Law Report: Disclosure orders are not limited: Re British & Commonwealth Holdings plc (No 2) - House of Lords (Lord Keith of Kinkel, Lord Ackner, Lord Jauncey of Tullichettle, Lord Lowry and Lord Slynn of Hadley), 29 October 1992

The court's power, under section 236 of the Insolvency Act 1986, to grant the administrator of a company an order for discovery of information, was not limited to those documents required 'to reconstitute the state of the company's knowledge', so long as the court was satisfied that the administrator reasonably required to see the documents to carry out his functions and their production did not impose an unnecessary and unreasonable burden on the person required to produce them.

The House of Lords dismissed an appeal by Spicer & Oppenheim, chartered accountants, who had been auditors of Atlantic Computers plc from 1983 to 1989, and affirmed the decision of the Court of Appeal ((1992) 2 WLR 931), reversing the decision of Mr Justice Hoffmann on 24 July 1991, and restoring the decision of Mr Registrar Scott on 29 April 1991, requiring the auditors to produce to the joint administrators of British & Commonwealth Holdings plc all records relating to B&C's acquisition of Atlantic Computers plc and the latter's audits for the years ending 1987 and 1988.

Peter Goldsmith QC, and Robin Knowles (Linklaters & Paines) for the auditors; Gabriel Moss QC, and John Brisby (Stephenson Harwood) for the administrators.

LORD SLYNN said the administrators took the view that serious questions had to be investigated concerning the conduct of Atlantic's business before and after its acquisition, and as to representations made to British & Commonwealth Holdings plc prior to the acquisition.

To that end, the registrar made an order under section 236 of the 1986 Act.

Under that section, the court might require 'any person whom the court thinks capable of giving information concerning the promotion, formation, business dealings, affairs or property of the company' to 'produce any books, papers or other records in his possession or under his control relating to the company or (its affairs)'.

Mr Justice Hoffmann, relying on Cloverbay Ltd v BCCI (1991) Ch 90 at 102, considered that an order under section 236 was limited to information necessary to enable a liquidator or administrator to reconstitute that state of knowledge the company should possess.

But when read as a whole, Cloverbay did not appear to have that effect, and section 236, whose wording was quite general, contained no such express limitation.

In his Lordship's judgment, the power of the court to make an order under section 236 was not limited to documents needed 'to reconstitute the state of the company's knowledge' even if that might be one of the purposes most clearly justifying making an order.

At the same time, it was plain that it was an extraordinary power and that the discretion had to be exercised after a careful balancing of the factors involved, and consideration of the effects, on the parties concerned, of either making or not making the order.

The proper case was one where the administrator reasonably required to see the documents to carry out his functions and their production did not impose an unnecessary and unreasonable burden on the person required to produce them.

This was an exceptional case and the order, though wide, should be upheld.

LORD KEITH, LORD ACKNER, LORD JAUNCEY and LORD LOWRY agreed.

Paul Magrath, Barrister