OTL was placed into compulsory liquidation. Prior to this it transferred monies to a trust located in HK of which N was perceived to be the principal trustee. The OR as liquidator applied for an order under s 236(3) of the Insolvency Act 1986 (IA 1986) that N produce a witness statement with supporting documents in relation to the company’s affairs. The primary question for HHJ Hodge QC was whether s 236(3) of the IA 1986 could have extra-territorial effect as N was resident in HK.
The powers conferred by s 236 of the IA 1986 were intended to enable the court to assist a liquidator to discover the truth about the affairs of a company and to complete his functions as effectively and economically as possible.
Analogies drawn in the recently decided case of MF Global between the court’s powers to compel production of a statement/supporting documents under s 25 of the Bankruptcy Act 1914 (BA 1914) and the comparable powers under s 236 of the IA 1986 were flawed. The relevant powers in s 25 of the BA 1914 were ancillary to the main power under that section of summoning a person to appear before the court for examination; the relevant powers in s 236 of the IA 1986 were separate and independent. MF Global and Re Omni Trustees Ltd could therefore be distinguished from the CA decision in Re Tucker which held that s 25 of the BA 1914 did not have extra-territorial effect.
Moreover, MF Global did not consider the decision of the CA in Mid East Trading Ltd, a successful s 236 application in respect of documents located abroad. The CA in the latter case held that in such circumstances the court should apply a balancing exercise to determine whether an order under s 236 was appropriate or whether it imposed an unnecessary or unreasonable burden on the respondent.
HHJ Hodge QC therefore concluded that an order for the production of a witness statement and documents against a person resident abroad could be made under s 236(3) upon the carrying out of such a balancing exercise.
MF Global not followed.