The power to require the production of documents and information under s.236(3) of the Insolvency Act 1986 was a standalone power, separate from the power to require attendance under s.236(2) and was not territorial in nature. An order under s.236(3) could therefore be made against a person outside of the jurisdiction.
Carna Meats (UK) Limited (the ‘Company’), a meat wholesaler incorporated and registered in England, was wound up in December 2015. Philip Wallace was appointed as liquidator of the company in June 2016 (the ‘Liquidator’).
The Company’s accounts indicated that the Company had debtors of £809,791 however the Liquidator needed to investigate the books and records for the Company which the directors of the Company said were held by the Company’s former bookkeeper, George Wallace, an Irish resident.
The Liquidator had written to George Wallace asking that he produce the Company’s books and records and had received a response stating that the Company owed George Wallace a considerable sum of money. The Liquidator responded asking that a proof of debt was submitted for this and asking for the production of the requested documents in the meantime however neither were received.
Just under a year later, the Liquidator applied to the Court for an order under s.236(3) of the Insolvency Act 1986 that George Wallace deliver up the books and records of the Company that were in his possession or control.
It was held that it was reasonable for the Liquidator to seek these documents in light of the fact that the accounts indicated debts which could yield some recovery and that the purpose of s.236 was to facilitate the function of the liquidator. The outstanding sums owed to George Wallace were held to not be a good reason to deny the Liquidator the information they were entitled to and the requirement to submit a proof of debt was the correct method for dealing with George Wallace’s claim. The Court was therefore happy that the order could be made in the usual course of proceedings however there was a question over whether this could be against a third party outside the jurisdiction.
Case law on s.236 and its ability to be applied to parties outside of the jurisdiction was considered however there were differing views and decisions. The Court in In Re MF Global UK Limited (in special administration) (No.7) had declined to give an order against a company in France for the production of documents and descriptions by way of witness statements on the basis of an analysis that s.236 was in substantially the same terms as s.25 of the Bankruptcy Act 1914. The Court relied on Re Tucker which had held that s.25 was territorial in scope and therefore the Court in Re MF Global held that as s.236 was similar to s.25 of the 1914 Act, the order could not be granted against people outside of the jurisdiction.
In contrast, the Court in Official Receiver v Norriss, awarded an order to produce a witness statement under s.236 against a resident in Hong Kong shortly after the decision in Re MF Global. The Court disagreed with the Court in Re MF Global, instead finding a material difference between s.236 and s.25 of the 1914 Act, in that s.25 related to the summoning of people whereas s.236 had an additional and separate power to require the production of documents. In Norriss, it was held that there was a free-standing power, independent of the power to summon a person before the court, to produce documents and information.
In this case, the Court held that s.25 of the 1914 Act was readily concerned with the enforcement of the attendance of persons before the Court and therefore adopted the approach in Norriss; that the power in s.236(3) was standalone. As the production of documents and information was considered less invasive than a summons and didn’t involve the exercise of anything like the Court’s subpoena power, the Court held that it was natural to construe the s.236(3) power to extending to any category of person whether within or outside the jurisdiction, particularly in the modern world of cross border practices.
The Court acknowledged that this approach could lead to orders being made against third parties with very limited connections to the insolvent companies. As a safeguard, the reasoning in Re Paramount Airways Ltd and Bilta (UK) Ltd v Nazir was followed, requiring the Court to ask itself whether, in respect of the relief sought, the individual was sufficiently connected with the jurisdiction for it to be just and proper to make an order despite the foreign element.
In the matter of George Wallace, the Court considered that he was closely connected to the Company, because he was an important part of the Company’s operations as bookkeeper. It was difficult to see how the winding up of the Company could progress without access to the information and the documents that he was presumed to have had.