Cost Effectiveness A Relevant Section 236 Consideration In Company Records Reconstruction

Cost-effectiveness is a relevant Section 236 of the Insolvency Act 1986 consideration in company records reconstruction.

The case of Dale & Ors v BDO LLP [2025] EWHC 446 (Ch) resulted in the auditors being ordered to produce certain audit files to the liquidators.

Oppression seems outflanked by a need for transparency even though a claim against the auditor was said to be:

The assets in this case are potential claims against BDO and members of the Companies’ management teams …

Judgment Highlights

The authorities clearly establish that one of the purposes of section 236 is to enable an insolvency office-holder who comes to a company as a stranger, as cost effectively as possible, to gain an understanding of its assets and liabilities. The assets in this case are potential claims against BDO and members of the Companies’ management teams and the evidence shows that it would be more cost-effective to obtain the relevant information to enable an assessment of the merits of any litigation, from the Audit Files than by trying to reconstitute all of the Companies’ records in a searchable format.

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When considering the potential prejudice or oppression to BDO in having to comply with such an order, I am not aware of any authority, I was taken to none, nor can I see any good reason why one would exist that provides that notwithstanding the court’s wide discretion when considering whether to make an order under sections 235 and 236 of the Act, that discretion should now be restricted or limited in some way, as a result of the introduction of the Protocol. The Applicants were appointed long after the audits in question and after the departure of key members of the Companies’ management team engaged in those audits. This, in part, is the reason why, according to the Applicants’ evidence, they have not yet been able to determine whether a claim may even lie against BDO.

I do not consider the Applicants’ request to be too wide or general. It is not asking for every document that ever passed between the Companies and BDO. It seeks a targeted order to see files which BDO’s evidence describes as “self-contained”.
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The potential oppression caused to BDO in providing them, knowing that their disclosure may lead to litigation being commenced against them and that a privilege review must first be conducted in respect of the 2018 Audit File, does not dissuade me from concluding that the Applicants’ requirement to see the files is reasonable, nor, when weighed in the balance, to decline to make an order in the terms sought.