Delberry Ltd, Re

An order under section 236 of the Insolvency Act 1986 is subject to a broad jurisdiction and a discretionary balance between the liquidator’s reasonable requirements and oppression or unfairness to the respondent.

The jurisdiction is not confined to documents belonging to the company, or to documents prepared or paid for by the company. It may be used to investigate whether remuneration should be fixed or challenged, including by obtaining pre-receivership records relevant to work done after appointment. The court should consider the documents’ relevance and necessity, the respondent’s status and duties, the volume and burden of production, and whether the application improperly gives an advantage in ordinary litigation.

The liquidator of Delberry Limited applied under sections 236(2)(c) and 236(3) of the Insolvency Act 1986 for production of documents from the company’s former administrative receivers and their firm.

The documents concerned pre- and post-receivership work, remuneration, communications with the debenture holder, strategic planning, internal reviews and legal correspondence. The liquidator wished to investigate whether the receivers’ remuneration was excessive and whether their conduct of the receivership involved breaches of duty.

The respondents argued that some documents did not concern the company, that the liquidator did not reasonably require them, and that the application was oppressive or an abuse of process. The central issue was whether section 236 could properly be used in these circumstances, including in connection with a possible application to fix remuneration under section 36.

1. The application was granted. The respondents were ordered to produce documents within the relevant categories. Where documents did not exist or could not be found, Mr Whitfield was permitted to provide an affidavit confirming that fact and explaining the search made or what might have happened to the documents.

2. Section 236 is expressed in wide terms. The court must balance the liquidator’s reasonable requirements in carrying out statutory functions against the need to avoid an order that is unreasonable, unnecessary, oppressive or unfair. Relevant considerations include necessity in the interests of the winding up, the respondent’s status and duties, the volume and burden of production, the existence of related litigation, and whether the documents belong to the company.

3. Documents prepared on the instructions of, or paid for by, a debenture holder may still relate to the company’s business, affairs or property. The identity of the person who paid for their preparation does not affect the jurisdiction. Documents belonging to the receivers may be ordered to be produced, although ownership remains relevant to the court’s discretion.

4. Section 236 may be used to investigate whether an application should be made to fix administrative receivers’ remuneration. It may also be used during a later assessment of remuneration. The fact that the remuneration application was ready to be heard did not make the section 236 application an abuse of process, particularly in light of the history of the parties’ correspondence.

5. The pre-receivership records were relevant because they could show what work had already been done and assist in assessing both the remuneration properly chargeable after appointment and whether the receivers had discharged their duties. The receivers’ strategic and planning documents were also relevant because the receivership was effectively over and the liquidator was investigating the circumstances of the sale.

6. The judge did not decide whether breach-of-duty allegations were properly dealt with within the section 36 procedure. If the documents disclosed a substantive claim, separate proceedings would ordinarily be the appropriate course.

First instance decision. No prior or appellate decision is stated in the judgment.