Costs: Section 236 of the Insolvency Act Compliance. In Re Harvest Finance Ltd (In Liquidation); Jackson and another v Cannons Law Practice LLP and others  EWHC 4237 (Ch),  All ER (D) 216 (Dec) at paragraphs  and  of the decision it was held that someone performing a public duty for an officeholder is not necessarily entitled to the costs of compliance.
It was noted that the Court at paragraph [59.1] appeared not to endorse the conduct of a firm of solicitors who in the performance of its duties appeared to have adopted an “unhelpful” approach without perhaps appreciating their public duty and notably commented at paragraph [59.2] on the Respondents’ failure to assist (notwithstanding its suggested cooperation) with the alternative of substantial cost. Mr Registrar Jones appears to suggest at paragraph [59.6] that the respondents were “wrong” to focus on costs of compliance in addressing the liquidator’s pre action correspondence.
Additionally in Re Harvest Finance Ltd at paragraph [47.3] the question of access to the information was considered and appears to suggest that merely because it might not be easily accessible due to the way it has been retained and maintained, that such a position would not necessarily be a cost visited upon the liquidation: “The Liquidation should not have to bear the financial burden resulting from the fact that the records are not easy to access…”.
The implication from the judgment is that the Court appeared to suggest that the notion of duty might be incompatible with an order for compliance costs to be met. Relevant extracts from the judgment are set out below:
19. The starting point is to recognise that the provision of information to an office holder, albeit under compulsion, is “a public duty in aid of the administration of justice” (see Re Aveling Barford(p.366 F). Office holders need to be in a position to identify and collect existing assets, to discharge liabilities, to discover the history and past activities of the company and to consider misdemeanours that might lead to claims or (in the public interest) disqualification proceedings. Private examinations under section 236 are an important tool for that process and were described as “… frequently indispensable for the efficient administration by the trustee or liquidator” in the “Cork Report”, The Review Committee on Insolvency Law and Practice, (1982) Cmnd 8558.
20. A public duty to provide information for such (amongst other) purposes therefore exists in order that: (a) office holders can perform their statutory duties; and (b) there is an effective insolvency process within this jurisdiction. Those with relevant knowledge should assist as a matter of public duty (see further in Re John T. Rhodes Ltd (1986) BCC 99.284 per Harman J., referred to in Re Cloverbay Limited above at page 738).
22. The existence of such a duty is potentially incompatible with the existence of an order to pay the costs of compliance. Rule 9.6(4), however, provides for payment of travelling expenses and“other costs falling upon him … at the court’s discretion”.
44. I make my decision in circumstances of the existence of a public duty which arises in respect of information needed by the Liquidators for the purposes of carrying out their statutory duties. There is no doubt from all the authorities that this duty creates a strong reason for not awarding costs of compliance. Its strength is evidenced by the approach of Mr Justice Warrington in Re Appleton, French & Scrafton Ltd (above) following the Court of Appeal in Ex parte Waddell. One of the reasons for referring to his judgment in such detail is that it provides forthright guidance upon this issue. If ordinarily examinees are not entitled to the costs of instructing lawyers whilst being examined, there is much to be said by analogy that Mr Cannon should not normally receive even his non-profit costs for his time charged as a lawyer of locating and delivering up/transferring the electronic files.
45. Its strength is further evidenced by the decisions and approaches of both Mr Justice Vinelott and Mr Justice Harman. Mr Justice Hoffmann has emphasised the existence and importance of the public duty in Re John T. Rhodes Ltd (above). In Re Aveling Barford Ltd (above) he considered the examination more analogous to a subpoena duces tecum or ad testificandum for which costs of compliance are not normally awarded, than a Norwich Pharmacal order where they are. This in circumstances where the position of examinees is different to witnesses because they are under a public, as opposed to being subject to orders in private litigation.
46. In this case, albeit as an innocent party, the Respondents had control of the files relevant to the transactions in issue. Their public duty required them to provide the files and relevant information to the Liquidators subject to the issue of legal privilege. Their difficulties were identifying the relevant files and achieving transfer but in my judgment (whether applying the approach of Mr Justice Vinelott or Mr Justice Hoffmann) I should not in the exercise of my discretion permit them to charge for the time incurred whether as solicitors or not.
47. My particularised reasons (individually and cumulatively) for that decision are:-
Costs of Section 236 Compliance