Shortly after the announcement by James Murdoch that Sunday was to be the last edition of News of the World, Reuters published an article entitled “Is Murdoch free to destroy tabloid’s records?” in which the claim was made that if News of the World were liquidated “the paper could simply destroy its documents to avoid the cost of warehousing them — and to preclude any other time bombs contained in News of the World’s records from exploding.”
That statement is based upon comments made by a “British media law star” who claims the strategy “is a stroke of genius — perhaps evil genius”.
But like most things in the article, the claim that the paper is to be put into liquidation for the purpose of enabling it to destroy its documents is almost certainly wrong.
First, there is nothing in the public record to suggest that there is to be any liquidation at all. James Murdoch’s announcement said simply that News of the World wouldn’t be published beyond Sunday. The company that publishes News of the World, is the same company that publishes the Sun. So, without transferring the Sun-related assets to another company, News of the World could not be liquidated. In any event, liquidation would hardly make any sense strategically, as News International would then lose all control over the very records it is (according to the “evil genius” theory) attempting to hide.
Secondly, even making the assumption that the publisher is to be liquidated, so what? It is an over-simplification of the law relating to liquidation of a company in the UK (as in Australia) to say the liquidator’s role is to maximise assets and minimise liabilities. While the liquidator is certainly entitled to disclaim so-called “onerous property”, any past conduct by NGN Ltd that could give rise to a claim for damages (whether or not that claim has yet been made) already gives rise to a liability for which the plaintiff (including potential plaintiffs who have not yet claimed) would be entitled to prove in the liquidation.
The liquidator is required to determine whether or not to admit that proof, and it could not do so without preserving for consideration the very records the “evil genius” theory postulates are to be destroyed.
Thirdly, it does not serve to “minimise liabilities” to destroy the company’s records. This is because if the documents were destroyed in the context of there being existing claims against the company, and further potential claims, the doctrine of spoliation of evidence may enable the court in existing claims to make adverse findings against the company in favour of the plaintiffs, thereby serving to increase the liabilities. Indeed, it might be a case ripe for the recognition in the courts of England of the tort of spoliation of evidence, in which plaintiffs may be entitled to damages against the liquidator personally because the documents were destroyed.
Fourthly, the destruction of documents known to be relevant or potentially relevant to existing proceedings would very likely amount to a most egregious contempt of court.
Fifthly, contrary to the Reuters article, there is in fact a well-recognised power vested in the courts, by making Anton Piller orders, where if there was a real suggestion that documents that might be used in evidence in existing or potential proceedings a party to those proceedings could ask the court for orders requiring their preservation.
Finally, given the current criminal investigation, no liquidator would destroy potentially relevant documents for fear of committing any number of criminal offences relating to interference with the due administration of justice, including most obviously perverting the course of justice.
For all of these reasons, and undoubtedly many more, the decision to close News of the World is far more likely to be a simply commercially driven, brand-protection exercise and not the “evil genius” claimed.
What’s all this talk about liquidation, anyway? I thought the problem with NotW was other than financial. Maybe the fellow meant “wound up” – or the British equivalent.
Still is great to see visibly ageing Murdoch scurrring around London to try and save the cash cow BSkyB deal.
Looks like there might be more criminal charges in the offing including bribery.
I hope the Gillard government has the balls to stand up to this bully and deny his organisation the chance to run and destroy our Ausnet service into Asia.
Don’t know about that. If I was a news Exec I’d be thinking very carefully about what extra problems could be dredged up if all the records were to enter the public or legal domain. Hard to believe that despite the above argument there wouldn’t be an obvious self interest in trying to stop additional dirty revelations sinking News even further in the muck, morally , legally and politically. Given the battery of well paid legal expertise they can no doubt access and the potential of their organisation even now to intimidate politicians, and potentially the legal profession, you would think it would be a bit early to rule out possible motives beyond just poleaxing the staff and masthead as a sacrifice to get back to business as usual.
Great summary – you could add, sixthly (although it is part of your first point), that liquidators have been known to sell the documents of the company to parties who are interested in buying them to use as ammunition against other targets. In White Industries (Qld) v Flower & Hart, White Industries was able to sue Flower & Hart because they were able to buy documents from the liquidator of Flower & Hart’s former client.
One could easily imagine that a liquidator of NGN Ltd might have documents which would be valuable to those who had claims against other companies in the News Limited group which the liquidator, in the course of their duty to maximise the return for creditors of NGN Ltd, might be inclined to sell, which would obviously not be interests of News International.