Monday, 12 October 2009

Section 236 of the Insolvency Act 1986 considered - Cowlishaw & Anor v O&D Building Contractors Ltd [2009] EWHC 2445 (Ch) (08 October 2009)

His Honour Judge David Cooke, sitting at the Birmingham Civil Justice Centre (pictured) as a judge of the Birmingham District Registry of the Chancery Division, has handed down his judgment in Cowlishaw & Anor v O&D Building Contractors Ltd [2009] EWHC 2445 (Ch) (08 October 2009). The case concerns, inter alia, s.236 of the Insolvency Act 1986. This provision notes that:
"(2) The court may, on the application of the office-holder, 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 subsection (2)(a) to (c) to submit an affidavit to the court containing 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) of the subsection."

"The administrators wish to consider whether they should attempt to complete the development themselves, or sell the property in its partly completed state and contend that in order to obtain advice on valuation and reach this decision they need to see the various classes of documents held by the respondent in relation to the property." But as the judge goes on to note, "The respondents expressed the concern that the administrators' true purpose is to obtain the documents so that they can be sold to a buyer as part of a package to sell the development. It is submitted on their behalf that it is an abuse of the procedure under section 236 to seek from them the "fruits of their labours"; that is to say documents produced in the course of the contract for which they have not been paid, in order to obtain, without payment, the advantage of the work they have done..."

Following a long and in-depth judgment the learned judge concludes, "the conclusion I have come to is that the administrators have shown that the documents sought will or may be of use to them and the performance of their functions. Their case as to the degree of usefulness is adversely affected by the indiscriminate nature of the application and the failure to refer in the evidence to other sources from which it, or part of it, might be available. I am not satisfied that it has been shown that any of the information requested is crucial to the outcome of the administration and unavailable from any other source, albeit that information obtained from other sources may require more expense to be incurred (such as the fees of architects or quantity surveyors) or be less complete (for instance as to the content of discussions with planning inspectors and neighbouring owners). The utility of the information to the administrators is also adversely affected by the fact that large parts of it could not be effectively used without being reproduced or supplied to third parties, in breach of the respondents copyright."

Picture Credit: http://www.earthinpictures.com/world/great_britain/birmingham/th_birmingham_civil_justice_centre_(country_courts).jpg

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