Public examinations of directors or other persons: When should an order be made that the examination be held in private rather?
/Public examinations provide a means by which a liquidator, administrator or other eligible applicant can examine officers of a corporation and any other person who may be able to provide information about the corporation's 'examinable affairs’. Section 597(4) of the Corporations Act 2001 (“Act”) provides that an examination should be held in public, except where or to the extent that the court considers it desirable, because of 'special circumstances', that it be held in private.
In the recent Supreme Court appeal case of Bazzo v Kirman [2020] WASCA 43, the Court of Appeal in Western Australia examined the operation of this provision of the Act by considering when an examination ought to be held in private and what constitutes special circumstances in that context.
Background
The case concerned an appeal by each of the appellants (Bazzo and Caratti) against the refusal by the Supreme Court at first instance to order that the appellants’ examinations be held in private. Summonses for public examinations had been issued against each of the appellants by the respondents (being the liquidators of GH1 Pty Ltd (In Liquidation) formerly known as Gucce Holdings Pty Ltd and ACN 142 745 337 Pty Ltd (In Liquidation) formerly known as Mammoth Civil Pty Ltd) pursuant to section 596A of the Act.
The examinations were adjourned when the appellants applied for orders that the examinations be held in private (under section 597(4) of the Act). The basis for the appellants’ applications for private examinations concerned a long running joint criminal investigation by the Australian Taxation Office and the Australian Federal Police targeting, it was said, the appellants and companies associated with them. The appellants based their application on the ‘high risk’ that potential jurors in any future criminal trial would be influenced by such reporting, denying them a fair trial unless the examinations were held in private.
Findings
Affirming the reasons set out by the primary judge (his Honour Justice Martin) for reaching the conclusion that it was not desirable by reason of special circumstances for the examination to be held in private[1], the Court upheld the primary Court’s decision and dismissed the appeals.
The Court confirmed that the starting point for the Court’s inquiry is with the patent policy of the Act, being that examinations are generally to be held in public save where the Court considers that, by reason of special circumstances, it is desirable to hold the examination in private. The Court cited with approval the observations of the Supreme Court of Victoria in Friedrich v Herald and Weekly Times Ltd[2] where it was observed that:
the Court retains power to control the examination to avoid injustice to the examinee, including by prohibiting publication about the examination where there is a real or substantial risk that publication will cause an interference with the administration of justice which must cause serious injustice; and
a non-publication order cannot be justified unless it is shown that the particular question and answer will, if published, result in prejudice of a kind which outweighs the need for publicity which the legislature sees as forming an essential element of the purpose of examinations.
The Court considered that such a risk might constitute special circumstances which make a private hearing desirable, however, in deciding whether that is the case in a particular matter, the potential impact on a criminal trial has to be balanced against the intention of the legislative policy that public examinations are generally beneficial to the commercial and general community by being in the public domain.[3]
In determining what constitutes ‘special circumstances’ under section 597(4), the Court found that:
the circumstances must be unusual or out of the ordinary;
it is not sufficient that there is merely something unusual about the circumstances of the case; and
something about the unusual or out of the ordinary circumstances must provide the reason why a private examination is desirable.[4]
The Court, in considering the prospect of publicity impacting on the accusatorial process in any future trial of the appellants, found that:
unlike In re Plutus Payroll Australia Pty Ltd (in liq)[5] where there was a pending prosecution, in the present case there were no pending charges profferred at the time of the hearing of the appeal, and even if charges were to be brought against the appellants in the near future, it would inevitably be a long time before any trial occurred[6];
it is necessary to have regard not merely to the risk of prejudice but also the various ameliorative steps that can be, and in the ordinary course are, taken to address that risk;[7] and
while there is potential for some overlap between the subject matter of the examinations and future criminal charges, it is a matter of speculation as to whether answers might be given and reported in a way that will have any impact on a future criminal trial. It is not desirable to hold the whole of the examinations in private based on such an unparticularised abstract risk.[8]
Ultimately it was held that:
the material before the primary judge fell ‘well short’ of establishing any real or substantial risk that a publication of reports of the appellants’ examinations will interfere with the administration of justice in any future criminal trial; and
even if it was assumed the appellants circumstances were unusual or out of the ordinary or special, they did not provide a reason for concluding that it is desirable that the whole of the examinations be held in private.
Key takeaways
In order to satisfy the Court that an examination ought to be held in private, the circumstances must be such that there is a real or substantial risk that a publication will cause an interference with the administration of justice of a kind which might cause serious injustice to the examinee. The recent decision of Gleeson J in In re Plutus Payroll Australia Pty Ltd[9] provides an example of a case in which a private examination was ordered by the Court. In that case, there was a pending prosecution, the defence to which might be prejudiced by what transpired in the examinations; the examinations were to take place in March 2020, and the criminal trial was listed to commence in October 2020. The Court’s decision in Bazzo v Kirman tells us that the Court will be hesitant to order that public examinations be held in private simply because there is something merely unusual about the circumstances, rather the circumstances must be sufficiently ‘special’ to justify the exercise of the court’s discretion to order the private hearing of an otherwise public examination, and the ‘special’ circumstance(s) must be real and patent and not merely speculative or theoretical. Further it is clear that the strong likelihood of the appellants facing serious criminal charges in the future was not sufficiently ‘special’ to warrant a departure from the norm.
[1] Robert Michael Kirman and William James Harris Joint and Several Liquidators of GH1 Pty Ltd (Receivers and Managers Appointed) (In Liq) v Bazzo [2019] WASC 45 at [74] – [89].
[2] [1990] VCR 995.
[3] At [73]
[4] At [37]
[5] [2020] NSWSC 46
[6] At [76]
[7] At [77]. In particular here the Court was referring to steps which are typically taken in criminal trials to neutralise the risk of jury prejudice, such as jury cautions and directions
[8] At [79]
[9] [2020] NSWSC 46.