After MF Global: is s 236 Insolvency Act 1986 extra-territorial? | Fieldfisher
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After MF Global: is s 236 Insolvency Act 1986 extra-territorial?

Kit Jarvis


United Kingdom

Is s. 236 Insolvency Act 1986 (applications to compel examination / production of documents re insolvent companies) extraterritorial? Court of Appeal clarification is needed.

This article was first published in Butterworths Journal of International Banking and Financial Law.


  • The court in MF Global did not expressly refer to the earlier decision of Re Casterbridge Properties Limited (in Liquidation) [2002] BCC 453 in which the High Court considered that there was “no doubt” about the partial extra-territoriality of s 236, and that the question of the full extra-territoriality of s 236 remained open.
  • The subsequent decision in Omni disagreed with the conclusion reached in MF Global.  The Sahaviriya Steel decision highlighted these inconsistent first instance judgments.
  • Whether or not s 236 can be said to be fully extra-territorial needs to be looked at in detail by the Court of Appeal.

After MF Global:  is S 236 Insolvency Act 1986 extra-territorial?

In this article, Kit Jarvis and Freya Law extract the principles of s 133 (public examination of officers on a winding up) and s 236 Insolvency Act 1986 (private examination of persons when a company enters administration and liquidation or production of documents) in light of recent case law.

The English High Court has recently denied the application under s 236 Insolvency Act 1986 (IA) of the administrators of MF Global against LCH Clearnet SA (LCH France) seeking production of documents and a witness statement describing the sales of auction processes by which the respondents closed out MF Global’s positions with LCH very shortly after the appointment of administrators (Re MF Global UK Ltd (In Special Administration), aka: Fleming v LCH Clearnet Ltd [2015] EWHC 2319 (Ch); 31 July 2015, David Richards J). In doing so, the High Court held that s 236 was not extra-territorial and therefore no order could be made against LCH France.

The court in MF Global did not expressly refer to the earlier decision of Re Casterbridge Properties Limited (in Liquidation) [2002] BCC 453 in which the High Court considered that there was “no doubt” about the partial extraterritoriality of s 236, and that the question of the full extra-territoriality of s 236 remained open. Moreover, the MF Global judgment did not expressly refer to the Court of Appeal case of Re Mid East Trading Ltd [1998] 1 BCLC 240, CA, which, like MF Global, concerned the production of documents situated in a foreign jurisdiction and so was pertinent to the question of extra-territoriality. Indeed, David Richards J himself considered that there was a “good deal to be said for concluding that s 236 was intended to have extra-territorial effect”, although he considered himself bound by the Court of Appeal in Re Tucker [1990] Ch 148. Since MF Global, a first instance court has expressly disagreed with the MF Global decision (see Omni below). It would be understandable if insolvency practitioners found themselves a little confused right now.

The reason why this is a fundamental issue is, of course, because s 236 entitles an insolvency practitioner to apply for an order that “any person whom the court thinks capable of giving information concerning the promotion, formation, business, dealings, affairs or property” of the insolvent company appear before the Court, or requiring such a person to give an account of his dealings with the company, or to produce documents in his possession or under his control relating to the company. There is, therefore, a very wide list of potential respondents to a s 236 application. Further, whilst the Court can and does balance the oppression involved in a s 236 application, ultimately it is one of the very few provisions under English law in respect of which a respondent cannot refuse to answer questions on the ground of privilege against self-incrimination.


MF Global had large open positions with LCH France involving European sovereign debt.  LCH France closed out those positions on MF Global’s entry into administration in 2011. The losses arising were quantified at approximately €422m. The administrators accepted that LCH France were contractually entitled to close out, but were concerned that the losses were exceptionally large when compared with contemporary prices: for example €2.2bn of Italian Government bonds were sold at 5.83 points below the corresponding Bloomberg price and significantly below the price obtained by LCH France the very next day. Not surprisingly, the administrators asked LCH France to disclose its documents relating to its closing out of those transactions so that the administrators could satisfy themselves that LCH France had acted in accordance with their duties under appropriate laws and regulations when exercising that right of close out.

In the week prior to the hearing, the administrators suggested an alternative order to the effect that the English Court request the French Court to examine a responsible officer of LCH France in France under ss 236 and 237(3) IA in accordance with the EU Regulation on Co-Operation Between the Courts of the Member States in the taking of Evidence in Civil or Commercial Matters (1206/2001) (the “Evidence Regulation”).

LCH submitted that s 236 had no extraterritorial effect, relying on Re Tucker. This was a decision under s 25 Bankruptcy Act 1914 (BA) which, as applied to bankruptcy, was in substantially the same terms as s 236/237.  The lead judgment of Dillon LJ referred to the general rule of English law that unless the contrary is expressly enacted or plainly implied, UK legislation is applicable only to English subjects or to others who by coming into the UK had made themselves subject to English jurisdiction. David Richards J dismissed the “bold” submission of the administrators that Re Tucker was either illogical or made without sufficient analysis of preceding bankruptcy law.

He also dismissed as “plainly wrong” the submission that the reference in s 237(3) to “any person who if within the jurisdiction of the court would be liable to be summoned to appear before it under section 236” meant not just the physical location of the person but also whether the person fell within the meaning of s 236. That phrase was, to David Richards J, 1 simply “an elaborate way” of saying “in England (and Wales)”. The court considered other IA provisions which have been held to have extraterritorial effect, namely:

  • Section 133 relating to public examination of directors and others: Re Seagull Manufacturing [1992] Ch 128.
  • Section 213 relating to fraudulent trading: Jetivia SA v Bilta [2015] UKSC 23.
  • Section 238 relating to transactions at an undervalue: Re Paramount Airways Ltd [1993] Ch 223.

The court also considered:

  • Masri v Consolidated Contractors International Co SAL [2009] UKHL 43 which concerned the territorial effect of CPR 71 under which a judgment debtor can be ordered to be examined. That case reviewed Re Tucker in some detail without any suggestion that it was wrongly decided.
  • McIsaac and Wilson, Petitioners [1994] BCC 410, a Scottish case which gave extra-territorial effect to s 236 but upon which neither the administrators nor LCH France put any weight, because it appears to have proceeded on a mistaken belief.

Ultimately, David Richards J concluded that it was “impossible to overlook” Re Tucker as a binding precedent on a first instance court, the re-enactment of earlier private examination provisions in s 25 BA in substantially the same terms as s 236(2) and the presence of s 237(3). Accordingly, s 236 did not have extra-territorial effect and no order could be made under it against LCH France.

However, this is not the end of the matter, because LCH France accepted (as had been held in Re Tucker as regards s 25(6) BA) that the court could make an order against it “in an appropriate case” under s 237(3). Before making any such order, the court would have to be convinced that the case is covered by available procedural machinery by which the respondent could be compelled to comply with the order to produce documents or be examined. The problem in this particular case was that the Evidence Regulation did not apply because the administrators were seeking the order to enable them to consider whether it would be appropriate to bring proceedings - if they had reached a firm decision to bring proceedings s 236 is unlikely to have been available in any case: Re Castle New Homes Limited [1979] 1 WLR 1075.


Re Casterbridge considered s 133 IA and Burton J examined in detail the issue of whether s 236 has extra-territorial effect. He considered Dillon LJ’s judgment in Re Tucker and noted that in Re Seagull the Court of Appeal held that s 133 IA had extra-territorial effect, though Burton J thought that the Court of Appeal in Re Seagull had clearly left the extra-territoriality of s 236 open. He went on to say:

“there is a potential issue about the full extra-territoriality of a s.236 order…I do not need to resolve that issue. [The Official Receiver’s]…arguments seem to be more logical, but the [applicant seeking to set aside the order under section 133]…may be said to have the greater backing of authority, albeit not binding. It remains…the position that a s.236 order may not have full extra-territorial effect. There is no doubt about (a) the partial extra-territorial effect of s.236, or (b) the undoubted full extra-territorial effect of s. 133.” (para 48(i))

The debate in this case between “partial extra-territoriality” and “full extra-territoriality” occurred because of a concession by the applicant that s 236 had extra-territorial effect, but that this was limited, where there was an application for private examination of someone abroad, to ordering such examination to take place in the foreign country in which he or she was situated (“partial extra-territoriality”), such that there could not be jurisdiction under s 236 to require such a person to attend private examination in England (“full extra-territoriality”). Burton J clearly considered that this concession was correctly made because of the words of s 237(3). This appears to be essentially the same concession that LCH France made in MF Global that the court could make an order against it “in an appropriate case” where a foreign court would compel the respondent to comply with the order. Whilst Burton J deliberately did not resolve the issue of “full extra-territoriality” of s 236, he certainly did not consider that Re Tucker made the position as clear as David Richards J did in MF Global.

David Richards J in MF Global noted that the Court of Appeal in Re Seagull had considered Re Tucker without any suggestion that Re Tucker was wrong. The conclusion that the provisions for private examination under s 25 BA did not have extra-territorial effect was distinguished on the grounds that:

  • the persons who could be the subject of public examination under s 133 were more narrowly confined; and
  • section 25(6) (which was “re-enacted” in s 237(3)) was considered conclusive by Dillon LJ in Re Tucker, but no similar provision applied in relation to s 133.


On 14 September 2015, HHJ Hodge QC (sitting as a Judge of the High Court) handed down the judgment in Re Omni Trustees Ltd (In Liquidation) (The Official Receiver v Tristram Norriss) [2015] EWHC 2697 (Ch). In this case, the Official Receiver applied for the production of a witness statement, with supporting documents, detailing and exhibiting various matters identified in the Application Notice from the Respondent, Mr Norriss, who resides in Hong Kong. The Official Receiver did not seek an examination of Mr Norriss either in the UK or in Hong Kong. Mr Norriss fell within the scope of s 236(2) IA as a person who was capable of giving information concerning the business, dealings, affairs and property of Omni.

Counsel for the Official Receiver took HHJ Hodge QC at length through the decisions in MF Global (up to para 33) and Tucker (particularly p 155C to p 159 G, including what is said at p 158 D-E namely that the court will not compel someone to come to this jurisdiction to be examined on oath and to produce documents).

Counsel submitted that a crucial distinction is to be drawn between:

  • compelling a respondent to a s 236 application to attend court for examination; and

requiring the production of documents or an account of dealings – had that distinction been identified before David Richards J in MF Global, he would have been entitled to regard the latter as falling outside the scope of the decision in Tucker.

Had the case been presented in that way, Counsel submitted, David Richards J might

well have felt able to conclude that s 236(3) is intended to have extra-territorial effect, leaving it to the court’s discretion to keep the use of s 236 within reasonable bounds.

Counsel also submitted that David Richards J’s judgment failed properly to distinguish between the requirements of a respondent to:

  • be examined on oath; and
  • give an account of dealings or produce documents.

He did so because his attention had not been drawn to the structural difference between the statutory provision of s 25 BA (which the Court of Appeal considered in Tucker) and ss 236(2)(3) IA considered in MF Global. Crucially, the Court of Appeal’s decision in Re Mid East appears not to have been cited to David Richards J either which might have assisted him in his deliberations.

HHJ Hodge QC agreed with Counsel. He stated at para 21 of his judgment:

“I accept those submissions, which I am satisfied are well-founded, with considerable reluctance and some hesitation. I decline to follow the decision of Mr Justice David Richards in the MF Global (UK) Ltd case. In my judgment, [s 236(3) IA] … does have extra-territorial effect; … the court does indeed have jurisdiction to require a person resident outside the jurisdiction to submit to the court an account of his dealings with the company, or to produce any books, papers or other records in his possession or under his control relating to the company.”


  • Insolvency practitioners would be forgiven for being confused about all of this learned debate. The principles appear to be:
  • Under s 133 a liquidator (either in an involuntary or a voluntary (using s 112IA) winding up) can apply for the public examination of officers and others who have been concerned or taken part in the promotion, formation or management of the company.
  • Section 133 orders have extra-territorial effect: Re Seagull; Re Casterbridge.
  • Section 236 applies when a company enters administration, administrative receivership, liquidation or provisional liquidation: s 236(1).
  • Section 236 examinations are made in private, unlike public examinations under s 133.
  • Section 236 applications can be made against any person whom the court thinks capable of giving information concerning the promotion, formation, business, dealings, affairs or property: s 236(2) (c). The purpose of s 236 applications is to enable a court to assist a liquidator to get to the truth of the company’s affairs, trading and dealings, quickly and with minimal expense, so that the liquidator can complete his functions as a liquidator (including where appropriate, ascertaining the facts about potential claims): British and Commonwealth Holdings plc v Spicer & Oppenheim [1993] AC 426 at 438, HL.
  • Section 236 orders take “partial extra-territorial” effect: s 237(3) – meaning the court may order the private examination of those persons who are either:
  • in the UK or submitting to UK jurisdiction; or
  • based in a foreign country in that location. It also appears to mean that if a foreign court can compel the respondent of a s 236 application to comply with the order to produce documents or give evidence, then the English court can make an order under s 236.
  • Section 236 orders may not take “full extra-territorial” effect: Re Tucker, Re Casterbridge and MF Global. If a foreign court will not enforce a s 236 order in its own jurisdiction, a s 236 order will not be made by the English court against a foreign person or entity. An IP could also consider other avenues for cross border enforcement of a s 236 order via sub-ss 426(4) and (5) IA where the courts have discretion to assist requests between the English court and the courts of other parts of the UK or other “relevant countries”.

Section 236 is undergoing active judicial consideration. The High Court has produced conflicting judgments as to the extra-territoriality of s 236 and the area requires review by the Court of Appeal. As recently as 13 October 2015, the High Court permitted a s 236 application to be served outside of the jurisdiction in Official Receiver v Sahaviriya Steel Industries Public Co Ltd [2015] EWHC 2877 (Ch). The judge in this case noted the unresolved status of the question of the extra-territoriality of s 236. He said (at para 12, emphasis added):

“the extraterritorial effect of [s. 236] … is much less straightforward because there are two conflicting High Court decisions concerning that issue … I am satisfied that it is appropriate to give permission for the application under s. 236 to be served out of the jurisdiction [though not] without notice.”

One is left with the distinct impression that the case law as it stands is unsatisfactory. Whether or not s 236 can be said to be fully extra-territorial and, if not , how far partial extra-territoriality extends, needs to be looked at in detail by the Court of Appeal – particularly if the powerful tool that is s 236 is not to lose a great deal of its utility. Moreover, the distinction between s 133 and s 236 looks increasingly out-dated in the modern financial world where, more often than not, commercial and, particularly, finance entities have deliberately set up multi-jurisdictional structures.