THE OFFICIAL RECEIVER v (1) MEADE-KING (2) ANDREW THOMAS GEORGE HAY and related appeals [2001] EWCA Civ 1227

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
HIS HONOUR JUDGE WEEKS QC
(sitting as a Deputy Judge)
[2001] EWCA Civ 1227Case No Case No: 2000/3575/3576/3577Venue Royal Courts of Justice, Strand, London, WC2A 2LL, Wednesday 25th July 2001
Between
THE OFFICIAL RECEIVERAppellant(1) MEADE-KING (2) ANDREW THOMAS GEORGE HAY and related appealsRespondents
Before
Lord Justice KennedyLord Justice ChadwickMr Jonathan Crow & Miss Bridget Lucas (instructed by Messrs Osborne Clarke, Bristol for the Appellant)Mr Stephen Davies QC & Mr Hugh Sims (instructed by Messrs Beachcroft Wansbrough, London for the Respondents)Date 25 July 2001
[1]CHADWICK LJ: These are appeals from orders made on 14 November 2000 by His Honour Judge Weeks QC, sitting as a Deputy Judge of the High Court in the Chancery Division, in proceedings in the liquidation of Pantmaenog Timber Company Limited ("the company"). In making those orders the judge allowed appeals from, and set aside, orders made on 2 October 2000 by District Judge Frenkel on applications made by the official receiver under section 236 of the Insolvency Act 1986 against two firms of solicitors and a firm of accountants. Those firms have taken no part in the proceedings and do not appear on this appeal. The effective respondent to the appeal is Mr Andrew Hay, a former director of the company against whom the official receiver has brought proceedings in which he seeks a disqualification order under section 6 of the Company Directors Disqualification Act 1986.[2]The appeals fall within section 55(1) of the Access to Justice Act 1999. They are brought with the permission of this Court (Lord Justice Aldous) granted on 11 January 2001. Permission was granted on the basis that the appeals raise a point of some general importance in relation to the powers of the official receiver; namely, whether, at a time when the official receiver is pursuing disqualification proceedings against a former director, the court has jurisdiction to make an order, on an application made by the official receiver under section 236 of the Insolvency Act 1986, requiring third parties to disclose documents and provide information to him in circumstances where the sole purpose of the application is to obtain evidence for use in the disqualification proceedings. The underlying facts[3]The company was incorporated under the Companies Act 1985 with the object of purchasing Pantmaenog Forest in the Pembrokeshire National Park from the Hay family trust. Mr Andrew Hay was one of the first directors of the company. The purchase was completed on 25 March 1995 by the issue to the Hay trustees of preference shares in the company. The company commenced trading shortly thereafter. It engaged Tilhill Economic Forestry Limited to provide a forestry management service.[4]On 16 May 1996 information was laid before the magistrates in Haverfordwest alleging that the company and Mr Hay had permitted the felling of trees in excess of the number allowed by the felling licence. Shortly thereafter, on 30 May 1996, Tilhill issued proceedings against the company in respect of unpaid fees. The company responded with a counterclaim alleging that Tilhill had failed to comply with instructions to obtain an adequate felling licence. On 29 April 1997 those proceedings were compromised on terms that Tilhill paid the sum of £6,500 to the company. In the meantime the company and Mr Hay had been convicted in the magistrates' court. Mr Hay's appeal to the Crown Court was dismissed on 29 November 1997. On 8 December 1997 he resigned as a director of the company. The company's appeal to the High Court, by way of case stated, was dismissed by consent on 28 January 1998. The company remained liable to pay £11,500 or thereabouts in respect of the fine and costs imposed by the magistrates.[5]The company had ceased trading on 25 September 1997. On 16 April 1998 it sold its business to a new company, Pantmaenog Limited, of which Mr Hay and his father, Mr Peter Hay, were directors. The purchase price, some £912,000, seems to have been applied in the redemption for cash of the preference shares which had been issued to the Hay trustees in 1995.[6]On 17 June 1999 an order was made in the Bristol County Court for the winding-up of the company. On the making of that order the official receiver became liquidator of the company by virtue of his office – see section 136(2) of the Insolvency Act 1986. On 30 November 1999, the registrar of companies, who appears to have been unaware that a winding-up order had been made, caused the company's name to be struck off the register under section 652 of the Companies Act 1985. Upon publication in the Gazette that that had been done, the company was dissolved – see section 652(5) of that Act. The Disqualification Act proceedings[7]Section 6(1) of the Company Directors Disqualification Act 1986 requires the court, on an application under that section, to make a disqualification order against a director or former director of a company which has become insolvent if satisfied that his conduct as a director of that company makes him unfit to be concerned in the management of a company. A disqualification order, in that context, is defined by section 1(1) of that Act. Section 7(3) of the Disqualification Act requires the official receiver (in a case where the company is being wound up by the court in England and Wales), if it appears to him that the conditions mentioned in section 6(1) are satisfied as respects a person who is or has been a director of that company, to report that matter to the Secretary of State. It is for the Secretary of State to decide whether it is expedient in the public interest that a disqualification order under section 6 of the Act should be made against a person who is the subject of a report made under section 7(3) – see section 7(1) of the Act. But, where the Secretary of State is of the view that a disqualification order should be made, an application for such an order may be made, if the Secretary of State so directs and where the company is being wound up by the court in England and Wales, by the official receiver – see paragraph (b) of section 7(1).[8]An application for a disqualification order under section 6 of the Disqualification Act against Mr Hay was made by proceedings commenced in the Bristol County Court on 29 February 2000. The application was made by the official receiver, purporting to act on the direction of the Secretary of State under section 7(1)(b) of that Act. The application, when made, was irregular in that – unknown to the official receiver and, no doubt, to the Secretary of State – the company had been dissolved some three months earlier. The effect of dissolution was that, at the date when the application for a disqualification order was made, the company was, strictly, no longer being wound up by the court – so that section 7(1)(b) had no application. In the circumstances as they were at the time, the application for a disqualification order should have been made by the Secretary of State, acting under section 7(1)(a). But the proceedings, although irregular, were not fatally flawed. The normal course, upon the official receiver and the Secretary of State becoming aware of the dissolution, would have been to transfer the proceedings from the County Court to the High Court and to substitute the Secretary of State as applicant in the place of the official receiver – see In re NP Engineering and Security Products Limited [1998] 1 BCLC 208. An application for transfer and substitution was, in fact, made jointly by the official receiver and the Secretary of State in the present case, on 4 September 2000; but, in circumstances which I shall describe, it was not pursued.[9]Proceedings under the Disqualification Act are subject to the Insolvent Companies (Disqualification of Unfit Directors) Proceedings Rules 1987 (SI 1987/2023). Rule 3(1) of those rules requires that, at the time when the proceedings are issued, there must be filed in court evidence in support of the application for a disqualification order. Where the applicant is the official receiver, that evidence is in the form of a written report "which shall be prima facie evidence of any matter contained in it" – see rule 3(2). Rule 3(3) requires that the official receiver's report shall include "a statement of the matters by reference to which the [respondent] is alleged to be unfit to be concerned in the management of a company".[10]The application for a disqualification order against Mr Hay was supported by a report made by the official receiver and dated 29 February 2000. No copy of that report has been put before this Court; but it appears from the judgment delivered by His Honour Judge Weeks QC on 14 November 2000 (now reported at [2001] 1 WLR 730) at page 733C-D, that the report contained three allegations of misconduct on the part of Mr Hay:(i) causing the company to redeem the preference shares before paying the fine and costs imposed by the magistrates;(ii) failing to ensure that adequate accounting records were kept; and(iii) causing the company to contravene its felling licence. The first of those matters – causing the company to redeem the preference shares issued to the Hay trustees – took place some two years after Mr Hay had resigned as a director of the company. As

the judge put it, at page 733D in his judgment:

"It was alleged (implicitly if not explicitly) that Mr Hay was a de facto director after his resignation on 8 December 1997."
[11]Rule 6(1) of the 1987 rules provides for the respondent to an application for a disqualification order to file in court such affidavit evidence in opposition to the application as he wishes the court to take into consideration. Mr Hay did not take that course. Instead he applied for an order that the official receiver's evidence be struck out and that the proceedings against him be dismissed. The grounds stated in his application were that "the claimant does not provide sufficient evidence to support his allegations and/or to disclose a cause of action . . .". The application was supported by a witness statement, dated 16 May 2000 and signed by a partner in the firm of Meade-King, solicitors, who had acted for the company both in the civil proceedings brought by Tilhill and in the criminal proceedings in the Haverfordwest magistrates court. He had also acted from time to time for Mr Hay and for his father, Mr Peter Hay.[12]On 16 August 2000 the Bristol County Court gave notice that Mr Hay's application to strike out the proceedings against him was listed for hearing before His Honour Judge Weeks QC on 12 October 2000. In the circumstances to which I am about to refer, that application has not yet been heard. The proceedings in the liquidation[13]As I have said, the winding up order was made on 17 June 1999. Section 132 of the Insolvency Act 1986 provides that where an order for winding up is made by the court in England and Wales it is the duty of the official receiver to investigate the causes of failure of the company and to make a report. Over the next five months the official receiver made enquiries of both Mr Hay and his father, and also of Messrs Wadge Rapps & Hunt, the firm of solicitors who had acted on the transfer of the Pantmaenog woodlands from the company to Pantmaenog Limited. It is reasonable to assume that it was as a result of a report made following those enquiries that the Secretary of State decided that it was expedient in the public interest that a disqualification order should be made. No immediate steps were taken to appoint an insolvency practitioner as liquidator in the place of the official receiver pursuant to section 137(1) of the Act.[14]It appears that neither the official receiver nor the Secretary of State became aware, until September 2000, that the company had been dissolved under section 652(5) of the Companies Act 1985 on 30 November 1999. On 1 June 2000, the Secretary of State purported to appoint Mr M P Gerrard, a partner in Messrs Grant Thornton, as liquidator in place of the official receiver. The appointment was ineffective in law - at the time when it was made - because, for the reason which I have already explained, the company was then no longer in the course of winding up. But the practical effect was that the company's books and papers were transferred to Mr Gerrard.[15]On 4 September 2000, as I have said, the official receiver and the Secretary of State made a joint application to transfer the disqualification proceedings to the High Court and to substitute the Secretary of State as claimant in those proceedings. Some nine days later, however, the official receiver had second thoughts. As

the judge put it, at page 735D in his judgment:

"On 13 September . . . the Official Receiver changed tack"
. He issued an application in his own name, and in the name of the company, to which the registrar of companies and the Treasury Solicitor were the only respondents, seeking an order under section 653 of the Companies Act 1985 for the restoration of the company's name to the register. The grounds of the application, as recorded by the judge (at page 7G-H), were that "Mr Gerrard as liquidator could then issue misfeasance proceedings seeking repayment of some £387,000". The order was made by the district judge, without opposition, at a hearing on 2 October 2000. No notice of that hearing was given to Mr Hay. The effect of the order restoring the name of the company to the register was that the company was deemed to have continued in existence as if its name had not been struck off – see section 653(3) of the 1985 Act. By that means the initial defect in the constitution of the disqualification proceedings was cured; the official receiver could rely on section 7(1)(b) of the Disqualification Act. The applications under section 236 of the Insolvency Act 1986[16]Faced with Mr Hay's application to strike out the disqualification proceedings the official receiver sought disclosure of documents from Meade King, Wadge Rapps and Hunt and Grant Thornton. His letters to those firms, requesting access to their files relating to the company's affairs, are dated 25 and 27 July 2000. It is apparent that Mr Hay was made aware of those requests; although not by the official receiver. Each of the three firms replied to the official receiver to the effect that Mr Hay, his father, or a company with which Mr Hay was associated, AJP Management Limited, were claiming confidence in or ownership of, the files in their possession. The position adopted appears from a letter dated 11 September 2000 from Messrs Beachcroft Wansborough, written on behalf of AJP Management Limited but at a time when that firm also acted for Mr Hay, to Messrs Osborne Clarke OWA, the solicitors instructed by the official receiver:
"It is acknowledged that some of the material on file may be susceptible to an application under section 236 of the Insolvency Act . However our client's instructions are to refuse consent to disclosure of the files save material properly relating to the business dealings and affairs of Pantmaenog and which is not otherwise protected from the duty of disclosure. In order properly to advise our client we do need to see the files ourselves. As we understand it Meade King's position is that they will not releases the files to either side without agreement. Therefore as a pragmatic solution we should invite you to agree that the files should be released from Meade King to ourselves, in order that we may conduct a review and advise our client in detail on the question of disclosure. As a result of that process it may be that we are able to authorise the release of material relating to Pantmaenog that will obviate the need for litigation on this issue. We regret that our client has not authorised the disclosure of further details of the Grant Thornton advice beyond that already disclosed. Our instructions are that the advice was provided to the trustees of the Hay family trust and not to Pantmaenog."
[17]The suggestion that Mr Hay's advisers should see the material first, so that they could satisfy themselves what (if anything) was properly the subject of claims to confidentiality or ownership, was not acceptable to the official receiver and his advisers. On 26 September 2000 Osborne Clarke issued applications on behalf of the official receiver for production of documents relating to the affairs or property of the company. Those applications were heard by District Judge Frenkel on 2 October 2000, immediately after the application under section 653 of the Companies Act 1985 for the restoration of the company to the register. 18. Section 236 of the Insolvency Act 1986 is in these terms, so far as material:
"(1) This section applies as does section 234; and it also applies in the case of a company in respect of which a winding-up order has been made by the court in England and Wales as if references to the office-holder included the official receiver, whether or not he is the liquidator. (2) The court may, on the application of the office-holder, summon to appear before it – . . . (c) any person whom the court thinks capable of giving information concerning the promotion, formation, business, dealings, affairs or property of the company. (3) The court may require any such person as is mentioned in subsection (2)(a) to (c) to . . . produce any books, papers or other records in his possession or under his control relating to the company or the matters mentioned in paragraph (c) of the subsection."
The effect of the opening words of section 236(1) – "This section applies as does section 234" – is that section 236 of the Act applies where a company goes into liquidation. In the context of section 234 "office-holder" includes the liquidator; but the effect of the second limb of section 236(1) is that that expression, in the context of section 236, also includes the official receiver, whether or not he is also the liquidator.[19]The affidavits sworn by Mr Nigel Boobier, a solicitor employed by Osborne Clarke, in support of the applications for orders for the production of documents under section 236(3) of the Insolvency Act, contained a paragraph (paragraph 4) in the following terms:
"The Claimant [meaning the official receiver] is investigating in accordance with his statutory duty the business, dealings and affairs of Pantmaenog Timber Company Limited ("the Company") pursuant to Section 132 of the Insolvency Act 1986 ("the Act"). In addition, the Claimant has issued proceedings against some directors of the Company pursuant to the Company Directors Disqualification Act 1986."
That paragraph may, I think, fairly be described as disingenuous. The true position appears from a passage in the judgment below, at page 736G-H:
"It was conceded before me that the sole purpose of seeking those orders was to obtain evidence to be used by the official receiver in the disqualification proceedings, either on Mr Hay's application to strike out or subsequently. The district judge was not told that that was the sole purpose, although he was aware that the official receiver might find the documents useful in those proceedings."
The orders made by the district judge[20]The district judge made the orders sought. He ordered that Meade-King "do within 7 days from the date of this order produce to the Claimant or his solicitors copies of all correspondence, internal memoranda, books, records, accounts, receipts, invoices and other documentation in [their] custody, possession or power which relate to the promotion, formation, business, dealings affairs or property of Pantmaenog Timber Co Ltd, which includes documentation relating to proceedings by Tilhill Economic Forestry Ltd and dealing with a criminal prosecution both against the company." Further that Meade-King make available for inspection and provide printed copies of all information stored electronically relating to those matters. Orders against Wadge Rapps and Hunt and Grant Thornton were made in similar terms; save that the documents and information to be produced by Wadge Rapps and Hunt were limited to those which related to the transfer of the Pantmaenog woodlands from the company, and the documents and information to be produced by Grant Thornton were limited to those which related to advice provided in relation to the company concerning the redemption of preference shares in the company. Each of the orders required Mr Hay to pay the official receiver's costs, assessed in the sum of £500.[21]We have been provided with a note of the district judge's reasons for the orders which he made. He said this:
"I have a wide discretion under section 236 of the Insolvency Act 1986. The Official Receiver is applying for specific disclosure of documents. I am satisfied that no one can suffer any prejudice or trespass upon their legal rights of privilege or fear that other documents under the draft order being disclosed. The three applications relate to documents which either belong to or relate to the Company . . . Mr Hay seeks to rely on some form of oppression by the disclosure of the documents as the Official Receiver may find them useful in the Company Directors Disqualification proceedings. I make my order with that in mind and that that might be the case. I however see nothing oppressive. The Official Receiver has to act in the public interest and if the Official Receiver seeks to introduce further evidence, it seems to me that if that puts the Defendant [meaning Mr Hay] at a disadvantage then the Court may adjourn the hearing to reconsider the position."
[22]Neither Meade-King, Wadge Rapps and Hunt nor Grant Thornton attended or were represented before the district judge. Each had written to the court indicating, I think, that they were content to abide with whatever order it should make. Mr Hay had been made a party to the applications under section 236 of the Insolvency Act 1986. He was represented by solicitors and, as I have said, the district judge made orders for costs against him. The decision in the High Court[23]Mr Hay appealed to the High Court, as he was entitled to do under rule 7.47(2) of the Insolvency Rules 1986 (SI 1986/1925). The primary submission made on his behalf – as appears from the judgment at [2001] 1 WLR 730, 737E-F – was that section 236 of the Insolvency Act could not be invoked in order to obtain documents or information for use in disqualification proceedings; at least where those proceedings had been commenced before the application under section 236 was made. The judge accepted that submission – see at pages 737F and 740A. He went on to say this, at page 740A-B:
"It follows from the concession made to me that the orders ought not to have been made in the instant case and I will set them aside. I understand that in two cases they have already been complied with and I will order the return of any documents supplied under those orders and any copies already taken."
The "concession" to which the judge was referring in that passage was that which he had set out earlier in his judgment, at page 736G-H; namely that the sole purpose of seeking orders under section 236 of the Insolvency Act had been to obtain evidence to be used by the official receiver in the disqualification proceedings.[24]In reaching the conclusion which he did the judge reminded himself of the observations of Lord Slynn of Hadley in British & Commonwealth Holdings Plc v Spicer and Oppenheim [1993] AC 426, at page 439D-E:
" . . . it is plain that this [the power under section 236] is an extraordinary power and that the discretion must be exercised after a careful balancing of the factors involved – on the one hand the reasonable requirements of the [office-holder] to carry out his task, on the other the need to avoid making an order which is wholly unreasonable, unnecessary or 'oppressive' to the person concerned."
Lord Slynn went on, in a passage to which

the judge did not refer expressly but which he plainly had in mind, to say this, at page 439G-H:

"The protection for the person called upon to produce the documents lies, thus, not in a limitation by category of documents ('reconstituting the company's knowledge') but in the fact that the applicant must satisfy the court that, after balancing all the relevant factors, there is a proper case for such an order to be made. The proper case is one where the [office-holder] reasonably requires to see the documents to carry out his functions and the production does not impose an unnecessary and unreasonable burden on the person required to produce them in the light of the [office-holder's] requirements."
[25]It is important to keep in mind that, in the present case, the persons required to produce the documents – Meade-King, Wadge Rapps and Hunt and Grant Thornton – were not suggesting that orders under section 236 of the Act would impose unnecessary or unreasonable burdens upon them. There was no reason, on that ground, to refuse the orders sought. The judge based his conclusion on the premise that the first limb of Lord Slynn's test was not satisfied; that is to say, that this was not a case in which the official receiver needed to see the documents in order to carry out his functions. He said this, at [2001] 1 WLR 730, 739F-H:
"In relation to non-disqualification proceedings, the court in earlier cases sought to draw a line named after an Italian river, the Rubicon. Once that line had been crossed, compulsory powers of obtaining documents were no longer available. In relation to disqualification proceedings, the line is, in my judgment, effectively drawn by the scheme of the legislation. It comes after the report under section 7(3) of the Company Directors Disqualification Act 1986, which is part of the investigative functions of the office holder and for which a period of two years is allowed, and before the initiation of the proceedings under section 7(1), which is an entirely different function of the official receiver, if so directed by the Secretary of State. In the proceedings the Secretary of State or the official receiver has the usual methods available to any litigant of obtaining the production of documents or the attendance of witnesses. It is not necessary for him to have the special advantages of sections 235 and 236 in the proceedings because the office holder has, ex hypothesi, already reported under section 7(3). If the Secretary of State or the official receiver requires further information or papers from the liquidator, he has the specific powers conferred on him by section 7(4) of the Company Directors Disqualification Act 1986."
[26]The crossing of the Rubicon – familiar to students of Caesar's campaign against Pompey - made its first appearance as a tool of judicial analysis in this field, I think, in the submission of Mr John Lindsay (as he then was) to Mr Justice Slade in In re Castle New Homes Ltd [1979] 1 WLR 1075, at page 1089D. It came to signify the point after which the court would not, in practice, permit a liquidator to have recourse to the powers, formerly contained in section 268 of the Companies Act 1948 and now found in section 236 of the Insolvency Act 1986. Mr Justice Slade propounded the test in Castle New Homes at page 1089G-H:
"If the evidence shows that the purpose of a liquidator in seeking the examination is to achieve an advantage beyond that available to the ordinary litigant, in litigation which he has commenced or which he has definitely decided to commence, the predisposition of the court may well be to refuse an immediate order for examination, unless the liquidator can show special grounds to the contrary. If, however, it appears from the evidence that the object of the liquidator is simply to elicit information which will enable or assist him to decide whether or not his company has a valid claim against a third party, the court will approach the liquidator's application with no such predisposition."
By 1990, when there was an opportunity for this Court to consider the point in Cloverbay Ltd v Bank of Credit and Commerce International S.A. [1991] Ch 90, 'the Rubicon test', as it had become known, had become entrenched in the practice of the Companies Court. It was disapproved by this Court in Cloverbay - see the observations of Sir Nicolas Browne-Wilkinson, Vice-Chancellor, at page 101E-H and of Lord Justice Nourse at page 106C-G. In a passage subsequently reflected in the speech of Lord Slynn in British & Commonwealth Holdings, the Vice-Chancellor said this, at page 102A-C:
"The words of the Insolvency Act 1986 do not fetter the court's discretion in any way. Circumstances may vary infinitely. It is clear that in exercising the discretion [under section 236 of the Act] the court has to balance the requirements of the liquidator against any possible oppression to the person to be examined. Such balancing depends on the relationship between the importance to the liquidator of obtaining the information on the one hand and the degree of oppression to the person sought to be examined on the other."
In so far as His Honour Judge Weeks QC was seeking to revive and apply a 'Rubicon test' in the present case - as counsel who appears for the official receiver on this appeal submits that he was - the judge was in error. For my part, however, I doubt if that was in the judge's mind. I think it reasonably clear that he took the view that the conclusion which he reached was the necessary result of a process of statutory construction.[27]Sections 7(3) and (4) of the Disqualification Act, to which the judge referred in the passage of his judgment at [2001] 1 WLR 730, 739F-H which I have set out, are in these terms:
"(3) If it appears to the office-holder responsible under this section, that is to say – (a) in the case of a company which is being wound up by the court in England and Wales, the official receiver, (b) in the case of a company which is being wound up otherwise, the liquidator, (c) in the case of a company in relation to which an administration order is in force, the administrator, or (d) in the case of a company of which there is an administrative receiver, that receiver, that the conditions mentioned in section 6(1) are satisfied as respects a person who is or has been a director of that company, the office-holder shall forthwith report the matter to the Secretary of State. (4) The Secretary of State or the official receiver may require the liquidator, administrator or administrative receiver of a company, or the former liquidator, administrator or administrative receiver of a company - (a) to furnish him with such information with respect to any person's conduct as a director of the company, and (b) to produce and permit inspection of such books, papers and other records relevant to that person's conduct as such director, as the Secretary of State or the official receiver may reasonably require for the purpose of determining whether to exercise , or of exercising , any function of his under this section."
[emphasis added] It is clear from the words which I have emphasised that the power conferred on the Secretary of State by section 7(4) of the Act – to require an office-holder to provide information or to produce documents is exercisable both before and after he has reached any decision, under section 7(1), that it is expedient in the public interest that a disqualification order under section 6 should be made. It is clear, also, that – in a case where the application for a disqualification order is to be made by the official receiver under section 7(1)(b), after such a decision has been reached by the Secretary of State – the official receiver has power, under section 7(4) of the Disqualification Act, to require an office holder to provide information or to produce documents for the purpose of pursuing that application.[28]The view which the judge took made it unnecessary for him to consider whether the orders could be challenged on the grounds that the district judge had erred in the exercise of his discretion. But he said this in the penultimate paragraph of his judgment, at [2001] 1 WLR 730, 740B-C:
"[Counsel] had alternative submissions as to the exercise of discretion that exists under section 236. I do not think I need to go into those submissions in any detail, but I should record some concern at the width of the orders and the fact that they were obtained on short notice and without joining all the parties who asserted title to the documents or rights to keep them private. The order addressed to Grant Thornton is particularly surprising because, on the face of it, it extends to advice given to anyone in relation to the company and neither Mr Peter Hay nor the Hay Trust, to whom the advice was allegedly given, was joined as a party to the application."
Was there jurisdiction to make an order under section 236 of the Insolvency Act 1986?[29]As I have indicated, the question of principle raised by this appeal is whether, at a time when the official receiver is pursuing disqualification proceedings against a former director, the court has jurisdiction to make an order under section 236 of the Insolvency Act requiring third parties to disclose documents and provide information to him in circumstances where the sole purpose of the application is to obtain evidence for use in the disqualification proceedings.[30]Section 236(2) of the Insolvency Act must be read in conjunction with the two sections which precede it. Section 234 gives the court power to require any person who has in his possession or control any property, books, papers or records to which the company appears to be entitled to deliver the property, books, papers or records to the office-holder. In that context the office holder means the administrator, the administrative receiver, the liquidator or the provisional liquidator (as the case may be) but does not include the official receiver – unless, of course, he is liquidator or provisional liquidator. Section 235 imposes a duty on those who are or have been officers or employees of the company to co-operate with the office-holder; and, in particular, to give to the office-holder such information concerning the company as he may reasonably require. The obligation is enforced by a penal sanction – see section 235(5). Section 236 reinforces sections 234 and 235; but goes one step further. It enables the court to summon before it any person whom the court thinks capable of giving information concerning the affairs or property of the company – see section 236(2)(c) - and to require any such person to produce books, papers or other records in his possession or under his control (whether or not such books, papers and records belong to the company or to the person summoned to appear). The power is enforceable by arrest – see section 236(5).[31]Sections 235 and 236 extend the meaning of "office-holder" to include the official receiver (whether or not he is the liquidator of the company) in cases where the company is the subject of a winding up order made by the court in England and Wales. In order to understand why that was thought appropriate it is necessary to have regard to sections 132 and 133 of the Act, and to sections 136 and 137.[32]Section 132 of the Act provides that where a winding up order is made by a court in England and Wales it is the duty of the official receiver to investigate, if the company has failed, the causes of the failure; and, if he thinks fit, to make a report to the court. Section 133 provides that, where a company is being wound up by the court in England and Wales, the official receiver may apply to the court for the public examination of any person who has been an officer of the company or has been concerned in its promotion, formation or management. Sections 235 and 236 of the Act may be seen as a further adjunct to section 132; that is to say, as providing the means (short of public examination under section 133) by which the official receiver can carry out the duties imposed on him by section 132.[33]Section 136 of the Act applies, also, in cases where a company is being wound up by the court in England and Wales; save in the case where the winding up order follows immediately upon the discharge of an administration order or where there is an existing voluntary arrangement – see section 140. In a case to which section 136 applies, the official receiver becomes the liquidator of the company by virtue of his office, until some other person is appointed in his place – either by the Secretary of State under section 137(1) or by the creditors or contributories under section 139. The effect of sections 235 and 236, therefore, is to provide the official receiver with the investigatory powers which he requires in order to carry out the duty imposed upon him by section 132, notwithstanding that he may have been replaced as liquidator of the company.[34]For the purposes of the provisions of the Insolvency Act to which I have referred, the "official receiver" in relation to a company means (subject to any direction given by the Secretary of State under section 399(6) or any appointment made under section 401(1) of the Act) the person holding the office of official receiver who is attached to the court in which the company is being wound up – see sections 399(1) and (4). The same person is the "official receiver" for the purposes of the Disqualification Act – see section 21(1) of that Act.[35]With those provisions in mind, it is easy to see why, in a case where a company is being wound up in England and Wales, section 7(3)(a) of the Disqualification Act provides that the person to consider whether the conditions mentioned in section 6(1) of the Act are satisfied as respects a person who is or has been a director of that company, and to make a report to the Secretary of State to that effect, is the official receiver; and why section 7(1)(b) provides that the Secretary of State may direct that, in the case of a person who is or has been a director of a company which is being wound up by the court in England and Wales, the application for a disqualification order under section 6 of that Act should be made by the official receiver. In such a case the official receiver – being the official receiver attached to the court in which the company is being wound up - is likely to be familiar with the affairs of the company and the conduct of persons in relation to it. He will have investigated the causes of failure ( ex hypothesi the company will be a company which has failed – see section 6(1)(a) of the Disqualification Act and section 132(1)(a) of the Insolvency Act). He may have made a report to the court as a result of that investigation – see section 132(2) of the Insolvency Act. He will have become the liquidator (save in a case within section 140 of the Act) – see section 136 of the Insolvency Act – and may still be in office as liquidator.

(b) of the Disqualification Act

[36]It does not follow, however, that the official receiver is entitled to invoke the powers conferred by section 235 and 236 of the Insolvency Act for the purpose of carrying out the role entrusted to him by the Secretary of State under section 7(1)(b) of the Disqualification Act. The question, as the judge identified, is for what purpose have powers been conferred on the official receiver by section 235, and on the court by section 236; in particular, does that purpose extend to the obtaining of information and documents solely for use as evidence in proceedings under the Disqualification Act. In my view the judge was right to answer that question in the negative.[37]There are, as it seems to me, two reasons which compel that conclusion. First, in a case where the company is not being wound up by the court, the applicant in any disqualification proceedings must be the Secretary of State. The Secretary of State is not a person who can invoke, directly, the powers conferred by sections 235 and 236 of the Insolvency Act. It is true that the Secretary of State can require the liquidator of the company, under section 7(4) of the Disqualification Act, to furnish him with information and to produce books and papers relating to the conduct of a person against whom an application for a disqualification order has been made. That is the effect of the words " or of exercising any function of his under this section " which appear in section 7(4). It was suggested in argument, by counsel for the official receiver, that, in the exercise of that power the Secretary of State could require the liquidator to exercise the power conferred on him under section 235 of the Insolvency Act, and could require the liquidator to make an application under section 236 of that Act. Further, it was submitted that the liquidator could properly exercise the power under section 235, or apply to the court for an order under section 236, in order to obtain information and documents for the sole purpose of use by the Secretary of State in disqualification proceedings. In my view those contentions are misconceived. The reason, as it seems to me, is that the powers conferred by sections 235 and 236 are conferred on the liquidator for the better discharge of his functions in the winding up; and are not conferred to enable the Secretary of State to obtain, indirectly, information and documents which Parliament has not thought it necessary or appropriate to enable him to obtain directly. There is no reason to think that Parliament intended that the powers to obtain information and documents for use in disqualification proceedings should be any greater in a case where the company was being wound up by the court in England and Wales than in a case where the company was in voluntary winding up. As I have sought to explain, the role of the official receiver in relation to disqualification proceedings in a case where the company is being wound up by the court is attributable to considerations of convenience and cost; there is no reason to explain that role on the basis that it reflects an intention to provide enhanced powers in relation to the obtaining of information and documents.[38]Second, in a case where the company is being wound up by the court in England and Wales, the function of the official receiver, under the Insolvency Act, is to investigate the causes of failure and to make a report to the court – see section 132 of that Act. It was plainly intended that the official receiver should be able to invoke the powers conferred by sections 235 and 236 for the purpose of discharging that function. Equally, as it seems to me, information which he obtains in the course of discharging his function under section 132 of the Insolvency Act is information to which he is intended to have regard, and to take into account, in making the report to the Secretary of State which section 7(3)(a) of the Disqualification Act requires. And, information which he obtains in the course of discharging his function under section 132 of the Insolvency Act is information which he is intended to use in pursuing disqualification proceedings, if that role is entrusted to him under section 7(1)(b) of the Disqualification Act. But the official receiver cannot have been intended to invoke the powers conferred by sections 235 and 236 of the Act either(i) for the purpose of carrying out his role under section 7(3) of the Disqualification Act – save in so far as that is incidental to the discharge of his function under section 132 of the Insolvency Act – or(ii) for the purpose of obtaining evidence for use in disqualification proceedings of which he has conduct under section 7(1)(b) of the Disqualification Act – again, save in so far as that is incidental to the discharge of his function under section 132 of the Insolvency Act. The reason is to be found in section 7(4) of the Disqualification Act. Unlike the Secretary of State – who may require information or documents under that section for the purpose of determining whether it is expedient in the public interest that a disqualification order should be made – the only purpose for which the official receiver could require an office-holder to provide information or documents under section 7(4) of the Disqualification Act would be that he reasonably required that information in connection with his functions under section 7(3)(a) or 7(1)(b) of that Act. But, if those were functions in connection with which the powers conferred by section 235 and 236 of the Insolvency Act could be invoked, section 7(4) – in so far as it applies to the official receiver - would be otiose. There would be ample power to obtain, under section 235(3)(c), any information which the official receiver required from a liquidator, administrator or administrative receiver. The inference, as it seems to me, is that Parliament included a reference to the official receiver in section 7(4) of the Disqualification Act because it was necessary to do so. It was thought necessary to do so, because Parliament did not contemplate that the official receiver would be able to invoke sections 235 and 236 of the Insolvency Act for that purpose. It is pertinent to keep in mind that the Insolvency Act and the Disqualification Act were enacted on the same day (25 July 1986) and form part of the same corpus of legislation.[39]It follows that I would hold that the court has no power to make an order, on the application of the official receiver under section 236 of the Insolvency Act, for the production of documents in circumstances where the sole purpose of the application is to obtain documents for use as evidence in pending proceedings under the Disqualification Act. I prefer not to attribute that result to an absence of jurisdiction in the court; rather, it follows from the conclusion that an application made for that sole purpose is an application which falls outside the scope of the section. It is an application made for an improper purpose – in this context – and the court should not entertain it. But the distinction may be no more than semantic. Conclusion[40]The conclusion which I have reached makes it unnecessary to consider whether the orders made on 2 October 2000 could be challenged on the grounds that the district judge had erred in the exercise of his discretion. But, for completeness, I should make it clear(i) that I share the concern of His Honour Judge Weeks QC as to the circumstances in which those orders were obtained, and as to their width,(ii) I would have held (if it had been necessary) that the district judge's exercise of his discretion could not stand in the circumstances that he was not informed that the sole purpose for which the orders were sought was for use as evidence in pending disqualification proceedings, and (iii), if it were a matter for the exercise of discretion in this Court, I should not have thought it right to make the orders sought in the circumstances that there was a pending application to strike out the disqualification proceedings. That application, as it seems to me, falls to be determined on the basis of the case which the official receiver has advanced in his report under rule 3 of the 1987 Rules. It is important to keep in mind that the purpose of that rule is to require the applicant for a disqualification order to set out the case which a respondent is called upon to meet under section 6 of the Disqualification Act.[41]I would dismiss this appeal.

LORD JUSTICE KENNEDY:

[42]I agree.

ORDER

Appeal dismissed with costs to be subject to detailed assessment if not agreed; Official Receiver to make payment on account; agreed minute of costs order to be lodged with the court; leave to appeal refused. (Order does not form part of approved Judgment)

Cited in 1 later judgment