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X and Local Government Management Agency (FOI Act 2014)

Case Number: 170136

Whether the LGMA was justified in its decision to refuse access to records relating to a report on the value for money of the mutual insurance model, on the ground that the records are exempt under sections 35, 36 and 40(1) of the FOI Act

Conducted in accordance with section 22(2) of the FOI Act by Elizabeth Dolan, Senior Investigator, who is authorised by the Information Commissioner to conduct this review

Background

By email dated 1 December 2016, the applicant made an FOI request for a copy of a report from PwC on the value for money of the mutual insurance model, and related records. By letter dated 26 January 2017, the LGMA purported to consult with Irish Public Bodies Mutual Insurances Limited (IPB Insurance) under section 38 of the FOI Act. IPB Insurance replied by 6 February 2017, to say that it objected to the release of the records. It stated that section 35(1)(b) of the FOI Act (confidentiality) applied, by reason of a non-disclosure agreement.

The LGMA did not issue a decision within the statutory time-frame. By email dated 20 February 2017, it granted access to some records and refused access to the remaining records under section 35(1)(b) of the FOI Act. On 27 February 2017, the applicant applied for an internal review of the decision in respect of the withheld records. The LGMA issued an internal review decision by email dated 21 March 2017, in which it affirmed its original decision. On the same day, the applicant applied to this Office for a review of the LGMA's decision. It seems to me that this is not a request to which section 38 of the FOI Act properly applies.

In conducting my review, I have had regard to the LGMA's decision on the matter; the LGMA's communications with the applicant and with this Office; the applicant's communications with the LGMA and with this Office; the content of the withheld records, provided to this Office by the LGMA for the purposes of this review; and the provisions of the FOI Act. During this review, this Office obtained submissions from IPB and I have had regard to these, as well as IPB's correspondence with the LGMA.

Scope of this Review

The LGMA identified eight records relevant to this request, two of which it released in full. The scope of my review concerns the remaining six records (Records 3-8), three of which were part-granted. I will refer to these as "the records" and adopt the numbering which the LGMA uses in its schedule.

During this review, the LGMA claimed two further exemptions, which the Investigator drew to the attention of the applicant and IPB Insurance. Accordingly, the question for me is whether the LGMA was justified in refusing access to the records under sections 35(1)(b), 36(1)(b) or 40(1)(d) of the FOI Act.

Preliminary Matters

Before considering the exemptions claimed, I wish to make the following points.

First, section 22(12)(b) of the FOI Act provides that when I review a decision to refuse a request, there is a presumption that the refusal is not justified unless the public body "shows to the satisfaction of the Commissioner that the decision was justified". Therefore, in this case, the onus is on the LGMA to satisfy me that its decision is justified.

Secondly, my jurisdiction under section 22 of the FOI Act is to make a new decision, in light of the facts and circumstances as they apply on the date of the review. The Courts have endorsed this approach.

Thirdly, while I am required to give reasons for my decision under section 22(10) of the FOI Act, I am also required to take reasonable precautions to prevent disclosure of information in an exempt record, under section 25. This means that the extent to which I can describe the records at issue is limited.

Finally, I should mention that during the review, the LGMA said that if the Information Commissioner did not uphold its arguments under section 35, it reserved the right to consult with IPB Insurance under section 38 and to furnish further submissions in the context of section 36. The Investigator contacted the LGMA to advise it that consultation under section 38 of the FOI Act applies during the process of dealing with an FOI request and that the relevant time limits are set out in the FOI Act. She informed the LGMA that she had consulted IPB Insurance to obtain its submissions and that the LGMA had this Office's contact details, should it wish to submit anything further. I endorse this position and confirm that the time for consultation under section 38 has now passed. In any event, section 38 applies only to requests to which sections 35(3), 36(3) or 37(5)(a) apply and which would fall to be granted in the public interest subject to the requirements of section 38.

Analysis and Findings

Section 35 - Confidentiality

The background to this case is that the LGMA commissioned PwC to conduct a review on the value for money of the mutual insurance model used by local authorities and education and training boards (the review). It did so on behalf of a steering group which oversaw the review. This group consisted of two representatives of Local Government, one representative of the Education and Training Boards and one representative of the Office of Government Procurement (the steering group).

The LGMA claims section 35(1)(b) of the FOI Act in respect of the records. It considers that the exemption applies on the basis of a non-disclosure agreement entered into between the LGMA, PwC and IPB Insurance in relation to certain information which IPB Insurance provided for the purpose of the review.

Section 35(1)(b) provides:

"(1) Subject to this section, a head shall refuse to grant an FOI request if -

...

(b) disclosure of the information concerned would constitute a breach of a duty of confidence provided for by a provision of an agreement or enactment (other than a provision specified in column (3) in Part 1 or 2of Schedule 3 of an enactment specified in that Schedule) or otherwise by law.

(2) Subsection (1) shall not apply to a record which is prepared by a head or any other person (being a director, or member of the staff of, an FOI body or a service provider) in the course of the performance of his or her functions unless disclosure of the information concerned would constitute a breach of a duty of confidence that is provided for by an agreement or statute or otherwise by law and is owed to a person other than an FOI body or head or a director, or member of the staff of, an FOI body or of such a service provider."

Submissions

LGMA

The LGMA submits that the records are subject to the non-disclosure agreement and accordingly, section 35(1)(b) applies. It says that it is contractually prohibited from granting the FOI request insofar as it relates to confidential information. It says that this information was supplied for the limited purpose of delivering a commercial review of IPB Insurance's offering to the local authority and education and training board sectors. Moreover, the LGMA says that the parties to the non-disclosure agreement are bound by its terms for six years from 8 September 2015.

The LGMA submits that section 35(2) of the FOI Act does not apply in circumstances where it has a contractual duty of confidence to an entity other than one covered by section 35(2). It says that whilst PwC is a service provider to the LGMA in this context, the duty of confidence is owed to IPB Insurance as the disclosing party. It says that whereas IPB Insurance is a service provider insofar as it provides [services to] local authorities and education and training boards, the confidential information was furnished for a specific and limited purpose and does not relate to the services otherwise provided by IPB Insurance or PwC in the ordinary or normal course of the services they provide under a contract for services. The LGMA refers to a High Court case which states that section 35(2) is aimed at limiting the use of the confidentiality exemption when the records are internal records of the FOI body (HSE v Information Commissioner [2008] IEHC 298). It says that the records at issue are not internal, but comprise confidential information provided under the terms of the non-disclosure agreement. The LGMA adds that it released any information which was not captured by the non-disclosure agreement to the applicant.

IPB Insurance

IPB Insurance submits that it is a private company established under the Companies Acts and its function as an insurer is such that it is neither an FOI body nor a service provider. It says that it supports the sentiments of the LGMA's submissions, which correspond with the provisions of the non-disclosure agreement applicable to its confidential and sensitive information. In its reply to the LGMA of 6 February 2017, it states that all the information which it provided to facilitate the review was conducted within the provisions of the non-disclosure agreement and therefore section 35(1)(b) applies.

Applicant

The applicant submits that the objectives of FOI could be completely frustrated by getting everyone to enter a non-disclosure agreement prior to the commissioning of any report that could not otherwise avail of valid exceptions to disclosure permitted in the FOI Act.

Analysis & Finding

As section 35(1) does not apply where the records fall within the terms of section 35(2), I should consider section 35(2) at the outset. I note the LGMA's reference to the High Court case HSE v Information Commissioner. However, the words "internal record" must be viewed in the context of the relevant statutory provision, which expressly refers to records prepared by FOI bodies or service providers.

Whether the records were prepared by an FOI body or service provider in the course of the performance of its functions

The first question is whether the records were prepared by an FOI body or service provider in the course of the performance of its functions. Section 2 of the FOI Act defines "service provider" as "a person who, at the time the request was made, was not an FOI body but was providing a service for an FOI body under a contract for services and contract for services in this definition includes an administrative arrangement between an FOI body and another person".

Records 3, 6 and 7 were prepared by PwC. They were refused in full. Records 4, 5 and 8 were prepared by the steering group. They were refused in part.

The LGMA says that Records 4, 5 and 8 were prepared by the steering group and created for the limited purpose in the non-disclosure agreement. Having regard to the composition of the steering group and the fact that these records comprise minutes of meetings of, and a report by, that steering group, I am satisfied that Records 4, 5 and 8 were prepared by FOI bodies in the performance of their functions.

It is then necessary to consider whether Records 3, 6 and 7 were prepared by a "service provider" in the performance of its functions. The LGMA says that 3, 6 and 7 were prepared by PwC on foot of the limited permitted purpose in the non-disclosure agreement. It says that whereas PwC is a service provider in this context, the duty of confidence is owed to IPB as the disclosing party under the non-disclosure agreement. However, the question at this point is whether these records were prepared by PwC as a service provider in the performance of its functions; not who the duty of confidence is owed to under the non-disclosure agreement. PwC was commissioned to provide a specific service to an FOI body: to conduct a review and prepare a report on foot of that review. Records 3, 6 and 7 comprise the reports which it prepared on foot of its review. I am therefore satisfied that Records 3, 6 and 7 were prepared by a "service provider" in the performance of its functions.

I therefore consider that Records 3, 6 and 7 were prepared by a service provider (PwC) and Records 4, 5 and 8 were prepared by an FOI body in the performance of their respective functions.

Whether disclosing the records would constitute a breach of a duty of confidence owed to a person other than an FOI body/service provider etc. under an agreement or statute or otherwise by law

The second question is whether disclosing the records would constitute a breach of a duty of confidence owed to a person other than an FOI body/service provider etc. under an agreement or statute or otherwise by law. The parties to the non-disclosure agreement are the LGMA, IPB Insurance and PwC. The LGMA is an FOI body and I have already found PwC to be a service provider. The LGMA submits that the duty of confidence concerned is owed to IPB Insurance. I must therefore consider the status of IPB Insurance.

The LGMA accepts that IPB Insurance is a service provider insofar as it provides services to the local authorities and education and training boards (who are FOI bodies). However, it says that the information which IPB provided in this context was furnished for a specific and limited purpose and does not relate to the services it otherwise provides under a contract for services. Yet according to the steering group's own terms of reference, it was agreed to conduct a value for money assessment of the insurance services provided by IPB Insurance to its members. As seen above, the records under review were prepared by the steering group or PwC and their subject matter is the value for money review. In those circumstances, I do not see how the records can reasonably be said not to relate to the services which IPB Insurance provides. Although IPB Insurance submits that it is not a service provider under the FOI Act, it does not substantiate this assertion beyond saying that it is a private company and an insurer.

IPB Insurance provides insurance services to the local authorities and education and training boards. In the circumstances, I believe that IPB Insurance is a service provider under the FOI Act. It follows that in my view, the LGMA has not identified an entity other than an FOI body or service provider to whom a duty of confidence is owed under the non-disclosure agreement. I therefore do not see how disclosing the records would constitute a breach of a duty of confidence provided for which is owed to a person other than an FOI body or a service provider.

I find that section 35(2) disapplies section 35(1) and that the LGMA is not justified in refusing access to the records under section 35(1) of the FOI Act.

Section 36(1) - Commercial Sensitivity

The LGMA did not claim section 36(1) when dealing with the applicant's FOI request, but claimed it during this review. My jurisdiction is to make a new decision in light of the present circumstances. I therefore believe that it is appropriate for me to consider whether section 36 applies in the circumstances.
Section 36(1) provides, insofar as is relevant:
"Subject to subsection (2), a head shall refuse to grant an FOI request if the record concerned contains -
... (b) financial, commercial, scientific or technical or other information whose disclosure could reasonably be expected to result in a material financial loss or gain to the person to whom the information relates, or could prejudice the competitive position of that person in the conduct of his or her profession or business or otherwise in his or her occupation,".
However, section 36(1) does not apply if the public interest would, on balance, be better served by granting rather than refusing the request (section 36(3) refers).

Submissions

LGMA

The LGMA says that the records include significant and detailed analysis of IPB Insurance's financial and commercial information which would not otherwise be available to potential competitors and whose disclosure could reasonably be expected to result in a material financial loss or could prejudice the competitive position of IPB Insurance. It says that the records contain information related to profitability, capital adequacy, claims reserves, value added services etc. It says that disclosing this information could create an unfair advantage to potential competitors of IPB Insurance. In relation to the public interest, it submits that disclosing the records would undermine the LGMA's ability to obtain such information and conduct such reviews in the future, if parties could not rely on confidentiality agreements. It says that it is in the public interest that the LGMA can conduct commercial reviews.

During the review, the Investigator informed both the applicant and IPB Insurance that the LGMA had raised sections 36 and 40 and invited their submissions. The Investigator referred both parties to the decisions and guidance notes concerning the exemptions available on this Office's website.

IPB Insurance

IPB Insurance says that it has "received a copy of the LGMA's most recent submissions in this matter, the sentiments of which are supported and correspond with the provisions of the non-disclosure agreement applicable to the confidential and sensitive information of IPB Insurance". It states in its correspondence with the LGMA of 6 February 2017 that the information is commercially sensitive. Despite having been given the opportunity to make submissions in light of the LGMA's submissions on sections 36 and 40, it does not make its own submissions on the applicability of section 36.

Applicant

The applicant submits that the LGMA's response might imply that there are some "trade secrets" being sought that would not otherwise be in the public domain. She says that this is simply not accurate. She says that information such as insurers' premium income, claims costs, expense ratios and commission payments can be found in Central Bank insurer returns and more detailed information can be found in certain forms which are filed with annual financial statements. The applicant points this Office to Central Bank insurance statistics and IPB Insurance's annual reports in support of her submissions.

Analysis & Finding

Section 36(1)(b)

The essence of the test in section 36(1)(b) is not the nature of the information but the nature of the harm which might be occasioned by its release. The harm test in the first part of subsection (1)(b) is that disclosure of the information could reasonably be expected to result in material financial loss or gain. I take the view that the test to be applied in this regard is whether the decision-maker's expectation is reasonable. The harm test in the second part of subsection (1)(b) is whether disclosure of the information "could prejudice the competitive position" of the person concerned. The standard of proof necessary to meet this test is considerably lower than the standard to meet the test of "could reasonably be expected to" in the first part of subsection 36(1)(b).

I note that the LGMA refers to IPB Insurance's "potential" competitors. IPB Insurance primarily provides insurance services to a specific market, i.e. its members. However, I understand from its publications that it also provides insurance services to non-members. Furthermore, one of the tasks for the review was to consider the option of seeking insurance cover in the open market. I am therefore willing to accept that IPB Insurance has potential competitors.

The applicant contests the suggestion that the information concerned would not otherwise be available to IPB Insurance's competitors. I note that according to its own terms of reference, certain parts of the review's reports are based on information which is publicly available. I also see that certain financial information of the kind contained in the records is available in IPB Insurance's own annual report (2016) and solvency and financial condition report (2016), which are accessible online. In invoking section 36 in respect of all the withheld records, the LGMA did not distinguish between those parts of the records which contain factual information on insurance and publicly available information about IPB Insurance, and those parts of the records which do not.

Notwithstanding the above, having reviewed the records, I believe that the level of detail about IPB Insurance which they contain is over and above the material which one could find publicly. I am prepared to accept that it would be possible for potential competitors to use this information to their advantage, thereby prejudicing IPB Insurance's competitive position. I am therefore willing to proceed on the basis that section 36(1)(b) applies to the records. This finding is subject to sections 36(2) and (3), which I consider below.

Section 36(2)

Section 36(2) provides for the release of information to which section 36(1) is found to apply in certain circumstances. I am satisfied that none of the circumstances identified at section 36(2) arises in this case.

Section 36(3)

Section 36(3) of the FOI Act requires me to consider whether, on balance, the public interest would be better served by granting than by refusing the request.

Section 36(1) itself reflects the public interest in protecting commercially sensitive information. I recognise that there is a legitimate public interest in entities being able to conduct commercial transactions with public bodies without fear of suffering commercially as a result.

On the other hand, the FOI Act recognises, both in its long title and in its individual provisions that there is a significant public interest in government being open and accountable. Section 11(3) of the FOI Act provides that public bodies shall, in performing any function under the FOI Act, have regard to a number of matters, including the need to achieve greater openness in their activities and to promote adherence by them to the principles of transparency in government and public affairs.

I take the approach that in attempting to strike the balance between openness on the one hand and the need to protect commercially sensitive information on the other, it is legitimate to consider two things: the positive public interest which is served by disclosure; and the harm that might be caused by disclosure.

In relation to the positive public interest which would be served by disclosure, where records relate to the expenditure of public money, as in this case, I take the view that there is a strong public interest in openness and accountability. I consider this to be a significant aid in ensuring the effective oversight of public expenditure and that the public obtains value for money, and in preventing fraud and corruption and the waste or misuse of public funds.

In relation to the harm which might be caused by disclosure, first, I have already identified the potential prejudice to IPB Insurance. Secondly, the LGMA submits that it would undermine its ability to conduct value for money reviews if parties could not rely on confidentiality agreements to protect commercially sensitive information.

In deciding where the public interest lies in respect of the information concerned, I would make the following observations. First, I consider that there is a strong public interest in transparency and accountability around the value for money obtained by FOI bodies. The subject matter of the records is precisely that: the value for money which certain FOI bodies obtain in their choice of insurance model. Secondly, I agree that it is in the public interest that FOI bodies can undertake value for money assessments. However, I do not accept that transparency and openness around such assessments would necessarily undermine such assessments. FOI legislation has been in force for two decades and section 36(3) clearly permits the release of commercially sensitive information where, on balance, the public interest would be better served by this. Parties which engage with FOI bodies must be aware of this. Thirdly, I consider the following factors relevant to assessing the weight of the potential harm to IPB Insurance's competitive position. IPB Insurance is something of a unique operator in the Irish insurance market, whose market predominantly consists of its members. Moreover, much financial information about it is already publicly available. Finally and as noted above, IPB Insurance did not make specific submissions on section 36. I fully acknowledge that the burden of proof in this case lies with the LGMA and not IPB Insurance. Nonetheless, I believe that I am entitled to have regard to the fact that the entity whose commercial interests are concerned did not make its own submissions on commercial sensitivity.

Having regard to the above, on balance, I find that the public interest would be better served by granting access to the records. I find that the LGMA is not justified in refusing access to the records under section 36 of the FOI Act.

Section 40 - Financial and Economic Interests of the State

The LGMA did not claim section 40(1)(d) of the FOI Act when dealing with the applicant's FOI request, but claimed it during this review. My jurisdiction is to make a new decision in light of the present circumstances. I therefore believe that it is appropriate for me to consider whether section 40(1)(d) applies in the circumstances. It provides:

"(1) A head may refuse to grant an FOI request in relation to a record (and, in particular, but without prejudice to the generality otherwise of this subsection, to a record to which subsection (2) applies) if, in the opinion of the head -

...

access to the record could reasonably be expected to result in an unwarranted benefit or loss to a person or class of persons.".

Where an FOI body relies on section 40(1), it should identify the potential harm specified in the relevant paragraph that might arise from disclosure and then consider the reasonableness of any expectation that the harm will occur. The FOI body should show the link between granting access to the record concerned and the harm identified. It must go on to consider the public interest test under section 40(3) before reaching a conclusion on the application of the exemption.

The LGMA submits that disclosing the confidential information "could result in an unwarranted benefit to IPB Insurance's potential competitors for the reasons outlined above in the submissions on commercially sensitive information". In relation to the public interest, it repeats its submissions on section 36(3). IPB Insurance made no specific submissions on section 40. The applicant submits that the LGMA has not addressed the requirement for the alleged effect to be "unwarranted".

The fact that the LGMA refers to its submissions on section 36 indicates that its claim of section 40 is in essence the same as that under section 36(1)(b). Yet section 40(1)(d) is a separate exemption, which requires the LGMA to demonstrate that an "unwarranted benefit or loss" could reasonably be expected to occur. The LGMA does not do this in its submissions on section 40. Having regard to section 22(12)(b), I am not satisfied that its application of section 40(1)(d) to the records is justified.

I find that the LGMA is not justified in refusing access to the records under section 40(1) of the FOI Act. In view of this finding, I am not required to consider section 40(3) of the FOI Act.

Decision

Having carried out a review under section 22(2) of the FOI Act, I find that the LGMA is not justified in withholding access to the records under sections 35, 36 or 40 of the FOI Act. I annul its decision and direct the release of the withheld records.


Right of Appeal

Section 24 of the FOI Act sets out detailed provisions for an appeal to the High Court by a party to a review, or any other person affected by the decision. In summary, such an appeal, normally on a point of law, must be initiated not later than four weeks after notice of the decision was given to the person bringing the appeal.

 



Elizabeth Dolan
Senior Investigator