UK: Extra-Territorial Effect Of Section 236 – The Debate Continues

Re Omni Trustees Ltd (In Liquidation) [2015] EWHC 2697 (Ch)

In an interesting judgment, the High Court in Manchester has decided not to follow the ruling from earlier this year of Mr Justice Richards in Re MF Global (UK) Ltd[1], deciding instead that section 236 of the Insolvency Act 1986 (the "Act") does indeed have extra-territorial effect. The decision in MF Global was covered in our blog in August (click here for article) but the judgement of Judge Hodge in Omni Trustees Ltd (in liquidation) illustrates that the question continues to be open for further debate.

The application

The matter before Judge Hodge in this instance was an application brought by the Official Receiver acting in its capacity as liquidator of Omni Trustees Ltd (the "Company"). The Official Receiver sought an order against Mr Tristram Michael Norriss pursuant to section 236 of the Act, for the production of documents in his possession or control. The Company acted as trustee of an occupation pension scheme, and in July 2014 around £3.7m of the scheme's £8.6m worth of assets, was transferred from the Company to a scheme located in Hong Kong which apparently acted by the respondent, Mr Norriss. The object of the application was to ascertain what had happened to the £3.7m that was transferred.

The application in this instance did not seek the examination of Mr Norriss, either in England or Hong Kong but instead sought, pursuant to section 236, that Mr Norris produces a witness statement with supporting documents to explain the transfer of monies. It should be noted that Mr Norriss did not attend the hearing before Judge Hodge, nor was he represented at the hearing, and the judgment should be considered in light of the absence of any serious counter-arguments.

Mid East Trading anyone?

Counsel for the applicant drew Judge Hodge's attention to the "classic test" for granting an order under section 236 which is set out in British and Commonwealth. Hodge J was satisfied that the test set out by Lord Slynn was satisfied; the documents required by the applicant were necessary to allow it to carry out its statutory functions and did not impose any unnecessary or unreasonable burden on the respondent.

Referring to the decision in MF Global, Judge Hodge noted Justice Richard's conclusion that, in the absence of authority and in the absence of what is now section 237(3), there was a good deal to be said for concluding that section 236 was intended to have extra-territorial effect. While this commentary was noted by Judge Hodge, he also noted that Justice Richards still found it impossible to overlook the authoritative standing of the Court of Appeal's decision in Re Tucker[2]. The decision in Re Tucker concerned the extra-territorial effect of section 25 of the Bankruptcy Act 1914, a provision similar to section 236. In Re Tucker, section 25 was ruled not to have extra-territorial effect. Therefore, by virtue of the similarities between the two provisions, Richards J considered by extension, that section 236 did also not have extra-territorial effect.

Judge Hodge on the other hand was not so convinced that sections 25 and 236 were in fact so similar. Instead he was satisfied with the arguments put forward by the applicant's counsel, that section 236 was in fact structured differently to section 25. Section 25 permitted the courts to order the production of documents, but such power was ancillary to, and dependent upon the principal power in section 25 which allowed the court to summon a respondent for examination. The construction of section 236 by contrast granted the court power, through subsection 3, to require a person to produce documents independently of the power to require their appearance before the court.

Counsel for the applicant further noted that in Re Tucker the thrust of that decision was based on a concern that the courts should not compel someone to come within its jurisdiction for examination. This, counsel argued, should be distinguished from the "less intrusive" requirement to produce documents. Counsel submitted that had this distinction been drawn to Justice Richards, he may well have concluded that section 236(3) was intended to have extra-territorial effect.

Judge Hodge's attention was then drawn to the Court of Appeal's decision in Re Mid East Trading Ltd[3], which also considered the extra-territorial effect of section 236(3), and notably had not been brought to the attention of Justice Richards in MF Global. Lord Justice Chadwick in that instance considered that, in so far as making an order under section 236 "in respect of documents [emphasis added] which are abroad...involve[s] an assertion of sovereignty, then that is an assertion which the legislature must be taken to have intended the courts to make in appropriate cases". He considered that, provided the test in British and Commonwealth was satisfied, section 236 should have extra-territorial effect.


In his concluding remarks, Lord Hodge accepted the submissions of the applicant with "considerable reluctance and some hesitation" and declined to follow the decision of Justice Richards in MF Global. Section 236(3) was regarded to have extra-territorial effect; and provided the test in British and Commonwealth is satisfied, the court has jurisdiction to require a person resident outside England to produce to the court, any books or papers in his possession or under his control relating to the company. While the question of whether section 236(3) has extra-territorial effect now appears to have been settled, it will be interesting to see if the courts also determine that the more "intrusive" section 236(2) also has a similar extra-territorial effect.

[1] Re MF Global UK (Ltd) (in special administration) [2015] EWHC 2319 (Ch)

[2] Re Tucker (A Bankrupt) ex p. Tucker [1990] Ch 148; [1988] 2 W.L.R. 748 CA

[3] [1998] 1 BCLC 240

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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