Sandford Farm Properties Ltd v Wharf Land Investments Ltd & Douglas Maggs
An order which permitted a liquidator to disclose the product of a private examination of a director under the Insolvency Act 1986 s.236 to the assignee of claims vesting in an insolvent company was varied to permit a second assignee to have disclosure. There was no evidence of any breach of the previous order and the situation could not be distinguished from one where the liquidator had sought to use the information himself.
The applicant company liquidator applied for an order permitting the product of a private examination of the second respondent director to be disclosed to the proposed assignee of a claim.
The liquidator had assigned claims vesting in the company to one of the company's investors on terms that the company would take a 15 per cent share of any recovery. By consent the court made an order under the Insolvency Act 1986 s.236 for a private examination of the director and listed specific documents that he had to disclose. The order provided that the liquidator was able to disclose the product of that examination to the investor on the condition that the investor undertook to use the information in confidence for the benefit of the company, on the same terms that the liquidator would have been able to use the information. The investor sought to re-assign a proprietary claim to the proposed assignee on the same terms. The liquidator therefore sought permission to amend the previous order to allow for disclosure on the same terms to the proposed assignee.
The respondents submitted that the proposed assignee (1) had not explained how it had identified one of the defendants to the proprietary claim, showing that the liquidator had breached the previous order and had not come to the court with clean hands; (2) had knowledge of significant events, relevant to the expiry of the limitation period for the claim, that could only have arisen from access to a diary revealed by the examination; (3) would obtain a windfall if the application was granted, and obtaining the documents would make it impossible to establish any previous breach.
(1) Most of the authorities dealt with when the court should make an order for private examination under s.236. In the instant case, that order had already been made and had dealt with disclosure to a third party, namely the investor. The question of whether the procedure would gain an unfair advantage for the liquidator against the examined party was relevant, British & Commonwealth Holdings Plc (In Administration) v Barclays de Zoete Wedd Ltd (No.1)  B.C.C. 200 and Esal Commodities Ltd (No.2), Re  B.C.C. 708 applied. The opposition to the instant application, which effectively sought to replace the assignee in respect of the proprietary claim, was opportunistic. The clean hands point was hopeless. There was no evidence to indicate how the defendant in question had been identified. There had to be much more to found a clean hands argument. (2) The submission regarding the diary was pure speculation. It was also questionable that such use of the diary would constitute a breach of the previous order: the investor had undertaken to use the information only for the company's benefit, and if the limitation period expired then the company would lose the right to a proportion of any recovery by the proposed assignee. (3) There would be no windfall. The situation could not be distinguished from one where the liquidator had sought to use the information himself. There was no reason for the position to be worse for an assignee, or a second assignee. None of the arguments established a difference between the situation at the time of the previous order and at the instant hearing. There was no evidence of any breaches, and the court could not see why making an order now would prevent any previous breach from being proven, although there was no proper evidence at the instant time. The substance of the application was to switch one assignee for another; the benefit to the company would remain exactly the same, and there was no unfairness or special advantage conferred that overrode the benefit to the company. There was no reason to refuse the application.