Angel Group Ltd & Ors, Re (Rev. 1)

In insolvency proceedings, disclosure is not treated as a routine application under the ordinary civil procedure rules. The court must consider the nature and purpose of the proceedings, their urgency, proportionality, and whether disclosure is necessary for disposal of the issue. Where a removal application raises a material question about whether the applicant seeks to obstruct an investigation into alleged wrongdoing, the trial judge may draw adverse inferences from a failure to give full and frank disclosure. That course may be preferable to ordering disclosure or cross-examination, particularly where the alleged wrongdoing will not itself be determined at the interlocutory hearing. An applicant seeking removal must have a legitimate interest in the relief sought.

Applicants sought the removal of administrators appointed over companies in the Angel Group and their replacement by an independent liquidator. The removal applications were listed for an expedited trial. The respondents sought specific disclosure of accounting advice and related information concerning an alleged dividend of approximately £11 million, said to be relevant to possible misfeasance claims and to the applicants’ interest and purpose in seeking removal. The applicants made a cross-application for disclosure, including disclosure relating to costs. The central issues were whether the respondents’ requested material was relevant to the removal application and whether disclosure should be ordered before trial.

1. No order on the respondents’ disclosure application. The court had jurisdiction under the Insolvency Rules 1986, but disclosure in insolvency proceedings is not a routine exercise under the ordinary CPR. The court must consider the nature of the proceedings, the disputed questions, the overriding objective, urgency, expense and oppression. Disclosure will generally be ordered only where it is necessary and proportionate.
2. The principles in Re Primlaks (UK) Ltd (No 2) [1990] BCLC 234 and Highberry Ltd v Colt Telecom Group Plc [2003] 1 BCLC 290 supported a restrained approach. Applications concerning the removal of administrators have important similarities to applications for an administration order, where disclosure or cross-examination will ordinarily require exceptional circumstances.
3. The alleged misfeasance was potentially material to the removal application. Although the trial judge would not determine the misfeasance issue, he might need to assess whether the removal application was intended to stifle investigation of the claim and whether the applicants had a legitimate interest in the relief sought. The principles referred to in Clydesdale Financial Services Ltd v Smailes [2009] EWHC 1745, Re Buildlead Ltd [2006] 1 BCLC 9 and Deloitte & Touche v Johnson [1999] 1 WLR 1605 were relevant to those issues.
4. The preferable course was to leave the trial judge to draw such adverse inferences as were appropriate from any failure by the applicants to provide full and frank disclosure about the alleged wrongdoing. A partial disclosure order risked creating further disputes and suggesting, incorrectly, that it defined the applicants’ disclosure obligations.
5. No privilege issue was determined. The applicants’ cross-application was adjourned to the trial judge, and costs were reserved to that judge.

First-instance interlocutory decision. The removal applications remained listed for trial; no prior appellate decision is stated in the judgment.