Jacob & Anor v Equitas Ltd

A creditor’s right to inspect documents in winding-up proceedings does not arise under rule 12.17 merely because a winding-up petition has been presented. Section 129(2) of the Insolvency Act 1986 fixes the commencement date of a winding up once a winding-up order exists; it does not deem a winding up to exist before such an order.

However, section 135(4) gives the court a broad power to confer functions on a provisional liquidator. That power may be used to require the circulation of limited creditor information where the disclosure supports the creditors’ collective interests. Appropriate safeguards, including undertakings restricting use and preserving existing confidentiality obligations, may be imposed.

Equitas represented creditors of UIC Insurance Company Ltd in a long-running provisional liquidation. The company’s winding-up petition, presented in 1996 on the ground of insolvency, remained adjourned and no winding-up order had been made. Equitas sought the names and addresses, or at least the names, of the company’s largest creditors.

The application was brought against the joint provisional liquidators. Equitas relied on three possible routes: rule 12.17 of the Insolvency Rules 1986, the court’s ability to confer an additional function under section 135(4) of the Insolvency Act 1986, and the liquidators’ status as officers of the court. The central issues were whether rule 12.17 applied without a winding-up order and, if not, whether disclosure should be ordered under section 135(4).

1. Rule 12.17. The application did not fall within rule 12.17(1)(b). That provision concerns a winding up by the court, which requires a winding-up order. The presentation of a petition, without an order, is insufficient.
2. Section 129(2). The provision does not create a winding up on presentation of a petition. It operates where there has been a winding-up order by fixing the deemed commencement date as the date of presentation. The court therefore rejected the attempt to extend section 129(2) to this provisional liquidation.
3. Inherent jurisdiction and office as officer of the court. The court did not grant the relief merely because the provisional liquidators were officers of the court. Where an express statutory route exists, resort to a vague inherent jurisdiction was unnecessary.
4. Section 135(4). The court held that the power to confer functions on a provisional liquidator was broad enough to include circulating creditor information. The power could fill the procedural gap created by the unusually prolonged provisional liquidation, although its exercise remained discretionary.
5. The creditors’ collective interest supported disclosure. The liquidators’ general concerns about commercial prejudice, debt dealing, economic pressure and leakage of scheme terms were not persuasive. Existing express confidentiality obligations relating to information supplied through the informal creditors’ committee had to be preserved.
6. Equitas was therefore entitled to receive the names only of the 50 creditors with the largest debts. The order was to be made under section 135(4), subject to an undertaking restricting use of the information to specified discussions concerning the liquidation, remuneration and the proposed scheme, together with an added protection for confidential committee information.