January 1993
Part 1 - Private Examination
23.1 Basis of examination (amended June 2007)
In the majority of cases the official receiver will obtain information and secure the production of documents from company officers, bankrupts and others in the normal course of his/her inquiries. However, where there is a lack of co-operation but either the circumstances of the case do not merit a public examination or the public examination route is inapplicable because the person concerned is not the bankrupt or is not concerned in the liquidating company’s management, either as an officer or otherwise, the official receiver may consider applying to the court for an order for what is commonly known as a private examination.
The Court of Appeal in the case of Pantmaenog Timber Company Limited (Pantmaenog) reported at Official Receiver (Apellant) v Wadge Rapps & Hunt (a firm) and another and two other actions [2003] UKHL 49 held that the official receiver could use the compulsive powers under section 236 (private examination) for the purpose of considering and conducting disqualification investigations and proceedings, but that those powers are subject to the discretion of the court as to whether to allow their use in such circumstances.
Consideration of the use of a private examination solely for the purpose of disqualification related investigations should be the exception rather than the rule. It will mostly be appropriate where a bank/solicitor etc is willing to provide the information but only subject to a court order. In the period prior to the issue of proceedings, and particularly in cases targeted for an investigation aimed at the preparation of a draft disqualification report, great care should be taken when considering whether to use section 236 against directors or their associates or advisors. In these circumstances if the official receiver has any concerns that the application could be construed as being solely for the purposes of a disqualification, Enforcement Directorate Technical Team should be approached for advice before the application is issued.
In cases where disqualification proceedings have been issued the usual means of obtaining further information to assist in the conduct or further consideration of the proceedings will be by use of a witness summons in the disqualification proceedings rather than by use of a private examination in the liquidation. If the official receiver wishes to use a private examination for this purpose post issue of disqualification proceedings, the Enforcement Directorate Technical Team should be approached for advice first. (See also paragraphs 11.62, 13.120 and 15.71)
Note: [s236(2) or 366(1)]
23.2 Affidavits
(August 2008)
The official receiver may also apply for an order against the person concerned requiring that he/she:
The persons who may be so ordered by the court include;
An affidavit may not be requested of a person falling under section 366(1)(a) of the Insolvency Act 1986 including the bankrupt or his/her spouse, except where they also meet the requirements of sections 366(1)(b) or (c) of the Insolvency Act 1986.
Notes: Production of records [s236(3) or 366(1); R9.3]
23.3 Terminology
The person in respect of whom an application is made is termed "the respondent".
Notes: [R9.1(2)]
Where a winding-up or bankruptcy order has been made, the official receiver (whether or not he is liquidator or trustee) may apply for any of the orders mentioned in paragraphs 23.1 and 23.2 above. He may also apply where he is acting as provisional liquidator of a company or as interim receiver of the property of a debtor (see paragraphs 2.26 and 2.27 respectively). In a winding up or bankruptcy the right to apply is also given specifically to liquidators and trustees. In relation to a company an administrative receiver may also apply, and it is therefore possible that such an application may be made where a company in liquidation is also in administrative receivership.
Note: [s236 or 366]
23.5 Who can be examined
The court can summon to appear before it the following:
(a) in a winding up:
any officer of the company;
any person known or suspected to have in his possession any property of the company or supposed to be indebted to the company;
any person whom the court thinks capable of giving information concerning the promotion, formation, business, dealings, affairs or property of the company;
(b) in a bankruptcy:
the bankrupt or the bankrupt’s spouse or former spouse;
any person known or believed to have in his possession any property comprised in the bankrupt’s estate or to be indebted to the bankrupt;
any person appearing to the court to be able to give information concerning the bankrupt or the bankrupt’s dealings, affairs or property.
The term "property" mentioned above has a wide meaning and includes money, goods, "things in action", land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property. (A "thing in action", sometimes referred to as a "chose in action", is that "when any man hath cause or may bring an action for some duty due to him", eg copyright, debts etc.)
Where the respondent is outside the jurisdiction of the court, see paragraph 23.32.
Notes: [Termes de la Ley][s236(2)]"Property" [s436]
23.6 Interim receiver
Where an application is made by an interim receiver, references in the preceding paragraph to the bankrupt and his estate should be taken as referring to the debtor and his/her property.
Note: [s368(b)]
23.7 Respondent’s expenses
Where an examination is ordered, the respondent must be offered from the estate a reasonable sum in respect of his/her travelling expenses incurred in connection with his/her attendance, even if this means incurring a debit balance on the estate. He/she should be asked well before the proposed hearing whether he/she requires an advance for this purpose.
Notes: [R9.6(4)]
23.8 Court order
Whether the respondent is allowed any other expenses (such as a witness fee, compensation for loss of earnings, etc) is a matter for the court. In this context, if a solicitor is examined, the Council of the Law Society has advised its members that they should claim their conduct money and professional witness allowance under the Rules of the Supreme Court, regardless of whether the examination is in the High Court or a county court.
23.9 Grounds for application- relation to costs
The official receiver should bear in mind that if he applies for a private examination in his capacity as a liquidator or trustee he may be made personally liable for costs. To avoid this possibility the official receiver should ensure that the reasons stated in the application for the holding of the examination can be related to the official receiver’s statutory office or that of him as provisional liquidator or interim receiver, if he/she is acting in that capacity (see also paragraph 23.30).
Notes: [R9.6(5)] [R9.2(1)]
23.10 Form and contents of application
The official receiver’s application should, rather than stating the relevant matters in the body of the application, be accompanied by a brief statement of the grounds on which the application is made. This is so that the statement of grounds will not be subject to inspection other than by order of the court. Following a decision of the Court of Appeal, (Re British & Commonwealth Holdings plc [1992] BCC 165), the court will allow inspection of this statement by the respondent where the respondent applies to set aside an order for a private examination, unless the official receiver can satisfy the court that the statement should remain confidential. In view of this, any part of the official receiver’s application which he wishes to keep confidential should be placed in an annex to the statement and the grounds on which the official receiver wishes that material to be kept confidential should be given either in the statement or in the annex, as appropriate to the circumstances of the case. Conversely, where there is no need for the application or the statement to remain confidential, the official receiver should consider voluntarily disclosing it to the respondent. The official receiver’s application may, and normally should, be made ex parte. The official receiver is not bound to do more than show the court that there is a prima facie probability that the person whose examination is sought is capable of giving important information. The application must also indicate whether the order sought is for the proposed respondent to do all or any of the following:
appear before the court;
answer interrogatories (written questions, which the court may require to be answered by affidavit); particulars of the matters to be covered in such questions should be given in the application;
submit affidavits; particulars should be given of the matters to which he is to be required to swear; or,
produce books, papers and other records; the relevant records should be specified.
Notes: [R9.5(3)] [R9.2(3)][R9.2(1) and (4)]
23.11 Shorthand writer
The official receiver should also apply for the appointment of a shorthand writer to take down the evidence (see also chapters 14 Part 8 and 32.3 Part 2).
Notes: [R7.16 to7.18]
23.12 Court’s discretion
An order for a private examination is a matter for the court’s discretion and it should be borne in mind that the court is unlikely to make the order where it appears to be vexatious or oppressive (ie excessively harsh or burdensome) to the respondent. Guidelines on the exercise of the court’s discretion have been provided by the Court of Appeal (Re British & Commonwealth Holdings plc (No 2) [1992] BCC 172) and approved by the House of Lords. These are that courts must balance the importance to the insolvency office-holder of obtaining the information against the degree of oppression placed on the respondent. Relevant matters which courts should consider include:
that the case for ordering a private examination against an officer or former officer of a company is usually stronger than it would be against a third party, because officers owe a fiduciary duty to the company and are under a statutory duty to assist the insolvency officer-holder (bankrupts have a similar statutory duty to the official receiver);
that if, by giving the information sought, a third party risks exposing himself to liability, that involves an element of oppression;
that an order for an oral examination is more likely to be oppressive than an order for the production of documents; and
that if someone is suspected of wrongdoing, especially fraud, it is oppressive to require him to prove the case against himself on oath before any proceedings are brought. (Nevertheless the fact that proceedings have started or are about to start against an individual does not necessarily prevent a private examination of that person and it may assist the official receiver in obtaining a private examination of such a person if the official receiver provides the court with a list of topics upon which he wishes to question that person (Re Arrows Ltd (No 2) [1992] BCC 446)).
Notes: [s235] [s291]
23.13
(Deleted)
23.14
(Deleted)
23.15 The court’s order
If it orders an examination the court will specify its time and date, which will be at least 14 days from the date of the order, and the place where it will be held. If the respondent is ordered to submit affidavits, the order will specify what must be covered in those affidavits and when they must be submitted to the court. If the order is to produce books, papers or other records, it will specify the time and manner in which they are to be produced.
Notes: [R9.3(3)] [R9.3(4)][R9.3(2); Form 9.1 - order under section 236 or 366 of the IA86]
23.16 Service of order
Any order which the court makes on the official receiver’s application must be served on the respondent as soon as practicable, and service must be personal unless the court orders otherwise.
Notes: [R9.3(5)]
23.17 Court’s enforcement powers
The court’s power to hold private examinations is supplemented by sections 237 and 367, which give it additional powers to make orders covering matters which come to light as a result of such an examination. In particular they provide for the court, on application by the person who seeks the examination, to order delivery of property or the repayment of a debt. If a respondent gives undertakings to a county court, eg that he will provide specified information to the official receiver within a given period, these undertakings should be recorded on a general form of undertaking and the court asked to order that the respondent sign the form before leaving the court.
23.18 Examinee’s failure to attend
If there are reasonable grounds for believing that a person has absconded or is about to abscond in order to avoid being examined, the court may issue a warrant for his arrest and for the seizure of records, property, etc in his possession. Where the official receiver becomes aware that attendance is unlikely, he should apply to the court ex parte for an order that the person concerned should surrender his passport or, exceptionally, for a warrant of arrest and/or seizure. If records or property are to be seized the official receiver should ask for them to be delivered to him or otherwise dealt with according to his instructions. The official receiver should show in his application that service of the order on the respondent was properly effected and that a reasonable sum was offered for expenses. Alternatively, where a private examination has been fixed, the court has power under section 37(1) of the Supreme Court Act 1981 to restrain the respondent from leaving the jurisdiction. Where the official receiver has grounds to believe that the respondent will not attend the examination, or where the examinee has been abroad and has returned to the jurisdiction, the official receiver should consider making an ex parte application to the court for such a restraining order.
Notes: [s236(4) and (5) or 366(2) and (3)] [Form PEWA]
23.19 Withdrawal of application
In certain instances a person capable of giving information to the official receiver may feel that he can only do so if he becomes subject to an examination, so that when the order for the private examination is served on him he may then supply the requested information. Where a bank is involved, for instance, inspection of accounts is normally allowed on production of the court order. In cases where prior to the examination the information sought is given, or required documents are surrendered, or there is an admission of indebtedness due to the insolvent, the official receiver should inform the court and seek leave to withdraw his application. If an order has already been made, the court can be asked to rescind it. The shorthand writer should also be informed that the examination will not proceed.
Notes: [R7.47(1) or s375(1)]
23.20 Procedure at hearing
At the examination the official receiver or assistant official receiver as applicant should attend in person, although he may be represented by a solicitor with or without counsel, and may put such questions to the respondent as the court will allow. The official receiver should normally only employ counsel where the assets in the estate are sufficient to cover the cost of doing so or adequate funds are provided by a third party. Where the official receiver considers that the exceptional circumstances of the case require the employment of counsel and there are no or insufficient funds, these circumstances should be reported to Technical Section at HQ London before a debit balance is incurred.
Notes: [R9.4(1)]
23.21 Respondent’s legal representation
The respondent may, at his own expense, employ a solicitor with or without counsel, to put such questions as the court allows to enable him to explain or qualify his answers. The respondent’s counsel may also make representations on his behalf.
Notes: [R9.4(5)]
23.22 Legal professional privilege
The inclusion in sections 291(1)(b) and 311(1) of the words "(including any which would be privileged from disclosure in any proceedings)" effectively avoids claims by solicitors who have acted for bankrupts that the legal professional privilege arising from the solicitor/client relationship precludes their producing, including in the context of a private examination in relation to the bankrupt, documents which might otherwise be subject to such privilege. In a winding up no such considerations arise in any event, since the company was the client and the liquidator will be in control of the company instead of its directors and can therefore authorise production.
23.23 Participants in the examination
In addition to the questioning by the official receiver, anyone else who could have applied for an examination (see paragraph 23.4) may, with the leave of the court (and provided that the official receiver as applicant does not object), attend the examination and put questions to the respondent through the official receiver. The official receiver should not discourage such participation, which may elicit further information from the respondent, but he should, before the examination, seek to obtain details of the substance of the questions.
Notes: [R9.4(2)]
23.24 Information from creditor
Where the application for the examination was made as a result of information given by a creditor, that creditor, with the leave of the court, may attend the examination and question the respondent through the official receiver, if the latter does not object. As in paragraph 23.23 above, the official receiver should obtain particulars of the line of questioning the creditor will adopt to ensure that it is relevant and not over-lengthy.
Notes: [R9.4(4)]
23.25 Interrogatories
If the respondent is ordered to answer interrogatories, the court will direct which of the questions he is required to answer and which of his answers, if any, should be by affidavit. He may be examined on oath and may not refuse to answer a question on the ground of self-incrimination if the court decides that it should be answered.
Notes: [s237(4) or 367(4)][R9.4(3)]
A written record of the examination will be taken by the shorthand writer and will be read over either to or by the respondent and signed by him at a venue fixed by the court. Unlike the record of a public examination, there is no need for verification by affidavit.
Note: [R9.4(6)]
23.27 Written record as evidence
The written record may in any proceedings, whether under the Insolvency Act or otherwise, be used as evidence against the respondent of any statement made by him in the course of the examination. This includes proceedings under the Company Directors Disqualification Act.
Notes: [R9.4(7)]
23.28 Restricted access to written record, etc
However, unless the court gives an alternative direction, the written record of the examination, any answers given by the respondent to interrogatories and any affidavits submitted in connection with the examination will not be put on the court file, nor will they be open to inspection, other than by order of the court, to anyone except the applicant for the examination or anyone who could have applied for the examination. The court can also give directions as to the custody of any documents or the provision of copies or extracts from them. Further guidance on disclosure of information generally is given in chapters 47 and 201.
Notes: [R9.5(1)] [R9.5(2)] [R9.5(4)]
23.29 Warrants and arrest of respondent
Where a respondent fails to attend an examination, or there are grounds to believe that he is about to abscond to avoid examination, the court may issue a warrant for his arrest. If the respondent is arrested, the person arresting him (who will be a court official or a police officer) is obliged to bring him before the court which issued the warrant as soon as practicable. If the respondent cannot be brought for examination immediately, application for an early hearing must be sought. The practice is that where it is the official receiver’s application, he applies for a hearing date and Form 7.9 will be used to produce the respondent from prison.
Notes: [Form WARPD] [R7.23(1)] [R7.23(2), (3) and (4)][s236(4) and (5) or 366(2) and (3)]
The court may make the respondent responsible for the costs of the examination where his refusal to provide the required information was unjustifiable. The court may also make the respondent responsible for such costs where it orders the delivery of property or payment of a debt. In other cases, unless the court otherwise orders, the costs will be paid from the insolvent’s estate and the availability of funds in the estate to pay these costs should be carefully considered before proceeding with a private examination. See also paragraph 23.9 above as to the possibility of the official receiver being made responsible for the payment of costs.
Notes: [R9.6(1)] [R9.6(2)]
23.31 Documents from Inland Revenue
As with a public examination, a private examination may be used in a bankruptcy to obtain a court order for the production of documents from the Inland Revenue which would otherwise be confidential, but only where a bankruptcy order has been made. See chapter 13 Part 10 for full details.
Note: [s369] [form IRDPN]
23.32 Persons outside the court’s jurisdiction
Where a respondent is outside the jurisdiction of the court in England and Wales but within another part of the United Kingdom the court may order that the respondent be examined in that other part, and section 426 (see chapter 52) may be used to enforce that order. Where the respondent is outside the United Kingdom the court may make a similar order but will normally not exercise its discretion to do so where there is no means of enforcing the order (Re Tucker (a bankrupt), ex parte Tucker [1988] 1 All ER 603 and Re Seagull Manufacturing Co Ltd [1991] BCC 550).
Notes: [s237(3) or 367(3)]