The powers of investigation afforded to office-holders under s. 236 of the Insolvency Act 1986 are there to enable the court to help an office-holder discover the true facts concerning the affairs of a company, its trading and dealings, to allow the office-holder to complete their function.

These powers are wide reaching and include compelling the provision of information to the office-holder by delivery up of books, papers or other records, answering requests for clarification, providing affidavits or submitting to oral examinations. 

Furthermore, these powers can extend to documents which comprise not only the company’s own records but those of third parties insofar as they relate to the affairs or property of the company. However, when it comes to exercising its discretion against third parties, the court must balance the reasonable requirements of the office-holder to obtain the information or documentation sought, against any possible oppression or inconvenience to the third-party.

In the case of Webb & Hussain v Eversholt Rail Limited & Norton Rose Fulbright LLP [2024] EWHC 2217 (Ch), the court considered an application under s.236 of the Insolvency Act 1986 by the liquidators of Eversholt Rail (365) Limited for documents from a fellow group company and the company’s solicitors.

The order sought by the liquidators included delivery up of “copies of all documents […] in its possession custody or control relating to the business, dealings, affairs or property of 365.”

Unfortunately for the liquidators, the court was not persuaded that the application was necessary, and it was dismissed. It is clear from the judgment that the Judge considered the liquidators’ request to be too broad in scope and related, potentially, to an enormous number of documents. The application had been made in circumstances where the liquidators had failed to explain why they needed to reconstitute, and see absolutely, all of the company’s records or why they felt they were unable to be more specific or targeted in their requests. 

At first glance, it is difficult not to have some sympathy for the liquidators in this case. The company and the first respondent shared common directors, the company’s operation was entirely dependent on the services of the first respondent, the company corresponded via the first respondent’s emails, all of the company’s documents were held by the first respondent (not separately filed, stored or segregated) and the liquidators received little to no documentation upon their appointment.

So, what should an office-holder do, if they find themselves in a similar situation?

Firstly, you will need to consider what it is you need and be specific – if the best you can do is a description of a class of information or documentation, can you limit this class to (i) a specific time period, (ii) as between specific parties and/ or (iii) relating only to a specific matter.

At the same time, consider what information or documentation you do already have, and whether the information or documentation you are seeking is available from any other source.

As seen by the outcome in Webb, it will adversely affect the court’s view as to the office-holder’s need, if the request for information or documentation is not sufficiently specific or is framed in indiscriminate terms.

Moving on to the office-holder’s need – why do you need the information or documentation sought? 

Remember, the court will only compel a third party to disclose information and deliver up documents that the office-holder reasonably requires. As such, the purpose for which you say you need the information/documentation is extremely important. And in every case, the onus of proving that the information/documentation is reasonably required, is on the office-holder.

Ensure you set out that purpose clearly in your correspondence with the third party and in any evidence in support of your application – blanket statements, reiterating the office-holder’s function, such as, the documents/information “are necessary to reconstitute records of the company”, “are valuable in progressing an office-holder’s investigations” or “cover the company’s business, dealings, affairs or property” will provide the court with no assistance when it comes to weighing the office-holder’s needs, against a third party who may allege inconvenience or oppression. You need to explain why you need the specific categories of information/documents to carry out your function and, where appropriate, outline the information/documentation is unavailable from any other source.

Finally, whilst you might like to have absolutely all of the company’s records, it is unlikely that you will need all of them to carry out your function. But if you do, it is clear from Webb that you will need to provide the court with compelling evidence as to why, if you are seeking them from a third party.