Company - Voluntary winding up - Liquidator

Re Sunwing Vacation Inc and others: Chancery Division (Mr Justice Morgan): 22 June 2011

The applicant companies were creditors of the respondent company which was in voluntary liquidation. The applicants were involved in arbitration in Germany.

They applied, pursuant to section 112 of the Insolvency Act 1986 (the act), against the respondent, a company in voluntary liquidation and its liquidators, for an order that the respondent, through its liquidators, should give disclosure and permit inspection of specified classes of documents.

Section 112(2) of the act provided that the court might accede to the application if it was satisfied that the determination of the question or the required exercise of the power would be 'just and equitable'.

Section 155 of the act provided that the court might at any time after making a winding up order make 'such order for inspection of the company's books and papers by, for example, creditors... as the court thinks just'. In the course of the hearing, the applicants stated that if there was a recovery in the arbitration, credit would be given for the amount of that recovery against the applicants' claim against the respondent.

Consequently, if those documents turned out to be helpful to the applicants, the result would be of benefit to the respondent and its creditors generally by reason of the credit which the applicants would give.

It fell to be determined: (i) whether the exercise of the power under section 155(1) of the act was for the purpose of the winding up; (ii) whether making the order sought, namely exercising that power, would be just and equitable; and (iii) whether the order should be made. The application would be allowed.

(1) It was well established by a number of authorities which discussed section 155(1) of the act or its predecessor that the unqualified statutory wording was, in fact, qualified by a purpose requirement so that the power which the court could exercise under section 155(1) had to be for the purpose of the winding up (see [10] of the judgment).

In the instant case, if the documents sought by the applicants were made available by the liquidators, that would result in the applicants making less of a claim against the company in liquidation. That seemed to fall within the qualification or the requirement that the order was made for the purpose of the winding up.

The prospect of those documents being of use and resulting in a beneficial result for first, the applicants and then, indirectly, the respondent, meant that the disclosure of documents was sufficient for the purpose of the liquidation (see [18], [19] of the judgment). DPR Futures Ltd, Re [1989] BCLC 634 applied; Company, a (No 005374 of 1993), Re [1993] BCC 734 considered.

(2) For the purposes of section 112(2) of the act, the court was not restricted to whether something was just and beneficial for the purposes of the liquidation. It could take into account other beneficial consequences (see [20] of the judgment). First, it seemed that it was potentially beneficial for the purpose of the winding up for a credit to be obtained by the applicants against the claim they were making against the respondent.

Secondly, there was at that time, being heard in Germany, a German arbitration brought by associated companies of the applicants. If the documents sought were admissible, relevant and persuasive in that German arbitration, it would be in the interests of justice and beneficial that the German arbitration result took into account relevant and helpful material rather than excluded it.

It followed that the exercise of the court's power pursuant to section 112(2) of the act would be just and beneficial (see [21] of the judgment). The court would exercise its discretion to make the order sought (see [22] of the judgment).

Matthew Collings QC (instructed by Howard Kennedy LLP) for the applicants. Kit Jarvis of Field Fisher Waterhouse LLP for the respondent.