A Reach Too Far? A Review Of The Extra-Territorial Scope Of The Court's Powers To Support Office-Holder's Investigations

Published date23 October 2020
Subject MatterInsolvency/Bankruptcy/Re-structuring, Insolvency/Bankruptcy
Law FirmQuadrant Chambers
AuthorMr William Mitchell

OVERVIEW

This article considers whether, following the case ofWallace (as liquidator of Carna Meats (UK) Ltd) v Wallace, the power to summon persons for private examination under section 236(2) of the Insolvency Act 19865 ('the IA') also has full extra-territorial effect. In addressing that open question, it reviews judicial comment to date and the extra-territorial reach of the IA more generally. The current position is found to be incoherent and ripe for review at the highest level, although on the present authorities the s.236(2) power appears likely to be territorially limited.

The current position

Successive cases have found that many of the office-holder's investigatory powers, and the court's supportive powers, were intended by the IA to have full extra-territorial scope. This reflects the intention of Parliament in 1986 that, given the strong public interest in ensuring that a company's failure is properly investigated including by holding those responsible to account, the office-holder's task ought not be stymied by either papers or persons being located in a foreign jurisdictions. A summary of some of the major powers is given in Table 1.

It is clear from the above that, at least at first glance, the power to order private examination under s.236 would be a significant outlier were it to be territorially limited.

Obiter consideration of the territorial scope of section 236(2)

One might detect a certain degree of judicial relief thus far in cases referring to this issue. In each case, the judge has not ultimately had to determine whether Parliament intended section 236(2) of the Insolvency Act 1986 to have full extra-territorial scope.

Most recently, in Wallace, Adam Johnson QC, sitting as a judge of the High Court, differentiated the power under s.236(3) and said at '54:

'whatever may be the correct position under section 236(2), I am concerned in this case only with section 236(3), and even if it is correct that the power to issue a summons under section 236(2) should be confined to persons within the jurisdiction, it seems to me that the power to require the production of documents and information is different. It is less invasive, and does not involve the exercise of anything akin to the Court's subpoena power. In the modern world of cross-border business practices, it is natural to construe that power as extending to any of the categories of person identified, whether within or outside the jurisdiction.'

The issue could have fallen for determination by Burton J in 2001 inRe Casterbridge Properties Ltd (in liq.) Jeeves v Official Receiver where the Receiver sought in the alternative an order for private examination of the applicant if the order for public examination under s.133 was set aside. However, having heard full argument on the point, Burton J did not set aside the s.133 order and concluded that he 'need not and [would] not resolve the interesting issue between the parties as to whether there would be jurisdiction to make such an order' ('51).

So how might this 'interesting issue' be determined?

The intended jurisdictional scope of s.236(2) - the position in Re Tucker

The scope of a statutory provision will turn on who was within the legislative grasp or intendment of s.263(2) - a principle of statutory interpretation most recentlyrestated by the House of Lords in Masri v Consolidated Contractors (UK) Ltd and others (no 4). Further, in considering such intendment, absent express enactment or plain implication, English legislation will only apply to British subjects or to foreigners within the jurisdiction: Ex parte Blain; In re Sawers.

The main difficulty facing an argument that s.236(2) was not intended to be territorially limited is the earlier House...

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