In the High Court decision of Jackson v Baker Tilly (unreported, 10 April 2014), the liquidators of an insolvent company successfully applied for the company's accountants to produce documents detailing their dealings with the company.
The accountants had audited the company's accounts in the period before it became insolvent. During the liquidation process, the liquidators became concerned about several tax issues and concluded that the accountants may hold relevant information that could assist them. They requested information concerning the company and its promotion, formation, business, dealings, affairs or property, pursuant to s.235 and s.236 of the Insolvency Act 1986.
The accountants refused to provide the documents, claiming that although they had audited the company's accounts, they had not advised on any tax matters. They also objected to the scope of the search and claimed that the relevant files contained legally privileged and confidential information. The liquidators therefore applied to the court for production of these documents and the court had to determine:
- whether the liquidators reasonably required the information sought; and
- whether the accountants' disclosure obligations were unreasonable, unnecessary or onerous.
The court granted the application, stating that the liquidators had limited information about the company's financial procedures and they should be entitled to search for further documentation. The court emphasised that they were experienced liquidators performing a statutory function and had provided sworn testimony outlining their reasons for the application.
The disclosure obligations were not considered unreasonable, unnecessary or onerous because the firm of accountants had the professional capability to search for the documents. The court held that the request was reasonable because it was primarily aimed at obtaining accounting details and potential tax advice.
Although an unreported decision this case does illustrate that an accountant can be ordered to hand over copies of its files to the liquidator of an insolvent company, if the liquidator reasonably requires the files in question to carry out their statutory duties and the disclosure sought is not unreasonable, unnecessary or oppressive.