitration is a single ongoing process, encompassing the several awards made and to be made, and that this is supported by the fact that the arbitrator is not functus until he issues his final award. In any event, by reason of the notes to the Annual Accounts published by the petitioner, there has been disclosure of the identity of parties to the arbitration, even if that has not extended to disclosure of the outcome of all of the awards. That is sufficient to render the making of an order under section 15(1) inept.
Whether any ground within section 15(2) is satisfied
[32] Finally, in respect of Mr Howie’s fall-back position, I place no weight on Mr Dunlop’s criticism that the respondent has produced no documentary material to vouch what it says are the adverse consequences of not being able to make a disclosure to substantiate its success before the arbiter on the question of termination. It suffices that Mr Howie’s submissions on these matters are made on his responsibility as counsel. However, there is in my view some force in Mr Dunlop’s submission that section 15 is not the forum in which to address the problems flowing from the obligations under rule 26. That is so, at least to the extent that the subject matter of these court proceedings does not relate to the issue or basis of the petitioner’s termination of the respondent’s appointment under the parties’ contract. On the other hand, the subject matter of these proceedings might provide indirect support or evidence of the kind sought, that the respondent was vindicated by the arbitrator. The petition bears to deal with the issue of loss and quantification following the respondent’s success before the arbiter on the termination issue (ie that the termination was procedurally ineffectual and substantively unjustified). Mr Dunlop made it clear that the petitioner would give no undertaking that any disclosure by the respondent within the context of the pre-qualification questionnaires was not actionable under rule 26. On balance, therefore, had this been a live issue, I would have accepted that the respondent had satisfied me that refusal of anonymity of these proceedings was necessary under either section 15(2)(b) or (d).
Decision
[33] For the foregoing reasons, I refuse the petitioner’s motion. I reserve meantime all question of expenses.