Section 236: speculation, fishing and oppression

A number of obstacles can affect a liquidator’s ability to obtain the information he or she considers is required in the execution of the statutory function to get in, realise and distribute the company’s assets and swell the same from the pursuit of potential claims. I deal here with one or two of the same which arose in the matter of Re Comet Group Ltd (in liquidation); Khan and others v Whirlpool (UK) Ltd and another [2014] All ER (D) 336 (Oct):
1. putting the liquidator to the challenge of speculating on what specific documents a respondent will have
2. the jurisdiction of the court to order production beyond those confined to the company in liquidation’s promotion, affairs, business dealings, property
3. the jurisdiction of the court to order production of third party documents
4. records including electronic documents
5. oppression and scope of the order sought.
The application by the Liquidator appears to have been largely successful and the Court did not appear to have sympathy with suggestions that liquidators are to speculate on precise documents in circumstances where the applicant does not know precisely what the respondent held. The Court appears to have held that documents can be identified by subject matter and do not need to be more specifically identified.
The Court also appears to have held that the ability of a liquidator to seek information under Section 236 is not limited to documents confined to the company in liquidation’s promotion, affairs, business dealings and property.
Relevant extracts from this decision are detailed below:

15. The Respondents resist the grant of the order sought both on grounds of jurisdiction and on grounds of discretion. With respect to jurisdiction the argument was put forward under three heads.
16. First it was submitted that there is ‘no jurisdiction to order production of anything extending beyond material relating to the company itself or to its promotion, formation, business, dealings, affairs or property‘, and reliance was placed on the wording of section 236 itself. The Respondents point to paragraph 1 of the Schedule and the request in relation to sales data showing the price per unit of compressors sold by the Respondents to each of their customers, by way of example, contending that this third party pricing information cannot possibly relate either to Comet itself or to its business, dealings, affairs or property. The Respondents conceded that such information may be relevant for the purposes of assessing damages in due course but that did not mean it related to the company itself or to its business, dealings, affairs etc within section 236.
17. I do not agree with this contention. In particular, it seems to me that in a cartel damages claim of the kind with which the Liquidators are concerned, the prices at which compressors are sold to others may very well bear directly on the business and affairs of Comet. In reaching this conclusion I bear in mind the purpose of section 236 as explained by Buckley J in the passage cited above from Lord Slynn’s speech in British & Commonwealth. That passage suggests the section should be not be construed over narrowly and that so long as the documents have some connection with the business or affairs of the company and are relevant to the proper carrying out by a Liquidator of his statutory functions, then they are within its ambit for jurisdiction purposes.
18. Second it was submitted that there is ‘no jurisdiction to order production of anything other than books, papers or other records‘. There are a number of sub-points within this submission and the first was in relation to the jurisdiction to order the provision of information.
19. Counsel for the Liquidators accepted that he was not seeking an order to interrogate either of the Respondents or any officer or servant thereof (either by oral examination or the issue of interrogatories) but he said it was common for orders under section 236 to be made for the supply of information in the context of a request for documents. He was unable to draw my attention to any authority supporting such an argument and said the reason for that was that it was too plain to need any authority.
20. Counsel for the Respondents, by contrast, said that it was unheard of to seek an order for information under section 236 outside the confines of interrogatories, oral examination or via affidavits….
…Counsel submitted that the application in the present case did not follow these rules very precisely, but since it was clear there was no request for anyone to appear or answer interrogatories or submit affidavits, then only documents could be ordered. Like counsel for the Applicant, he was unable to refer to any authority to support his submission and he too said the reason for that was that it was too plain to need any authority.
21. From a consideration of sections 236 and 237 together with Part 9 of the Insolvency Rules, it seems to me that it is not appropriate to mix up requests for information and documents without making the matter clear. The Rules provide means for obtaining information2 and, if information is what is wanted, then those means should be used.
22. Thus I conclude there is no jurisdiction to order the supply of information other than pursuant to a summons to appear or via interrogatories or the submission of affidavits (i.e. in accordance with the Rules) and that an application to produce documents cannot be a disguised request for information.
23. It became apparent during the hearing that the Liquidators would be content if the words “documents containing” were inserted prior to “sales data” in the first line of paragraph 1 and prior to “data” in the first line of paragraph 3 of the Schedule and the final sentence of paragraph 3 of the Schedule deleted. If that were done, with equivalent amendments to the substantive part of the order, this objection to jurisdiction falls away.
24. In this context, however, it is also said that the Schedule should be framed by reference to particular books, papers or other records held by the Respondents, for without that particularity the task is almost impossible to address. The difficulty I have with this submission is that the Respondents know which documents they have and the Liquidators do not. Accordingly if this were a fundamental flaw, as the Respondents contend that it is, there would rarely be a section 236 order where third parties are involved. If a section 236 applicant does not know the identity of the particular documents he wishes to see but does adequately describe them by reference to the subject matter they contain, this, in my view, could be sufficient. It is one of the factors which goes into the mix when addressing discretion. It does not, in my view, go to jurisdiction.
25. Third it was submitted that there was ‘no jurisdiction to order the production of books, papers or other records which are not in the possession of or under the control of the respondent‘. I accept this point either as a matter of jurisdiction or as being an almost decisive factor in the exercise of discretion. But since the order sought does not extend to such documents, the point is of no substance.
26. Before leaving the issue of jurisdiction, and because of what was said in argument, I wish to make clear that I consider the term ‘books, papers or other records’ to include documents in electronic form. The reason I wish to make this clear is that I perceived that the Respondents did not accept the point, although when it was put at the hearing that documents in electronic form were included, there was no real argument to the contrary.
29. I have looked again at the previous correspondence between the parties and the evidence in this case (including in particular the evidence of Mr Lewis, an economist, who explains the rationale behind the identification of the documents sought) and I have taken into account the asymmetry of information between the parties as well as the well known difficulties of proving causation in cartel damages cases. I am satisfied that the Liquidators are being truthful, reasonable and fair and conclude that they have established on the evidence that they reasonably require to see the documents in order properly to carry out their functions and obligations. That being so, I must turn to whether or not the production of the documents would impose an unnecessary and unreasonable burden on the Respondents.
30. The first point to note is that the Liquidators have sought to make it easier for the Respondents by providing in the order that they will accept a summary of the documents relating to Sales Data and Input Cost Data in place of the documents themselves. The Respondents have countered by saying they are not interested in providing any such summary, that I have no jurisdiction to oblige them to provide a summary and that the question of oppression or inconvenience must be tested by a consideration of the request for the documents themselves.
31. I accept that, pursuant to a request for production of documents, I have no jurisdiction to order a party to summarise the content of the documents. But I do not think I must ignore completely the fact that offers of help to minimise inconvenience and burden have been rejected. This, though, must be a point of rather little weight since I do not know why the offer of assistance was rejected. It may have been because the Respondents wanted to be as obstructive as possible or it may have been because their task was relatively easy and assistance was not needed or it may have been for some other reason.
32. In submitting that the production of documents would be oppressive the Respondents relied on a number of factors.
33. First they relied again on the fact that the Liquidators have already made a decision to commence cartel damages claims. I have already reached a conclusion on this matter. However, in reaching my overall conclusion on discretion I will bear in mind the correspondence already referred to and to the fact that the Liquidators have asserted in the past (although they do not do so now) that they intend to issue proceedings for recovery of compensation in relation to cartel infringements.
34. Secondly, the Respondents submitted that there would be a clear and unfair advantage to the Liquidators if they were to have available now documentation or information which ordinarily would only become available at a later stage in the disclosure process and/or be ordered to be dealt with through witness evidence in the litigation. Moreover, it was urged upon me that it cannot be assumed that the English courts would have jurisdiction to hear and determine any cartel damages action against Whirlpool UK and Embraco. It was urged that Whirlpool UK have not admitted any wrong doing and that, as a mere customer of the Whirlpool group, it was unlikely to have been mixed up with the cartel even though it, like Embraco, is a subsidiary within the Whirlpool Group. It seems to me that these are two separate points and I address each in turn.
35. I see some force in the first point but do not regard it as very persuasive in the light of the admitted infringement by Embraco of the anti-cartel provisions and the fact that the only alleged benefit is early sight of the documentation. Indeed, it might be argued that, in a case like the present where there has been an admitted infringement by one of the Respondents, an early assessment of the documentation might lead to a saving of costs.
36. With regard to the second point, I agree that it goes into the mix and is an important factor to consider when carrying out the balancing exercise, especially bearing in mind that if there is no claim against Whirlpool UK, Article 6(1) of the Judgments Regulation would preclude a case in the English courts against Embraco (Comet not being a direct victim of the tort – see Dumez France v Hessische Landesbank Case C-220/88 [1990] ECR I-49).
37. Thirdly, it is submitted that the order sought is extremely and unjustifiably wide and is in the context of a long period of time and that the production of the documents would be burdensome and costly. Mr Kelly, a partner in the firm of solicitors acting for the Respondents has given some evidence on this point and, to my mind, it is not very impressive. He appears only to have had ‘preliminary discussions’ with the Respondents about the matter, which is slightly surprising in view of the fact that the matter has been in issue for some considerable time, and he does not really condescend to detail with respect to any matters. Moreover he does not address at all the Liquidators’ detailed evidence to the effect that the Respondents must already have collated the relevant documentation bearing in mind the circumstances of the admitted unlawful activity and the various claims arising out of the same which the Whirlpool Group including, in particular, Embraco, has faced to date. That evidence effectively went unchallenged.
38. Moreover, the Respondents have done nothing to help themselves in this matter, for example by responding to any of the requests for information or documents. Of course, the Respondents are entitled to adopt the position they have adopted, but I have to balance the matter from both parties’ points of view in the actual circumstances which present themselves.
39. In connection with the question of whether or not the documents are sufficiently identified and the Respondents’ contentions thereto (which were made in the context of jurisdiction but are just as apposite to discretion), I regard the classes of documents sought to be sufficiently described by reference to their subject matter.
The aforesaid is not legal advice and is not to be relied upon as such. No liability is accepted by the writer for any reliance placed on the same. 
If you have a specific query then you should seek independent legal advice on the same.

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