The house always wins – the latest on Crown Resorts v Zantran

In brief 3 min read

The Full Federal Court has overturned the trial decision in Crown Resorts Limited v Zantran Pty Limited [2020] FCAFC 1, and cast further light on the enforceability of employee confidentiality agreements in the context of civil litigation. In particular, employers can be more confident their employees' confidentiality obligations will not be abrogated in favour of case management considerations.

Key takeaways

• A court will not permit a person to breach confidence merely for the convenient running of litigation.
• Parties seeking to obtain evidence from those owing an obligation of confidence may need to obtain the information through formal litigation means, such as discovery or interrogatories.
• Employers can be more confident that their employees' confidentiality obligations will not be abrogated in favour of case management considerations.

Who in your organisation needs to know about this?

Legal counsel.

Background

This case concerned a class action lawsuit that Zantran Pty Limited brought against Crown Resorts Limited. Zantran sought, among other things, damages arising from various alleged contraventions of legislation by Crown. Central to the case were allegations that Crown had made misleading representations concerning its operations in China, and had failed to notify the Australian Securities Exchange of various matters related to those operations.

An age-old problem arises

Zantran's solicitors were contacted by a group of former Crown employees who wanted to give evidence against Crown in the class action. However, most of the group members owed express confidentiality obligations to Crown under their employment contracts.

Zantran asked the court to relieve the relevant former employees of their confidentiality obligations, to allow them to assist Zantran in preparing the class action. Zantran relied on AS v Minister for Immigration and Border Protection (Ruling No 6) [2016] VSC 774, which held that the court could relieve a party from a valid obligation of confidence, for a limited purpose, by the exercise of a discretion in favour of the more convenient running of litigation. The primary judge, applying AS v Minister, largely granted the relief Zantran sought.

The Full Federal Court steps in!

On appeal, the Full Federal Court overturned the primary judge's decision and dismissed Zantran's application. The court rejected the approach taken in AS v Minister.

The Chief Justice noted that although an express confidentiality clause could be rendered void or unenforceable due to an identified public interest (such as where the contract sought to prevent disclosure of fraud), this was distinct from the position taken in AS v Minister, in which it was suggested that the court had legal authority not to enforce a valid contract so as to further the efficient conduct of civil litigation. His Honour also noted that although case management considerations were important, they do not provide the court with a 'warrant of authority to set aside, revoke or suspend substantive rights of parties to litigation.'

Justice Lee emphasised that there was a number of alternative options available to Zantran to obtain the relevant information from the employees, including the use of interrogatories or pre-trial oral discovery. Confidentiality obligations are no answer to a compulsory court process requiring disclosure. Critically, however, Zantran had not pursued those avenues.