There are circumstances where a liquidator may approach the Court concerned that their position in future proceedings may be weakened if the matters they put before the Court in current proceedings are revealed. In an appropriate case the Court will make a non-publication order to prevent prejudice to the proper administration of justice. The recent case of Australian Securities and Investment Commission v Piggott Wood & Baker (a firm)  FCA 18 examined in what circumstances a non-publication order is necessary.
Piggott Wood & Baker (PWB) is a Tasmanian firm of solicitors. It had a failed mortgage scheme resulting in a court order that the mortgage business of PWB be wound up as an unregistered managed investment scheme. Mr Hamilton was appointed as liquidator of the scheme in December 2001 and was conferred with all the powers that a liquidator of a company would have pursuant to section 477 of theCorporations Act 2001 (Cth).
In October 2002 the Law Society of Tasmania obtained orders that PWB was in default, which triggered drawdowns from the Solicitors’ Trust Fund, a fund set aside to protect clients of solicitors from losses. The Solicitors’ Trust Fund made significant payments to return the principal to the majority of investors in the scheme. However, the investors did not recover the interest that had been promised to them. The scale of the investors’ losses proved beyond the capacity of many of the partners of PWB. Many of the partners became bankrupt.
Mr Hamilton commenced proceedings with the object of recovering from the former partners of PWB the principal paid to investors by the Solicitors’ Trust Fund, the principal outstanding to investors and interest. The relevant parties later entered mediation and reached a settlement. Mr Hamilton then sought approval of the settlement from the Court. After consideration of whether the agreement was legally and commercially sound and whether the terms of the agreement were sufficiently clear the Court approved Mr Hamilton entering into the settlement.
Mr Hamilton also sought an order that the affidavit he lodged, to support the settlement being approved, not be published without leave of the Court. The Federal Court has power to make a non-publication order pursuant to section 37AF of theFederal Court of Australia Act 1976 (Cth), and the ground on which an order can be made is that “the order is necessary to prevent prejudice to the proper administration of justice.”
The Court considered that “[t]he administration of justice, including the just and efficient winding up of a company, requires that proper compromises be facilitated rather than obstructed.”  In the circumstances of the current case, the Court did not believe that the publication of the details of the settlement would obstruct a proper compromise.
It was acknowledged that a liquidator may approach the Court concerned about future proceedings being weakened should the nature of the matters they put before the Court in support of a particular step in which the court’s approval must be sought be revealed. However, such a concern was not relevant in this case. Mr Hamilton had already realised all the property that he could sell pursuant to mortgages granted by borrowers and exhausted all avenues of recovery against borrowers, mortgagors and guarantors for capital advanced to borrowers plus interest.
Upon the Court approving the settlement, the Court could not foresee any further litigation other than interlocutory proceedings seeking directions from the Court on how funds should be distributed by Mr Hamilton following settlement. In such circumstances, the Court did not see how disclosing the matters set out in Mr Hamilton’s affidavit could relevantly disadvantage him, in his position as liquidator, or prejudice the proper administration of justice.
Therefore, the Court did not make a non-publication order. The circumstances of the case meant the Court was inclined towards the fullest possible disclosure and transparency rather than secrecy. The factors which influenced this decision that full transparency was necessary were:
- The plight of the investors had been and was still a matter of considerable public interest;
- The management of the mortgage scheme involved a firm of legal practitioners;
- There had been a significant delay between the collapse of the fund and the settlement;
- The compromise did not result in full satisfaction of all investor claims; and
- Having regard to the above, there is some risk that failure to expose the reasons that justify the compromise, and the material upon which the Court relied, could be misunderstood as the legal profession protecting its own. This point was particularly relevant as the 300+ investors had not been given notice of the proceedings due to the difficulty of doing so, and therefore had not been given an opportunity to be heard.
An order was made, however, that the reasons for decision not be published to any persons other than the parties to the proceeding until 12 February 2015. This gave Mr Hamilton 14 days following judgment to initiate any proceedings with respect to confidentiality that he may be advised to pursue.
Whilst the non-publication order was not granted in the case discussed, points raised indicate that where further litigation is anticipated, and matters being brought before the Court could prejudice these, then it is available to liquidators to seek non-publication orders. If such circumstances exist then it may well be necessary for the order to be made so as to prevent prejudice to the winding up of the company.