The confidentiality of commercially sensitive information can be jeopardised by the operation of s 275 of the PPSA.
If any document contains provisions which constitute a "security interest" for the purposes of the PPSA the party having the benefit of the security interest may need to disclose that document, or information related to it, to certain parties who request a copy of the document or the relevant information under s 275(1) of the PPSA. The secured party does not need to comply with such a request if the parties have agreed to keep the document and information confidential. The confidentiality terms must be agreed not later than the time the document constituting the security interest is entered into (including the confidentiality terms in the document itself will suffice).
Confidentiality clauses usually have a number of carve outs including for disclosures required by law. If the confidentiality clause is intended to curtail the operation of s 275(1) of the PPSA the carve out for disclosures required by law needs to have an exception for s 275(1).
Including a confidentiality clause will not be effective in certain circumstances, including where there has been a default in relation to the security interest (s 275(7)). For this reason, if information in a document is particularly sensitive, you should consider whether any clauses that might constitute a security interest should be in a separate document.
"Security interest" is defined very broadly in the PPSA and it can include arrangements not previously thought of as security. For example, bailment arrangements (e.g. provision of principal supplied items under a construction contract or agreements to transport products) and leasing or hiring of goods could be security interests. Retention of title clauses will definitely be security interests. Various pre-emption and forfeiture of rights provisions could possibly be security interests depending on the precise terms. If a document that has these types of clauses in it, and it also contains commercially sensitive information that the parties would not want disclosed, you should address the potential application of s 275.
This issue can arise under any document that has provisions which constitute a security interest. The relevant provisions can make the entire document a "security agreement" for the purposes of the PPSA. Examples of where this can be an issue include joint venture agreements, construction/EPC contracts, sale or supply contracts, transportation contracts and storage contracts.
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