The decision of the English High Court in Willmont and Finch v Shlosberg clarifies how insolvency practitioners can use and disclose documents obtained under compulsion or litigation to related insolvency estates.
This case concerned the bankruptcy of Mr Schlosberg and the liquidation of his company Webinvest Ltd (the estates). Mr Willmont, was a joint liquidator of the company and a joint trustee of the bankruptcy. The trustees and the liquidators (the officeholders) were investigating transactions which involved the estates and the issue was whether information could be shared and used between the common officeholders. The officeholders were also advised by the same solicitors.
The Court found no issue with the dual role held by Mr Willmont as common officeholder and the sharing of information obtained by compulsion. It found that the sharing of information between common officeholders of connected estates is inevitable. However, if the information is not permitted to be shared between those estates, only the estate that first obtained the information may use them in proceedings.
Permission of the Court is not required to share with officeholders of subsidiary companies material obtained by compulsion where the estate includes shares in subsidiary companies and there is a real rather than fanciful (but not necessarily likely) prospect of a surplus in the subsidiaries which would benefit the shareholders.
However, disclosure is not permitted if material obtained by compulsion may assist in discovering dishonesty or malpractice. Permission of the Court would be required.
Information that has been obtained by disclosure in litigation does not prevent the common officeholder from reviewing that information notwithstanding that it may be relevant to the connected estates. Where the parties are experienced insolvency practitioners, the risk of unconscious use of disclosure material is not real. However, in cases where trade secrets are involved, this risk may be real unless appropriate safeguards are implemented.
See Court decision here.