The duty not to disclose information is specifically covered by the Crown Entities Act 2004 and so applies to board members of Crown entities in our ‘family of boards’. It has been the subject of recent judicial scrutiny by the Court of Appeal. We have included this duty as a separate topic because of the recent importance and focus given to it by the courts.
Crown Entities Act 2004 provisions
Section 57 of the Act addresses the situation when Crown entity board members have, in their capacity as a member, information that would not otherwise be available to them. The Act provides that the Crown entity board member should not disclose, make use of or act on that information.
The first set of exceptions is when disclosure, making use of or acting on the information is:
- in the performance of the entity’s functions; or
- as required or permitted by law; or
- in accordance with subsection (2); or
- in complying with the requirements for members to disclose interests.
The second set (“subsection 2’’) applies, if:
- the member is first authorised to do so by the board; and
- the disclosure, use, or act in question will not or be unlikely to, prejudice the entity.
The Court of Appeal Approach
The Court of Appeal looked carefully at the issue of the duty not to disclose information in a case involving the tender of certain pathological services in Auckland. The unsuccessful tenderer, who had held the contact for many years, brought an action in the High Court.
They claimed that a medical practitioner and Auckland DHB member who was a party to the successful tender had breached his duty. They argued that the successful tender had, through the board member, gained an advantage with his knowledge of the wish for open book accounting, the perception that they, the previous provider had profits that were too high and the knowledge of the board member of how much savings the District Health Boards wished to make.
The board member had declared his interests and had withdrawn from being involved in the DHB’S decisions. The High Court largely agreed with the aggrieved former provider and their decision meant that Crown entity board members could quite easily be in possible breach of the duty. The Court of Appeal narrowed the scope of the duty and upheld the appeal by the Board member (and others).
What Crown entity board members need to consider
Even though the scope of the duty has been narrowed by the Court of Appeal from what the High Court had determined, it is still important for board members to be well aware of the duty. They must not take advantage of any information (unless it is exempted) they hold as board members and that is not available to others.
Updated on 7th October 2019