Veolia ES Nottinghamshire Ltd v Nottinghamshire County Council & Ors

Factual and Procedural Background

This appeal concerns the inspection rights granted to "persons interested" under section 15(1) of the Audit Commission Act 1998 ("ACA 1998"). The central dispute involves whether commercial confidential information contained in a waste management PFI contract between Company A and a County Council, as well as invoices pursuant to that contract, fall within the scope of section 15(1) and whether such information can be protected from disclosure.

The person interested is an elector within the local government area of the Council ("Appellant"). On 29 June 2009, the Appellant applied to inspect and copy the contract and invoices under section 15(1). Company A objected on grounds of confidentiality but consented to disclosure of material already publicly available. The Council proposed to disclose certain schedules and invoices (the "first disputed documents"). Company A obtained an interim injunction to prevent disclosure of confidential parts designated as "Commercially Sensitive Contract Provisions" in Schedule 45 of the contract.

Company A sought judicial review of the Council's decision to disclose these documents, arguing that the documents did not fall within the statutory right of inspection. The judge rejected this technical argument, holding that the documents related to the accounts to be audited. Company A advanced further grounds on appeal, including that section 15(1) should be read down to protect confidential information under English common law, the European Convention on Human Rights ("ECHR"), and EU law (the 2004 Directive), and that the use of inspected information should be limited to audit purposes.

A second set of disputed documents ("second disputed documents") containing Company A's financial model and profit margin were also raised. The Council had yet to decide on disclosure of these, pending this court's guidance. The Appellant had previously sought information under the Freedom of Information Act 2000 ("FIA 2000") and Environmental Information Regulations ("EIR"), with the Information Commissioner's decision largely upholding the Council's refusal to disclose confidential information.

Legal Issues Presented

1. Whether the commercial confidential information contained in the PFI contract and invoices falls within the statutory right of inspection under section 15(1) of ACA 1998.
2. Whether section 15(1) should be read down to exclude confidential information by reason of English common law, the ECHR, and/or the 2004 Directive.
3. Whether the use of information accessed under section 15(1) can be limited to the purposes of the audit.

Arguments of the Parties

Appellant's Arguments (Company A)

• The contract and invoices do not fall within the scope of documents "relating to" the accounts to be audited because the accounts in question are high-level summaries in the Council’s statement of accounts, and the documents are not expressly referred to therein.
• Section 15(1) should be read down to protect confidential information on grounds of English common law, the ECHR (articles 8 and 1 of the First Protocol), and the 2004 Directive on public procurement confidentiality.
• The right of inspection under section 15(1) does not permit unrestricted use of the accessed information; use should be limited to audit purposes only, preserving confidentiality outside that context.

Respondent's Arguments (Council and Audit Commission)

• Both the Council and Audit Commission agree with the judge’s broad interpretation that the disputed documents relate to the accounts to be audited and fall within section 15(1).
• The Council accepts the possibility that the ECHR may be engaged but submits disclosure of the first disputed documents is justified; it disputes the applicability of the 2004 Directive outside the procurement process.
• The Audit Commission supports in principle the protection of confidential information under the ECHR and the 2004 Directive but notes the Council has yet to carry out the necessary balancing exercise regarding the second disputed documents.
• Regarding the limitation on the use of accessed information, the Audit Commission supports the proposition that confidential information accessed under section 15(1) should only be used for the audit’s purposes; the Council takes no formal position on this issue.

Appellant's Arguments (Appellant Elector)

• The Appellant asserts that the documents relate to the accounts to be audited and supports the judge’s broad interpretation.
• The Appellant rejects the limitation on the use of accessed information, relying on precedent that persons interested can use the information for any lawful purpose.
• The Appellant supports the Council’s position disputing the applicability of the 2004 Directive and is content to accept the Council’s submissions on the ECHR issue.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Regina (HTV Ltd) v. Bristol City Council [2004] EWHC 1219 (Admin)	Interpretation of "persons interested" and use of inspected information under section 15(1)	Used to illustrate that persons interested may use information for any lawful purpose; court questioned the rationale for unlimited use.
Oliver v. Northampton Borough Council [1987] 151 JP 44	Need for protection of personal information under predecessor legislation	Led to introduction of section 15(3) protecting personal information; distinguished from confidential commercial information.
Regina (Morgan Grenfell & Co Ltd) v. Special Commissioner of Income Tax [2002] UKHL 21	Protection of legal professional privilege and confidential information under common law	Supported reading down statutory powers to protect fundamental rights; analogous principles applied to confidential commercial information.
Tooheys Ltd v. Commissioner of Stamp Duties (NSW) (1961) 105 CLR 602	Narrow interpretation of "relating to" in statutory context	Rejected as not applicable; court held "relating to" in section 15(1) should be given a broad meaning.
Varec SA v. Belgium [2008] 2 CMLR 24	Protection of confidential information and business secrets in public procurement under EU law	Supported the principle that confidentiality protections survive beyond procurement process; balancing required between transparency and confidentiality.
R (Malik) v. Waltham Forest NHS Primary Care Trust [2007] EWCA Civ 265	Definition of "possessions" under ECHR Article 1 of the First Protocol	Supported that commercial confidential information may fall within "possessions" protected by ECHR.
Roy Stirrat v. City of Edinburgh Council 1998 SCLR 973	Irrelevance of applicant’s motive in accessing documents under similar legislation	Supported that use limitation based on purpose is impractical and that access rights are broad.
Harman v. Secretary of State for the Home Department [1983] AC 280	Limitation on use of disclosed documents to litigation purposes	Illustrated that documents disclosed under compulsion are limited to use for that purpose; analogous principle applied to audit documents.
Parry-Jones v. Law Society [1969] 1 Ch 1	Confidentiality of client documents and limited use of disclosed information	Reinforced that disclosure for a limited purpose does not breach confidentiality if use is restricted accordingly.

Court's Reasoning and Analysis

The court began by interpreting the phrase "accounts to be audited" in section 15(1) of ACA 1998. It rejected the appellant’s narrow interpretation limiting the accounts to high-level summaries in the Council’s statement of accounts. Instead, it adopted a broad meaning encompassing the running ledger accounts and all documents that have a factual connection to those accounts, including contracts, invoices, and related schedules. The court emphasized that "relating to" does not require express reference but a factual connection, consistent with the statutory context and legislative history.

Turning to the protection of confidential information, the court considered whether section 15(1) could be read down to exclude such information. It found persuasive the principle from common law and the ECHR that fundamental rights and property interests, including commercial confidentiality, should not be overridden by general statutory language without express words or necessary implication. The court accepted that confidential commercial information constitutes "possessions" under Article 1 of the First Protocol to the ECHR and is protected accordingly.

The court acknowledged the competing public interest in transparency and democratic accountability inherent in ACA 1998. It concluded that the right of inspection must be balanced against the protection of confidentiality, with the ECHR providing a framework for such balancing. The court provisionally held that confidential information can be protected by reading down section 15(1), subject to justification based on proportionality and public interest.

Regarding the use of information accessed under section 15(1), the court diverged in views. It rejected the broad use arguments advanced by the Appellant and found that use should be limited to the purposes of the audit to protect confidentiality. The court reasoned that unrestricted use could undermine the legitimate confidentiality interests of commercial parties and that the audit process and statutory provisions (such as section 49) provide mechanisms to safeguard such information.

The court noted that the first disputed documents had already been disclosed following the lower court’s judgment and that Company A accepted this outcome. However, for the second disputed documents, containing highly sensitive financial models and profit margins, the court found no justification for disclosure at this stage and indicated that the Council’s decision to withhold these documents should be upheld unless a proper balancing exercise justified otherwise.

Two members of the court expressed reluctance to decide the issue of the limitation on use of accessed information on this appeal, noting that the proceedings were for judicial review of the Council’s disclosure decision and not for private law remedies restraining use. They preferred that such issues be resolved in appropriate future proceedings if necessary.

Holding and Implications

The court upheld the lower court’s decision that the disputed documents fall within the scope of section 15(1) of ACA 1998, meaning they relate to the accounts to be audited and are subject to inspection rights.

The court further held that section 15(1) must be read down to exclude confidential information protected under the ECHR, requiring a balancing of public interest in disclosure against the protection of confidentiality.

Regarding the use of accessed information, the majority held that such information should be restricted to use for the purposes of the audit, thereby limiting the risk of misuse of confidential information.

As a direct consequence, the first disputed documents, already disclosed, remain accessible but subject to the limitation on use. The second disputed documents, containing highly sensitive financial information, should not be disclosed unless justified by a balancing exercise which the Council has yet to perform or has rejected.

The decision does not set new legal precedent on the use of accessed information beyond the audit, as some members preferred to leave that question open for future private law proceedings. No broader implications were established beyond the application of existing common law, human rights, and EU law principles to the statutory inspection rights under ACA 1998.