England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT

		Royal Courts of Justice Strand London WC2A 2LL
		November 25 2002

Mr Justice Lawrence Collins:

I Introduction

1. This is an unusual application for disclosure of documents, the provision of information, and directions for cross-examination in an unusual petition for an administration order presented against COLT Telecom Group plc ("COLT"). The Petitioners are Highberry Ltd and Highberry LLC. The Petitioners hold approximately £75m (or US$ equivalent) face value of Notes issued by COLT.
2. The Petitioners' case is that COLT is, or is likely to become, both cash-flow and balance sheet insolvent and that an administration order would be likely to achieve relevant purposes under section 8 of the Insolvency Act 1986, namely the survival of the company and the whole or some part of its undertaking and/or a compromise under section 425 of the Companies Act 1985.
3. The Petition is unusual in that the Petitioners claim that COLT is or is likely to become insolvent notwithstanding that COLT is a constituent member of the FTSE mid-250 index and has a market capitalisation of in excess of £550 million, that its latest balance sheet shows net assets of £977 million, and that the various series of Notes issued by COLT are not in default and do not fall due for repayment until the period 2005 to 2009. Against that, the Petitioners have in their proposals to COLT have relied on the dramatic fall in its share price since the year 2000, and on its substantial operating losses and negative cash-flows.
4. Not only is the Petition unusual (and indeed has features in common with corporate litigation in the United States) but the present application is unusual (and probably unprecedented) in that the Petitioners seek disclosure of documents and information, and cross-examination of witnesses (including expert witnesses), on the basis that, because there will be a dispute as to the solvency of COLT on the hearing of the petition, disclosure and cross-examination will be necessary to test the evidence put forward by COLT and to resolve the dispute as to its solvency. The application therefore raises some important questions of principle on the approach to be taken where there are contested issues of fact in insolvency proceedings of this kind.

II COLT and the Petitioners

5. COLT is the holding company of a group of companies ("the Group") whose trading operations are carried on by its subsidiaries. The Group's business was established in 1992 and COLT became the holding company in 1996. The business of the Group comprises the provision of advanced telecommunications services to business and government customers across Europe.
6. The Group employed just under 5,000 people as at the end of September 2002. Its annual turnover is in excess of £1 billion. COLT's balance sheet as at September 30, 2002 shows assets totalling £2.6 billion, creditors totalling £1.5 billion, net assets of £977 million and cash balances of £455 million. At that date, the Group had aggregate cash balances of £978 million.
7. COLT's assets consist primarily of cash held by it and investments in its subsidiaries comprising shareholdings in, and long term funding to, those subsidiaries. COLT's liabilities consist principally of its indebtedness on the nine series of Notes issued by it between 1996 and 1999. COLT's business has also been funded by raising equity capital totalling over £2 billion, the most recent being of about £500 million in December 2001.
8. Highberry Ltd is an English company which was incorporated in November 2001, and Highberry LLC is a Delaware corporation which was incorporated in September 2002. COLT says that the Petitioners are part of an American group called the Elliott Group, which is controlled by Mr Paul Singer, the father of Mr Gordon Singer, a director of Highberry Ltd and the person who verified the Petition. According to COLT, the Elliott Group is a "vulture fund," which specialises in the taking of "short" positions in shares of a company (in the expectation of a drop in their value) and acquiring debt securities at a discount (in the hope that their price will rise).
9. COLT says that the Petitioners have acquired Notes in the market at various times as recently as September of this year at a discount from their initial principal value. There are no outstanding sums due on the Notes held by the Petitioners and the earliest date (in the absence of a declaration of default) on which the principal sum is due to be repaid on Notes held by the Petitioners is 2006. COLT says that it believes that the administration petition is part of the strategy of the Petitioners is to make a speculative profit from its acquisition of Notes at a discounted price, and also from their (or their affiliated companies') short position on COLT's shares and that the Petitioners are seeking to achieve the profit by forcing an unjustified transfer of value from shareholders to noteholders.

III The Notes and the "no-action clause"

10. The total outstanding value (initial principal) of the nine series of Notes issued by the Company is £1.1 billion. The Notes are long term and are not due to be repaid until various dates between 2005 and 2009. COLT has paid all its interest obligations to date on the Notes on time and in full.
11. The Notes are governed by New York law, and contain the following "no-action" provisions:

"SECTION 6.6 Limitation on Suits A Holder may not pursue any remedy with respect to this Indenture or the Notes unless:

(a) the holder gives to the Trustee written notice of a continuing Event of Default;

(b) the Holders of at least 25% in aggregate principal amount at maturity of Outstanding Notes make a written request to the Trustee to pursue the remedy;

(c) such Holder or Holders offer the Trustee indemnity satisfactory to the Trustee against any costs, liability or expense (including the reasonable fees and expenses of its counsel);

(d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and

(e) during such 60-day period, the Holder of a majority in principal amount at maturity of the Outstanding Notes do not give the Trustee a direction that is inconsistent with the request

SECTION 6.7 Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any holder to receive payment of principal of, premium, if any, or interest on a Note or to bring suit for the enforcement of any such payment, on or after the due date for such payment expressed in the Notes, is absolute and unconditional and shall not be impaired or affected without the consent of such Holder."

12. No-action clauses in bond issues have a very long history, and have even been the subject of discussion in the International Court of Justice (although not the subject of decision) in relation to insolvency proceedings brought directly by bondholders: Belgium v. Spain (Barcelona Traction case), 1970 ICJ Rep 3, 104-5, per Judge Sir Gerald Fitzmaurice QC. They are also the subject of many decisions in the United States, and also in Canada, where the most recent appears to be Casurina Limited Partnership v. Rio Algom Ltd., Ontario, August 22, 2002.
13. COLT has adduced evidence from a partner in the eminent New York law firm, Cravath, Swaine & Moore, to the effect that these provisions would be effective to prevent the maintenance of proceedings such as these. The Petitioners propose to serve evidence in reply later today. In the course of the present hearing I expressed the view that this point might have formed the basis of an application to strike out the petition, or of an application for a preliminary issue. If COLT is right on the point, it would have been a complete answer to the petition and might have rendered unnecessary the extensive (and no doubt expensive) evidence on the financial affairs of COLT.
14. But I was informed that the issue has not been taken as a preliminary point because in response to COLT's announcement in accordance with Stock Exchange Listing Requirements of the Petitioners' threat to present an administration petition, the Petitioners published their views which included a statement that "Highberry believes that the insolvency of COLT is inevitable". In the light of the Petitioners' public statement and the allegations as to insolvency made in the Petition, COLT wishes to see off the Petitioners' attack in public in order to reassure its customers and the market.

IV The issues on the Petition

15. The main issues are on the Petition are these. The first is whether as a matter of New York law (the law governing the Notes), the terms of the no-action clauses in the relevant indentures creating and regulating the Notes prevent the Petitioners bringing these proceedings. The second is whether COLT is or is likely to become insolvent. The remaining issues (which are not relevant for the purposes of these applications) will be whether the making of an administration order would be likely to achieve either of the statutory purposes mentioned in the Petition, and whether as a matter of discretion an administration order should be made.
16. On insolvency, the Petitioners rely upon the rule 2.2 Report of Mr Heis of KPMG. As regards cash-flow insolvency he accepts that the position regarding cash-flow insolvency is that COLT is currently cash-flow solvent. But the Petitioners' case is that COLT will continue to absorb the cash that it currently holds such that there will be insufficient cash to repay a substantial amount of debt by 2006, i.e. the Notes falling due then. Mr Heis says that the forecast of Morgan Stanley, the Group's house broker, is that there will be insufficient cash to repay a substantial amount of the debt by 2006, and the current business plan appears likely to fail unless extra funding is made available to meet the repayment of current debts.
17. As regards balance sheet insolvency, Mr Heis' evidence is that it turns upon the value to be attributed to the tangible fixed assets of the group, of which COLT is the holding company. This in turn depends upon an analysis of the value to be attributed to the network infrastructure assets.
18. Financial Reporting Standard 11 (FRS 11) requires directors to carry out an impairment review if events or changes in circumstances indicate that the carrying amount of a fixed asset may not be recoverable. Such a review was carried out by COLT, and on September 27, 2002 it announced that, given the recent downturn in the telecommunications industry and in the overall economic environment, it was prudent to take further action to ensure that its assets base remained aligned with the realities of the market. Accordingly an impairment charge of £551 million was made to write down the book value of fixed assets. The results (including the review) were subject to an independent interim review report by its auditors, PricewaterhouseCoopers ("PwC").
19. The FRS 11 review comprises a comparison of the carrying amount of the fixed assets with their recoverable amount, which is defined as the higher of their value in use and their net realisable value (NRV). The value in use is defined as the present value of the future cash-flows obtainable as the result of an asset's continued use, including those resulting from its ultimate disposal. NRV is the amount at which an asset could be disposed of, less any direct selling costs. Mr Heis concludes that the relevant "value in use" is negative and that "net realisable value" is therefore the higher figure for determining their "recoverable" amount; that net realisable value is some 10% of book value; and that that the net assets of £1,624 million would be written down by £1,500 million leading to net assets of £124 million as at December 31, 2001, and that as at June 30, 2002 there would be, on a balance sheet basis, net liabilities (on a group basis) of £13 million.
20. COLT denies that it is or is likely to become insolvent on either the balance sheet or cash-flow basis. It relies on the evidence of its Chief Executive Officer, Mr Akin (to which I shall revert) and a report by Mr Halkes and Mr Hughes of Ernst & Young ("E&Y"), which analyses the evidence supporting the petition and additional publicly available information. On cash-flow E&Y say that any prediction that COLT was unlikely to repay or refinance its bonds in 2006 was speculative and subject to considerable uncertainty, and no account was taken of the options available to COLT including increasing revenues, reducing expenditure, receiving further shareholder support and making further repurchases of bonds at a discount. On balance sheet solvency they maintain that the application of FRS 11 by Mr Heis was incorrectly performed, and they estimate that Mr Heis' impairment of £1,626 million is overstated and a more reliable estimate was between £569 million and £791 million, which would result in net assets of between £1,044 million and £822 million, and no reliable evidence had been presented to justify an increase in the impairment beyond the £551 million already reflected in the third-quarter results of COLT, which resulted in positive net assets of £978 million.

V Applicable principles on the application

21. The remaining live issues on this application are whether an order should be made in favour of the Petitioners for disclosure of documents and the provision of information by COLT, and whether (as the Petitioners contend) there should be cross-examination of Mr Akin, COLT's chief executive officer, and of COLT's experts. The Petitioners contend that because Mr Akin has asserted that COLT has expectations of better cash-flows than those relied upon by Mr Heis and that COLT will in fact pay off all its Notes and the Petitioners' case is based on incomplete information, the Petitioners ought to be able to test that assertion by seeing the documents, or having the information, on which it is based; and that the difference between the Petitioners and COLT can only be resolved by cross-examination.
22. The starting point for the Petitioners is the submission that the hearing of the petition will be a trial: under CPR 32.5 the general rule is that there is to be oral examination on witness statements unless the court otherwise orders. Consequently the burden is on COLT to satisfy the court that cross-examination on witness statements is not appropriate in these proceedings. Disclosure of documents and information is necessary for the just resolution of the issues and for the effective conduct of cross-examination.
23. The position of COLT is that the Petitioners' application for disclosure and cross-examination is based on a fundamental misconception that the hearing of an administration petition is a trial. The normal trial process does not apply: there are no pleadings, and there is no automatic disclosure.
24. In my judgment the starting point is the Insolvency Rules 1986 ("the 1986 Rules"). They apply to "insolvency proceedings," i.e. any proceedings under the Insolvency Act 1986 or the 1986 Rules: r. 13.7. By r. 7.51(1), the Civil Procedure Rules (CPR) and the practice and procedure of the High Court apply to insolvency proceedings in the High Court, with any necessary modifications, "except so far as inconsistent with these Rules." The effect of r. 7.57 is that the practice and procedure of the High Court with regard to the use of affidavits and witness statements applies to insolvency proceedings.
25. The effect of r. 7.7(1) is that in insolvency proceedings evidence may be given by affidavit or witness statement "unless by any provision of the Rules it is otherwise provided or the court otherwise directs; but the court may, on the application of any party, order the attendance for cross-examination of the person making" the affidavit or witness statement. By r. 7.60 any party to insolvency proceedings may apply to the court for an order for (inter alia) additional information or disclosure and inspection of documents.
26. Counsel for the Petitioners did not formally abandon his argument that the hearing of an administration petition was a trial for the purposes of the CPR, but it seems to me that the effect of the 1986 Rules is absolutely clear. The hearing of insolvency proceedings (including administration petitions) will normally be on the basis of written evidence, but the court does have the power to order disclosure of documents and information and to order cross-examination under rr. 7.7 and 7.60. The 1986 Rules do not provide for disclosure akin to the procedure under the CPR, which is inconsistent with the 1986 Rules.
27. Administration petition procedure is dealt with in r. 2, which provides for evidence in support by affidavit (which can also be by witness statement: r. 7.57(5)), and for the variety of persons who can be represented at the hearing, who include not only the petitioner and the company but also persons who have petitioned for winding up, and (subject to the leave of the court) any other person who appears to have an interest justifying his appearance: r. 2.9(i)(g).
28. There have, it seems, been a very small number of cases in which the person making a r. 2.2 report has been cross-examined on it. From enquiries made by counsel, it seems that an order for disclosure is unprecedented in the context of a contested administration petition.
29. As long ago as 1883 Chitty J. said that he had had considerable experience of winding up petitions, and he had never heard of an order for general disclosure of documents: Re Hoover Hill Gold Mining Co (1883) SJ 434. He said: "the late Master of the Rolls had always emphatically refused such applications, saying that he was not going to assist a man to wreck a company by ransacking its documents."
30. Prior to the CPR orders for discovery and/or cross-examination were been made in proceedings under the Companies Act 1985: see, e.g Re Lifecare International plc [1990] BCLC 222 (application for order under section 428 for transfer of shares) and contrast Re Cloverbay Ltd (No. 2) [1990] BCLC 449. Orders for disclosure and cross-examination have also been made under the Insolvency Act 1986: Re Primlaks (UK) Ltd (No. 2) [1990] BCLC 234: application to set aside voluntary arrangement. But orders for disclosure have been refused because they were not necessary for fairly disposing of the matter: Re Polly Peck International plc [1993] BCC 886 (Directors Disqualification Act 1986, s. 7(2); Re Bank of Credit and Commerce International SA (No. 4) [1994] 1 BCLC 419 (application under Insolvency Act 1986, s. 130 for leave to commence proceedings).
31. There are some cases where the resolution of a factual dispute (e.g. as to the honesty of a director) plainly calls for cross-examination: see Re Lo-Line Electric Motors Ltd [1988] Ch 477, 487. So also there may also be extremely rare cases (as an exception to the general rule that a winding up petition on a disputed debt will be dismissed) where the existence of the debt may be resolved in the winding-up proceedings after cross-examination: Re Claybridge Shipping Co. [1997] 1 BCLC 572, 579, per Oliver LJ.
32. The Petitioners point to the procedure in relation to unfair prejudice petitions pursuant to section 459 of the Companies Act 1985 as affording an analogy for disclosure and cross-examination on petitions. But I accept the submission for COLT that the section 459 procedure does not afford a helpful guide. Petitions under section 459 are not "insolvency proceedings", and in any event they do not involve a "trial" for the purposes of the CPR. For example, unless directed by the court, there are no pleadings, no automatic disclosure and no presumption that the evidence is to be given orally. The procedure in the case of a section 459 petition is governed by the Companies (Unfair Prejudice Applications) Proceedings Rules 1986 and, subject to any contrary provisions in those rules, the CPR applies. Those Rules specifically provide for the court, among other things, to give directions as to whether there should be pleadings and for there to be cross-examination of deponents of statements: see r. 5. Similar provisions govern contributories' winding up petitions: see r. 4.23, 1986 Rules.
33. Consequently in my judgment the governing provisions are the 1986 Rules, rr. 7.7(1) and 7.60, which give the court power to order disclosure and cross-examination on the application of any party to insolvency proceedings. The equivalent CPR provisions are not incorporated by reference through r 7.51(1) of the 1986 Rules, because the CPR and the practice and procedure of the High Court apply to insolvency proceedings "except so far as inconsistent with these Rules," and the 1986 Rules make express provision for these matters. Whether such an order will be made will depend upon the nature of the proceedings and the nature of the disputed questions. Any application for such an order must be viewed in the light of the overriding objective laid down by the CPR, which is not, of course, not inconsistent with the 1986 Rules, and is incorporated by reference through r. 7.51(1).
34. At the hearing of the administration petition the court must be "satisfied" (Insolvency Act 1986, section 8) that the company "is or is likely to become unable to pay its debts" within the meaning of section 123, under which both cash-flow insolvency and balance sheet insolvency must be "proved to the satisfaction of the court" (section 123(1)(e) and section 123(2)).
35. It seems to be plain that the nature and purposes of an application for an administration order, the nature of the enquiry by the court, and the usual urgency of the application, make it inevitable that only very exceptional circumstances will justify an order for disclosure or cross-examination in proceedings for an administration order.

VI The orders sought on the application

36. The Petitioners seek orders for the cross-examination of Mr Akin, the chief executive officer of COLT, and of Mr Halkes and Mr Hughes of E&Y. The request for documents and information is based on matters which are relied upon by Mr Akin in his main witness statement. The Petitioners do not seek the documents on the basis that there are documents referred to and which can be obtained under CPR 31.14. What is said is that there are matters of fact raised to dispute the allegations of the Petitioners and it is necessary for the underlying documents and information to be available to resolve the differences of fact.
37. The requests for documents and information are as follows:-

(1) Mr Akin, in support of his evidence that COLT is a solvent and substantial going concern, relies upon the fact that the balance sheet as at September 30, 2002 was subject to an interim review by its auditors, PwC, and showed net assets of £977 million and cash balances of £455 million. The Petitioners seek copies of the documents which comprise the interim review, including instructions, documents with which PwC were provided, and a copy of their review or report.

(2) In connection with balance sheet insolvency, Mr Akin relies upon the involvement of PwC as auditors in the impairment review, and the Petitioners ask for copies of the September 2002 impairment review, including board meetings in July and September at which impairment was discussed. These documents are said to be necessary to understand and respond to his assertions about its financial position.

(3) In reliance upon the proposition that COLT is not likely to become insolvent, Mr Akin mentions its expectation that it is going to be able to repay the Notes when they fall due, and states that that expectation is based on actual results to date. The Petitioners ask for relevant management or other accounts for information, on the ground that they are necessary to understand COLT's current position and the expectation referred to.

(4) Similarly Mr Akin refers to COLT's business plan, and the Petitioners seek copies of the documents which comprise it, as being necessary to understand and evaluate his assertion about its financial position and expectations.

(5) There are many references to cash-flow expectations, and the Petitioners seek details of, and documents supporting, the cash-flow expectations from the present to 2009, because they say that it is necessary to understand and respond to his assertions about its ability to repay the Notes in and from 2006 to 2009.

(6) Mr Akin relies on cash-flow sensitivity analyses, and the Petitioners seek copies because it is said they are necessary to understand the assumptions used by COLT and how appropriate they are in the circumstances of the present and expected operating environment.

(7) Mr Akin says that COLT will be able to repay the notes with a modest amount of external funding. The Petitioners seek documents showing the foundation for the expectation that it will be able to obtain external financing, and that it would amount to significantly less than the amount of EBITDA expected in 2006, and details of EBITDA forecasts for the period 2002 to 2009, documents detailing the amount of funding expected to be required, and any documentation on these issues relied upon in reaching the conclusions and beliefs set out in Mr Akin's witness statement.

(8) Mr Akin refers to capital expenditure and expected revenues. The Petitioners seek details of and documents evidencing COLT's forecast capital expenditure and anticipated revenue, because this is required to evaluate the expectation that net cash-flows will be higher than those relied upon by Mr Heis.

(9) Mr Akin refers to cash held in a subsidiary, COLT Telecom Finance Euro, and the Petitioners seek copies of relevant documents relating to investments in it.

(10) Mr Akin asserts, contrary to the evidence of the Petitioners, that COLT's London network has produced a positive operating profit, and the Petitioners ask for confirmation of the amount and the date on which it was achieved, and copies of the relevant management accounts or other documents showing the operating profit referred to.

(11) The petitioners seek copies of all board and management minutes which record consideration given to any of the above matters since June 2002.

38. The Petitioners seek to support their case for disclosure in this way: the Petitioners' case is based upon publicly available information as to COLT's financial position and prospects. In rebuttal of that case, COLT seeks: (1) to rely upon evidence by way of the E&Y Report, effectively dealing with the publicly available information and saying that (a) it has been misconstrued or wrongly analysed by Mr Heis of KPMG and (b) to raise questions as to the limits of usefulness of such information; (2) to rely upon Mr Akin's witness statement, which in substance amounts to repeated assertions, based specifically upon information available to Mr Akin and the board of COLT, to the effect that COLT is in fact solvent and will remain so and that the relevant information shows a much rosier picture than the publicly available information; (3) to deny access to the Petitioners and the court to the relevant information, so that the Petitioners and the court are in a position where there are assertions that that information leads to specific answers to the issues in the case but where those assertions and answers are apparently to be simply accepted unchallenged.
39. The Petitioners say that they seek only limited disclosure. Disclosure is sought in relation to documents containing information which COLT (by the witness statement of Mr Akin) specifically asserts justifies COLT's position (a) that certain financial information available to COLT's management shows a more healthy position than the comparable publicly available information analysed by Mr Heis and/or (b) that assumptions or assertions made by Mr Heis are invalid if such information is considered.
40. COLT's position is this. It does not dispute that the court has jurisdiction to make appropriate orders for disclosure and/or further information. But it submits that the court should only grant a request for disclosure in the context of an administration petition where the Petitioners can show that there are exceptional circumstances justifying the making of such an order. There are no such exceptional circumstances in the present case. The Petitioners are not entitled to make good any deficiency in their evidence by fishing for extensive documentation or information which might bolster their case.
41. COLT says that the documentation and information sought is of a type which no publicly traded company would generally make or be required to make to an individual investor. Disclosure to the Petitioners would require the substance of the information to be made available to the market through a formal announcement in the absence of confidentiality restrictions. COLT has sought to deal with the Petitioners' allegations in as open a manner as is compatible with ensuring that the hearing of the Petition is in public, without disclosing sensitive information to competitors and the market. COLT is entitled to and wishes to see off Highberry's attack in public in order to reassure its customers and the market. The Petitioners' answer is that the court is able to deal with the confidentiality issue by appropriate undertakings and/or holding parts of the hearing in private. In the alternative, the Petitioners say that the relevant parts of Mr Akin's witness statement should be struck out.

VII Conclusions

42. This is an unusual case, but what must be the unprecedented nature of the petition does not, in my judgment, make it a case with exceptional circumstances for present purposes. It is for the Petitioners to prove the allegations made in the Petition. The Petitioners have presented the Petition on the basis of publicly available information. I accept the submission for COLT that the Petitioners should not be permitted to have access to documents containing confidential and sensitive information which is not available to other investors for the purpose of trying to second guess the expectations of COLT.
43. On balance sheet insolvency the Petitioners seek copies of documents which comprise the interim review, including disclosure of communications between COLT and its auditors, and documents provided to PwC, and board minutes in July and September 2002 at which the impairment review was discussed.
44. The reason put forward for these requests is that the documents are "necessary to understand and respond" to COLT's assertions about its net asset position or its financial position. It is plain that this is not on its face a good reason for an order for production. It is clear that the Petitioners wish to prove that the PwC review was inadequate, and that they are fishing for documents to support that case.
45. Most of the other requests relate to cash-flow insolvency. In evaluating them, it must be borne in mind that the Petitioners do not assert present cash insolvency. They are endeavouring to satisfy the court that COLT is "likely" to be cash-flow insolvent in 2006. COLT says that its expectation is that it will be able to pay those Notes which become due in 2006 is supported by its actual results to date, its business plan, its cash-flow expectations, its cash-flow sensitivity analyses, its prospects for external financing, its forecast capital expenditure and expected revenues, and the return on capital invested on the London network.
46. The nature of the applications in respect of these matters is breathtaking. The Petitioners seek management accounts for the actual results to date, information on business plans, details of, and documents supporting, COLT's cash-flow expectations to 2009, details of EBITDA forecasts from 2002 to 2009, details of and documents evidencing COLT's forecast capital expenditure and anticipated revenues, and copies of all board (and board committee) and management minutes which record consideration given to any of these matters since June 2002. They are said to be necessary, variously, to understand or evaluate or respond to COLT's assertions, or expectations or assumptions. In some cases, the application notice schedule makes no attempt is made to justify the request, as in the case of COLT's investment in COLT Telecom Finance Euro, or the London Network return on capital expended.
47. Whether COLT has adequately responded to the Petitioner's, evidence is, of course, a matter for the judge hearing the petition, but for the purposes of this application (and only for that purpose) I am satisfied that COLT's position is clearly and comprehensibly (and comprehensively) set out, and that the Petitioners do not require the information or the documents to understand or evaluate its position. If they need the documents to respond to COLT's position, then I consider that they are simply "fishing" for information or documents to bolster their position, and that that is not a legitimate use of the exceptional power to make orders for disclosure or information.
48. The width of the requests can be illustrated by the request provoked by Mr Akin's reference to external funding:

"(a) Documents showing the foundation for the board's expectation that COLT will be able to obtain external financing at reasonable commercial rates, and that it would amount to significantly less than the amount of EBITDA expected in 2006

(2) Details of EBITDA forecasts for the period 2002 to 2009

(3) documents detailing the amount of funding expected to be required

(4) any documentation on these issues relied upon by Mr Akin and/or the board in reaching the conclusions and beliefs set out in Mr Akin's witness statement".

49. The requests are not only extensive, but in many cases vague and unparticularised. I also take into account the confidential nature of the material which is requested. The Petitioners do not respond to COLT's assertion that cash-flow expectations are amongst the most sensitive pieces of information that any publicly traded company produces and they form the basis of much of any company's medium and long term planning. Details of cash-flow expectations are not prepared for or released to the market. I accept that where justice requires that confidential documents be made available there are procedures (disclosure to professional advisers only or the court sitting in private) designed to mitigate the damage from disclosure, but I consider that confidentiality is a factor in the exercise.
50. The Petitioners do not require the material to respond to the E&Y response to Mr Heis' r. 2.2 report. The documentation sought by the Petitioners has not been made available to E&Y, who have responded to Mr Heis' r. 2.2 report on the basis of the same type of information as was available to Mr Heis.
51. Although the Petitioners say that they are seeking specific disclosure, it seems to me clear that in reality they are seeking disclosure of any documentation which might impact on the financial position of the company – in effect, standard disclosure. In fact, not only are the proceedings as a whole reminiscent of American corporate litigation, but the request for documents has many of the hallmarks of an extensive US-style discovery request.
52. On cross-examination, the Petitioners say that in these proceedings the court will have to determine the factual issues regarding solvency and the likelihood of achievement of the relevant section 8 purposes; and that there are disputes of fact and expert evidence which are properly to be resolved by cross-examination. I do not accept that there will be an issue as to the likelihood of the COLT being or becoming insolvent on a balance sheet or cash-flow basis, which can only be resolved by cross-examination. The court must be "satisfied" as to insolvency. It will not be making a decision following trial. The idea that the court could "try" the question whether COLT is "likely" to be cash-flow insolvent in 2006 (or in 2020 or 2050) is fanciful.
53. I accept the submission for COLT that it would plainly be disproportionate for the court to enter into a protracted and minute examination of COLT's position and prospects for the future in the context of an administration petition; and such an examination is not necessary for the fair disposal of the issues. It would be quite wrong to treat the hearing of an administration petition as if it were a trial. The consideration of the issues is not intended to be done by way of a very detailed and protracted investigation as in a trial. The reality of the matter is that in this case the assertion of balance sheet insolvency turns on issues of judgment in relation to the impairment review, and cash-flow insolvency turns on the future prospects of COLT, which also raise questions of judgment and speculation as to future events. It will be for the Petitioners to satisfy the court that the judgment of COLT and its advisers is wrong, and that COLT is insolvent on the balance sheet basis or is likely to become (in several years) insolvent on the cash-flow basis. There is nothing in the material before me which justifies an order which in effect requires COLT to make the petitioners' case for them.
54. Consequently, I dismiss the application for disclosure of documents and information, and for cross-examination of Mr Akin. I would have dismissed any application for the cross-examination of the E&Y experts, but I understand that it has been agreed that the experts will be made available at the hearing of the petition, and that it is agreed that this can be dealt with by the judge hearing the petition. Since the judge hearing the petition will be seised of the New York law issue, I will order attendance for cross-examination of the experts on New York law, if the evidence for COLT is contested. If there are matters on the form of the order or any matters canvassed but not resolved at the hearing of this application, I will hear further argument.