England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY

		Birmingham Civil Justice Centre Bull Street, Birmingham B4 6DS
		8 October 2009

HHJ David Cooke :

1. This is my reserved judgement on an application by administrators for an order pursuant to section 236 of the Insolvency Act 1986 seeking provision of a wide range of documents from the respondent building contractors. The applicants were represented by Mr Brian Rawlings, solicitor advocate, and the respondents by Mr Stephen Whitaker of counsel. I am grateful to them both for their well focused submissions.
2. The applicants are the joint administrators of two companies, Junared Three Limited and Warnock Estates Limited, having been appointed by the directors on 8 June 2009. The background to the administration and this application is of a partly completed mixed-use property development at Harrow Road in London. Junared Three Limited obtained funding of some £5.19 million from Bank of Scotland Plc for the project, part of which was used to acquire the shares in Warnock Estates Ltd, which owned the relevant property. The respondent company was engaged under a fixed price contract for £1,755,000 for the design and building work involved in the development, including the full project management of the site.
3. The details of the contract under which the respondent was engaged are not entirely clear. The only contractual documentation is a letter dated 29 May 2007 addressed to the respondent on notepaper with the printed name "Junared Property Group Ltd" and a registered number. The letter begins "We Junared Property Group Limited write to confirm that it is our intention to enter into a contract with your company for the construction of the above project and you are authorised to proceed with the works based on the following conditions; (1) the form of contract will be a JCT Design & Build Contract (2) the contract sum will be £1,755,000…". Although this appears to envisage a subsequent contract document, no such document was ever entered into.
4. There is no limited company registered under the name "Junared Property Group Ltd". The registered number quoted on the letterhead is that of a company called Junared Property Ltd, which is not subject to any insolvency procedure. Insofar as the respondent was paid for work done pursuant to the contract, the payments were made by Junared Three Ltd. I have no evidence of the relationship of Junared Property Ltd to that company, but I presume that it is at least under common control. The evidence is that Mr Louie Hussain is a director of Junared Three Limited and two other companies, Junared One Ltd and Junared Two Ltd, to which the bank also lent money for other developments, and that he is presumed to be the controlling shareholder of all of them. If so it would appear likely that he is also in control of Junared Property Limited. The application proceeds before me on the basis that whatever contract was made was between Junared Property Limited and the respondent. The respondent's position (which the administrators have insufficient information to accept or contest) is that the contract was made by the letter that I have referred to, and that it incorporates the JCT Standard Form of Design and Build Contract, 2005 Edition.
5. Work commenced on the contract in September 2007. In November 2008 the respondent gave notice pursuant to clause 4.11 of the JCT standard terms suspending performance on the grounds of non-payment by the employer. In January 2009 an Adjudicator held that the employer was liable to pay the respondent some £292,000. The respondent has not yet given notice terminating the contract but contends that it is entitled to do so, whereupon money retained from earlier stage payments will become immediately due to it. The full amount outstanding, including the retentions, is some £354,000. On the face of it the respondent is a creditor of Junared Property Limited for this amount. It has not contended before me that it has a claim against either of the companies in administration, but it is plain that they were intended to be the source of funds for payment. The respondent has been referred to as the principal unsecured creditor in the administration, perhaps on a slightly loose basis but reflecting the practical reality of the position.
6. The partly built property is the only significant asset of the two companies in administration. The administrators wish to consider whether they should attempt to complete the development themselves, or sell the property in its partly completed state and contend that in order to obtain advice on valuation and reach this decision they need to see the various classes of documents held by the respondent in relation to the property. Mr Rawlings submits that the administrators have very little in the way of documentation available to them, although I notice that the evidence filed on their behalf does not give any information about what documentation they have and have not been able to obtain from the records of the companies themselves. The administrators are not yet in a position to say whether it is likely that they will realise enough to pay the secured creditor in full, and the objective of administration they are pursuing is therefore either realisation on behalf of the secured creditor or a better result for the creditors as a whole.
7. The application seeks an order that the respondent should produce "the books, correspondence and documents in their custody as identified in the schedule attached to this application". The schedule consists of seven paragraphs each with a heading. The text beneath the headings does not for the most part give any greater clarification of what documents are sought, being more in the nature of a justification of the administrators request for them. Some further elucidation is given in the witness evidence, although the administrators make clear that they do not know what documents exist in these categories. In response to my question, Mr Rawlings said that what the administrators seek is every document of whatever nature in the possession of the respondents that can be said to fall within any of the seven headings set out in the schedule.
8. The categories are:

i) "Planning and approvals". In the witness evidence it is explained that the administrators have been able to obtain copies of the public information in relation to the planning permissions and building regulation contents granted (I am told that this includes the plans attached to the consents) but they do not have any information about any subsequent correspondence or negotiations that have taken place between the respondent and the relevant inspectors in the course of performance of the contract. An example is given that the approved plans provide for two lifts, but only one has been installed. The administrators do not know whether this variation has been agreed with the inspectors or is a breach of the conditions attached to the consents.

ii) "Build contracts". This is explained in the schedule as being "key information concerning the different parties which have completed work on the site", that is to say the various professionals and subcontractors employed by the respondent. The administrators wish, they say, to be able to approach those subcontractors themselves or pass on their details to any purchaser who may wish to obtain information about what they have done, or employ them to finish off the work. Mr Whitaker makes the point that any such persons would have been engaged and paid by the respondent and yet in some cases at least that cost has not been, and will not now be, reimbursed to it. Insofar as their identity is a valuable piece of information, he says that it is not fair that the respondent should be required to give it up in the circumstances.

iii) "Drawing and Specifications". This is said to include any specifications and drawings produced by architects engineers and consultants "to enable the administrators and interested parties to properly consider the works required to complete the development", and also any documentation relating to party walls "to ascertain the current status of the party wall issues which will enable the administrators and interested parties to properly consider the activities required to resolve these issues." The administrators presumably do not need any documentation from the respondent to establish which walls of the property are party walls and which are not; this will be apparent from the title documents to the property. What they may benefit from knowing is what negotiations have taken place and what agreements have been made with the neighbouring owners, all of which, to the extent done by the respondent, would have been done for the purposes of its contract.

iv) "Site Progress". It was explained that although written progress reports had been submitted by the respondent to Junared Property Ltd, these documents have not been provided to the administrators. The respondent does not object to providing further copies. In addition however the administrators seek all the internal documentation of the respondent relating to the works to date (before and after the date of the last progress report) in order to identify what has and has not been done, whether any problems have been encountered and what is needed to complete the work.

v) "Health and Safety". Although the schedule itself is of no assistance in identifying what is required under this heading, the explanation in the witness evidence is that it refers to the respondent's own health and safety files, written systems of work and risk assessments. It is said that this may be of assistance to any purchaser or incoming contractor although they would of course be required to undertake their own risk assessments and develop their own system of work.

vi) "Sales and Marketing". The respondents have said they hold no documents relevant to this heading, which is not therefore pursued.

vii) "Warranties and Guarantees", which is explained as "copies of all of the warranties and guarantees held in relation to all aspects of the property. This should include… warranties provided by the respondent". Mr Rawlings explained that the purpose was to identify any warranties, such as collateral warranties, given by professionals or subcontractors which might be directly enforceable by the owner of the property from time to time. It was accepted that it was unlikely that any such warranties would have been given by someone whose work was incomplete or had not been paid for, but that if any did exist, the administrators wished to know about them. It was further accepted that the administrators had no legitimate interest in warranties that were only available to be enforced by the respondent.

9. The respondent's initial reaction when these documents were requested in correspondence was to say that they would be provided if the amount owing to them in respect of the work they had done was paid in full. Their evidence is that insofar as the documents requested exist, they are the property of the respondent and (with particular reference to the drawings and plans requested) the respondent's copyright. With the exception of progress reports that have in fact been sent, none of them would normally be provided to the employer in the course of the operation of the contract. At its conclusion, and provided the respondent was paid in full, it would be obliged to hand over a pack of documents consisting of evidence of compliance with the planning and building control regulations, an approval by the NHBC which would enable the developer to obtain an individual NHBC certificate for each flat subsequently sold by it, health and safety and operation manuals (relating not to the construction work but to the future operation of the building and the equipment installed in it) and a set of "as built" drawings. None of these documents, for obvious reasons, exists at present.
10. In relation to those drawings, the respondent would retain the copyright and the developer would be entitled to a limited licence entitling it, amongst other things, to use the drawings the purpose of selling the flats. Until completion and payment however, Mr Whitaker submitted, the developer had no contractual entitlement to any drawings or designs that had been produced for the purposes of the contract, or indeed any of the other internal documents that were being requested. Insofar as they were subject to copyright, the developer was not entitled to any licence to make use of them.
11. The respondents expressed the concern that the administrators' true purpose is to obtain the documents so that they can be sold to a buyer as part of a package to sell the development. It is submitted on their behalf that it is an abuse of the procedure under section 236 to seek from them the "fruits of their labours"; that is to say documents produced in the course of the contract for which they have not been paid, in order to obtain, without payment, the advantage of the work they have done. Mr Whitaker submits that an order for disclosure of these documents would alter the respondent's contractual and property rights and interfere in the commercial relationship between the respondent and the companies in administration. It would amount to a transfer of value from the principal unsecured creditor to the secured creditor, which has declined to fund payment of the respondent's debt but would now be the beneficiary or principal beneficiary of any reduction in cost of completion and/or increase in realisation.
12. In response to that, Mr Rawlings submits that what the administrators seek is not the documents themselves but the information contained in them, and he accepts that an order for disclosure under section 236 would not affect any property rights held by the respondent, including copyright. He further accepted that these rights may constrain the use that the administrators may make of the documents, and that they would be responsible for any breach committed. It was denied that the documents were to be sold to any third party, and said that they were to be used by the administrators for the purpose of making their own decisions, specifically to identify what work required to be done to complete the project in compliance with the relevant planning and building regulation consents, so that the administrators could take professional advice as to whether it was preferable for them to complete the work themselves, or provide information that a purchaser would request if buying the site with a view to building it out.
13. Section 236 provides as follows:

"(2) The court may, on the application of the office-holder, summon to appear before it—

(a) any officer of the company,

(b) any person known or suspected to have in his possession any property of the company or supposed to be indebted to the company, or

(c) any person whom the court thinks capable of giving information concerning the promotion, formation, business, dealings, affairs or property of the company.

(3) The court may require any such person as is mentioned in subsection (2)(a) to (c) to submit an affidavit to the court containing 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 or the matters mentioned in paragraph (c) of the subsection."

14. It was not in dispute that on the face of it the respondent falls within paragraph (2)(c) as being a person capable of giving information in relation to the property at Harrow Road which is, at least in relation to Warnock Estates Ltd, "property of the company", and that the documents requested are documents "relating to" that property, so falling within the wording of paragraph (3). Mr Whitaker's submission however is that in the circumstances of the case the documents requested either are not properly the subject of a request under this section, or alternatively that the court ought to decline to exercise its discretion to make the order sought on the grounds that it would be oppressive to the respondent.
15. The advocates were agreed that the principal authority is the decision of the House of Lords in British & Commonwealth Holdings plc v Spicer and Oppenheim [1993] AC 426. In that case, the administrators of the applicant company sought information from the files of the auditors of one of its subsidiaries, including in particular information relating to work done prior to the acquisition of that subsidiary. The acquisition had proved disastrous and the administrators wished to find out whether the acquiring company had any claim against any person arising out of it. The information requested was very extensive and part of the opposition to the application was based on the allegedly oppressive nature of making an order in the wide terms sought. The principal question concerning their Lordships however was whether the jurisdiction under section 236 was limited to disclosure required in order to provide the officeholder with such information as would have been available to the company but for its insolvency, the so-called "reconstitution of knowledge" argument. It was accepted that some at least of the information requested was information that the company would not itself have been entitled to, having no contractual or other relevant relationship with the auditors of the acquired company.
16. The principal judgement was given by Lord Slynn, with whom all the other law Lords agreed. He held that the was no such limitation in jurisdiction, and that contrary to the opinion of the first instance judge, no rule establishing such a limitation had been laid down by the previous decision of the Court of Appeal in Cloverbay Ltd (Joint Administrators) v Bank of Credit and Commerce International SA [1991] Ch 90. Having reviewed the judgments in that case, and previous authority, he said this:

"Although the passages to which I first referred support the conclusion reached by Hoffmann J. as to the effect of the judgment of the Court of Appeal, I do not think that reading the judgment overall such a limitation to "reconstituting the company's knowledge" was intended to be laid down in Cloverbay.

In any event for my part I do not think that such a limitation exists.

The wording of the section contains no express limitation to documents which can be said to be part of a process of reconstituting the company's state of knowledge. The words are quite general. Thus section 236(2)(c) refers to "any person whom the court thinks capable of giving information concerning the promotion, formation, business, dealings, affairs or property of the company," and by subsection (3) such a person may be ordered to produce "any books, papers or other records in its possession or under his control relating to a company or the matters mentioned in paragraph (c) of the subsection."

Nor do I see any support in earlier judgments which have been cited to us relating to the predecessors of section 236 or to comparable sections for such a limitation to "reconstituting the company's knowledge." On the contrary, for example, in In re Gold Co. (1879) 12 Ch.D. 77) in a case under section 115 of the Companies Act 1862 (25 & 26 Vict. c. 89) (which enabled the court to summon any officer or any persons supposed to be capable of giving information concerning the transaction and trade dealings of the company), Sir George Jessel M.R. said, at p. 85:

"the whole object of the section is to assimilate the practice in winding up to the practice in bankruptcy, which was established in order to enable assignees, who are now called trustees, in bankruptcy to find out facts before they brought an action, so as to avoid incurring the expense of some hundreds of pounds in bringing an unsuccessful action, when they might, by examining a witness or two, have discovered at a trifling expense that an action could not succeed."

Similarly, Chitty J. said in In re Imperial Continental Water Corporation (1886) 33 ChD 314, 316:

"Those extensive powers are conferred upon the court for the beneficial winding up of the company, for sometimes it happens that the liquidator is unable to obtain from unwilling persons the information which he requires."

In In re North Australian Territory Co. (1890) 45 ChD 87, in relation to the same section, Bowen L.J. said, at p. 92:

"The section which the court is putting in force in the examination of a person under such circumstances is the section which places the decision as to an examination and as to its limits within the discretion of the court. That being so, I do not think that we ought to attempt beforehand to classify all the occasions upon which it may be proper to make such an order…"

In In re London and Northern Bank Ltd. [1902] 2 Ch 73, 84, Cozens-Hardy L.J. recognised the discretionary nature of the court's powers under section 115 of the Companies Act 1862. In In re Rolls Razor Ltd. (No. 2) [1970] Ch. 576, 592, Megarry J. referred to "the unfettered discretion of the judge brought to bear upon any exercise of this extraordinary jurisdiction" under section 268 of the Companies Act 1948 which replaced section 115 of the Act of 1862. In In re Highgrade Trades Ltd. [1984] B.C.L.C. 151, Oliver L.J. in relation to section 268 said, at p. 177c "the jurisdiction is a most useful one, and I certainly do not wish to say, and it is unnecessary to say, anything which would limit its scope." In In re John T. Rhodes Ltd. (1986) 2 B.C.C. 99,284, 286, Hoffmann J. again emphasised the discretionary nature of an order made under section 561 of the Companies Act 1985, the successor of section 268 of the Act of 1948.

In my opinion, although there may be some difference in the wording of these sections, the position under section 236 of the Insolvency Act 1986 is broadly the same as that under section 268 of the Companies Act 1948 as explained by Buckley J. in In re Rolls Razor Ltd. [1968] 3 All E.R. 698, 700, in a passage subsequently approved by the Court of Appeal in In re Esal (Commodities) Ltd. [1989] B.C.L.C. 59, 64:

"The powers conferred by section 268 are powers directed to enabling the court to help a liquidator to discover the truth of the circumstances in connection with the affairs of the company, information of trading, dealings, and so forth, in order that the liquidator may be able, as effectively as possible, and, I think, with as little expense as possible … to complete his function as liquidator, to put the affairs of the company in order and to carry out the liquidation in all its various aspects, including, of course, the getting in of any assets of the company available in the liquidation. It is, therefore, appropriate for the liquidator, when he thinks that he may be under a duty to try to recover something from some officer or employee of a company, or some other person who is, in some way, concerned with the company's affairs, to be able to discover, with as little expense as possible and with as much ease as possible, the facts surrounding any such possible claim."

These words, which reflect what was said by Sir George Jessel M.R. in 1879, seem to be wholly consistent not just with the wording of section 236 but also with the purposes of the administration as set out in section 8(3) of the Act of 1986 and in particular:

"(a) the survival of the company, and the whole or any part of its undertaking, as a going concern; … (d) a more advantageous realisation of the company's assets than would be effected on a winding up."

As Megarry J. said in In re Rolls Razor Ltd. (No. 2) [1970] Ch. 576, 591-592:

"The process under section 268 is needed because of the difficulty in which the liquidator in an insolvent company is necessarily placed. He usually comes as a stranger to the affairs of a company which has sunk to its financial doom. In that process, it may well be that some of those concerned in the management of the company, and others as well, have been guilty of some misconduct or impropriety which is of relevance to the liquidation. Even those who are wholly innocent of any wrongdoing may have motives for concealing what was done. In any case, there are almost certain to be many transactions which are difficult to discover or to understand merely from the books and papers of the company. Accordingly, the legislature has provided this extraordinary process so as to enable the requisite information to be obtained. The examinees are not in any ordinary sense witnesses, and the ordinary standards of procedure do not apply. There is here an extraordinary and secret mode of obtaining information necessary for the proper conduct of the winding up. The process, borrowed from the law of bankruptcy, can only be described as being sui generis."

I am therefore of the opinion that the power of the court to make an order under section 236 is not limited to documents which can be said to be needed "to reconstitute the state of the company's knowledge" even if that may be one of the purposes most clearly justifying the making of an order."

17. He prefaced his consideration of the approach taken below in exercising the discretion as follows:

"At the same time it is plain that this is an extraordinary power and that the discretion must be exercised after a careful balancing of the factors involved - on the one hand the reasonable requirements of the administrator to carry out his task, on the other the need to avoid making an order which is wholly unreasonable, unnecessary or "oppressive" to the person concerned. The latter was stressed by Bowen L.J. in In re North Australia Territory Co., 45 Ch.D. 87, 93:

"That is an inquisitorial power, which may work with great severity against third persons, and it seems to me to be obvious that such a section ought to be used with the greatest care, so as not unnecessarily to put in motion the machinery of justice when it is not wanted, or to put it in motion at a stage when it is not clear that it is wanted, and certainly not to put it in motion if unnecessary mischief is going to be done or hardship inflicted upon the third person who is called upon to appear and give information."

Such an approach was stressed more recently by Brightman J. in respect of oral examination in In re Bletchley Boat Co. Ltd. [1974] 1 W.L.R. 630.

The protection for the person called upon to produce documents lies, thus, not in a limitation by category of documents ("reconstituting the company's state of knowledge") but in the fact that the applicant must satisfy the court that, after balancing all the relevant factors, there is a proper case for such an order to be made. The proper case is one where the administrator reasonably requires to see the documents to carry out his functions and the production does not impose an unnecessary and unreasonable burden on the person required to produce them in the light of the administrator's requirements. An application is not necessarily unreasonable because it is inconvenient for the addressee of the application or causes him a lot of work or may make him vulnerable to future claims, or is addressed to a person who is not an officer or employee of or a contractor with the company in administration, but all these will be relevant factors, together no doubt with many others."

18. Finally in approving the order made despite objections to its width and form he said

"I comment briefly on criticisms of the order which has been made. In the first place it is to be accepted that it is made in wide terms though it is not said that they are so imprecise that there is a doubt as to what is covered by the order. Secondly the order relates to the audit before and after acquisition. In my view, when the truth of representations is being considered, no objection can be taken to the request relating to the first audit, nor to the second audit since the latter may well reveal material relevant to the conduct of the company's business before acquisition and after acquisition in a way which reflects on the earlier conduct of the business. The material involved may go to show how accurate were the company's financial statements and how accurate were any representations made. It is not possible to say that the material as to the second audit must be irrelevant. Thirdly, the order relates to the working papers of the auditors of Atlantic and not simply to Atlantic itself but these papers could clearly contain information of relevance to the administrator's investigation even if that information could not have been obtained in litigation against Atlantic. Fourthly, the appellants were never auditors of B. & C. That does not seem to me in any sense to be conclusive since the inquiry is into the affairs of Atlantic of which the appellants were auditors and as to representations made about it before acquisition. Fifthly, although a court may hesitate to order production by those not officers of the company whose administrators apply for the documents, there is no embargo in principle against ordering "third parties" to produce documents. In this case the process of the acquisition by B. & C. of Atlantic shares created a close relationship between them of which the auditors were well aware. Next, it is said that the volume of documents is very large. That is a factor but it is not conclusive against the order. I assume that every effort will be made to ease the task by mutual cooperation of the solicitors and accountants concerned in order to carry out the court's order. Next I am not satisfied that the carrying out of the registrar's order, though extensive and highly inconvenient for the appellants, will create such a precedent that a flood of such orders will follow which would disrupt the business of major auditing firms in the City who carry out these administrations. That papers may be produced which could possibly lay the appellants open to further claims (as to which I know nothing) is a factor to take into account but it is only one factor to be balanced against the administrator's reasonable requirements. The fact that the company never had and was never entitled to have some of the documents and that certain of them could only be obtained by litigation with the appellants, in so far as they were relevant to issues in that litigation, are factors to take into account in the balancing exercise to be set against the purposes of the administration set out in section 8 of the Act of 1986.

This may well be an exceptional order. The size of the financial crash, however, gives rise to an exceptional case. Creditors and investors stood to lose vast sums. It was the respondents' task to investigate "what was the true financial position of Atlantic at the time of its acquisition and, if it was different from the way it was represented, how and why the truth was concealed:" Hoffmann J. [1991] B.C.C. 651, 661. They need in this very complex situation to check the accuracy of the various financial documents and to know not only what representations were made but how accurate they were. Like Woolf L.J. I find it difficult to see how the order can be cut down and remain effective. No way has been suggested to achieve this."

19. The application must therefore be considered in two stages; first as to the availability of jurisdiction and the second as to the exercise of discretion. It is plain from the passages I have cited and the authorities referred to by Lord Slynn that the jurisdiction is extremely wide and the application against this respondent is not excluded by the facts that the respondent is not an officer or employee of the company in administration, or even in a contractual relationship with it, or that the company does not own the documents sought and would not otherwise have any entitlement to inspect them, except perhaps in the context of disclosure in litigation. The court however must be careful in the exercise of its discretion not to make an order which is unfair, particularly where it affects third parties. In my judgement, the respondent in this case is within the category of those referred to as "third parties".
20. Neither advocate was able to refer to any authority in which section 236 has been used in similar circumstances. The power is to be exercised in support of the performance of the office holder's functions. It is of course commonly used where the officeholder wishes to identify the existence or location of assets, to understand the nature or effect of transactions that the company has entered into, or to ascertain whether the company has any claim against some person arising out of its business, or to evaluate the strength of such a claim, or obtain evidence in support of it. None of those purposes is involved in this case; the administrators know what the asset is and are only concerned to make the most advantageous realisation of it. There is no suggestion of investigation of any claim against the respondent or any other person.
21. They hope that they will be able to extract more value from the partly completed development if they have the information they seek, in the first instance by making the best choice as between completing the development themselves or selling the property in its present condition. Whichever option is taken, it is easy to see that the more information that can be provided either to a contractor considering completing the project or to a potential purchaser, the better the position of the administrators may be. Dealing with a contractor, for instance, the administrators would wish to specify as fully as possible in the initial contract what works were required to be done to complete the project and comply with planning and other regulatory requirements, because anything omitted at that stage would no doubt cost more if introduced as an "extra". If potential purchasers were faced with large areas of uncertainty as to what they would have to do to complete the building and sell the flats, they could be expected to factor this uncertainty into the price they offered.
22. Making the best possible realisation of the company's known assets is obviously part of the officeholder's function, just as uncovering hidden assets and investigating the affairs of the company or claims that it may be able to bring would be. In principle therefore information about the state of completion of the building and what is required to be done to build it out is information will or may assist the administrators in the performance of their functions. I can see no basis on which any of the objections put forward by the respondent can found an argument that the order sought is outside the jurisdiction conferred by the section, as explained by Lord Slynn. On the other hand, the matters raised by Mr Whitaker seem to me to be clearly relevant once the court turns to the exercise of its discretion as I now do.
23. This involves, as Lord Slynn made clear in the passages I have cited above, balancing the reasonableness of the officeholder's requirement to see the document against the burdens that the order would impose on party required to produce documents, including any element of unfairness, prejudice or oppression to him. In that balance, it is clear that the court can and must take account of the fact that the respondent has no connection with the ownership or management of the company but is a third party dealing with it at arms length and in good faith, nothing to the contrary having been suggested. In that context I bear in mind particularly the remarks made in the passages cited above about the potential unfairness of such an order against third parties and the fact that the order made in the BCH case itself was said to be exceptional.
24. As far as the administrators' need for the documents is concerned, it is relevant that the contract with the respondent was on a "design and build" basis, or what is often referred to as a "turnkey" contract. The respondent therefore would have the principal responsibility for the design work, liaison with planning and other authorities, and engagement, monitoring and coordination of the work of any professionals, such as architects, or subcontractors employed. Nevertheless, it is difficult to believe that the employer would have no involvement at all and no knowledge whatsoever of any part of the process. To take an obvious example, it would be expected that the employer would approve the overall design before it was sent to the planning authorities, and be consulted about any major changes required to deal with planning objections. It is not realistic to suppose that the employer would have acquired no documentation at all about the progress of the work. The extent to which the administrators reasonably require access to the contractor's documents depends in part upon what documents are already available to them from the company's own records.
25. The evidence filed by the administrators does not however give any information about what documentation is already available to them. Instead, it deals solely with requests made to the respondent for information and the reasons why that information would be useful to the administrators. This begins with an e-mail sent by a member of staff to solicitors acting for the respondent on 22 June 2009 saying that "we are keen to obtain copies of all the relevant information regarding the above site which I have been informed that your client [the respondent] holds… I have attached below a 'wish list' of the type of information that I think might be available, which I have broken into the various relevant sections. I appreciate that you might not have all of the below information." This gives no information about what documents the administrators already have, and conveys the impression that they are simply seeking to obtain everything that might be available, with a view to deciding how useful it is once they have received it. The request made has if anything become even more general in its terms, since although the schedule attached to the application is based upon the same headings as were set out in the 'wish list', that list does at least contain some information about categories of documents sought within each heading which is almost entirely absent from the schedule.
26. It may be the case that the records of the companies are incomplete, or have not been made available by the directors. But there is no information in the evidence about that. Mr Rawlings was able to tell me on instructions that the administrators do have copies of the publicly available documents relating to planning and building regulation approvals, including the plans approved by the relevant authorities, and that no enquiries have yet been made of any such authorities in relation to the way in which matters have developed since those approvals were given, such as site inspections and any formal or informal concessions made in relation to deviations from the plans submitted or compliance with the conditions imposed. He also said that insofar as written progress reports have been submitted by the respondent, the administrators do not have them. I do not doubt what he tells me, but it is no substitute for a full and proper explanation in the evidence.
27. If the administrators wish to obtain advice about whether they should build out the project themselves, the obvious course of action would be to engage an appropriate professional to inspect the site, compare what is found with the approved plans, and draw the specification for the work required to complete. The most convincing part of the administrators' case to me seems to be the submission that variations to those plans may have been agreed with the relevant inspectors in the course of building, such that it is not necessary to complete the work in accordance with the original plans in every respect. The example of the apparently missing lift shaft is an obvious one. In principle of course if the inspector has agreed a variation he could be expected to have some record of it himself and to be in a position to confirm it if asked on behalf of the administrator. I accept however that the administrators' representative could be assisted in establishing the facts and negotiating with the relevant inspectors if he had access to documents generated by the respondent showing what had gone before. Further, to the extent that the respondent had prepared programmes and specifications for the work remaining to be done, if they were made available to the administrators' representative they might be reused so as to reduce the work required to be done by him.
28. I also accept that the administrator could be assisted by knowing the identity of the professionals and subcontractors who have so far been engaged to work on the site. Anyone considering building it out may well find it easier to approach the same people to complete the work they have started, rather than a new contractor who would have to take over someone else's work. I have no doubt that the same applies to the position of the respondent itself, and that one commercial effect of the order sought would be to reduce the advantage that the respondent would happen in putting itself forward to complete the contract.
29. I accept further that if any subcontractor or professional has already given a collateral warranty enforceable by the owner of the building, or transmissible by it so that it would be enforceable by any purchaser, that constitutes an asset of the company in administration and the administrators have a legitimate reason to identify its existence so that they can take the benefit of it. The likelihood is of course that any subcontractor or professional who either has not finished his work, or has not been paid, may not yet have issued any warranty he expected to give, so there may in practice be little documentation available under this head.
30. I am less convinced about other aspects of the application. So far as progress reports are concerned, there is as I have said no objection to supplying further copies of the reports already submitted. So far as concerns work done since the last report, it seems to me likely that the state of that work would have to be established definitively by inspection on site, and the assistance to be gained by looking at records which inevitably would not describe fully everything that had been done, would be likely to be limited. In respect of health and safety documentation, it seems to me that any new contractor would have to develop its own system of work and prepare its own risk assessments based on that system, and the assistance likely to be gained from looking at those generated in the past would also be limited.
31. These needs of the administrators must be balanced against the effects of the order on the respondent. There are it seems to me two principal areas into which Mr Whitaker's objections fall, firstly the effect of the order sought on the respondents property and other rights in relation to the documents requested, particularly copyright, and secondly what is said to be the unfair taking advantage of the respondents work without paying for it.
32. It is not of course an objection in principle to the production of documents under section 236 that the documents are owned by the person required to produce them. If it were, the section would be of very little effect indeed. Nor can it be an absolute objection that copyright exists in the documents; this is no doubt likely to be so in most cases, and in many (though not all) such cases the copyright owner will be the person asked to produce the documents and not the insolvent company itself. As Mr Rawlings accepted, an order for production would not deprive the copyright owner of his right. He also conceded that it would not give the administrator permission to do acts that would otherwise be a breach of copyright, but said that this should not prevent the disclosure of the documents so that the administrators could look at them and use the information they contained.
33. Given Mr Rawlings' concession on the last point, I have heard no argument about whether an order under section 236 of necessity entitles the officeholder to make some use of the documents provided that would otherwise be a breach of copyright, and I express no opinion of my own on that subject. I am sceptical that the administrators would in practice be able to use the documents sought for the purposes indicated without infringement of copyright. While it might be possible to obtain the opinion of a valuer on the likely costs to completion and the likely value of the property sold in its present state by permitting the valuer to see the documents disclosed without making copies, once the administrator has decided which of these courses to follow it is difficult to see how it could be implemented while taking advantage of the information obtained but not making copies of the documents. Part of the information sought, for instance, relates to specifications prepared by the respondent for fixtures and fittings in the flats such as doors and door furniture. How could this be used as the basis of a tender by contractors to complete the site without reproducing it in the tender documents in one form or another? Insofar is there are plans which might shed light on the work remaining to be done, how could these be of use to any purchaser of the site unless he were allowed to take copies of them?
34. This is a matter which bears it seems to me on both sides of the balance. It reduces the utility of the documents to the administrators and thus the reasonableness of their requirement to have them. It also exposes the defendants to a risk of breach of their proprietary rights. Mr Rawlings offers to submit to an order prohibiting use of the documents in breach of copyright, or to give an undertaking to similar effect, but it seems to me this is not a complete answer because the respondents inevitably would not be in a position to monitor the use that is made of their documents and potentially be subjected to the difficulty and cost of establishing the facts of any suspected breach after it had occurred.
35. It is the second area however which seems to me to be the most fundamental objection to this application. The respondents were engaged for reward to build this project. The documents sought have all been generated by them in the course of doing so. With some exceptions, they are not documents which the companies in administration would be entitled to have (even if one of them was the employer under the contract) during the performance of the contract. Except in the limited respects outlined above, those companies would not be entitled to the documents even upon conclusion of the contract, and given that entitlement would be conditional upon having made payment in full and subject to the limited licence provisions contained in the contract.
36. There is no evidence before me suggesting that the respondents are in breach of their obligations under the contract; indeed the contrary is the case, the contract has been suspended because of failure to pay, in circumstances in which it is clear that the payments were to be made directly or indirectly by the companies in administration. The documents are sought for their economic value, but insofar as they have an economic value in relation to the property in question, it is a value that has been created because of the work that the respondents have done in performance of their contract, and not been paid for. It is this economic value that the administrators seek to obtain, without making any payment (other than payments for the time and cost involved in providing copies). The benefits will accrue, in the first instance at least, to the secured creditor which declined to fund the continuation of the project prior to administration (that is, declined to fund the settlement of amounts due to the respondent which is the principal unsecured creditor). It is conceivable that if the secured creditor is paid in full any remaining realisations would benefit the respondent as an unsecured creditor, but nonetheless the first beneficiary of any better realisations will be the secured creditor.
37. Mr Rawlings submits that this does not amount to oppression of the respondent, and that orders have been made under section 236 even where the effect has been to expose the respondent to the risk of civil claims or even criminal prosecution. These however are cases where the respondent is an officer or employee of the company and under a duty to provide information by virtue of his position which outweighs the personal consequences to him of doing so (such as Re Jeffrey S Levitt Ltd [1992] Ch 457) or where a civil claim is a potential asset of the insolvent company and it is in the interests of creditors that the officeholder should be able to evaluate whether to pursue it and that interest outweighs the prejudice to the alleged wrongdoers. The respondent in this case is not in my judgement in any comparable position.
38. Mr Rawlings further submits that it cannot be an objection to production of documents that time and effort has gone into producing them, referring me to Re Trading Partners Ltd [2002] 1 BCLC 655 in which liquidators were enabled to obtain reports prepared by receivers of the same company at the expense of the debenture holders who appointed them. That however also seems to me to be a different circumstance; it was not suggested there that the receivers had not been paid for the work they did in producing the reports. Mr Rawlings submits the mere fact of non-payment cannot be an objection to production, since it is clear that production may be ordered under s 236 of documents which are subject to a solicitor's lien (Re Aveling Barford Ltd (1988) 4 BCC 548).
39. That case however was dealt with on the basis that the lien referred to was not enforceable as against an officeholder, and not on the basis of any exercise of discretion involved in consideration of the fairness to the solicitors of being required to disclose their documents. No such question arose in that case; what the administrators sought to have was information to enable them to identify and investigate the transactions in which the solicitors had acted for the company in the past. In this case the exercise of discretion does involve consideration of fairness to the respondent, which arises not by the mere fact that the respondent is unpaid but because the documents reflect the value of its unpaid work, which value the administrators seek to obtain.
40. Mr Rawlings made a submission that was, in effect, the reverse of the position put by Mr Whitaker. He contended that it was the respondent which was seeking to capitalise on the administrators' need to obtain the documents to extract a payment for itself. He referred me to the decision of the Court of Appeal in Innovate Logistics Limited v Sunberry Properties Limited [2008] EWCA Civ 1321 in which the decision of the first instance judge to permit proceedings to be brought against the company in administration was overturned, where the purpose of the proceedings was to put the claimant landlord in a position to create and exploit a bargaining position against the purchase of assets from the administrator. That decision in my judgement certainly shows that administration may produce adverse effects for some creditors to the benefit of others; in that case the purchaser of the assets was given a temporary licence to occupy leased property, admittedly in breach of the lease, upon payment of an amount equivalent to the passing rent for the relevant period, in order that it could make an ordered removal of the assets acquired. What the landlord sought to achieve however was the right to expel the purchaser from the premises immediately, and by threatening such expulsion to force it to enter into a long-term lease of the property instead of moving the business elsewhere, and thereby obtaining a great advantage for itself.
41. I do not accept that submission by Mr Rawlings. The degree of prejudice to the landlord in Innovate in being kept out of its property for a short period upon payment of the full amount of its rent was minor and justifiable in the context of the benefit of the transaction to the creditors as a whole. The company was enabled to continue to make use of a property it had, prior to the insolvency at least, been entitled to occupy, on payment of the amount it had contracted to pay and so did not achieve, by virtue of its insolvent position, any significant extra benefit at the expense of the landlord. The balance of prejudice and benefit in this case is to my mind entirely different. The respondent cannot be said to be unfairly exploiting the insolvency of the company to obtain an additional benefit for itself, as the landlord was in that case.
42. When these two sets of factors against each other, the conclusion I have come to is that the administrators have shown that the documents sought will or may be of use to them and the performance of their functions. Their case as to the degree of usefulness is adversely affected by the indiscriminate nature of the application and the failure to refer in the evidence to other sources from which it, or part of it, might be available. I am not satisfied that it has been shown that any of the information requested is crucial to the outcome of the administration and unavailable from any other source, albeit that information obtained from other sources may require more expense to be incurred (such as the fees of architects or quantity surveyors) or be less complete (for instance as to the content of discussions with planning inspectors and neighbouring owners). The utility of the information to the administrators is also adversely affected by the fact that large parts of it could not be effectively used without being reproduced or supplied to third parties, in breach of the respondents copyright. The benefit to the administration of obtaining these documents is in my judgement outweighed by the unfairness to the respondent of being required to produce them, in circumstances in which the respondent is a stranger to the companies in administration and (perhaps indirectly) a substantial unsecured creditor which will go unpaid as a result of that administration. But for the insolvency the respondent would have been under no obligation to provide any of the documents to the companies in administration and, particularly, that purpose and effect of the order sought is to obtain the benefit of the work done by the respondent in performance of his contract, without the payment which the companies in administration ought to have made for that work.
43. I have referred above to the fact that the documents sought are identified only in the most general terms. Given the conclusion I have come to overall, and also the fact that Mr Whitaker has not taken any point about difficulty of identification of such documents or the extent of the work required to produce them, this is not an issue which I need to deal with further.
44. In summary then, my conclusion is that I should make an order for production of the following two classes of documents only:

i) further copies of all progress reports submitted by the respondent prior to the date of suspension of the contract, to which there was no objection, and

ii) documents evidencing the provision of collateral warranties or guarantees given by any agent or subcontractor engaged on the project, to the extent that they are already in force and capable of being relied upon by the companies in administration or their successors in title, these being evidence of assets of those companies

but that save as aforesaid I decline in the exercise of discretion to make the order sought by the administrators, on the grounds that it would be unfair to the respondents in the circumstances and for the reasons given above.