MF Global UK Ltd, Re

Section 236 of the Insolvency Act 1986 does not ordinarily authorise an order requiring a person outside the territorial jurisdiction to provide information or documents. Section 237(3) may permit examination abroad, but only where effective procedural machinery exists to compel compliance. A request under the Evidence Regulation requires evidence intended for use in judicial proceedings already commenced or contemplated; preliminary investigation to decide whether proceedings should be brought is insufficient. An order under section 236 also requires a genuine case for enquiry. The court should not conduct a mini-trial, but must identify circumstances warranting investigation. Differences between small-market-transaction prices and the price obtained for a very large disposal, particularly during exceptional market volatility, may be insufficient.

The joint special administrators of MF Global UK Limited sought orders requiring LCH.Clearnet Limited and LCH.Clearnet SA to produce documents, information and recordings concerning the close-out of MF Global’s open positions in Italian and Spanish government bonds.

LCH France challenged the court’s jurisdiction under section 236 and opposed the proposed alternative request under section 237(3) and the Evidence Regulation. LCH UK accepted jurisdiction but argued that the court should refuse relief in its discretion. The central issues were the territorial scope of the statutory powers, the availability of cross-border evidence procedures, and whether the administrators had shown a sufficient basis for investigation.

1. The application was refused in its entirety. No order was made against either respondent.

2. The re-enactment of a statutory provision in substantially the same terms is presumed to retain the meaning given to its predecessor, particularly where that meaning has been authoritatively decided. The reasoning in Re Tucker [1980] Ch 148 therefore applied to sections 236 and 237 of the Insolvency Act 1986.

3. Section 236 has no extra-territorial effect. It could not support an order against LCH France, a company incorporated and operating in France without a presence in England. The different conclusions reached concerning sections 133, 213 and 238 of the Insolvency Act 1986 were distinguishable because those provisions had different statutory contexts. The court also rejected reliance on McIsaac & Anor Petitioners (Joint Liquidators of First Tokyo Index Trust Ltd) [1994] BCC 410, which was based on a mistaken understanding of section 426(5).

4. An order under section 237(3) could in principle be made against a person abroad, but the court first had to be satisfied that available procedural machinery could compel compliance. The proposed request under the Evidence Regulation failed because the evidence was sought only to enable the administrators to decide whether proceedings should be brought. Article 1.2 required evidence intended for use in judicial proceedings commenced or contemplated. The alternative order was therefore refused.

5. The application under section 236 against LCH UK was also refused. The court had to see a case for enquiry, without conducting a mini-trial. Bloomberg prices for parcels of €25 million did not provide a reliable comparison with the price obtained for €2.2 billion of bonds. The price differences between 2 and 3 November were also explicable by the extraordinary events occurring during the euro crisis and did not, without more, warrant the extensive disclosure sought.

6. The court did not determine the disputed French-law limitation issue, although it considered that the application might otherwise have served no purpose if the relevant claim were time-barred.