FEDERAL COURT OF AUSTRALIA Young v Thomson (Trustee), in the matter of Young (Bankrupt) (No 3) [2017] FCA 50 File number: NSD 1738 of 2016 Judge: FARRELL J Date of judgment: 1 February 2017 Catchwords: PRACTICE AND PROCEDURE – application for non-publication of the reasons for judgment dismissing an application under ss 178 and 179 of the Bankruptcy Act 1966 (Cth) to set aside a litigation funding agreement entered into by the trustee in bankruptcy or alternatively, for an inquiry into the conduct of the trustee – where trustee involved in a number of pieces of ongoing litigation – whether order necessary to prevent prejudice to the proper administration of justice – appropriate duration of non-publication order – consideration of Pt VAA of the Federal Court of Australia Act 1976 (Cth) Legislation: Bankruptcy Act 1966 (Cth) ss 178, 179 Federal Court of Australia Act 1976 (Cth) Pt VAA Cases cited: Young v Thomson (Trustee), in the matter of Young (Bankrupt) (No 2) [2017] FCA 8 Date of hearing: Heard on the papers Date of last submissions: 30 January 2017 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 8 Counsel for the Applicant: Mr J Sheller Solicitor for the Applicant: Greg Walsh & Co Solicitors Counsel for the First Respondent: Mr D Eardley Solicitor for the First Respondent: Mercantile Legal Counsel for the Second Respondent: Mr S Golledge Solicitor for the Second Respondent: William James Lawyers ORDERS NSD 1738 of 2016 IN THE MATTER OF LESLIE JAMES YOUNG, A BANKRUPT BETWEEN: JOANNE YOUNG Applicant AND: LOUISE THOMSON AS THE FORMER TRUSTEE OF THE PROPERTY OF LESLIE JAMES YOUNG, A BANKRUPT First Respondent IRONBARK FUNDING RED PTY LTD ACN 606 518 656 Second Respondent JUDGE: FARRELL J DATE OF ORDER: 31 JANUARY 2017 THE COURT NOTES THAT: The substantive proceedings were dismissed by order made on 19 December 2016. The reasons for that decision are set out in Young v Thomson (Trustee), in the matter of Young (Bankrupt) (No 2) [2017] FCA 8. THE COURT ORDERS THAT: 1. Publication of the reasons for judgment in Young v Thomson (Trustee), in the matter of Young (Bankrupt) (No 2) [2017] FCA 8 be restricted to the Official Trustee in Bankruptcy, the parties and their legal advisors pursuant to Div 2 of Part VAA of the Federal Court of Australia Act 1976 (Cth), in order to prevent prejudice to the proper administration of justice. This order is made as a non-publication order as defined in s 37AA of that Act. 2. Order 1 has effect until 5.00 pm on Monday, 1 May 2017 (Sydney time) or until further order. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT 1 On 19 December 2016, I dismissed Ms Young's application filed on 19 October 2016 for orders pursuant to ss 178 and 179 of the Bankruptcy Act 1966 (Cth). In her application, Ms Young sought an order setting aside a litigation funding agreement entered into by Ms Thomson as trustee on 30 September 2016 with the second respondent, Ironbark, or alternatively, an inquiry pursuant to s 179 of the Bankruptcy Act into Ms Thomson's conduct, with one or more orders, including setting aside the funding agreement and removing Ms Thomson from office. On 17 January 2017, I delivered my reasons for dismissing the application: Young v Thomson (Trustee), in the matter of Young (Bankrupt) (No 2) [2017] FCA 8. At that time, I was advised that Ms Thomson was no longer the trustee of Mr Young's bankrupt estate and had been replaced by the Official Trustee. 2 Given the reasons dealt with matters potentially relevant to ongoing litigation to which Ms Thomson was a party, when I delivered my reasons, I made orders restricting publication of the reasons to the Official Trustee, the parties and their legal advisors pursuant to Div 2 of Part VAA of the Federal Court of Australia Act 1976 (Cth) (FCA Act) until 23 January 2017 or until further order to prevent prejudice to the proper administration of justice. The order was made as a non-publication order as defined in s 37AA of the FCA Act. I invited the parties to make submissions as to any further orders I should make in relation to the non-publication of those reasons. Ms Thomson and Ms Young have each submitted that non-publication orders should be made in relation to the entire judgment. As for the duration of the non-publication order, Ms Thomson suggests a period of 12 months or until further order; Ms Young says the period should be until further order. Ironbark adopted Ms Thomson's submissions. 3 Part VAA of the FCA Act permits the Court to make non-publication orders in limited circumstances. The ground relevant to this application is whether the order is necessary to prevent prejudice to the proper administration of justice: see s 37AG(1)(a). It is not enough that the order be merely desirable. 4 I am satisfied that making a further non-publication order is necessary to prevent prejudice to the proper administration of justice. To establish whether it was just and equitable to set aside the funding agreement or to authorise an inquiry into the trustee's conduct, it was necessary for the evidence and submissions made by the parties to canvass in some detail whether the funding agreement was on commercial terms and the circumstances of the litigation to be funded, including the trustee's opinion on those issues and the funder's perception of the risks involved in the various pieces of litigation. The judgment reflects that evidence and those submissions in some detail. That information is commercially sensitive and its disclosure at this time may be of tactical advantage to the opposing parties in the litigation. Its disclosure at this time may also impair the trustee's capacity to conduct the litigation (both as plaintiff and defendant) or impact the terms on which it might be settled for the benefit of the bankrupt estate. 5 Creditors of a bankrupt estate will generally not know the detail of the issues in funded litigation at the outset of an application under ss 178 or 179. The "warts and all" only become clear in the conduct of the application so they cannot know the extent of any prejudice to which they might expose the bankrupt estate by instigating their claims in relation to the trustee's conduct. I accept that it would have a chilling effect on the willingness of those affected by a trustee's decision to make an application under ss 178 or 179 in relation to a litigation funding agreement if it was necessary to accept the risk that a judgment would be published exposing information that is commercially and tactically sensitive. 6 Such concerns may also constrain a trustee in the conduct of a trial of an application under ss 178 or 179 if the bankrupt estate is exposed to the risk that such information would be made available to opposing parties to funded litigation to the detriment of the bankrupt estate. If the Court is not willing to make appropriate non-publication orders, it may therefore also inhibit the fair trial of such an application. 7 That chilling effect may therefore significantly inhibit the Court's capacity to supervise the conduct of trustees, the purpose for which the powers under ss 178 and 179 of the Bankruptcy Act were granted. There is both a public and private interest in ensuring that trustees conduct the administration of bankrupt estates efficiently, honestly and in accordance with the duties imposed on them by the Bankruptcy Act. 8 Having said that, in deciding whether to make an order, the Court must take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice: s 37AE of the FCA Act. In light of this legislative direction to the Court, I do not consider it appropriate to make the non-publication order simply "until further order" or even for a period of 12 months. At least one of the matters discussed in the reasons has been set down for hearing within the next six weeks. While it is not possible to know how long all of the funded litigation will take, I am minded to make the orders for a period of three months (until 1 May 2017) or until further order. While it may become necessary to make a further order, I am satisfied that at this time, an order for a longer period is not justified. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Farrell. Associate: Dated: 1 February 2017