In re Pantmaenog Timber Co Ltd (Official Receiver v Grant Thornton, Official Receiver v Meade-King, Official Receiver v Wadge Rapps & Hunt)

The official receiver may use the compulsory information-gathering powers in sections 235 and 236 of the Insolvency Act 1986 to investigate a company’s failure and perform functions connected with the winding up. Those powers cannot be invoked solely to obtain evidence for pending director-disqualification proceedings under the Company Directors Disqualification Act 1986.

The statutory scheme does not give the official receiver enhanced evidence-gathering powers merely because the company is being wound up by the court. Information obtained lawfully during the investigation may be used in subsequent disqualification proceedings, but that incidental use cannot convert a disqualification purpose into a proper section 236 purpose.

The appeals arose from orders made under section 236 of the Insolvency Act 1986 requiring three professional firms to produce documents concerning a company in liquidation. The applications were made while the official receiver was pursuing disqualification proceedings against a former director under section 6 of the Company Directors Disqualification Act 1986.

The official receiver conceded before the High Court that the sole purpose of the applications was to obtain evidence for use in those proceedings. The High Court set aside the orders. The central issue was whether section 236 permitted such an application.

1. Appeal dismissed. The Court of Appeal, in the judgment of Chadwick LJ agreed with by Kennedy LJ, upheld the setting aside of the section 236 orders.
2. Sections 234 to 236 of the Insolvency Act 1986 form part of the statutory machinery supporting the office-holder’s functions in the winding up. In the case of a court winding up, sections 132, 235 and 236 enable the official receiver to investigate the causes of the company’s failure and report to the court.
3. The official receiver cannot use section 236 solely to obtain documents as evidence for pending disqualification proceedings. The power is conferred for the better discharge of winding-up functions, and cannot be used indirectly to obtain material which Parliament has not authorised the Secretary of State to obtain directly.
4. The same conclusion follows from the statutory scheme. Where the company is not being wound up by the court, the applicant in disqualification proceedings is the Secretary of State, who cannot directly invoke sections 235 and 236. Section 7(4) of the Company Directors Disqualification Act 1986 separately permits the Secretary of State, and in specified circumstances the official receiver, to require information and documents relevant to disqualification functions. Treating sections 235 and 236 as independently available for that purpose would make the reference to the official receiver in section 7(4) otiose.
5. Material obtained in the course of a proper section 132 investigation may be taken into account in the report under section 7(3) and used in disqualification proceedings under section 7(1)(b). That is incidental use, and does not authorise a section 236 application made solely for the purpose of obtaining evidence in those proceedings.
6. The Court declined to attribute the result to a revived “Rubicon” test. Cloverbay Ltd v Bank of Credit and Commerce International SA [1991] Ch 90 had disapproved that approach. The court’s conclusion instead followed from statutory construction. Chadwick LJ nevertheless indicated that the width of the orders, the lack of full notice, and the pending strike-out application would independently have raised serious discretionary concerns.

• Court of Appeal: Appeal dismissed, with costs subject to detailed assessment if not agreed. Leave to appeal was refused.
• High Court, Chancery Division: His Honour Judge Weeks QC, sitting as a Deputy Judge, allowed the appeals from the District Judge’s orders dated 2 October 2000 and set those orders aside. The decision was reported at [2001] 1 WLR 730.
• District Judge: Orders were made under section 236 of the Insolvency Act 1986 requiring production of documents and information.