Section 236 and third parties—striking a balance

Section 236 and third parties—striking a balance

Restructuring & Insolvency analysis: What does the latest Comet Group case tell us about applications made by insolvency office-holders for information from third parties pursuant to the Insolvency Act 1986, s 236 (IA 1986)?

Original news

Re Comet Group Ltd (in liquidation); Khan and others v Whirlpool (UK) Ltd and another [2014] EWHC 3477 (Ch), [2014] All ER (D) 336 (Oct)

Mr John Baldwin QC, sitting as a Deputy Judge of the Chancery Division, was faced with the issue of whether the court had jurisdiction to make an order for production of information and documents sought by the liquidators of Comet Group Ltd (Comet) against Whirlpool (UK) Ltd (Whirlpool) and Embraco Europe srl (Embraco) pursuant to an application made under IA 1986, s 236. If it did, the second issue for the judge was whether the court should exercise its discretion in favour of the liquidators.

The judge held that the court did have jurisdiction (once the liquidators confirmed they were content with a slight variation to the order originally sought). Further, taking all relevant matters into account, and being careful not to impose an unreasonable burden on the respondents, the judge ordered that the respondents provide to the liquidators the documentation sought.

Why is this case of interest?

For office-holders, this case provides some guidance as to what the court can and cannot order under IA 1986, s 236, and calls for some precision when drafting the application as to what relief is sought, to ensure that it falls within the court’s jurisdiction.

This case also confirms that office-holders need to be as specific as possible as to the classes of documents sought, and that a fishing expedition will generally not be tolerated.

What does IA 1986, s 236 say?

IA 1986, s 236 forms part of the armoury available to administrators, administrative receivers,

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.