Cowlishaw & Anor v O&D Building Contractors Ltd

The jurisdiction under section 236 of the Insolvency Act 1986 is wide. It is not limited to documents needed to reconstitute the insolvent company’s knowledge, and it may extend to documents held by an arm’s-length third party which the company did not own or have a contractual right to inspect.

The court must nevertheless balance the office-holder’s reasonable requirements against the burden, unfairness, prejudice or oppression caused to the person required to produce the documents. A broad request may be refused where it principally appropriates the unpaid economic value of a contractor’s work for the benefit of other creditors. Production may still be ordered for documents evidencing assets of the company, such as enforceable collateral warranties.

The applicants were joint administrators of Junared Three Limited and Warnock Estates Limited, whose principal asset was a partly completed mixed-use development. The respondent building contractor had carried out design and construction work under a fixed-price arrangement, but the contract had been suspended following non-payment.

The administrators sought a wide range of documents concerning planning, subcontractors, drawings, site progress, health and safety, and warranties. They wished to decide whether to complete the development or sell it in its existing state. The respondent argued that the request exceeded section 236 or that production would be oppressive because the documents embodied unpaid work and were subject to proprietary rights and copyright. The central issue was whether the documents should be ordered under the jurisdiction and, if so, whether discretion should be exercised in favour of production.

1. Jurisdiction. The court held that section 236 of the Insolvency Act 1986 confers an extremely wide jurisdiction. Following British & Commonwealth Holdings plc v Spicer and Oppenheim [1993] AC 426, the jurisdiction is not confined to documents required to reconstitute the company’s state of knowledge. It may extend to documents held by a third party, even where the company does not own them or would not otherwise have been entitled to inspect them.
2. Discretion. The jurisdiction is extraordinary and must be exercised by balancing the administrator’s reasonable need for the documents against the burden imposed on the recipient, including unfairness, prejudice and oppression. The fact that production is inconvenient, extensive, or may expose the recipient to future claims is relevant but not conclusive.
3. Application. The respondent was a stranger to the companies in administration and an arm’s-length contractor. The requested documents could assist valuation, planning discussions, identification of contractors and assessment of the remaining works. However, the application was indiscriminate, the administrators had not properly explained what information they already possessed, and much of the material could not be used effectively without copying or supplying documents in a manner potentially infringing copyright.
4. The most important consideration was that the documents embodied the economic value of the respondent’s unpaid design and construction work. Requiring their production would allow the administration, principally for the benefit of the secured creditor, to obtain that value without paying the contractual price. In those circumstances the benefit to the administration was outweighed by the unfairness to the respondent.
5. Copyright and ownership were not absolute bars to production. The court expressed no concluded view on whether section 236 itself authorised use which would otherwise infringe copyright. The court ordered production of further copies of progress reports already submitted and documents evidencing collateral warranties or guarantees already in force and enforceable by the companies or their successors in title. The remainder of the application was refused.