Court’s power under section 236(3) Insolvency Act 1986 – Wallace v Wallace [2019]
Case background
In Wallace v Wallace [2019] EWHC 2503 (Ch) the High Court considered whether it had jurisdiction under section 236(3) of the Insolvency Act 1986 to order a third party, who was a resident outside of the UK, to deliver up documents.
The case concerned a liquidator of an insolvent company who sought an order under section 236(3) for the respondent, the former bookkeeper who was resident in Ireland, to deliver up the books and records of the company.
Key facts and decision
The Court highlighted that previous decisions of the High Court conflicted with each other on this issue. That said, the Court noted that the company’s centre of main interests was in the UK and that an Irish court would enforce an order under the Insolvency Regulation 2000. It also noted that the bookkeeper held vital information in relation to the matter. Relying on these factors the Court then made the order for disclosure as sought by the liquidator.
However, the Court stressed that section 236(3) should be viewed as a standalone power which should be regarded as completely separate from the power to summon a person to court from outside of the jurisdiction in order to provide evidence.
The Court further held that courts should be wary of making orders that attempt to regulate a third party who resides outside of the jurisdiction, particularly where the case has no direct link to that jurisdiction.
Significance
The Court emphasised two key points:
In order to use the power under section 236(3) there must be a sufficient connection to the third party residing outside the jurisdiction in order that the Court to consider that it would not be exercising its jurisdiction excessively in make the order.
Section 236(3) is different to section 235(2) of the Insolvency Act 1986 in that it is far less intrusive. The Court is purely asking for the delivery of documents rather than summoning the third party from outside of the jurisdiction and therefore the Court can not be considered to be acting excessively, when making an order under section 236(3) as long as the subject of the order has a sufficient connection with the subject insolvency.
Should you have any questions in respect of the above or require more information about insolvency generally, then please contact James Thornton or Katherine Hall from our Litigation and Dispute Resolution Team.
James Thornton – Head of Litigation and Dispute Resolution
Email: jthornton@fionabruce.co.uk
Tel: 01925 217026
Katherine Hall – Trainee Solicitor
Email: khall@fionabruce.co.uk
Tel: 01925 263273