Section 236 of the Insolvency Act 1986 has no extraterritorial effect, save as against EU parties

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The liquidators of a company (the “Company”) applied pursuant to section 236(3) of the Insolvency Act 1986 for orders requiring the respondents (Italian companies) to produce documents and give an account of their dealings with the Company.

The Respondents resisted the application on the ground inter alia that there was no jurisdiction under section 236 to make orders against persons based overseas.

There were two questions that needed to be decided: the first was whether there was jurisdiction to grant orders under section 236(3) against persons wherever they were situated; and the second was whether, if there was no such jurisdiction, the Insolvency Regulation (EC 1346/2000) altered the general position such that there was jurisdiction to make section 236(3) orders against EU residents. (The Insolvency Regulation has been recast for insolvency proceedings commencing on or after 26 June 2017, but as regards the subject matter of this case there is no material difference between the two regulations.)

On the first question, the court stated that there were conflicting first instance decisions: one line of authority to the effect that the court was bound by precedent to follow a Court of Appeal decision which concerned predecessor legislation, which was to the effect that there was no such jurisdiction; and another line of authority to the effect that that Court of Appeal authority was not binding as it concerned predecessor legislation, not the current legislation. The court held that the former line of authority was to be preferred, namely the Court of Appeal did bind the present court such that there was no jurisdiction outwith the Insolvency Regulation to make a section 236(3) order against persons based overseas.

On the second question, the court reasoned that section 236(3) proceedings “derive directly from [the insolvency proceedings] and … are closely connected to them”, as such they fall within the scope of the Insolvency Regulation. Furthermore, the jurisprudence on the Insolvency Regulation can and does extend the territoriality of domestic insolvency provisions to the rest of the EU even where those domestic insolvency provisions limit their scope to their own territory. It followed that the court did have jurisdiction to make a section 236(3) order against EU residents.

In re Akkurate Limited (in liquidation) [2020] EWHC 1433 (Ch)

 

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