Section 34(4)(A)(I) – Trade secret of an agency

Section 34 of the Freedom of Information Act 1982 (Vic) (the Act) contains four streams of exemptions that relate to commercial information of third parties or agencies. There are three other Exemption Practice Notes that discuss the other streams in section 34.

This Practice Note sets out the exemption, summarises the steps to take when applying it, and then discusses each element in detail. All legislative references are to the Act unless otherwise stated.

THE EXEMPTION

A document or information is exempt under section 34(4)(a)(i) if two conditions are satisfied:

1. the document or information contains a trade secret of an agency; and
2. disclosure would be likely to expose the agency unreasonably to disadvantage.

APPLYING THE EXEMPTION – A SUMMARY

1. Specifically identify the information considered to be a trade secret.
2. Determine if the information is in fact a trade secret of the agency.
3. Critically and objectively consider whether disclosure would be likely to expose the agency unreasonably to disadvantage by identifying and establishing three elements:
   1. what the disadvantage is;
   2. whether the disadvantage is likely to occur; and
   3. the disadvantage is unreasonable.
4. If the exemption is made out, consider whether to exercise the discretion in section 16(2) to provide access to the information or document despite the exemption applying.

WHAT IS A TRADE SECRET?

A ‘trade secret’ is not defined in the Act, however it is generally proprietary knowledge of the agency. Examples might include secret formulas, processes, or methods used in production of goods or provision of services.

There are a number of indicators to information constituting a trade secret.¹ These include:

• whether the information is of a technical character;
• the extent to which the information is known outside of the agency;
• measures taken by the agency to guard the secrecy of the information;
• the value of the information to the agency and any competitors;
• the effort and money spent by the agency in developing the information; and
• the ease or difficulty with which others might acquire or duplicate the secret.

Information is generally not considered to be a trade secret where the processes, procedures, or methods are well known or widespread (including in that industry), could be assumed, or are publicly available.

LIKELY TO EXPOSE THE AGENCY UNREASONABLY TO DISADVANTAGE

When determining if disclosure is likely to expose the agency unreasonably to disadvantage, three distinct elements must be identified and considered:

1. what the disadvantage is;
2. why and when disadvantage is likely to occur; and
3. the disadvantage is unreasonable.

Unreasonable disadvantage

An agency must be able to articulate how disclosing the information exposes the agency to disadvantage.

Tribunals and courts discuss ‘disadvantage’ in terms of financial implications – if disclosure is likely to:

• reduce an agency’s capacity to compete in a competitive market for buying and selling goods or services;²
• reduce an agency’s capacity to negotiate future commercial contracts;
• strengthen the bargaining position of entities that an agency has to negotiate, at the expense of the agency (competing for marketplace share);³ or
• expose the rates that an agency is prepared to accept for various services – and if so, the likely impact on the agency’s operations.

The meaning of ‘likely’

Disclosure of the trade secret must be likely to cause unreasonable disadvantage. ‘Likely’ is given its plain English meaning – seeming like truth, fact, or certainty, or reasonably to be believed or expected.⁴ Case commentary suggests that the threshold is:

• probable, such as well might happen or be true;⁵ or
• more likely than not.⁶

An agency should carefully consider if disclosure is ‘likely’ to cause unreasonable disadvantage, as opposed to it being a mere possibility – then articulate that consideration in their written reasons.

Unreasonable

An agency must establish that disclosure would likely cause ‘unreasonable’ disadvantage – not just any level of disadvantage. Whether disclosure is likely to expose an undertaking unreasonably to disadvantage depends on the particular facts and circumstances of the matter, considering the consequences that likely to follow from disclosure of the information. An agency must be able to articulate in their reasons why the disadvantage is unreasonable, as opposed to mere disadvantage.

Whether disadvantage would be unreasonable for the purposes of section 34(4)(a)(i) involves the consideration of all circumstances, including factors both in favour of, and against disclosure, such as:⁷

• the nature of the information;
• whether there is any public interest in disclosure or nondisclosure;
• the circumstances in which the information was obtained or created;
• whether the information has any current relevance; and
• the identity of the applicant and the likely motives of the applicant.

DISCRETION TO DISCLOSE EXEMPT DOCUMENTS

Nothing in the Act prevents an agency from providing access to information where an exemption applies. Section 16(2) acknowledges that decision makers can release exempt information as long as they are not legally prevented from doing so. Nevertheless, while section 20(2) notes that an agency is not required to provide access to an exempt document, the High Court of Australia⁸ has interpreted this as not preventing an agency from providing access to an exempt document.

Disclaimer: The information on this page is general in nature and does not constitute legal advice.

Version: June 2020 – D20/1533

1. Re Bankers Trust Australia Ltd v Ministry of Transport (1989) 2 VAR 33; Re Organon (Aust) Pty Ltd v Department of Community Services and Health (1987) 13 ALD 588
2. Binnie v Department of Industry, Technology & Resources (1986) 1 VAR 345 at [348].
3. Save Albert Park Inc v Australian Grand Prix Corporation [2008] VCAT 168.
4. See Macquarie Dictionary.
5. Asher v Department of innovation, Industry and Regional Development [2005] VCAT 2702 at [38].
6. RJE v Secretary to the Department of Justice [2008] VSCA 265 at [53].
7. Asher v Department of Innovation, Industry & Regional Development [2005] VCAT 2702 at [42].
8. Victorian Public Service Board v Wright (1986) 160 CLR 145 at [3].