Jackson & Anor v Baker Tilly & Anor

This is an oral ex tempore judgment is in six parts:

The Applicants are liquidators and seek production of documents pursuant to sections 235 and 236 of the Insolvency Act 1986 from the accountants of the company for which the liquidators were appointed, Alocasia Limited. The case also concerns the potential involvement of two directors and the company secretary of that company. For the purposes of this judgment concerning Alocasia Limited, I shall refer to the liquidators as the Applicants, I shall refer to their accountants as the Respondents and the company directors and secretary as the Additional Party.

On 13^th September 2013, the Applicants took out an application in Form 7.1A of the Insolvency Rules 1986 seeking from the Respondents the following relief under sections 235 and 236 of the Insolvency Act 1986:

In support of that application an Applicants’ witness statement was settled and dated 13^th September by James Douglas Ernle Money, who was one of the joint liquidators of BDO Limited, on his own behalf and that of his co-liquidator, Bryan Jackson. So far as material, I shall come to the key parts of that in due course.

The application and the supporting witness statement in broad terms essentially followed the wording apparent from sections 235 and 236 of the Insolvency Act 1986. Such an application is required formally to comply with the Insolvency Rules 1986, rule 9.1 and 9.2, which it plainly did by means of that witness statement and exhibit.

In response, a Respondent’s witness statement was provided dated 20^th November 2013 from Sally Ann Baker, the legal counsel at Baker Tilly, and contained exhibits to which, as material, I will come to in due course.

On 11^th December 2013, the Additional Party issued an application dated 11^th December 201, which contained a draft order in the following terms so far as material:

In accordance with the order made by this court on 18^th December 2013, a second Applicants’ witness statement was provided by James Douglas Ernle Money, which dealt with both the statement of the Respondents and the Additional Party, to which I have just referred.

On the first day of the hearing before me, fixed for 8^th and 9^th April 2014, counsel for the Applicants provided at 10.30 a.m. a draft order to both the Respondents and the Additional Party and this Court. That draft order indicates a much narrower relief sought than in the application set out above. The only further document I have been provided with during the course of the hearing itself was a letter of 4^th April 2014, in which Enyo Law, acting on behalf of the group of companies of which Alocasia Limited is one, made it clear in particular they had no objection to documents being properly disclosed which were Alocasia’s, but wished to redact the documents so far as they were group company, who I shall refer to as the Minton Group.

In support of their case and in accordance with orders, the Applicants provided a skeleton argument dated 2^nd April 2014, settled by Simon Davenport QC and Daniel Lewis, counsel for the Applicants. The Respondents provided a skeleton argument dated 1^st April 2014 from Daniel Bayfield, counsel for the Respondents. The Additional Party provided a skeleton argument dated 2^nd April 2014 from Francis Tregear QC and Lyndsey de Mestre, counsel for the Additional Party. With one exception which I will come to, that is the material on the basis of which this judgment will be given.

The essential facts and background to this application are conveniently contained in the first witness statement of James Douglas Ernle Money. I read from paragraphs 7 to 10 inclusive:

So far as the documents that evidence these matters are concerned, the exhibits to that first statement of Mr. Money provide: as recorded at Companies House, there is registered on 6^th December 2011, special and ordinary resolutions were passed pursuant to section 378(1) of the Companies Act 1985, and sections 84(1)(b) and 100 of the Insolvency Act 1986, by which, so far as material, at a general meeting of the company duly convened by MCR (at their address), resolutions were passed for the appoint of Bryan Alan Jackson and James Douglas Ernle Money as joint liquidators. That was signed by Mr. Spiro, as chairman of the meeting and attested to a by a further signature in the usual way.

So far as company accounts are concerned, the first set of company accounts provided are for the year ending 31^st December 2003. These were obtained from Companies House on 14^th April 2004, and so far as material were accounts carried out by PwC - that is to say not the Respondent. For present purposes I put those to one side. The first set of accounts provided in respect of these Respondents was for the period of time between 8^th August 2004 and 31^st July 2005. Those accounts are signed off by Mr. Thompson, as secretary, on 25^th April 2006, and contain the usual independent auditors’ report from Baker Tilly (as they then were) on 25^th April 2006. It is apparent from these accounts, which show a balance sheet signed by their director, Mr. Gershinson, that the accounts have a current debtors of very small figures, £203. If one goes to those accounts it is quite apparent that the figures, such as they are, relate essentially to these matters. I read from page 7 of the accounts:

“The company had a deferred tax asset relating to unutilised capital losses at the beginning of the period. During the period, gains for corporation tax purposes of approximately £11,120,000 have been elected to the company by fellow subsidiary companies. These have been fully relieved by utilisation of the company’s losses.”

and page 8 of the internal accounts indicates:

“The investment represents 8,475,270 shares (12.5% of the issued share capital) in Future Publishing Holdings Limited. The shares were acquired at market value, which was less than £1.”

It also indicates at page 9 as follows:

“The immediate parent company is Minton Land Properties Limited, the ultimate company and controlling party is Minton Group Limited. Group accounts of the ultimate parent company only are drawn up and can be obtained from the Registrar of Companies, Companies House ...”

Thus there is a separate set of accounts, not before me, for the Minton Group.

Subsequent accounts were provided, also from Companies House, for the year ending 31^st July 2006, again signed off by Mr. Thompson as company secretary, and on this occasion by Baker Tilly UK Audit LLP on 2^nd May 2007. Looking at those accounts they confirm the general background as set out above from the statement of Mr. Money. At page 7, for instance, under the heading “Factors affecting current and future tax charges and credits”:

“The company had a deferred tax asset relating to unutilised capital losses at the beginning of the period. During the period, gains for corporation tax of approximately £1,404,00 have been elected to the company by fellow subsidiary companies. In the 2005 accounts the amount elected for that period was disclosed at £11,120,000 but that assessment has been revised downwards to £5,280,000 since preparation of those accounts.”

There is reference to the investments in Future Publishing Holdings, that is 8,475,270 shares being 12.5%; and also to the holding company being the Minton Group.

There are the further accounts for the next year signed off on 7^th April 2008 by Baker Tilly UK Audit LLP. There is a further set of accounts on 22^nd May 2009, again Baker Tilly UK Audit LLP. There is a further set of accounts on 12^th April 2010 by Richard Coates, who is a senior stat auditor for and on behalf of Baker Tilly UK Audit LLP. Lastly, there is a set of accounts on 8^th April 2011, again by Richard Coates in the same way.

The last set of accounts indicate that so far as the balance sheet is concerned as at 31^st July 2010 the equity shareholders’ deficit was £4,545,351, a figure similar to one that I will come to in due course. So far as details are given, there is reference to Future Publishing Holdings and the 12.5% issued share capital, to which I have already referred, and reference to the holding company being the Minton Group.

That, therefore, indicates what was found at Companies House, no doubt by Mr. Money as part of his exercise of understanding the company for which he became a liquidator. Quite separately, other documents have been provided and relied upon by the Applicants. They are few and far between, but they do give some indication, at least prima facie, of further dealings with Alocasia Limited by the Respondents. There is a set of emails which commence on 1^st February 2006, which of course is the time of those accounts that I first referred to above. It is apparent that Mr. Steven Dowers, who is a tax manager engaged by the Respondents, wrote to Alocasia Limited in respect of these accounts. By way of example, at 11 o’clock on 1^st February 2011, he indicates he has received PwC’s Bristol draft response to the Future Network, that is the seller of Alocasia:

“… regarding the Inspector’s letter 11.11.05, which enquired into Alocasia’s capital loss. I understand that the other companies formed by The Future Network at the same time, which received the rest of the FPH shares, have received identical letters.

The response was sent to me by Jane Burgoyne at TFN yesterday. A copy of her email is attached …”

Reference is made to similar matters. There is a further email at 5.46 on the same day which says:

“Thank you for your email. As your email only contains a dopy of the draft response to the Revenue letter and not the actual letter to which it is seeking a reply …

I think that the point that the Revenue may be seeking to argue is that is a loss arises under section 24(2) [of the 1992 Act] …”

A further email follows at 6.48 on that same day, reference being made to the clarity of the Inspector’s letter and other such matters under that Act.

What is also apparent as part of the background is that from 11^th November 2005 HM Revenue and Customs are writing to PwC and not the Respondents, about the tax returns, and certain questions being raised as to 2002 and 2003 before the Applicant was involved.

So there is some further evidence in the hands of the Applicants which may, on its face, indicate that there was involvement beyond simple accounting on the part of these Respondents.

On 14^th December 2011 under the heading “PKF Accountants and business advisers”, a letter was written to Baker Tilly UK LLP by James Money. So far as it is legible it appears to say this:

“From our records, we understand that you were the auditors and tax advisers to the Company who formed part of the Minton Group until December 2010.

May I ask that you assist with our investigation as Liquidators by providing us with any information relating to the tax advice given to the Company.”

A response came from Baker Tilly on 10^th January 2012, referring to a letter of 14^th December 2011 saying this:

“I can confirm my firm were auditors to the Company. Contrary to the statement in your letter, Baker Tilly were not tax advisers and have not provided any tax advice, to the Company.”

Matters stayed there for some time, no doubt while the Respondents made certain enquiries as they are required to do under their statutory obligations, until 2013. On 7^th January 2013 PKF Accountants and business advisers wrote again to Baker Tilly UK LLP in this way:

“Dear Sirs

Alocasia Limited (‘the Company’)

Bryan Jackson and I were appointed Joint Liquidators over the Company following a meeting of creditors on 30 November 2011.

We write following our previous letter dated December 2011 regarding your position as Auditors and Tax advisers to the Company, which was a subsidiary of the Minton Group.

Whilst you had previously advised you were not engaged as tax advisers to the Company, we believe there would have been audit work carried out on the tax position. In particular, the tax losses of the Company would have needed to have been verified in order to be offset against other completes within the Minton Group as part of the tax avoidance scheme under which the Company was acquired in the first place.

Can you please therefore deliver your audit files and any other advice and correspondence in relation to the Company to enable us to carry out our statutory investigations as liquidators of the Company.”

That is signed by James Money, joint liquidator.

Reading that letter objectively, it looks to me as if there are two species of particular documents sought: first of all, those relating to the audit files themselves; and secondly, those relating to other advice in connection or separate from those audit files. It seems to me those two classes of documents have a pretty clear affinity with the two matters I have set out above, namely the company accounts over which these Respondents were responsible, and possible advice at an early stage in 2006 and may go beyond that, having regard to how those accounts developed over those years, as I have briefly described.

On 22^nd January 2013, Baker Tilly replied to Mr. Money in these terms:

“I confirm that Baker Tilly, and subsequently Baker Tilly UK Audit LLP, were the Company’s auditors for the period 8 August 2004 to 31 July 2005 and for the years ended 31 July 2006 to 31 July 2010 inclusive. Neither Baker Tilly UK Audit LLP (nor any other entity in the Baker Tilly group) has been engaged by the Company to provide any other services or advice.

Whilst we do not wish to be unhelpful, it is not this firm’s general policy to deliver up the entirety of its audit files. In addition, in relation to this particular matter there are likely to be issues of confidentiality due to the fact that we were also auditors of the Company’s ultimate parent, Minton Group Limited (and certain other subsidiaries). I understand that the papers for the audits of the parent company and its subsidiaries would have been stored on the same audit file (being a paper file for the years 2005 and 2006, and an electronic file for all subsequent years). However, if you would confirm the nature of your investigations, together with any specific documents or categories of documents (with relevant date ranges where possible) that you would like sight of to assist you in your investigations, we shall be happy to consider your request further.”

That letter was replied to on 30^th January 2013 by Moon Beever, solicitors acting for the Applicants, in which they set out their response to the policy not to deliver, making reference to the provisions of the Insolvency Act, sections 235 and 236, and making reference to the question of confidentiality by way of noting how that could be dealt with, and further matters. In particular the letter states as follows:

“In summary, our clients require you to deliver up:

(1)

all of your audit files …

(2)

any due diligence concerning the acquisition of Alocasia;

(3)

any property belonging to Alocasia;

(4)

all correspondence with Alocasia/its directors …

(5)

all papers concerning Alocasia’s affairs …

(6)

all advice that you provided to Alocasia/its directors …”

The first substantive response was, in effect, on 14^th March 2013 from Mayer Brown International LLP, acting for the Respondents, to Moon Beever.

On 25^th March 2013 Moon Beever wrote to Mayer Brown International LLP, in which, amongst other things, they set out a list of documents that they sought. I read from paragraphs 12 to 17 in particular:

“12 The scope of information disclosable under the above provisions is exceptionally wide. As such, the following papers clear and naturally fall to be disclosed:

12.1

your clients’ audit files for Alocasia …

12.2

the due diligence upon the acquisition of Alocasia …

12.3

omitted - see below

12.4

all correspondence …

12.5

all papers …

12.6

all advice …”

(Paragraph 13 then refers to the sections of the Act.)

“14 We have previously said that our clients are investigating the affairs of Alocasia during the years leading up to its insolvency but unfortunately have been only been able to recover very limited papers. This has placed our clients in a difficult position, not least as Alocasia entered liquidation with a massive deficiency and in circumstances which our clients are genuinely and proper concerned to understand. Our clients need to understand how this deficiency arose and whether any recoveries may be made for the benefit of creditors and in accordance with their duties.

15 It appears to our clients that given the size of the deficiency, the nature Alocasia’s trading (or non-trading) and the absence of available records, that our clients must review the accounting records for the entire period of Alocasia’s incorporation, charting its financial fortunes from incorporation to liquidation. As part of this exercise, our clients will need to investigate the treatment of Alocasia’s tax affairs, the conduct of Alocasia’s officers, dealings with HMRC, dealings intra group and in relation to the initial acquisition. Your clients were Alocasia’s auditors for a substantial period of time … [they set out the years]. They were involved throughout almost the entirety of Alocasia’s incorporation and importantly at the critical periods, such as during the difficulties it had in relation to taxation and shortly prior to liquidation. As Alocasia’s auditors, your clients would have been required to collate and analyse various information and records and are therefore well placed to assist our clients’ enquiries now. Indeed, the papers they hold may be the only papers available to our clients.

16 In summary, in these circumstances the papers listed within the numbered sub-paragraphs of paragraph 12 above are reasonably required …

17 We do not intend to divulge to you or your clients any further details of our clients’ investigations, their conduct of the liquidation nor their intentions going forward. Unless you are prepared to provide clear authority indicating that they are required to do so we consider that the reasonableness of our clients’ request is now fully established.”

Then they refer to oppressiveness and confidentiality.

The response on 1^st May 2013 from Mayer Brown International LLP makes reference to information they received from Mr. Gershinson and Mr. Spiro that the Respondents have commenced proceedings against them under section 212 of the Insolvency Act 1986 and the fact that that was not referred to in the witness statement of Mr. Money.

I, therefore, turn to those matters, though slightly out of date. On 21^st February 2013, Moon Beever wrote to Mr. Spiro by means of a letter before action, and I read from paragraphs 1 and 2 and 15 and 16 in particular:

“1 We are instructed by Bryan Jackson and James Money of PFK (UK) Limited, the joint liquidators of Alocasia Limited.

2 This is a letter of claim in accordance with the Practice Direction …

Particulars of Breach of Duty

15 Turning to the losses caused to Alocasia by these arrangements, you allowed other group companies to allocate their chargeable gains …

16 There is no scenario in which such action was in the interests of Alocasia itself. Alocasia was a non-trading holding company incorporated for the purposes of the wider Minton/Future group scheme. Alocasia assumed vast group chargeable gains and the resultant liability for corporation tax. Had the scheme worked as originally intended, Alocasia would not have sustained a loss to the extent that the negligible value claim was sufficient to offset the liabilities transferred. As it was, Alocasia assumed the risk that the scheme would be disallowed, and having been disallowed, assumed a liability to HMRC for £4.68 million.”

A similar figure to the one I have referred to earlier in those company accounts.

The substantive response to that letter was 2^nd April 2013 from Enyo Law to Moon Beever, setting out disputes as to what a pre-action protocol letter should and should not contain. As a result of that, or maybe in any event, on 11^th April 2013 a further Form 7.1A of the Insolvency Rules was issued naming Mark Howard Gershinson, Ivor Spiro, Mark Thompson (who are, of course, the two directors and company secretary of the Alocasia Limited). The particulars of that case are under section 212 of the Insolvency Act 1986 for:

“1 A declaration that the Respondents have acted in breach of their fiduciary duties …

2 An order that the Respondents jointly and severally are ordered to pay to the Applicants the sum of £4,681,262.55 …

3 Alternatively, an order that the Respondents do contribute ...”

That is supported by a further witness statement from James Douglas Ernle Money dated 11^th April 2013.

So far as a substantive response to that is concerned, it is dated 7^th June 2013, from Enyo Law to Moon Beever, and indicated that they were instructed by their three clients, and they set out their case in some detail. The most important paragraph in which they respond to the particulars of the breach of duty as set out in the claim letter is paragraph 5.1:

“As to paragraphs 15 and 16 of the Claim Letters, it is agreed that Messrs. Gershinson and Spiro allowed chargeable gains to be allocated to Alocasia on 27 July 2006 and 17 July 2007 but it is denied that this was done in breach of any duty owed to Alocasia. The Directors were acting at all relevant times on advice from PwC that the tax mitigation planning would be effective. Other professional advisers, including Baker Tilly as the auditors, had also considered the risk of the tax planning failing. For example, in respect of the audit of Alocasia’s July 2005 financial statements, Baker Tilly, as auditors for Alocasia (and other company in the Minton Group), considered, in detail, whether a provision or note should be made in the company’s accounts in respect of the risk of the tax planning failing. After careful consideration Baker Tilly were satisfied that the risk of the tax planning failing and a tax liability arising in Alocasia was remote. Therefore, in accordance with the requirements of the relevant accounting standards, Baker Tilly did not consider it necessary to recommend that a contingent liability note be made in the accounts.”

There is a footnote then to the Financial Reporting Council’s Financial Standard, s.12, which is a well known standard. It makes reference to a letter of representation of April 2006 to Baker Tilly in respect of the audit of Minton Group in 2005.

Thereafter, pleadings followed in that action pursuant to a court order by means of a points of claim and defence and counterclaim. For present purposes, I do not go into detail and read those, but I have considered them.

I, therefore, turn now briefly to main parts of the statements, the first statement of Mr. Money in support of this application. Under the heading “The Company’s advisors”, in particular in paragraph 15 he says this:

“I noted above that the records recovered for the Company are limited. However, within those limited papers there is certain correspondence which demonstrates that the first and second Respondents (and their staff) were involved in the affairs of the Company in a broad capacity, limited not just to audit work. To explain I first need to comment on contents of limits …”

He then refers to the very letters I have quote from already, and I therefore do not quote those, and continues:

“20 Whilst in an ideal world we would wish to support this application with further evidence of the specific involvement of the Respondents and their staff, we are inevitably hampered by the lack of available records and the first and second Respondents’ effective disinclination to provide even partial assistance. We are simply able to say that the Respondents were for many years involved in the audit of the Company’s accounts. As a result of that instruction the Respondents would have needed to conduct certain enquiries into the Company’s financial affairs, one part of which would have been the Company’s tax affairs and its interaction with HMRC … The Respondents therefore appear well placed to provide assistance in accordance with our enquiries into the Company’s affairs.”

Further on in paragraph 28 he says this:

“Needless to say, Moon Beever’s exhaustive letter did not lead to disclosure taking place. After a further holding letter and chaser, Mayer Brown responded on 1 May 2013 substantially changing tack. Instead of responding to the reasonable request, they focused instead on a stated concern that if (which was not admitted) grounds existed for disclosure to be given, the appropriate mechanism for disclosure was CPR 31.17. Mayer Brown noted that they had reviewed the letters before action, application notice and detailed witness statement with wholly separate proceedings against the Company’s directors. They then asserted that a third party disclosure application should be made pursuant to the Civil Procedure Rules within those wholly separate proceedings, rather than pursuant to sections 35-236 Insolvency Act 1986. No authority was provided as to this leap of logic, nor was any substantive response provided to the points raised in Moon Beever’s letter dated 25 March 2013. Mayer Brown simply reserved their clients’ position thereto.”

I have referred to those two letters, and continued:

“29 The first and second Respondents were invited to provide disclosure long before the wholly separate proceedings were issued. Whilst it is possible that any disclosure that the Respondents are eventually compelled to give may inform those proceedings, that does not prevent documentation being relevant to the off-holders’ enquiries as to the affairs of the Company more generally. The proceedings are now clearly established, inevitably without reference to the papers that the Respondents have failed to disclose. Even if the papers were critical to the wholly separate proceedings against the directors, the existence of those proceedings would not in itself dispose of the Respondents’ obligations under sections 235-236 of the Insolvency Act 1986.

The last letter which I refer to in the chronology is the letter of 19^th March 2014 from Mayer Brown International LLP to Moon Beever, and sets out the following:

“As we mentioned in our letter of 7 May 20113, the information that ‘may relate’ to Alocasia and its associated companies, which would need to be searched by our clients, amounts to 26 boxes of hard-copy documents, 0.258GB of electronic audit files for four accounting periods and 125GB of electronic mail boxes, archived emails and associated attachments and electronic drives. At this stage our clients have preserved electronic data relating to those who worked on potentially relevant assignments. In the circumstances, this information will need to be searched twice, first to find those documents that may be relevant to the Minton Group and second, to isolate those that are identified by you in accordance with the proposed draft order.

Given the large amount of data, it is unreasonable for your clients to seek the production of documents in such broad and unfocused terms. We continue to consider that it can only be helpful to the court for the parties to seek to agree an order with your clients before the hearing listed in April 2014, if only to identify the areas where the parties differ.

We have accordingly compiled a high-level of the categories of documents …

A.

Hard copy statutory audit papers comprising the whole or part files, which are labelled or tabbed, in whole or in part as appropriate, as Alocasia, for accounting periods 2005 - 2009.

1 audit working papers files contained the following tabs …”

They are listed from (a) to (v) inclusive, of which (s) is taxation.

“2 tax audit files;

3 accountancy papers;

4 signed accounts.

B.

Papers and documents resulting from work undertaking by Baker Tilly as statutory auditors of the Minton Group in respect of acing periods 2005 - 2011.”

There is a large list of matters there, including:

“20 electronic consolidated audit files for whole Minton Group for 2007 - 2011, which contain a common structure …”

and they set out the structure at (a) to (q), but (n) is taxation. They then indicate in the second to last paragraph:

“Separately, we are aware that the claim against Mark Gershinson, Ivor Spiro and Mark Thompson is ongoing. In the event that disclosure in the GST Claim were to take place, or if the GST Claim were to settle prior to the listed court hearing, please would you confirm whether your clients would continue to pursue the application against our clients.”

It appears that there was no response.

There was attached to a previous letter dated 17^th November 2013 a draft order from Mayer Brown International LLP, indicating what they proposed as a form of relief, which was not acceptable to the Applicants.

Sections 235 and 236 of the Insolvency Act 1986 contain the following provisions that may be applicable to this application, as it now stands.

“235(1) This section applies as does section 233; and it also applies, in the case of a company in respect of which a winding up order has been made by the court in England and Wales, as if references to the office-holder included the Official Receiver, whether or not he is the liquidator.

(2)

Each of the persons mentioned in the next sub-section shall -

(a)

give to the office-holder such information concerning the company and its promotion, formation, business, dealings, affairs or property as the office-holder may at any time after the effective date reasonably require; and

(b)

attend on the office-holder at such times as the latter may reasonably require.

(3)

The persons referred to above are -

(c)

those who are in the employment of the company, or have been in its employment (including employment under a contract for services) within that year, and are in the office-holder’s opinion capable of giving information which he requires.

(4)

For the purposes of sub-sections (2) and (3), ‘the effective date’ is whichever is applicable of the following dates -

(d)

the date on which the company went into liquidation.

(5)

If a person without reasonable excuse fails to comply with any obligation imposed by this Section, he is liable to a fine and, for continued contravention, to a daily default line.”

Section 236 provides so far as material:

“(1)

This section applies as does section 234; and it also applies in the case of a company in respect of which a winding up order has been made by the court in England and Wales as if references to the office-holder included the Official Receiver, whether or not he is the liquidator.

(2)

The court may, on the application of the office-holders, summon to appear before it -

(a)

any officer of the company,

(b)

any person known or suspected to have in his possession any property of the company or supposed to be indebted to the company, or

(c)

any person whom the court thinks capable of giving information concerning the promotion, formation, business, dealings, affairs or property of the company.

(3)

The court may require any such person as is mentioned in sub-section (2)(a) to (c) to submit to the court an account of his dealings with the company or to produce any books, papers or other records in his possession or under his control relating to the company or the matters mentioned in paragraph (c) the sub-section.

(3A) An account submitted to the court under sub-section (3) must be contained in -

(a)

a witness statement verified by a statement of truth (in England and Wales) …

(4)

The following applies in a case where -

(a)

a person without reasonable excuse fails to appear before the court when he is summoned to do so under this Section, or

(b)

there are reasonable grounds for believing that a person has absconded …”

Then sub-sections (5) and (6) for present purposes I do not read.

In broad terms, simply from the wording of the Act, it looks as if one could possibly pick three broad categories. One is information concerning dealings, affairs or property of the company. The second is the production of books, papers or records in the possession of or relating to the company. The third is the need for a witness statement to account for the dealings of the company. I use that in loose, summary language, but in broad terms that does categorise the approach set out in the original application. In view of the draft order provided to the court, it is no longer necessary to go into details of the need for attendance for those purposes.

The leading authority on this Act is a decision of what was the House of Lords in British & Commonwealth Holdings Plc v. Spicer and Oppenheim [1993 AC 426. The decision is that Lord Slynn of Hadley, and I read from the headnote:

“Held, dismissing the appeal, that the power to make an order under section 236 of the Insolvency Act 1986 was not confined to documents which could be said to be necessary to reconstitute the state of the company’s knowledge, even if that might be one of the purposes most clearly justifying the making of an order, but extended to all documents which the administrator reasonably required to see to carry out his functions; that the Applicant had to satisfy the court that after balancing all the relevant factors, there was a proper case for making the order; that since the information sought was necessary to enable the administrators to carry out the administration and production of the documents did not impose an unnecessary and unreasonable burden on the accountants, the registrar’s order, despite its width, was proper in the exceptional circumstances.”

It refers to various pages and cites the dictum of Buckley J in In re Rolls Razor Limited, and also cites Cloverbay Limited v. Bank of Credit and Commerce International SA, which was considered:

“Per curiam. An application is not necessarily unreasonable because it is inconvenient for the addressee of the Applicant or causes him considerable work or may make him vulnerable to future claims, or is addressed to a person who is not an officer or employee of or contractor with the company in administration, but all of these will be among the factors relevant to be taken into consideration.”

Of the cases cited, apart from the above two I have just described, there is also reference to Highgrade Traders, which I will also come to.

Lord Slynn, giving the judgment of the court, concurred with by Lords Keith, Ackner, Jauncey and Lowry (see page 432), so far as the ratio of the case is concerned, and per curiam I read that out first, at page 439C says:

“I am therefore of the opinion that the power of the court to make an order under section 236 is not limited to documents which can be said to be needed ‘to reconstitute the state of the company’s knowledge’ even if that may be one of the purposes most clearly justifying the making of an order.

At the same time it is plain that this is an extraordinary power and that the discretion must be exercised after a careful balancing of the factors involved - on the one hand the reasonable requirements of the administrator to carry out his task, on the other the need to avoid making an order which is wholly unreasonable, unnecessary or ‘oppressive’ to the person concerned.”

Then reading down at G-H:

“The protection for the person called upon to produce documents lies, thus, not in a limitation by category of documents (‘reconstituting the company’s state of knowledge’) but in the fact that the Applicant must satisfy the court that, after balancing all the relevant factors, there is a proper case for such an order to be made. The proper case is one where the administrator reasonably requires to see the documents to carry out his functions and the production does not impose an unnecessary and unreasonable burden on the person required to produce them in the light of the administrator’s requirements. 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.”

Reference is then made to the case of Cloverbay, and the reference to Nourse LJ, which I will come to.

Cloverbay Limited (Joint Administrators) v. Bank of Credit and Commercial International SA [1991] Ch 90, is a majority decision of Sir Nicolas Browne-Wilkinson V.-C, Nourse LJ, with a dissenting judgment of McCowan LJ. So far as the holding is concerned, it says this:

“… in deciding whether to order examination under section 236 of the Insolvency Act 1986 on an application by the liquidator of a company, the test whether the liquidator had reached a firm decision to bring an action against the party against whom the order was sought was not the appropriate test, for the court had an unfettered discretion under the Section; that in exercising that discretion the court had to balance the requirements of the liquidator against possible oppression of the party sought to be examined, bearing in mind that the purpose of the section was to enable the liquidator to reconstitute the knowledge the company should possess in order to discharge his duties to the creditors and possibly the contributories; that the case for making an order against an officer or former officer would usually be stronger than that against a third party …”

So far as the ratio is concerned as set out in the headnote, I refer to the main parts at page 102A:

“Nor do I think that there is any other simple test that can be substituted. The words of the Insolvency Act 1986 do not fetter the court’s discretion in any way. Circumstances may vary infinitely. It is clear that in exercising the discretion the court has to balance the requirements of the liquidator against any possible oppression to the person to be examined. Such balancing depends on the relationship between the importance to the liquidator of obtaining the information on the one hand and the degree of oppression to the person sought to be examined on the other …

That said, there are a number of points which in my judgment should be borne in mind in exercising the discretion. First, the reason for the inquisitorial jurisdiction contained in section 236 of the Act of 1986 is that a liquidator or administrator comes into the company with no previous knowledge and frequently finds that the company’s records are missing or defective. The purpose of section 236 is to enable him to get sufficient information to reconstitute the state of knowledge that the company should possess. In my judgment, its purpose is not to put the company in a better position that it would have been enjoyed if the liquidation or administration had not supervened. In many cases an order under section 236 may have the result that the company is in such improved possibility, e.g. an order for discovery of documents made against a third party in order to reconstitute the company’s own trading records may disclose the existence of claims which would otherwise remain hidden. But that is the result of the order not the purpose for which it is made.”

Then reading from page 103C:

“Fourth, although the section treats the production of documents and the oral examination of witnesses together, an order for oral examination is much more likely to be oppressive than an order for the production of documents. An order for the production of documents involves only advancing the time of discovery if an action ensues: the liquidator is getting no more than any other litigant would get, save that he is getting it earlier.”

I then briefly deal with the judgment of Nourse Lord Justice (referred to above), at page 105 at D-G:

“Parliament’s purpose in vesting this or that power in the court can usually be discerned without much difficulty. In most cases the court may only have to ask itself whether a proposed exercise of the power will serve that purpose or not and, if it will, whether in all the circumstances it is proper that it should be made. But sometimes a proposed exercise of the power will raise a direct conflict between the purpose for which it is given and the purpose of some other settled rule of law or practice. When that happens a balance must be struck between the two, a balance subject to a greater tension than the normal.

The purpose of the power which is vested in the court by section 236(2) of the Insolvency Act 1986 is to enable an ‘office-holder’ to obtain information which will enable him to discharge the duties which he owes to others, usually the creditors and sometimes the contributories of the company. The persons who may be brought for the court include: ‘(c) any person whom the court thinks capable of giving information concerning the promotion, formation, business, dealings, affairs or property of the company.’ Such person may be those who have had some more than occasional connection with the company, for example employees, accountants, solicitors, surveyors and other agents or bankers. Or they may be people who have dealt with the company in the course of its business, either regularly or only occasionally, or people who have had no contractual connection with it at all, for example the wife of a director.”

That is as far as I need to read from that authority.

I now deal with the other authority cited in the House of Lords (which I referred to above), Re Highgrade Traders Limited [1984] BCLC 151, and was a decision under the previous Act, that the is Companies Act 1948, section 268, which is in not dissimilar terms. I read from the headnote again:

“(2)

The court had jurisdiction under section 268 of the Companies Act 1948 to order an examination … However, on the facts, as the only undisclosed information of any significance in the possession of Mr. Alexander was in the reports, and as these were covered by legal professional privilege, the court should in the exercise of its discretion discharge completely the order made against Mr. Alexander.”

Certain page references are given there, and I read from those, in particular at I:

“Certainly, as it seems to me, the court would not ordinarily, as a matter of discretion, summon a person under the section unless it deemed him capable of giving some information which was likely to be of assistance to the liquidator in carrying out his duties, but I can see no context, as a matter of jurisdiction, for reading into the section some subject adjective as that which the appellant suggests.

I turn, therefore, to the appellant’s second point which is that the liquidator in any event failed to lay any proper foundation for the exercise by the court of its jurisdiction. In essence, this is a reiteration of the same submission as has already been made with regard to jurisdiction. No doubt it is for the liquidator (or other Applicant for an order under the section) to satisfy the court that it does, indeed, deem the person sought to be summoned capable of giving information. But, as I read the authorities, this involves no more than showing that the person is likely to have some information (which may or may not be direct and may or may not be admissible as evidence) which will assist the liquidator to carry out his functions, even if it may do no more than assist the liquidator to a better understanding of the company’s affairs. In this context the court gives great weight to the liquidator’s views as to the type of information which he requires (see Re Spiraflite Ltd [1979] 2 All ER …).”

Since that House of Lords case in British & Commonwealth v. Spicer, and the two authorities cited in it, further authority has discussed this Act. I refer to Shierson & Another v. Rastogi [2003] 1WLR 586, a decision of Peter Gibson LJ in particular. In view of the time, I do not read the entire headnote, but it can be taken to be read into this judgment, as necessary, citation is given for both Cloverbay and the House of Lords decision in British & Commonwealth Holdings, both of which are applied. In particular, I read from page 594, paragraph 23:

“I start with the statutory scheme. The primary duty of a liquidator of a company being wound up by the court is to collect its assets with a view to discharging its liabilities to the extent the assets permit. To perform that function that liquidator needs information, and the companies legislation has for many years given the liquidator power to obtain it from those who can be expected to have relevant information.”

He refers to two methods. Then at paragraph 25 he says:

“Another innovation was the express duty imposed by section 235 on past and present officers of a company and other persons within section 235(3) to co-operate with the office-holder of the company. The only qualification on the obligation to give information is that it should be reasonably required by the office-holder. The sanction for an officer for failing to comply with a reasonable requirement is qualified by the condition that he should have so failed ‘without reasonable excuse’.

It is common ground that sections 235 and 236 are to be read together, but it is plain wherever section 235 contains a mandatory obligation on the officer to give information reasonably required, the court has a discretion whether to order a private examination, in contrast to a public examination …”

Further, at page 599B-C, he says this:

“But that view expressed as general guidance deserves the greatest respect, the more so because, save on one point not material to the present case, the balancing exercise suggested by Sir Nicolas Brown-Wilkinson V-C was approved by the House of Lords in In re British and Commonwealth Holdings plc. That was a case where third parties, auditors of a company, sought unsuccessfully to resist an order under section 236 for the production of documents relating to audits.”

That seems particularly relevant to this case.

Since then there have been two decisions of Robert Walker J in January and February of the same year, Re Bank of Credit and Commerce International SA and Morris & Ors. v. Bank of America National Trust & Savings Association & Ors. [1997] BCC 561. Reference is given to section 236 of the Insolvency Act 1986 at page 569F, as follows:

“It is common ground that section 236 confers on the court a wide a discretion which is not fettered by statutory conditions. But (in the words of Steyn LJ in Re Arrows Ltd. (No.2) [1994] 1 BCLC 355 at page 361B:

‘That does not mean that the power to order an examination is open textured. It is not. The common law supplements the omission of the legislature. The power under section 236 may only be used for the purpose for which the power created, that is, to authorise an examination in order to facilitate the tracing and collection of assets of the company and the bringing of claims against persons or companies. Moreover, the power is only to be exercised after the judge has balanced all relevant considerations for and against the ordering of an examination, and only if he ultimately concludes that it is just and convenient to order an examination.’

The width of the discretion, and the need for a balancing exercise by reference to the circumstances of the particular case, have been emphasised by higher courts in a number of recent cases …”

He cites Re Cloverbay and British Commonwealth Holdings, both of which I have quoted from, and carries on saying that they:

“… are the most important. In Cloverbay the Court of Appeal rejected (as an inflexible test) what was referred to in argument as the ‘Rubicon test’ (see Receive Castle New Homes Limited [1979].”

Then further down at page 570H:

“Approach to the balancing exercise

On any opposed application for an order under section 236 the court should, in line with the observations of Lord Slynn …”

to which I have just referred -

“… which I have already set out, first see whether the office-holders made out a reasonable for a oral or (as in this case) documentary evidence. If a reasonable requirement is made out, then the court has to carry out a balancing exercise, weighing the likely importance of the information to the office-holders against the risk of oppression to the witness. The risk of oppression may arise from one or more of a variety of factors of which the most are any exposure of the witness to self-incrimination (in respect of civil or criminal liability) and the disruption, stress and expense likely to be caused to the witness in complying with the order.

Then further down at page 570B:

“Mr. Falconer described the liquidators’ requests as unfocused, as part of a fishing expedition, and as going beyond the scope of the discovery likely to be required in any eventual proceedings.

However there is (as Mr. Sheldon submitted and as I accept) a basic and important distinction between the procedures which the court may order under section 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 section 236, whose object (as Sir George Jessel MR said in Re Gold Co (1879)) is to enable the office-holders to find out facts before they action (and, it may be, to discover that an action would not succeed). Indeed, it is as rue Cloverbay, as behalf, that where office-holders have already put together a fairly clear claim against a proposed defendant, the balance would normally come down against making an order under section 236 against that person …”

citing Sir Nicolas Browne-Wilkinson said in that case, and also citing Ralph Gibson LJ in British and Commonwealth in the Court of Appeal. Then he says:

“As Mr. Sheldon has pointed out, r.9.(1) of the Insolvency Rules 1986 requires an application under section 236 to be accompanied by a brief statement and Mr. Sheldon emphasised ‘brief’ of the grounds on which it made.”

Then at page 570G:

“I must therefore go on to perform the balancing exercise as best I can. I do to some extent accept Mr. Falconer’s submission that I have to do so on incomplete information, but that is not unusual. In the nature of things the office-holders do not know all the underlying facts, and the potential witnesses may choose (as the Respondents have chosen in this case) not to put in affidavit evidence as to the underlying facts. (I have already mentioned the limited scope of Mr. Harvey’s affidavits).”

Secondly, Joint Liquidators of Sasea Finance Ltd. v. KPMG [1998] BCC 216, the other judgment of Robert Walker J (as he then was). This is now in July 1997. In that case he cites his previous decision of Bank of Credit and Commerce International SA, which I have just quoted, and in particular at page 220 he says:

“The essential conditions for office-holders applying for relief under section 236 are to establish a reasonable requirement for information (a matter on which the onus is on the office-holders, but on which the view the views of the office-holders themselves are normally entitled to a good deal of weight) and then for the court to carry out a balancing exercise, weighing the potential importance of the information to the office-holders against the potential oppressiveness to the Respondents of being required to provide it. Some pertinent observations about circumstances giving rise to oppression and degrees of oppressions, were made by Ralph Gibson LJ in Re British and Commonwealth Holdings Plc …”

He then goes at page 223:

“I return to the two basics - a reasonable requirement on the part of the office-holders and, if that is established, the balancing exercise. Miss Gloster has, in impressively sustained submissions, sought to dissuade me from accepting Mr. Pallen’s assertion that he has a reasonable requirement for the English documents. Mr. Pallen has gone further and said in his third report that they are likely to be ‘absolutely crucial’ to any sensible assessment of whether to proceed with the action against KPMG. Mr. Pallen has referred to two documents by way of example, engagement letters and audit check lists, which Mr. Gha, in a late second affidavit, says are not extant. Mr. Pallen has then emphasised that what the liquidators need to know is what, if anything, was done by the UK firm, that is the English KPMG partnership. The fact that the stated purpose of the liquidator’s requirement, and the only stated purpose, is to assess the chances of success in litigation, cannot by itself be a bar since as long ago as 1879 Sir George Jessel MR said that that was the whole object of the jurisdiction (see Re Gold Co). Even if it is not the whole object, it is one important object.

Against this, Miss Gloster has submitted that the liquidators have failed to discharge the onus of demonstrating a requirement to more than the 27 files of documents that they already have. They yare not entitled, she says, to be put in a position of omniscience before putting in a statement of claim in the action which they have already started. They have no right to read the whole of KPMG’s files in England before pleading their case. To give that right would, she says, be to give them extraordinary rights as ordinary litigants bringing an ordinary negligence claim.

There are powerful submissions, but I have come to the conclusion that the liquidators have discharged the onus of showing a reasonable requirement. That is what they have to show, not absolute need (see Sir Nicolas Browne-Wilkinson V-C in Re Cloverbay). Nor are the liquidators under a duty to make out that requirement in detail (in as much detail, for instance, as they might be on an application for discovery where issues have already been defined by pleadings).”

That is sufficient, in my judgment, from the cases I have been shown, to give a fair overview of the law and the correct approach to the legal test that I have to apply in this case. I do cite from one further authority relied upon by the Respondents. It is the case of Elliot Harry Green v. BDO Stoy Hayward LLP [2005] EWHC 2413 (Ch) a decision of Kitchin J. I have been invited to read the whole case by counsel for the Respondents. I have done so. I am not going to cite it all. What is clear, however, is that from paragraph 2:

“The appeal is brought under Insolvency Rule 7.47(2) and is by way of review of the decision by the District Judge. Accordingly, I should not interfere with his decision unless it is based upon an error of law or a wrongful exercise of discretion. As to the latter, it is not appropriate for me to set aside the decision simply on the basis that I might have exercised my discretion differently.”

The background is set out in paragraphs 5 to 10, and I do not quote them all, though they can be taken to be read into this judgment. There is then reference at paragraphs 12, 13 and 14 as to the approach taken to this case by BDO, who in that case were being asked for documents rather than as in this case. The judge then sets out the various letters on the application itself, which again I do not read in detail. So far as material, at paragraphs 28 and 29 the learned judge cites British and Commonwealth Holdings, which I have cited. He quotes from Lord Slynn as to the appropriate law. He goes through the grounds of appeal. Essentially, the most important parts are paragraphs 33 and 35. I reverse the order for emphasis:

“35 I am unable to accept this criticism. It is no doubt true to say that the purpose of the application was to establish the true financial position of the Company, to investigate fully the affairs of the Company and to reconstitute the state of knowledge of the Company. But this is to do no more than state a liquidator’s function and is a matter which the District Judge had well in mind, as appears from paragraph 5 of the decision. What the liquidator has failed to do in the evidence in support of the application is to explain why the documents sought are required in order to carry out those functions. The Liquidator must establish a reasonable requirement for the documents he seeks and that is what the District Judge looked for but failed to find in the evidence in support of the application. He considered that, in the light of the circumstances to which I have referred, it was not good enough simply to state that the documents were required without any further explanation. That, in my judgment, was a view he was entitled to come to, particularly bearing in mind the scope of the request and the inevitable cost and burden of complying with it.”

The previous paragraph, paragraph 33, dealt with the second limb of appeal:

“Secondly, it seems to me that it is important that the application in issue be considered against the whole of the background to which I have referred and that is what, in my judgment, the District Judge did. In particular, I have in mind the following. The application relates to the a liquidation which happened over seven years ago and yet the Liquidator has provided no details of what investigations have been carried out over that period, what those investigations have revealed and what, if any, gaps remain. Further, the evidence of BDO shows that their involvement was relatively limited and came to an end at the latest in July 1997. Further, their last material involvement in the affairs of the Company was in July 1996, that is to say a year before the shares were first suspended and nearly two years before the Company entered compulsory liquidation. Despite this limited involvement, the application is made on an extremely broad front and seems to extend to all documents which BDO might conceivably have. Further, the letter sent on behalf of the Liquidator on 27 January of this year reveals that the Liquidator is seeking documents which are in the public domain or which relate to activities that took place after BDO resigned as auditors. It was in the light of all of these circumstances that the District Judge came to the conclusion that the evidence submitted on behalf of the liquidator did not establish a reasonable need for the documents requested.”

That seems to me to be a fact sensitive case on appeal which cites and confirms some of the cases which I have more fully set out for the purposes of this judgment.

Lastly, and on a quite separate point relating to the confidentiality of any documents provided, I refer to a decision of Vinelott J in Re Brook Martin & Co (Nominees) Limited [1993] BCLC 328. The headnote is all I need to read for present purposes:

I note, as a matter of record, though I appreciate that neither counsel relied on this, the leading textbook on “Confidentiality” by Toulson and Phipps, 3^rd Ed, 2012, does not appear to cite this case, and therefore any analysis of this area of the law with regard to confidentiality and co-confidentiality is a matter which may, in my judgment, require further submissions and review.

This decision can be dealt with relatively shortly. There are four things which I deal with:

The skeleton arguments of the parties, so far as the Applicants are concerned, dealt with the purpose in this way, paragraph 35:

“The purpose of the application is addressed above. As set out in the Joint Liquidators’ evidence, the documentation that they seek is required to investigate the Company’s affairs and reconstitute its records (in circumstances where the books and records in their possession are very limited).

Reference can be made to further parts of that skeleton argument, in particular paragraph 10:

“From the period end 31 July 2005 until liquidation Baker Tilly were the Company’s auditors. It appears from the correspondence between Mr. Thompson and Baker Tilly that Baker Tilly advised upon the tax avoidance scheme, the legitimacy of which they would also have been required to consider in auditing the Company’s accounts.”

and I read from paragraphs 22 and 23:

“22 The Joint Liquidators are required to investigate and understand the Company’s affairs and, in doing so, to reconstitute the Company’s records. They are experienced and respected insolvency practitioners from a substantial firm (breakdown) and their views as to the need for the documentation sought should be given substantial weight.

23 That the Company’s former accountants’ paper should be relevant to the Joint Liquidators’ inquiries should be obvious, particularly where the books and records handed over to the Joint Liquidators by the Company’s former officers were so limited.”

He cites the witness statement of Mr. Money, to which I have already referred, and which exhibited the correspondence I have set out and which was relied upon in the Applicant’s oral submissions.

So far as the skeleton argument of the Respondents is concerned, under this head matters are somewhat thin. Paragraph 25 says, half way through:

“As a starting point, they therefore need to demonstrate a ‘reasonable requirement’ to see the Respondents’ working papers and other documents which were not created during the course of the Respondents’ retainer by Alocasia before the court will consider the possible exercise of its discretion in the Liquidators’ favour.”

It then refers in paragraphs 26 to 29 to various items of evidence, some of which I have referred to, but it can be assumed that it is read into this judgment as needs be.

The oral submissions of the Respondents developed this point beyond that, and indeed cited authority which I have referred to, the Green v. BDO case, which did not appear in their skeleton argument, but upon which great weight was placed. It was suggested that the authority of Green v. BDO was binding authority on me as a matter of law, which was to the effect that if liquidators were short on material that was not a proper reason to seek an application under section 235 and section 236 of the Insolvency Act 1986. I reject that as a matter of law and, in my judgment, the case of Green v. BDO is not authority for that proposition, and such a proposition would run contrary to the Act and the cases I have set out above which bind me.

In broad terms, however, there are, it seems to me, from all the submissions made, and it is right to say that both parties developed their case to some extent, there are three matters which I have to take into account: firstly, as is apparent from the authorities I have read and indeed the Applicants’ skeleton argument, I am required to, and I do, give weight to who the Applicants are in this application. These are liquidators, and experienced liquidators, there is no doubt at all, who have a function to carry out, and they come before this court with sworn testimony which does not have to be in great detail, but in sufficient detail to explain to me why it is they seek further documentation. That is the first point.

Secondly, it is clear from their evidence, and I find as a fact, that on the basis of what they tell me they have a lack of information as to the accounting procedures of this company generally. Therefore, that is a matter which they are properly entitled to search further under their statutory powers.

Lastly, it seems to me, that there is prima facie evidence of dealings on the part of these Respondents giving advice on tax matters in respect of HMRC to Alocasia Limited and/or the Minton Group. That is apparent from the limited documentation in the possession of these Applicants, as I find it, but a matter which is sufficient for them to then make a proper enquiry within their broad powers given under this Act.

In my judgment, having looked at all the evidence and acknowledging that the onus of proof is on the Applicant, I am quite satisfied that the reasonable requirements have been met by these Applicants and, therefore, it is proper to move on to the next stage to see whether the matter is unreasonable, unnecessary or oppressive. I will, as need be, expand on those reasons if required by either party when I correct this judgment.

The starting point again is looking at the parties’ skeleton arguments. In particular, this is a matter which was raised in some detail by the Respondents from paragraph 30 onwards. In the matters were the scope of the order sought, and they quoted from the letter dated 19^th March 2014, which I have cited, that there is a very large volume of the gigabyte material available. Secondly, they made reference to the position of confidential documents, and that of course concerns the Additional Party. Their position was that they are, in a sense, “agnostic” on the matter. They of course had more than one client, and it is not for them to waive the privilege of another party or their confidentiality. That, of course, has force and is a matter that, in my judgment, requires further legal analysis should the point have to be decided.

They then refer to privileged documents, which I put to one side for the moment. Then they look at the liquidators’ purpose, and the question as to whether or not this is done in support of the application under section 212 of the Insolvency Act 1986 in proceedings brought by the Applicants against the Additional Party. They make certain submissions under CPR 31.17. They then refer to oral examination, and in view of the draft order I do not go over those parts of their skeleton argument.

So far as their oral submissions were concerned, they were much shorter and more focused. The points were essentially these: the application was too broad and not necessary. Again, they referred to the amount of material available. Secondly, they said that, because of the volume of material, it was oppressive to ask them to search that amount of material. Thirdly, they indicated that I should consider what other matters could be done in respect of the Applicants’ approach, and I take that to be reference to those other applications. Lastly, they said I should bear in mind the costs of the application.

Looking to the question of oppression, in my judgment, it seems to me that the starting point is that I am not affected per se by the amount of work being asked of these Respondents. They are, of course, a professional firm. I have quoted in some detail now the very helpful letter dated 19^th March 2014 setting out the extent of the documents that they have. I am satisfied that they have control of those documents. As one would expect from a firm as well known as this and as professional as this, they are categorised under quite a detailed set of sub-headings, of which they have now provided. That gives me some real confidence that the exercise they can carry out is achievable, it is not oppressive or indeed unnecessary.

So far as the reasonableness is concerned, I cannot say that this application is unreasonable on the part of the Applicants. I will deal with that in more detail when I look at the order itself, and the draft of what they are now asking for. It is apparent to me that the categories of document sought are essentially twofold, and always have been such. In broad terms, they want details of the accounting itself, for which they know that this firm carried out accounts. Secondly, they want details of potential advice on tax matters, as it is apparent from the limited amount of correspondence they have that these Respondents took some part in that. It strikes me as reasonable to make requests in that regard and I do not consider it unreasonable to expect these Respondents to provide that material, given how well their files appear to be ordered.

Quite separately, there is, in my judgment, some force in the question of confidentiality and the possible need for further argument. It is right to say that, as a result of the Additional Party appreciating that the grounds made by these Applicants were no longer threefold, as set out in their application, but twofold in accordance with the draft order provided at the start of this application, the third part of the original application did not come for consideration before me.  So far as the second category of the application is concerned, I will come to that when I look at the draft order, but it seems to me that I have to be concerned and careful to ensure that certainly the Additional Parties themselves, if they wish to submit more, should have a chance to do so; and possibly the Minton Group.

I promised to refer to one further document later in this judgment. So far as Alocasia Limited itself is concerned, since attending court I have received a letter from Enyo Law LLP, which I note has been copied to Moon Beever and Mayer Brown International LLP, solicitors for the Applicants and the Respondents, dated 10^th April 2014 in which, as a result of no doubt attendance before this court during the hearing, they showed some concern as to the width of this application. I will not read that out in detail now, but I have noted what they say and I shall be dealing with these matters when it comes to the draft order which I am prepared to accept as part of my discretion.

I have referred to the question of a dual confidentiality, the decision of Vinelott J in Re Brook Martin & Co (Nominees) Limited [1993] BCLC 328 and page 332. There is some authority for that proposition, but it seems to me that the matter is subject to some further interesting potential legal argument as to confidentiality, as opposed to privilege, which that case was essentially about. In any event, it seems to me that in the exercise of my discretion I have to be careful as to what matters I allow to be disclosed, or indeed sworn to. In that regard, I am proposing to make an order that gives a period of time to reserve the position of both the Additional Party and potentially the Minton Group. I note in this regard that the Minton Group, do not object to provision being made of Alocasia’s documents by Baker Tilly, and that seems to me entirely proper. However, they are concerned about documents which could have a dual confidentiality or indeed be their own confidential documents. as to which the precise call could be difficult, and often is in practice. Their suggestion is that the matters be redacted. That is, of course, a common approach to take. Although I have not cited authority, there are authorities for that proposition and it is an approach that is well within my powers. The approach I am going to take to the third parties in this judgment is to give a period of time to allow them to take such points as they think proper and therefore not deal with that today. That has avoided their attendance over these two days of hearing, which, in my judgment, is a proper use of the court’s time and indeed the Overriding Objectives, which I am bound by.

Liquidators in these situations are, of course, not only duty bound to carry out certain duties in looking at the company, but to do so in a timeous way under the provisions of the Insolvency Act 1986. This application was dated 13^th September 2013, and we now find ourselves in April 2014 without any disclosure at all, not even, though it has been offered, the retainer of the Respondent. It seems to me that these liquidators have to get on with their job and, therefore, the periods of time which, in my judgment, are proper in respect of compliance with the order ought to be timeous. For that purpose I no doubt will hear more submissions, but it strikes me that the periods of time sought in the draft order, to which I shall come in a moment, by these Applicants is realistic.

The draft order provided to the court by the Applicants to the Respondents and the Additional Party as they came to court is made, on its face, exclusively under section 236 of the Insolvency Act 1986. It indicates in broad terms the provision of three categories of documents. The first relates to the accounts for which these Respondents quite rightly accepts they were responsible. The second relates to correspondence, papers and advice in relation to HMRC, for which there is limited information provided in the documents initially provided to these liquidators, and it is now argued positively that, as section 212 proceedings indicate, that there would be, or could be, more material in that regard. Lastly, there is the retainer itself. The other possible sub-category is an application for due diligence of documents which concerns the Future Group and the Minton Group. I have made reference to those two groups and their involvement, so it appears, from the face of the accounts present at Companies House, which these liquidators have obtained.

The second part of this draft order relates to the provision of a witness statement. That is twofold: the first concerns the retainer and the extent of the advice being given. That was a matter raised specifically by counsel for the Additional Party and is referred to in the letter of 10^th April 2014, to which I have just referred. The second concerns the scope of methodology, and that I will return to in a moment and no doubt ask for possible further submissions.

So far as the application for any examination of witnesses is concerned, that I propose to adjourn. Therefore, I do not deal with that aspect of this case today.

Dealing with that draft order, in my judgment, the following are, in broad terms, entirely acceptable, though I am going to hear further submissions from counsel on detail. First of all, so far as the Additional Party is concerned, it is agreed between all three parties that that application should be adjourned, and that is the order I will make in the wording appropriate.

Secondly, so far production of documents is concerned, the date sought is by 30^th April 2014. In broad terms, in my judgment, that is a realistic date. The date of 4^th June 2014 suggested by the Respondents strikes me as not sufficiently timeous in regard to both the period of time this application has taken and indeed my obligations to ensure that, so far as this court is concerned and indeed so far as the liquidators are concerned, they get on with what they are required to do. Therefore, the requirement for files - that is to say document, and I would add to the production of documents “being all papers and records”, in accordance with the relevant Act. The years are satisfactory - that is 2005 to 2010. It is quite clear those accounts did take place. Therefore, that order, in my judgment, is proper.

So far as the question of due diligence in respect of the company and the acquisition of Future Group and Minton Group is concerned, I will need more assistance with that in due course. However, there clearly is reference to those groups involvement with this company and that is a matter that, to some extent, it seems to me, these Respondents would have had, or should have had, some dealings and therefore there could be documentation properly sought.

So far as the balance of the three matters is concerned, namely all correspondence, all papers and all advice, one can again deal with that wording but it strikes me that, in broad terms, there must have been some dealings, but I can form no final view. It is certainly a potential area which these Applicants are entitled to search as part of their duties generally and in regard to the matters more specifically in view of the limited correspondence they have shown me and which I have set out in this judgment.

In broad terms, I accept that those are necessary. It could be that simply one composite order is made there that more closely associates itself with the Act itself.

So far as the retainer is concerned, the third group, I am proposing to make a recital. Counsel for the Respondents very helpfully told me that there was one letter of retainer. I am proposing to make that a recital to this order, that on the basis of counsel’s representation there is just the one, and as a result of that that should be provided forthwith or within a short period of time. On that undertaking it strikes me that 2.6 is unnecessary, as indeed is any reference to the retainer in 3.1 in terms of a witness statement. I am satisfied that is a proper way of dealing with this matter responsibly.

So far as the need for methodology is concerned, I am in some doubt as to whether that is a proper way to go about things at this moment in time. My approach is that what shall happen in terms of disclosure of documentation to accord with the right or the potential right of the Minton Group, or indeed, as they assert, the Additional Party, to protect their interests is that any document that is not a company document - and I see the wording used in this draft order - is a matter which will have a 21 day order, which these Applicants did not oppose, before the matter is put into effect. That is to give a fair period of time for the Minton Group and/or the Additional Party to make any submissions they wish before the court before that becomes effective so that they can protect any confidentiality they may have.

So far as the balance is concerned, it is adjourned: I agree with that and therefore make no further order than is suggested in broad terms.