Mitchell & Anor v Al Jaber & Ors

A private examination under section 236 of the Insolvency Act 1986 is an investigative process. The fact that it occurs before a judge, under compulsion and within insolvency proceedings, does not make it a judicial proceeding in which a witness gives evidence for the purposes of core witness immunity.

Extended witness immunity also requires necessity and a sufficient connection with the preparation of evidence for contemplated proceedings. It does not ordinarily protect conduct belonging primarily to the investigatory function. The existence of a pre-existing duty to provide information is a powerful reason against immunity.

Joint liquidators of a BVI company sought permission to make further amendments to their claim against the respondents. The proposed amendments alleged that the first respondent, a company director, had made and maintained false statements about the ownership and transfer of company shares during section 236 examinations and related proceedings.

The respondents argued that the amendments had no real prospect of success because the statements were protected by core or extended witness immunity. They also challenged the alleged post-liquidation fiduciary duties, the pleaded asset-transfer allegations, the capacity in which representations were made and the alleged loss.

1. Amendment test. The court applied the test applicable to summary judgment under CPR Part 24. The proposed amendments required a real prospect of success.
2. Core immunity. Sections 235–237 of the Insolvency Act 1986 establish an investigative process enabling an office-holder to obtain information about the company. A section 236 examination is held in court and involves procedural compulsion, but the court does not determine a dispute, establish rights or make a final decision. The examinee supplies information and is not an ordinary witness giving evidence in judicial proceedings. The four considerations identified in Trapp v Mackie therefore pointed against treating the examination as a judicial proceeding attracting core witness immunity.
3. Extended immunity. The examinations were not shown to be conduct sufficiently connected with the preparation of evidence for proceedings already under consideration. The material relied on showed an investigation to facilitate the liquidation, not an investigation with a view to contemplated litigation. The reasoning in Taylor, as explained in Darker, did not establish immunity on these facts.
4. Necessity and policy. Immunity must be confined to cases where it is necessary in the interests of the administration of justice. The examinee already owed a statutory and fiduciary duty to provide information. Privacy, the existing duty to cooperate and the investigatory purpose of section 236 meant that immunity was not necessary. Extending it could create a perverse incentive to withhold information until compelled to attend an examination.
5. Remaining pleading objections. The proposed post-liquidation duties to account were not fanciful and had an evidential basis. The authorities relied on did not establish that the claims were incapable of supporting equitable compensation. The pleaded inferences concerning the asset transfers, the capacity in which representations were made and the alleged loss each had a real prospect of success.
6. Order. The Final Proposed Amendments were permitted in full, subject to replacing “in specie” with “themselves” in paragraphs 55Q, 82A and 82B. Directions were given for re-service of the amended pleadings.