Akkurate Ltd, Re

Section 236(3) of the Insolvency Act 1986 does not have extraterritorial effect as a matter of domestic law. That conclusion follows the binding interpretation of materially equivalent bankruptcy legislation in Re Tucker (a bankrupt) [1990] Ch 148. However, where the Council Regulation (EC) No 1346/2000 applies, it confers international jurisdiction for insolvency proceedings closely connected with proceedings opened in the member state of the company’s centre of main interests. The court retains a broad but exceptional discretion under section 236. It must balance the office-holder’s reasonable requirements against oppression, unnecessary burden and the foreign connection. Orders should be confined to information reasonably required for the office-holder’s functions.

The joint liquidators of Akkurate Limited sought orders under section 236(3) of the Insolvency Act 1986 requiring two Italian companies to provide accounts of dealings and documents concerning the company’s trademarks, licensing arrangements and post-liquidation conduct.

The respondents argued that section 236(3) had no extraterritorial effect. The liquidators relied additionally on the Council Regulation (EC) No 1346/2000, because Akkurate’s centre of main interests was in England and Wales. The issues were whether the court had jurisdiction and, if so, whether the orders sought should be made and in what form.

1. Domestic jurisdiction. The court was bound by Re Tucker (a bankrupt) [1990] Ch 148. Section 25 of the Bankruptcy Act 1914 had been construed as lacking extraterritorial effect, and section 237(3) of the Insolvency Act 1986 was materially equivalent. The structural separation between sections 236(2) and 236(3) did not alter that conclusion. Re MF Global UK Ltd [2015] EWHC 2319 (Ch) was preferred to Re Omni Trustees (No 2) [2015] EWHC 2697 (Ch) and the domestic-law reasoning in Re Carna Meats (UK) Ltd; Wallace v Wallace [2019] EWHC 2503 (Ch).
2. Effect of the 2000 Regulation. The Regulation extended the territorial reach of domestic insolvency provisions where the proceedings derived directly from, and were closely connected with, the insolvency proceedings. Applications under section 236(3) met that description. The court followed the reasoning reflected in Bilta (UK) Ltd v Nazir (No 2) [2016] AC 1, Seagon v Deko Marty Belgium NV [2009] 1 WLR 2168 and Schmid v Hertel [2014] 1 WLR 633.
3. Discretion. The power under section 236 was extraordinary. Applying Re British and Commonwealth Holdings plc (Nos 1 and 2) [1993] AC 426, the court balanced the liquidators’ reasonable need for information against the risk of unreasonable, unnecessary or oppressive burden. The foreign residence of the respondents, their status as outsiders and the breadth of the request were relevant, but did not prevent relief.
4. Scope and order. Post-liquidation dealings fell within section 236 where they concerned the company’s business, dealings, affairs or property. A narrowed order was proportionate and reasonably required to investigate the continued use of the trademarks, payments, licensing arrangements, alleged breaches, marketing activities, samples and unsold stock. Orders for production and accounts were made against both respondents in the form set out at paragraph 68.