Liquidator’s Reach Extended Beyond UK Borders – Test Case Ruling

January 13, 2020

Judges are keen to support insolvency practitioners in their quest to recover funds for the benefit of creditors, and a ground-breaking High Court ruling will no doubt be greeted as a welcome extension of their reach beyond the borders of the UK.

Outline of the case

The case concerned an English-registered meat wholesaling company in liquidation. In order to recover over £800,000 that debtors owed the company, the liquidator required access to its books and records. The company’s former directors did not have them and stated that they were in the possession of its former bookkeeper, who was resident in the Republic of Ireland.

The liquidator initially had difficulty contacting the bookkeeper.  After the liquidator made contact the bookkeeper admitted having the relevant documents, but failed to produce them, stating that he was owed a considerable sum of money by the company. In those circumstances, the liquidator sought an order under Section 236 of the Insolvency Act 1986, requiring him to deliver up the company’s books and records.

Next steps in the case

In ruling on the matter, the Court noted that the question of whether Section 236 has extra-territorial reach, thus enabling an order to be made against a person who lives abroad, had been the subject of academic debate and apparently conflicting legal authority.

In granting the order sought, the Court found that, in the modern world of cross-border business practices, requiring the bookkeeper to deliver up the documents was not an excessive or exorbitant exercise of jurisdiction. The order was not so invasive as to require him to attend court in person and did not involve the exercise of anything akin to the Court’s power to order a witness to attend court.

Far from being an unconnected third party, the bookkeeper had played an important part in the company’s operations. He had been validly served with notice of the application and there was reason to believe that he was in possession of documents critical to the liquidator properly administering the winding up of the company. He was given 42 days in which to comply with the delivery up order.

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Wallace v Wallace. Case Number: CR-2016-000565