High Court sets limits on liquidators’ “everything forever” information requests

The High Court of England and Wales has dismissed an appeal by the joint liquidators of Eversholt Rail (365) Ltd, confirming that liquidators seeking documents and information under sections 235 and 236 of the Insolvency Act 1986 must demonstrate a reasonable requirement for what they seek and cannot rely on a blanket entitlement to all records connected with the company’s affairs. In a judgment delivered by Sir Anthony Mann, the Court upheld a decision of ICC Judge Burton refusing wide-ranging disclosure orders against group service provider Eversholt Rail and its solicitors, Norton Rose Fulbright, finding the application was framed far too broadly and unsupported by evidence explaining why such extensive material was reasonably required. The decision provides a clear reminder that sections 235 and 236 are powerful but controlled tools, and that courts will not endorse “everything forever” applications untethered from a properly explained investigative need.

The appeal arose from the liquidation of Eversholt Rail (365), a special purpose vehicle within the Eversholt UK Rails Group that owned and leased a fleet of Class 365 rolling stock. The company had no employees and relied entirely on services provided by its sister company, Eversholt Rail Ltd, under a long standing services agreement. As a result, virtually all documents relating to 365’s business were held by ERL rather than by the company itself when it entered creditors’ voluntary liquidation in August 2019.

Faced with what they described as a near complete absence of corporate records, the liquidators applied for orders compelling ERL and Norton Rose Fulbright to provide copies of all documents “relating to” the business, dealings, affairs, or property of 365, including wide categories of correspondence, board materials, financial information, and legal advice. The application effectively sought production of everything held by the respondents without meaningful limitation by category or time period.

At first instance, ICC Judge Burton dismissed the application, holding that while liquidators are entitled to considerable latitude, sections 235 and 236 require them to show that the information sought is reasonably required. The judge found that ERL had cooperated with focused requests, that the liquidators had failed to explain why disclosure of such sweeping scope was necessary, and that the application was “fundamentally misconceived” in seeking to place the liquidators in a better position than the company itself had occupied before liquidation.

On appeal, the liquidators argued that the purpose of sections 235 and 236 is to allow office holders to reconstitute the company’s state of knowledge and that, in circumstances where all records were held by a third party service provider, they were entitled to seek everything without having to justify each category. Sir Anthony Mann rejected that submission, holding that the concept of reconstituting corporate knowledge explains the purpose of the provisions but does not displace the statutory requirement to demonstrate reasonable necessity.

The Court emphasised that section 235 expressly limits disclosure to information the office holder “may reasonably require” and that the same requirement applies to section 236 through established authority. Reconstitution of knowledge may justify extensive disclosure in an appropriate case, but it is not a blank cheque. Liquidators must still explain why the material sought is needed and why the burden imposed on the respondent is justified in light of that need.

The Court also rejected arguments that the services agreement between 365 and ERL lowered the threshold for disclosure or entitled the liquidators to all documents “embraced” by that agreement. While the contractual arrangements formed part of the factual background, the application had been brought under the statute rather than as an enforcement of contractual obligations, and in any event went wider than the agreement itself.

Sir Anthony Mann further declined to interfere with the lower court’s refusal to carve out narrower categories of documents from the overly broad application, noting that the liquidators had not properly advanced a focused alternative case at the hearing. In those circumstances, the judge was entitled to deal with the application as framed and reject it in its entirety.

Read the decision here.

Daniel Bayfield KC and Paul Fradley, both of South Square (instructed by Norton Rose Fulbright) acted for Eversholt Rail and Norton Rose Fulbright, while Lexa Hilliard KC of Wilberforce Chambers and Adam Deacock of Radcliffe Chambers (instructed by DLA Piper) acted for the joint liquidators.