Sunwing Vacation Inc & Ors v E-Clear (UK) Plc & Ors

The court may order disclosure of a company’s books and papers under sections 112 and 155 of the Insolvency Act 1986 only where the order is sufficiently connected with the purposes of the winding up. That requirement may be satisfied where disclosure will assist a creditor’s claim against third parties and any recovery will reduce the creditor’s claim against the company. The separate requirement that the exercise of the power be just and beneficial permits consideration of wider beneficial consequences, including enabling relevant evidence to be used in foreign arbitration. The court retains discretion over whether to make the order and its terms.

The applicants, creditors of a company in voluntary liquidation, sought an order requiring the company’s liquidators to disclose and permit inspection of specified documents. The documents were intended for use in German arbitration proceedings against Deutsche Bank AG and Pago eTransaction Services GmbH. The applicants undertook to give credit against their claim in the liquidation for any recovery obtained from those parties. The liquidators remained neutral and did not oppose the order. The issue was whether the statutory jurisdiction under sections 112 and 155 of the Insolvency Act 1986 was engaged and whether the proposed order was just and beneficial.

1. Order made. The court granted the revised disclosure and inspection order under sections 112 and 155 of the Insolvency Act 1986.
2. Section 155(1), although expressed in unqualified terms, is subject to a purpose requirement. The power must be exercised for the purposes of the winding up. The court accepted the useful statement of that qualification in Re DPR Futures Limited [1989] 1 WLR 778, at 788–789.
3. The purpose requirement was satisfied. The applicants intended to use the documents in claims against Deutsche Bank and Pago, and had stated that any recovery would be credited against their claims against the company. A possible reduction in the company’s liabilities therefore provided a sufficient benefit to the company and its creditors. The reasoning was analogous to Re a Company (No 005374 of 1993) [1993] BCC 734, where disclosure by administrative receivers to assist a third-party claim was treated as capable of being for the purposes of the receivership.
4. Section 112(2) required the court to be satisfied that the exercise of the power would be just and beneficial. That inquiry was not confined to benefits for the liquidation. It was also potentially beneficial and in the interests of justice for relevant, admissible and persuasive material to be available in the German arbitration.
5. The court retained discretion both as to whether to make the order and as to its form. It declined, by a narrow margin, to require notification of the order to the German respondents or to provide for an application to this court to vary or discharge it. Any legitimate objections to use of the documents could be raised in the German arbitration.