Federal Court of Australia

Australian Securities and Investments Commission v Atkins, in the matter of Magnolia Capital Pty Ltd (in liquidation) [2023] FCA 714

ORDERS

THE COURT ORDERS THAT:

1.    Subject to order 2 made on 26 June 2023, Sarah Danckert of The Age newspaper be granted access under r 2.32(4) of the Federal Court Rules 2011 (Cth) to the following documents filed in the proceeding:

(a)    An unredacted copy of the plaintiff’s submissions Part B lodged on 19 June 2023;

(b)    Annexures MJP-3 (pp 32-256) and MJP-14 (pp 335-376) to the affidavit of Mark John Pangbourne sworn on 18 June 2023 and lodged on 19 June 2023.

2.    The defendant’s interlocutory application from the Bar for the suppression and/or non-publication of the material referred to in order 1 be dismissed.

3.    Order 1 above be stayed for a period of seven days.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

STEWART J:

1    On 19 June 2023, I made orders following an ex parte hearing restraining the defendant, Mitchell Alexander Gray Atkins, from leaving Australia without the consent of the Court and compelling him to deliver up his passport and other travel documents to the Court’s Registry. As will be seen, an issue has now arisen as to a third party’s access to documents on the electronic court file.

2    At all relevant times, Mr Atkins controlled and operated the Magnolia Group of companies in Australia. Mr Atkins is an Australian citizen.

3    The Magnolia Group carried on a financial services business which included a borrowing and lending business and an investment management business. The Group consisted of about 80 individual companies. Mr Atkins served as the sole director of most of the companies. Some of them were special purpose vehicles in relation to an investment scheme operated by Mr Atkins through the Group.

4    The Magnolia Group has now collapsed. Many of the companies are in liquidation. Further, Mr Atkins filed a debtor’s petition and is now an undischarged bankrupt.

5    ASIC has tentatively estimated a shortfall to investors in the investment scheme (ie, leaving aside other creditors) of more than $40 million as a result of the failure of certain companies within the Group. Total losses to all creditors could amount to as much as $50 million.

6    ASIC commenced an investigation into Mr Atkins and companies in the Group under s 13 of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). ASIC has examined Mr Atkins once under s 19 of the ASIC Act. It expects to require him for further examination. ASIC is concerned that if Mr Atkins is permitted to leave Australia, he will not return, leaving “aggrieved persons” without remedy.

7    The injunctions against Mr Atkins were made under ss 1323(1)(j) and (k) of the Corporations Act 2001 (Cth) because there is an investigation being carried out under the ASIC Act in relation to an act or omission by Mr Atkins that may constitute a contravention of the Corporations Act (s 1323(1)(a)), and/or a civil proceeding has been commenced against Mr Atkins under the Corporations Act (s 1323(1)(c)), and I considered it necessary and desirable. That was for the purpose of protecting the interests of aggrieved persons to whom Mr Atkins may be liable for damages or compensation arising from the failed investment scheme.

8    Following the ex parte hearing, the following documents were relevantly reflected as having been filed on the electronic court file:

(1)    The originating process;

(2)    An affidavit of Mark John Pangbourne lodged on 19 June 2023 (and annexures to that affidavit);

(3)    An outline of submissions lodged on 19 June 2023 (being Part A dealing with the relevant principles);

(4)    An outline of submissions lodged on 19 June 2023 (being Part B dealing with facts and submissions);

(5)    A second affidavit of Mark John Pangbourne lodged on 19 June 2023 (and annexures to that affidavit).

The request for access

9    On 22 June 2023, Sarah Danckert, a journalist at The Age newspaper, made a request using the Court’s relevant form for access to the documents listed in the previous paragraph. Ms Danckert explained her reason for seeking access as being “To prepare a fair and accurate report on proceedings and also the Judge’s decision to grant temporary travel orders following the June 19 hearing.” That is a legitimate and laudable reason.

10    The originating process is an unrestricted document (r 2.32(2)(a) of the Federal Court Rules 2011 (Cth)), and since the first hearing of the matter had already occurred the access request to the originating process was granted without controversy.

11    The last mentioned document listed above, ie, the second affidavit of Mr Pangbourne, was not read at the ex parte hearing. There was therefore no basis on which access might have been granted to that document. That much is not in dispute.

12    The first affidavit of Mr Pangbourne (including the lengthy annexures) and the two outlines of submissions are documents referred to in r 2.32(4), ie, documents that a person (not being a party to the proceeding) is not entitled to inspect but in respect of which they may apply to the Court for leave to inspect. Recognising that there might be some contest as to whether access should be granted to those documents, I caused the parties to be asked for their positions on the access request. ASIC indicated no opposition to the granting of access, but Mr Atkins by his solicitors opposed access being granted. I then listed the question of access for hearing on the next court day which was in any event the return day for the ex parte orders. I invited Ms Danckert to appear and make submissions. Legal counsel for The Age, Mr White, appeared for Ms Danckert and The Age. I granted Mr White leave to appear to the extent that that was required.

The dispute

13    On the hearing of the request for access to the documents, Mr Atkins, by his counsel Mr Krochmalik, opposed access being granted to the following:

(1)    Annexure MJP-3 to Mr Pangbourne’s first affidavit, being the transcript of a private examination of Mr Atkins pursuant to s 19 of the ASIC Act conducted on 25 October 2022 (125 pages);

(2)    Annexure MJP-14 to Mr Pangbourne’s first affidavit, being reports by the liquidators of Magnolia Credit Pty Ltd and Magnolia Capital Pty Ltd (two of the Magnolia Group companies) under s 533 of the Corporations Act lodged on 22 February 2023 and 17 February 2023 respectively (ie, two reports, each of 21 pages);

(3)    From within annexure MJP-17 of the first affidavit of Mr Pangbourne, a file note of Lucy Hughes dated 31 May 2023 recording details of a conversation with Mr Atkins (pages 393-395 of the affidavit); and

(4)    A few sentences of the Part B outline of submissions which contain facts drawn from the transcript and liquidators’ reports referred to above (ie, paragraph [76] and the first sentence of each of paragraphs [85] and [86]).

14    Mr Krochmalik also applied for suppression or non-publication orders under s 37AF of the Federal Court of Australia Act 1976 (Cth) (FCA Act) on the ground identified in s 37AG(1)(a), ie, that it is necessary to prevent prejudice to the proper administration of justice, consistent with the opposition to access. Mr Krochmalik made it clear that Mr Atkins did not advance any case based on disclosure of the contested matters causing him any prejudice, embarrassment or related-type difficulty. His opposition to access to, and his application for suppression or non-publication of, documents (1), (2), and (4) above is based on the submission that the identified matters enjoy the protection of confidentiality under the ASIC Act and for that reason should continue to be protected notwithstanding that they were relied on in open court on the ex parte hearing. With respect to the file note (3) above, the submission is that it contains personal details about Mr Atkins’s life and family that should enjoy protection and in respect of which there is no public interest in disclosure.

15    After hearing submissions I granted access to those parts of the documents to which access was sought which was not opposed and to the file note (3) above. However, I made suppression orders over email addresses, phone numbers, residential addresses and any bank account details on the basis that public dissemination of those matters could cause significant prejudice to innocent individuals and there is no public interest in those matters being publicly available. Consequently, public dissemination of that information would cause prejudice to the proper administration of justice. I reserved judgment on the question of access to the other disputed documents (ie, (1), (2) and (4)).

Consideration

16    The Court’s general approach to access to documents on the court file is set out in the Access to Documents and Transcripts Practice Note (GPN-ACCS) dated 10 February 2023. The Practice Note recognises the following (drawing on [2.1]-[2.3]).

17    The principle of “open justice”, including justice being seen to be done and ensuring that nothing is done to discourage the making of fair and accurate reports of proceedings, is an overarching principle which guides the Court in its judicial and procedural operations. This principle, which extends to questions of access to Court documents, is reflected in s 17 of the FCA Act and in the provisions of the Rules referred to above.

18    However, the Court recognises that the principle of open justice is not absolute, and must be balanced with the need of the Court to act at all times in the “interests of justice” and avoid prejudice to the proper administration of justice or other potential harm.

19    “Interests of justice” is a broad concept that gives rise to many matters that the Court must consider when assessing a request for access, including the interests of all parties (eg, questions of confidentiality and privacy), the community, the application of any Commonwealth law, and any reasonably necessary requirements to ensure the just and fair administration of justice. Further, the Court must consider whether a request may be unreasonably burdensome on the administration of justice.

20    In considering a request for access, the Court will consider a range of factors, including, but not limited to:

(1)    whether the applicant for access is a party or non-party;

(2)    whether the documents fall initially within a restricted or unrestricted category;

(3)    the context surrounding, and purpose underpinning, the request;

(4)    the nature of the documents sought (eg, whether the documents have been admitted into evidence or read out in open court, whether the documents are confidential, restricted from publication, the subject of legal privilege, contain scandalous material, etc); and

(5)    the principles identified above, including whether the request may result in an undue burden on the Court (or, I would add, any particular party).

(See [4.27] of the Practice Note.)

21    It is convenient to deal first with the file note. As I mentioned, I granted access to it. These are my reasons.

22    As a bankrupt, Mr Atkins required the consent of his trustee to leave the country. The file note records a conversation between (I infer) an employee of his trustee and him in which he explained why he wished to travel overseas. It also deals with various other matters but Mr Krochmalik drew particular attention to the reasons given for his travel. Those concern the ill-health of a member of his wife’s family. That person lives abroad. Mr Atkins wished to travel with his wife to visit the person.

23    Leaving aside other reasons, the principal difficulty with the opposition to granting access to the file note is that those matters were in any event recorded in Mr Pangbourne’s affidavit to which no objection was taken. There was therefore nothing in the file note to which objection was taken to protect. In any event, Mr Atkins’s reason for wanting to travel was a relevant matter in considering whether to grant the injunctions and is therefore a matter well within the sphere of protection given by the open justice principle.

24    Turning now to the other documents, Mr Krochmalik puts the argument – as I understand it – on the basis that the ASIC Act protects the confidentiality of the information in question and that it is necessary to prevent prejudice to the administration of justice to maintain that confidentiality regime by denying access and/or making suppression orders.

25    Mr Krochmalik refers to a number of provisions of the ASIC Act. Section 19 provides that where ASIC, on reasonable grounds, suspects or believes that a person can give information relevant to a matter that it is investigating, it may by written notice require the person to appear for examination on oath and to answer questions. Section 22 provides that such examinations must take place in private. Section 127 includes the following provisions:

(1)    ASIC must take all reasonable measures to protect from unauthorised use or disclosure information given to it in confidence in or in connection with the performance of its functions or the exercise of its powers (sub-s (1)).

(2)    The disclosure of information as required or permitted by a law of the Commonwealth or a prescribed law of a State or Territory is taken to be authorised use and disclosure of the information (sub-s (2)).

26    As mentioned, the reports of the liquidators that are at issue are reports under s 533 of the Corporations Act. Such reports are referred to in s 1274(2)(a)(iv) of the Corporations Act as being documents lodged with ASIC which may not be inspected by “a person”. On that basis, Mr Krochmalik submits that they enjoy the protection of confidence in much the same way as the s 19 examination transcript. 

27    Mr Krochmalik accepts that ASIC was authorised to disclose the examination transcript and the s 533 reports (and the information in them) to the Court in the way in which it did, but submits that it was incumbent on ASIC to seek from the Court suppression or non-publication orders in order to maintain the confidentiality reposed in those documents by the statutory provisions referred to. In the absence of ASIC having done so, Mr Atkins applies for such orders in order, so he submits, to maintain the statutory scheme of confidence.

28    Mr Krochmalik refers to a number of cases which emphasise, in particular, the confidential nature of ASIC examination transcripts. However, none of those cases deal with a case such as the present where the transcripts (and the s 533 reports) have been disclosed and relied on in evidence in open court. None of the cases to which he refers deal with the question of access to such documents where the open justice principle operates. He refers to: Johns v Australian Securities Commission [1993] HCA 56; 178 CLR 408; Maronis Holdings Ltd v Nippon Credit Australia Ltd [2000] NSWSC 138; 18 ACLC 609; Shipley v Masu Financial Management Pty Ltd [2008] NSWSC 1187; 68 ACSR 412; and Mercedes Holdings Pty Ltd v Walters (No 7) [2013] FCA 138.

29    The ASIC Act plainly envisages that documents such as those in question might be tendered in open court. For example, s 76 of the ASIC Act provides that a statement that a person makes at an examination of the person is admissible in evidence against the person in a proceeding, save for certain exclusions not presently relevant. The prohibition in the ASIC Act against disclosure of certain documents contemplates a distinction between authorised and unauthorised disclosure and does no more than require ASIC to use reasonable endeavours to protect against unauthorised disclosure: Re Trio Capital Ltd [2010] NSWSC 454; 239 FLR 99 at [48] per Ward J.

30    As it was accepted that the production of the relevant material in evidence was authorised, the statutory confidentiality regime has little to say about the point in issue; it does not prevent or prohibit their public disclosure once they are used in evidence with relevant authority. Even if one accepts that there is a public interest in the maintenance of the confidentiality of the documents, as expressed in the relevant statutory regime, after they are adduced in evidence, that does not outweigh the importance of open justice in this context.

31    The particular considerations in this case are the following.

32    First, the orders that were made against the defendant are draconian and exceptional. They severely infringe on the defendant’s ordinary liberty to travel. They were not lightly made, nor could they have been. That also means that there is a significant public interest in the Court being open to public scrutiny of what it did. Were the orders justified? Is this what courts should be doing? Was ASIC justified in seeking such orders? Should the legislation even empower a court to make such orders? Those are all important questions that can only properly be answered if there is full access to what was before the Court.

33    Secondly, the defendant’s conduct has, on ASIC’s case, left scores of people without their investments. They have a keen interest in being able to follow what is going on in ASIC’s efforts to protect them.

34    Thirdly, there is the defendant’s interest in having his personal affairs kept private. That is an important interest. However, as mentioned, he does not say that disclosure of the information will prejudice him. Moreover, the affairs in question are not really private affairs. They are affairs that affect many other people and in which there is a great public interest in openness and disclosure.

35    In the circumstances, I am not satisfied that there is any necessity to deny access to the documents, or to make non-publication orders, in order to prevent prejudice to the proper administration of justice. I therefore grant the access request and dismiss the defendant’s application for non-publication orders.

36    The defendant has requested that the orders for access be stayed for seven days to give him the opportunity to consider any appeal options. I will make such an order to preserve any rights of appeal, particularly as there does not appear to be any great urgency attached to the request for access.

Associate:

Dated:    28 June 2023