How To Deal With Suggestions Of Fishing and Oppression (Section 236/366 Examination and Orders)

Overview Of How To Deal With Suggestions Of Fishing and Oppression

Dealing with suggestions of fishing and oppression can be a challenge for a Liquidator or Trustee in Bankruptcy

If the suggestions of fishing and oppression are well made then it is necessary for the Liquidator, Administrator or Trustee in Bankruptcy to adjust their approach accordingly when seeking information or examinations under Sections 236 of the Insolvency Act 1986 or Section 366 of the Insolvency Act 1986. This may involve withdrawal of such an application for example only.

However, there are instances in which suggestions of embarking upon fishing expeditions or acting oppressively can be levied at the door of an Insolvency Practitioner (“IP”) incorrectly and perhaps even unfairly when they are trying to discover information and properly fulfil their duties to investigate. But what do you do if you are uncertain of the position?

The following are some possible examples of issues that can arise when oppression might be relied upon incorrectly and what might be some of the counter-arguments capable of consideration. Please note the disclaimer at the end of this post.

Historic Documents Relating To The Insolvency Estate

A request for historic documents owned by the insolvent estate is not necessarily oppressive because they are historic and go back a number of years.

The starting point is if they are owned by the estate then given the IP will typically be engaged in matters of records reconstruction, reconstitution of knowledge and information gathering, having entered office as a stranger, entitled to assemble information to investigate; then oppression might be addressed simply with reference to reference to Walker Morris v Khalastchi [2001] 1 BCLC:

(1) The starting point is that the files are the property of the Company, and the Liquidator is entitled to possession of them. The applicants have no right whatsoever to withhold them.

However, if the information is not owned by the insolvent estate and is historic, then perhaps Re Akkurate Limited [2020] EWHC 1433 (Ch) may assist as follows:

An application is not necessarily unreasonable because it is inconvenient for the addressee of the application or causes him a lot of work or may make him vulnerable to future claims, or is addressed to a person who is not an officer or employee of or a contractor with the company in administration, but all these will be relevant factors, together no doubt with many others.

Criticism Of The Requests For Information

If there is criticism of the requests for information then this needs to be properly particularised by the objector to explain the rationale for the objections. To however put matters into some perspective, an IP might consider matters articulated by His Honour Judge Paul Matthews about information an IP (in the case he was considering a Trustee in Bankruptcy) could reasonably anticipate when considering the Purpose of Section 366 of the Insolvency Act 1986:

… Consistently with the policy behind section 366, that trustees in bankruptcy should have the maximum available information about the bankrupt’s estate, in order to protect the interests of creditors in the bankruptcy, and taking a realistic view of the resources available to trustees in bankruptcy, I hold that it is not a breach of privacy or confidence for third parties on request from a trustee in bankruptcy to supply that information which the court would have ordered to be supplied if an application had been made (I am not now dealing with privileged information, to which different considerations may apply).

Objections To Meetings Or Examinations

It is not unusual to be faced with having to address arguments about oppression when seeking to interview or examine people who have knowledge that would appear useful to an IP’s investigations. However, except where connected proceedings have already been threatened and or decided upon by the IP, if such a proposed examination is purely a fact-finding mission, then if the suggestion of oppression is raised it is certainly conceivable that could be incorrect because even an interview on oath in Court is an examination; it is not cross-examination.

Furthermore, the absence of adversarial proceedings also distinguishes matters because an application say under Section 236 of the Insolvency Act 1986 is not an application for discovery in which fishing may be pertinent. In the matter of Re Bank of Credit and Commerce International SA (in liq) (No 12),; Morris and others v Bank of America National Trust and Savings Association and others [1997] 1 BCLC 526 the following statement was made by the Court:

…there is (as Mr Sheldon submitted and as I accept) a basic and important distinction between the procedures which the court may order under s 236, on the one hand, and discovery on the other hand. Discovery (like other procedures to which accusations of ‘fishing’ may be pertinent, such as interrogatories and writs of subpoena duces tecum) is naturally constrained by and limited to issues which have, by then, been raised and pleaded in adversarial proceedings. The same is not true of applications under s 236, whose whole object (as Sir George Jessel MR said in Re Gold Co (1879) 12 ChD 77 at 85) is to enable the office-holders to find out facts before they bring an action (and, it may be, to discover that an action would not succeed).

Confidentiality And Requests For Undertakings

There might be instances in which information is initially refused in the absence of the provision by the IP of undertakings as to its prospective deployment. The rationale for the request for the undertaking can be rooted in arguments about oppression when information is released that could perhaps prejudice the party called upon by the IP under statutory powers to provide information.

A request for an undertaking may often swiftly be addressed when the material is owned by the insolvent estate by reference to the aforementioned Walker Morris v Khalastchi case. In theory, absent a dispute over ownership of the documents there may be little scope for further argument.

However, what about confidentiality? Well, confidentiality may present a more challenging issue in some cases because of the potential restrictions upon deployment of material acquired under Section 236/366 powers. However, the case of The Joint Liquidators of Sasea Finance Ltd v KPMG (a firm) [1998] BCC 216 is a case that may outflank an attempt to fetter disclosures on oppression grounds because in that case inspection of the documents was permitted by the Court in advance of consideration of the form of undertakings that were to be considered.

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