Lawyers were ready to ban the ABC from publishing top secret documents found in an old filing cabinet if they weren't given back to the government.
The national broadcaster published a series of stories based on cabinet papers found locked in a second-hand filing cabinet, before handing back the documents to police.
Stephanie Foster, deputy secretary at the Department of Prime Minister and Cabinet, said the breach of security was "extraordinarily grave".
"We watched the story unfold on the ABC website with some disbelief and horror," Ms Foster told a Senate hearing on Monday.
The Australian Federal Police is investigating how the documents ended up in a second-hand filing cabinet and then entered the public domain.
Ms Foster said the department negotiated with the ABC to return the documents, with threats to take the matter to court to stop publication.
"We had the paperwork being prepared for injunctive relief ... we made that very clear," Ms Foster said.
Prime Minister Malcolm Turnbull has said he wants "heads to roll" over the failure to keep top secret documents secure.
