The position in the UK regarding the extraterritorial effect of Section 236 of the Insolvency Act 1986 (whereby a liquidator may apply to Court for an order for the examination of persons relevant to company business and to compel such persons to deliver up any property or documents of the company) was somewhat uncertain until welcome clarity was provided in last week’s decision of the High Court in Wallace (as Liquidator of Carna Meats (UK) Limited) v Wallace.
In the Cayman Islands, the power of liquidators to apply to the Grand Court of the Cayman Islands for an order for the examination of persons relevant to company business and to compel such persons to deliver up any property or documents of the company is enshrined in section 103 of the Companies Law (2018). The same section (at paragraph 7) states that the Court shall have jurisdiction to make such orders against persons resident outside the Cayman Islands. However, the position in the UK was less clear.
In Wallace, the plaintiff was a liquidator appointed over a meat wholesaler who had been hampered in his investigations into the company’s affairs by a lack of books and records. Having pressed a number of the company’s officers for answers regarding their whereabouts, the liquidator finally identified the company’s former bookkeeper as likely to be the best source for relevant information and the books and records themselves. However, the former bookkeeper was resident in Ireland which raised the issue of whether section 236 had extraterritorial effect.
The Court examined past authorities noting that differing views had been expressed as to the proper scope of the section and as to whether its reach extended as far as allowing orders to be made against parties overseas. This created “a somewhat fragmented picture” in the Court’s view.
While stressing the need to be conscious of the international dimension, the key question identified by the Court was whether, in respect of the relief sought against him, the respondent is sufficiently connected with the jurisdiction for it to be just and proper to make an order despite the foreign element. In this case, the Court ruled that there was a sufficient connection as the respondent was an integral part of the company’s operations who was likely to have documents and information “critical” to the liquidator.
The Judge summarised as follows:
“It seems to me that a person who takes on the role of bookkeeper to an English company, and in that capacity has possession of the company's books and records, cannot complain that an order requiring him to make those books and records available on a winding-up involves any excess of jurisdiction by the English Court.”
The decision indicates that the UK position will now replicate that already existing in the Cayman Islands under section 107.