Following the recent decision of Justice White in the Federal Court case of Matthews v Clifton, liquidators now need to be aware of the sensitivity of content stored on the computers of companies under liquidation. Caution is required if confidential, personal or legally privileged information held in material or on assets subject to the liquidation process has the potential to enter the public record.
The decision
Two companies, IWH Pty Ltd (IWH) and Scarce Builders & Developers Pty Ltd (Scarce), were placed into administration, and subsequently into liquidation by resolution of the creditors. Among their assets were several computers, to which the plaintiff liquidator sought access.
The principals of IWH and Scarce, and several other companies associated with them, sought orders preventing the liquidator from accessing, using or disclosing any of the content on the computers that were books and records of any of the principals or related companies, and seeking permission to delete that content. They argued that the principals had used the computers to send and receive emails about, and store material related to, their personal affairs and the affairs of other companies with which they were associated. They argued that this content was confidential to them and, to the extent that it contained communications with their lawyers, protected by legal professional privilege.
The principals and associated companies were successful in arguing that the content should be protected by equity as confidential information. The court decided that they had sufficiently identified the information that was claimed to be confidential. This information was confidential in nature, given that it consisted of emails concerning the personal or business affairs of their senders or recipients, books and accounts of companies, and communications with lawyers.
The liquidator argued that, because IWH and Scarce's internet usage policy stated that the email and internet facilities could only be used for business purposes and that emails could be reviewed by the companies, the content had lost its confidential nature. However, the court disagreed, especially because the claimants were principals of IWH and Scarce rather than ordinary employees and therefore controlled access to the content on the computers.
The claimants also argued that IWH and Scarce were required under the Privacy Act 1988 (Cth) not to use or disclose the content because it amounted to personal information protected by the Act. The Court did not need to decide the case on this basis and did not reach a view, particularly because it had been raised late in the proceedings and not argued in detail. However, the Court did note that the Privacy Act could only protect personal information of the principals of IWH and Scarce, not information of any of the associated companies, because only individuals may be the subject of personal information. The judge also raised doubts about whether IWH or Scarce had 'collected' any of the material on the computers and therefore had obligations under the Privacy Act in relation to it, given that the information was voluntarily disclosed to the companies through the principals' use of their company computers and email accounts.
Impact
The decision highlights the difficulties that may be faced by liquidators when recovering information stored on company computers. As occurred in this situation, it is not uncommon for individuals to use their work computers to send and receive emails and store material that relates to affairs of persons other than the company, even if company policy purports to prohibit this. A liquidator should be careful to discern between what is company property and what may be confidential or personal to others.
