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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Shierson & Anor v Rastogi & Anor [2002] EWCA Civ 1624 (08 November 2002) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/1624.html Cite as: [2003] 1 WLR 586, [2003] BPIR 148, [2002] EWCA Civ 1624

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Laddie J.

		Royal Courts of Justice Strand, London, WC2A 2LL
		8 November 2002

Peter Gibson L.J.:

1. RBG Resources plc ("the Company") is in compulsory liquidation. On 8 May 2002 the Company by its provisional liquidators commenced proceedings in the Chancery Division against four individuals, alleging fraud and claiming damages or compensation in excess of US $400 million. On 12 June 2002 the liquidators applied for an order under s. 236 of the Insolvency Act 1986 ("the 1986 Act") against the First Defendant, Viren Kumar Rastogi, who was an executive director and chief executive officer of the Company, the Second Defendant, Gautam Krishna Majumdar, who was another director of the Company, and the Third Defendant, Anand Kumar Jain, who was also an executive director of the Company and had overall supervision of the trading activities of the Company. Mr. Majumdar submitted to a consent order. Mr. Rastogi and Mr. Jain opposed the making of an order, but on 25 July 2002 an order was made against them by Laddie J. Thereby they were directed to attend before the Companies Court Registrar to be examined in connection with the assets and affairs of the Company. Mr. Rastogi and Mr. Jain sought but were refused permission to appeal by the judge, but such permission was given by myself as the single Lord Justice considering the application on paper.
2. The issue before this court is whether the judge, in ordering the examination of Mr. Rastogi and Mr. Jain after the commencement of proceedings against them by, in effect, the liquidators, erred in the exercise of his discretion by making such an order.
3. The background to this case is set out clearly and accurately in the judge's judgment. I will only repeat the salient features of that account. The Company was incorporated on 21 May 1996. At all material times Mr. Rastogi and Mr. Jain were senior executives. The Company had a metal merchanting business with customers round the world. The growth in its business appears to have been nothing short of phenomenal. But the liquidators say that the Company purported to carry out a large number of bogus trade transactions through a network of trading counterparties controlled or used by Mr. Rastogi and Mr. Jain. Those transactions were presented as genuine to financiers, the liquidators say, for the purpose of extracting funds through the sale to the financiers under receivables agreements of the liabilities purportedly due and owing to the Company as a result of those transactions. By May 2002 the Company's indebtedness to financiers was more than US $400 million.
4. The accounts of the Company were audited by Pricewaterhouse Coopers ("PwC"). In the last audited financial statements for the group of which the Company is the holding company the group's turnover exceeded $1 billion and its operating profit was $29 million. In the course of the 2001 audit, on 30 January 2002 PwC resigned as the relationship of trust and confidence between themselves and the directors of the Company had broken down. The cause of the breakdown was the directors' inability to provide PwC with satisfactory information concerning the legitimacy of transactions between the Company and 6 counterparties. The debts of those counterparties to the Company have been assigned to Westdeutsche Landesbank Girozentral ("Westdeutsche"), one of the financiers of the Company. When PwC resigned, Westdeutsche carried out its own investigations through Arthur Andersen, who concluded that a substantial part of the Company's indebtedness was likely to be fictitious.
5. Westdeutsche presented a winding-up petition on 2 May 2002 and two partners in Grant Thornton, Malcolm Shierson and Michael Jervis were appointed provisional liquidators by Laddie J. early the next day. Against undertakings to issue proceedings forthwith, they obtained freezing and disclosure orders from the judge against each of the four Defendants as well as an order to disclose forthwith to the provisional liquidators all information known to that Defendant concerning the nature, location and value of the Company's assets, to swear an affidavit deposing to the truth of that disclosure and to deliver up any documents of the Company in his possession or control. Each Defendant was restrained from leaving the jurisdiction and was required to deliver up his passport. The orders were executed simultaneously with raids by the Serious Fraud Office on the Defendants' homes.
6. A claim form commencing the Chancery proceedings was issued on 8 May. On 12 June the Company was compulsorily wound up and the provisional liquidators (Mr. Jervis was replaced on 24 May by another Grant Thornton partner Kevin Mawer) were appointed the joint liquidators.
7. In the Particulars of Claim served on 24 May, it was pleaded that Mr. Rastogi and Mr. Jain owed fiduciary duties and a duty of care to the Company. In para. 16 a receivables agreement called the Compass Receivables Agreement was pleaded and in para. 17 reference was made to other receivables agreements. In para. 38 it claimed that a scheme was operated whereby bogus transactions were created for the purpose of procuring finance under the Compass Receivables Agreement and the other receivables agreements involving the operation of a world-wide network of controlled or compliant counterparties, that the finance so procured was misapplied and misappropriated, that the accounting records and trading documentation of the Company were falsified and that the Defendants sought to conceal the scheme from, amongst others, PwC. In para. 45 various matters were pleaded as evidencing the fact that trades were bogus. In para. 47 other matters were pleaded as establishing certain dishonest activities there set out. In para. 48 it was alleged that each of Mr. Rastogi and Mr. Jain knowingly participated in or turned a blind eye to and concealed the dishonest activities. In para. 50 it was pleaded that each of Mr. Rastogi and Mr. Jain acted in breach of his fiduciary duties and his duty of care as director of the Company and in breach of his employment contract. In para. 52 a claim of fraudulent conspiracy was pleaded against Mr. Rastogi and Mr. Jain.
8. By their Defence Mr. Rastogi and Mr. Jain asserted that the Company developed a substantial, genuine and profitable global business. They said that the Company's case was based on fundamental misconceptions as to the nature of the markets in which the Company operated, its activities and its method of financing. All of the allegations of fraud and falsification of documents were denied.
9. The liquidators had two meetings, each for an hour, with each of Mr. Rastogi and Mr. Jain. On 15 May on the advice of their solicitor they declined to answer questions on certain topics. Those topics included trading with the counterparties, who number more than 100. The liquidators have had no response from the vast majority of the counterparties. Mr. Rastogi and Mr. Jain through their solicitors told the liquidators that they were willing to provide any information reasonably required by the liquidators concerning any aspect of the affairs of the Company subject to one caveat. The caveat was expressed by a solicitor acting for Mr. Rastogi and Mr. Jain, William Sutton, in this way in his second Witness Statement:

"subject to their right – on the advice of their lawyers – to refuse to cooperate when to do so might trespass on to the territory of the issues raised in the Chancery proceedings with possible consequent prejudice to their position as Defendants in that action."

10. That was not acceptable to the liquidators. On 12 June they issued their application for an order under s. 236 so that they might be at liberty to examine the first three Defendants "respecting all information known to them respectively concerning:

(a) the nature, location and value of the assets and property of the Company;

(b) the promotion, formation, business, dealings or affairs of the Company."

11. In their Statement of Grounds the liquidators set out the basis on which they claim to need the assistance of those Defendants. Under the heading "Asset Deficiency", they set out the deficiency for creditors, estimated at some $350 million. They said that the Company was insolvent and that those Defendants had not provided information to explain the difference between that deficiency and the net asset position of $45 million shown in draft financial statements for the period ended 30 September 2001 which the directors had endorsed immediately prior to the provisional liquidation. The liquidators referred to the Chancery action and stated that they were "struggling to identify how much of the outstanding receivables are collectable, which of those receivables are due and how to go about effecting their collection." Under the heading "Missing Monies" they said that they wished to examine those Defendants to obtain information which would assist or enable the liquidators to recover the monies paid to the Company in consideration for the assignment of the outstanding receivables. Other areas of enquiry are specified under the heading "Other Information", to three of which I shall refer. One is whether goods pledged by the Company to Banque Cantonale Vaudoise ever existed, those Defendants being required to provide information concerning trading with goods warehoused at, amongst other places, the warehouses of a specified company in Singapore. Another related to the trading system of which a full explanation was needed from those Defendants, a general lack of documentation causing considerable difficulties in analysing the trading of the Company. A third area was the source of funding for the Company's subsidiaries in Bolivia and Romania about which the liquidators wished to ask those Defendants in the absence of documentary evidence.
12. On 21 June the solicitors for Mr. Rastogi and Mr. Jain wrote to the solicitors for the liquidators, repeating their willingness to cooperate fully with the reasonable requests from the liquidators subject to the caveat to which I have referred in para. 9 above. They said in respect of the liquidators' concerns expressed under the heading in the Statement of Grounds "Missing Monies" that allegations relating to that question went directly to the heart of the liquidators' primary case in the Chancery action, but subject to the caveat they repeated the willingness of Mr. Rastogi and Mr. Jain to cooperate, and they provided information on certain topics on which the liquidators had indicated they needed assistance.
13. Mr. Shierson in his Sixth Witness Statement dated 27 June expressed the liquidators' gratitude for the information which had been provided by that letter but stated his belief that there was substantial further information which Mr. Rastogi and Mr. Jain could provide to liquidators which, he said, could only be provided by formal examination under s. 236.
14. The most relevant statutory provisions are s. 235 (headed "Duty to cooperate with office-holder") and s. 236 of the 1986 Act. S. 235 was a new provision when first enacted in the Insolvency Act 1985. It provides, so far as material:

"(2) Each of the persons mentioned in the next subsection shall -

(a) give to the office-holder such information concerning the company and its promotion, formation, business, dealings, affairs or property as the office-holder may at any time after the effective date reasonably require, and

(b) attend on the office-holder at such times as the latter may reasonably require.

(3) The persons referred to above are –

(a) those who are or have at any time been officers of the company,

(b) those who have taken part in the formation of the company at any time within one year before the effective date,

(c) those who are in the employment of the company, or have been in its employment (including employment under a contract for services) within that year, and are in the office-holder's opinion capable of giving information which he requires,

(d) those who are, or have within that year been, officers of, or in the employment (including employment under a contract for services) of, another company which is, or within that year was, an officer of the company in question, and

(e) in the case of a company being wound up by the court, any person who has acted as administrator, administrative receiver or liquidator of the company.

....

(5) If a person without reasonable excuse fails to comply with any obligation imposed by this section, he is liable to a fine and, for continued contravention, to a daily default fine."

15. S. 236, so far as material, is in this form:

"(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.

(4) The following applies in a case where –

(a) a person without reasonable excuse fails to appear before the court when he is summoned to do so under this section, or

(b) there are reasonable grounds for believing that a person has absconded, or is about to abscond, with a view to avoiding his appearance before the court under this section.

(5) The court may, for the purpose of bringing that person and anything in his possession before the court, cause a warrant to be issued to a constable or prescribed officer of the court –

(a) for the arrest of that person, and

(b) for the seizure of any books, papers, records, money or goods in that person's possession.

(6) The court may authorise a person arrested under such a warrant to be kept in custody, and anything seized under such a warrant to be held, in accordance with the rules, until that person is brought before the court under the warrant or until such other time as the court may order."

16. The judge identified two issues which needed to be addressed in deciding how the court should exercise its discretion under s. 236: (1) what are the factors to be taken into consideration, and (2) is the discretion to be applied in the same way, irrespective of the status, or former status, of the potential examinee?
17. The judge considered the second issue first in the light of the authorities. He said that ss. 235 and 236 must be read together and that the classes of people covered by s. 235 (whom he called "insiders") are under a greater duty and compulsion to assist the office-holder than outsiders because during their association with the company they owed a duty of fidelity to it and may be regarded as being in a special position to help the office-holder. Reading ss. 235 and 236 together he said that the insider's ability to resist an order under s. 236 must be reduced, and that applied with particular force to executive directors. The judge rejected the argument of Mr. Heslop Q.C. for Mr. Rastogi and Mr. Jain that a person involved in civil litigation should not be made the subject of an order for examination under s. 236 because he would be disadvantaged in those proceedings. He referred to the authorities which hold that the privilege against self-incrimination had been abrogated by the enactment of s. 235, and said at para 53:

"In my view, it would be strange indeed if the presumed legislative intent was to abrogate the privilege against self-incrimination but should leave in place a right of the examinee to be excused from producing documents or answering questions because it would put him at a tactical disadvantage in civil proceedings – something which is far less dangerous, and therefore less "oppressive", than exposing oneself to prosecution. The principle expounded by the Court of Appeal in [Bishopsgate Investment Management Ltd. v Maxwell [1993] Ch. 1] is that the need for "insiders" to assist office-holders is supreme. Even the severe consequences of self-incrimination will not be allowed to stand in its way. If that is so, it seems to me that the legislative intent applies with no less force to the judge-made rule that oppression in the form of a tactical disadvantage in civil proceedings is a major factor to be put in the scales against the making of a s 236 order, and that rule must be put to one side."

18. The judge continued in para. 57:

"It follows that, as a matter of law, those classes of persons covered by s 235(3) of the Act are in a different position to others when it comes to making orders under s 236. They are obliged to help the office-holder on pain of punishment whereas outsiders are not. By the same token, the court should be careful not to refuse to make s 236 orders in circumstances which would appear to sanction a breach of s 235. This does not mean that the existence of civil proceedings is wholly irrelevant to the exercise of the discretion. It may be, as I will consider in a moment. However, for the above reasons, I reject Mr. Heslop's submission which came close to bestowing on the existence, or possibility of, civil proceedings a veto on making s 236 orders. In my view, in many cases not only will the existence or fear of civil proceedings not constitute a shield, it will not even be a major factor in the exercise of the discretion."

19. The judge then turned to the exercise of discretion under s. 236 and posed the question, what is the test which must be applied in determining whether a s. 236 order should be made? He referred to a passage in the judgment of Sir Nicolas Browne-Wilkinson V.-C. in this court in Cloverbay Ltd. v BCCI Ltd. [1991] Ch. 90 and to a passage in the speech of Lord Slynn in Re British & Commonwealth plc [1993] AC 426, and said in para 61:

"In the light of the later two cited passages, it seems to me that the correct approach to deciding whether to exercise the discretion to make an order under s 236 is as follows. On the one hand, if the office-holder says that the information and help sought is "reasonably required", that weighs heavily in favour of making an order. However, as against that will be weighed factors which show that the order sought is either wholly unreasonable or unnecessary, or is oppressive. As far as oppressiveness is concerned, Mr. Smith accepts, at least at this level, that making an order which may be tactically disadvantageous in civil proceedings to the examinee is prima facie oppressive where the examinee is an outsider. He reserves the right to argue that the law should be otherwise hereafter. I do not need to consider that point. He argues that the same prima facie oppressiveness does not apply where the examinee is an insider. That is really the point I have considered above. I accept Mr. Smith's argument."

20. The judge considered but rejected an argument for Mr. Rastogi and Mr. Jain that the order sought was for a collateral purpose because the private examination would inevitably result in improving the liquidators' position in the civil litigation. The judge said that the Statement of Grounds and the evidence of Mr Shierson pointed to the need which the liquidators had for information, the documentation and records of the Company being deficient, with documents allegedly shredded and files deleted from computer records of the Company, but there being no response by Mr. Rastogi or Mr. Jain to these allegations or to an allegation that some documents had been doctored. The judge also referred to the allegations that many of the trading transactions were bogus. The judge concluded in para. 73:

"Mr. Heslop argues that the information sought here is at the dotting the i's and crossing the t's end of the spectrum. It is not. It is central and crucial. In my view, taking into account all the matters set out above, this is a case where the need for an order under s 236 is overwhelming. Indeed, even if the liquidators had to demonstrate a need for the order rather than a reasonable requirement, which is the proper test according to the House of Lords in Re British & Commonwealth Holdings, and even had s 235 not existed, I would have held that this was a case which demanded an order under s 236. Without it, the liquidators' attempt to carry out their duties will, to a large extent, be frustrated. For these reasons, I will grant the application."

21. In this court Mr. Heslop launched a powerful attack on the judge's decision. He submitted that it was based on a series of propositions wrong in law, unjustified either as a matter of statutory construction or principle and in any event contrary to authority, and that the order made was oppressive, would seriously prejudice the interests of Mr. Rastogi and Mr. Jain and cannot be permitted to stand. He argued that the judge, having wrongly decided that in the case of an officer of a company the rule that oppression is a major factor in the exercise of discretion must be put to one side, never exercised his discretion properly, there being nothing to set in the scales against giving effect to the requirements of the liquidators. He further submitted that the judge ignored a very great risk of serious prejudice to Mr. Rastogi and Mr. Jain that third parties, including prosecuting authorities, would obtain access to transcripts of the examination for use in the conduct of further investigations which might help to construct a criminal case against the examinees.
22. Mr. Stephen Smith Q.C. for the liquidators supported the correctness of the judge's decision. He submitted that directors of a company are in a different position from that of outsiders as shown by s. 235, and that the court is not required to consider oppression unless the court concludes that the office-holder does not reasonably require the information sought. He further submitted that even if that was wrong the judge in para. 73 of his judgment had properly exercised his discretion in favour of making an order under s. 236.
23. I start with the statutory scheme. The primary duty of a liquidator of a company being wound up by the court is to collect its assets with a view to discharging its liabilities to the extent the assets permit. To perform that function the liquidator needs information, and the companies legislation has for very many years given the liquidator power to obtain it from those who can be expected to have relevant information. Two methods, borrowed from the law of bankruptcy, were provided prior to 1985. One was by public examination. But this was conditional on the Official Receiver reporting that a fraud had been committed in relation to the company by an officer of the company, and the court had a discretion whether to make an order for the examination of the officer (see s. 270 Companies Act 1948). For nearly 50 years prior to 1982 this route was never chosen. The other was by private examination. Again the making of the order was subject to the court's discretion. The court would not make an order if to do so would be oppressive to the intended examinee. This court in Re Metropolitan Bank (Heiron's Case) [1880] 15 Ch D 139 held that it was vexatious for a liquidator who, having brought an action against a director and obtained sufficient answers to interrogatories, sought a further order for examination of the director in order to decide whether to go on with the action. James L.J. said (at p. 1423) that the powers conferred on liquidators were very inquisitorial and the more inquisitorial they were the more the court was bound to take care that they were not used for the purpose of vexation and oppression. The authorities show that the court was reluctant to allow a liquidator who had embarked, or was about to embark, on litigation to examine a person against whom the litigation was, or was about to be, brought, as it was considered oppressive to the examinee that the liquidator should have anything like a dress rehearsal of the cross-examination in the action; the statutory machinery was not to be used to bolster up the liquidator's case (see Re Castle New Homes Ltd. [1979] 1 WLR 1075 and the cases there reviewed). However it was recognised that there could be circumstances in which an examination of officers of the company would be ordered even if an action was pending, for example if there was reasonable ground for suspecting that directors had put into their own pockets moneys of the company (see Re Imperial Continental Water Corporation (1886) 33 Ch D 314 at pp. 320, 1 per Cotton L.J.).
24. The Cork Committee in its report in 1982 on insolvency law and practice (Cmnd. 8558) recommended greater use of the public examination. The statutory provisions were recast so that in s. 133 of the 1986 Act, on the application of the official receiver or liquidator, "the court shall direct that a public examination of the person to whom the application relates shall be held". Those who can be examined include any past or present officer of the company. The official receiver or liquidator is given a discretion whether to apply to the court for an order, but, unless the court otherwise orders, he is obliged to make the application if requested by one half in value of the company's creditors or three-quarters in value of the company's contributories.
25. Another innovation was the express duty imposed by s. 235 on past and present officers of a company and other persons within s. 235(3) to cooperate with the office-holder of the company. The only qualification on the obligation to give information is that it should be reasonably required by the office-holder. The sanction for an officer for failing to comply with a reasonable requirement is qualified by the condition that he should have so failed "without reasonable excuse".
26. It is common ground that ss. 235 and 236 are to be read together, but it is plain that whereas s. 235 contains a mandatory obligation on the officer to give information reasonably required, the court has a discretion whether to order a private examination, in contrast to a public examination where the official receiver or liquidator has requested an order. On the face of the 1986 Act Parliament must have intended that even in the case of a past or present officer of a company, the court retained a discretion to refuse to make an order under s. 236, although the fact that the proposed examinee is or was a director obliged under s. 235 to give information reasonably required would be likely to be a powerful factor in favour of making the order.
27. I turn now to the authorities. The first is Cloverbay on which Mr. Heslop relied. In that case administrators of a company issued, but did not serve, a protective writ against a bank, claiming breach of the bank's mandate and knowing participation by the bank in fraudulent breaches of trust. The administrators obtained orders from the Registrar under s. 236 for the examination of two officials of the bank. Harman J. set aside the order and, on appeal to this court, his order was upheld by the majority (Sir Nicolas Browne-Wilkinson V.-C. and Nourse L.J., McCowan L.J. dissenting).
28. The Vice-Chancellor referred to what is now s. 236 as conferring a general discretion on the court, and to the guidance given in the authorities reviewed by Slade J. in Castle New Homes as to the proper basis for the exercise of discretion. The Vice-Chancellor ([1991] Ch at p. 99B) agreed with "the basic proposition that the exercise of the discretion involves the balancing of the requirements of the liquidator or administrator to obtain information on the one hand against the possible oppression to the person sought to be examined on the other". But he criticised as unsatisfactory a rule which had in practice developed whereby the outcome of the balancing exercise turned on whether the office-holder had already commenced, or decided to commence, litigation, and continued (at p. 102A):

"Nor do I think that there is any other simple test that can be substituted. The words of the Insolvency Act 1986 do not fetter the court's discretion in any way. Circumstances may vary infinitely. It is clear that in exercising the discretion the court has to balance the requirements of the liquidator against any possible oppression to the person to be examined. Such balancing depends on the relationship between the importance to the liquidator of obtaining the information on the one hand and the degree of oppression to the person sought to be examined on the other. If the information required is fundamental to any assessment of whether or not there is a cause of action and the degree of oppression is small (for example in the case of ordering premature discovery of documents) the balance will manifestly come down in favour of making the order. Conversely, if the liquidator is seeking merely to dot the i's and cross the t's of a fairly clear claim by examining the proposed defendant to discover his defence, the balance would come down against making the order. Of course, few cases will be so clear: it will be for the judge in each case to reach his own conclusion."

29. A little later at p. 102G the Vice-Chancellor referred to the position of officers of the company:

"Third, in my judgment the case for making an order against an officer or former officer of the company will usually be stronger than it would be against a third party. Officers owe the company fiduciary duties and will often be in possession of information to which the company is entitled under the general law. Their special position as officers of the company is emphasised by section 235 of the Insolvency Act 1986 which imposes on them a statutory obligation to assist the liquidator or administrator. The enforcement of these duties owed by its officers to the company may require an order under s. 236 of the Act of 1986 even though it exposes such officers to the risk of personal liability. No such considerations apply when an order is sought against a third party. He owes no duty to the company. In an otherwise proper case he may be required to disclose documents or answer questions so as to provide the liquidator with the information necessary to carry out his functions even though this may have unfortunate repercussions for him. But he owes no general duty to give such information (apart from an order under s. 236) and if by giving the information he risks exposing himself to liability this involves an element of oppression. That is not to say that an order cannot or should not be made against a third party. But it should be borne in mind that the degree of possible oppression is greater in his case."

30. Pausing there, I observe that the Vice-Chancellor recognises the special position of officers of the company, as emphasised by s. 235, in contrast to third parties, but does not say that there can be no relevant oppression in the case of an officer: he merely says that the degree of possible oppression is greater in the case of a third party than in the case of an officer. The Vice-Chancellor (at p. 103D) then explained why oral examination carried a greater risk of oppression in a way that does not distinguish between those who are or were officers of the company and third parties:

"oral examination provides the opportunity for pre-trial depositions which the liquidator would never otherwise be entitled to: the person examined has to answer on oath and his answers can both provide evidence in support of a subsequent claim brought by the liquidator and also form the basis of later cross-examination."

31. The Vice-Chancellor continued (at p. 103E):

"In In re John T Rhodes Ltd. (1986) 2 B.C.C. 99,284 Hoffmann J. suggested that the time may have come to reconsider whether oral examination is oppressive even if it does involve the risks which I have mentioned. He pointed to the change in attitudes since Victorian times and to the growth of investigatory powers such as those given to inspectors appointed by the Department of Trade and Industry. Those remarks were made in the context of a case where oral examination was sought of the "moving light" and de facto director of the company: I have already said that in my view the fiduciary duties owed to the company by such a person may well justify a more stringent approach. But for myself I am unable to accept, in the absence of specific statutory authority, that it is not oppressive to require someone suspected of wrongdoing to prove the case against himself on oath before any proceedings are brought. In the exercise of its discretion, the court may consider that the legitimate requirements of the liquidator outweigh such oppression: but it remains oppressive."

32. Laddie J., when citing this last passage, underlined the words "in the absence of specific statutory authority", and it would appear that he may have thought that s. 235 provided such authority in the case of officers of the company. But if he did, I find it impossible to believe that the Vice-Chancellor shared that view. He had referred to s. 235 on the previous page and he was plainly giving general guidance on s. 236. Had he considered that s. 235 provided the answer in the case of a director as in John T. Rhodes Ltd. he would surely have said so.
33. The Vice-Chancellor (at p. 104F) found the following considerations outweighed the administrators' view that the information to be obtained from the examination was required:

"When one turns to the other side of the balance, B.C.C.I. and its employees owe no fiduciary duties to the company: they are third parties against whom the company has already issued a writ, albeit a protective writ. The claim is to examine individuals whom, it is thought, may have knowingly participated in a fraud with a view to establishing such knowledge. In my judgment, to order pre-trial depositions from parties suspected of fraud or dishonest behaviour is very oppressive. The courts have always been astute to protect the interests of those accused of fraud in the civil courts and to require the plaintiff to prove his case against them. To use s. 236 of the Insolvency Act 1986 so as to run contrary to that attitude is, in my judgment, oppressive."

34. Nourse L.J. agreed with the Vice-Chancellor. He specifically agreed with him on what he said about Hoffmann J.'s suggestion in John T. Rhodes Ltd., saying (at p. 108D):

"That suggestion was embraced by [counsel for the administrators] as support for a more general argument that in current circumstances the public interest requires the court to pay less regard to the oppression which is caused if the examination is ordered to go ahead. So far as this court is concerned, that argument cannot succeed. As I have said, an office-holder owes duties to the creditors and sometimes to the contributories of the company. Although they may fairly be described as members of the public, in the eyes of the Companies Court they are private individuals. True it is that there is a public interest in enabling the office-holder to discharge his duties. But under earlier decisions of this court there is a countervailing public interest in preventing oppression in cases where it ought to be prevented. The public interest in any larger sense does not come into it. If the current balance is to be shifted, it must be shifted by some higher decision or by Parliament. For myself, I can see no good reason for shifting it"

35. Thus the view of the majority in this court was that the court in exercising its discretion must conduct a balancing exercise in which the fact that the intended examinee is a director makes for a stronger case for ordering examination than where he is a third party, but the oppression in ordering examination of a person against whom proceedings have been, or are to be, brought weighs in the scales the other way. That view in respect of a director sought to be examined was of course obiter, a decisive consideration in the case being that the intended examinees were third parties. But that view expressed as general guidance deserves the greatest respect, the more so because, save on one point not material to the present case, the balancing exercise suggested by the Vice-Chancellor was approved by the House of Lords in the British & Commonwealth case. That was a case where third parties, auditors of a company, sought unsuccessfully to resist an order under s. 236 for the production of documents relating to audits. Lord Slynn (with whom the other members of the House agreed) said ([1993] AC at p. 439):

"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."

36. Mr. Smith relied on the decisions of Hoffmann J. in Re Bishopsgate Investment Management Ltd. [1992] BCC 214 and of the Court of Appeal in the same case [1993] Ch. 1. In that case Kevin Maxwell, the director of a company in provisional liquidation, had been ordered under s. 236 to swear an affidavit to give the provisional liquidator information about dealings with assets which had been under the company's control. Mr. Maxwell applied to set aside the order, and the provisional liquidator applied for the oral examination under s. 236 of Mr. Maxwell. Two points were taken by Mr. Maxwell: (1) it was oppressive to require him to incriminate himself; (2) it was oppressive to order his examination as it would put him at an unfair advantage in relation to the litigation which the provisional liquidator had already commenced against Mr. Maxwell. Hoffmann J. rejected both points. I will come back to what he said on the second point as that is relevant to the exercise of discretion. As I read his judgment that judge was applying the guidance given by Cloverbay and deciding on the balancing exercise that an order under s. 236 should be made.
37. Mr. Maxwell then appealed against Hoffmann J.'s decision on the first point but not the second. At [1993] Ch. pp. 14 – 15 Dillon L.J. pointed out that in two other cases then thought to be going to appeal, in which the question of the availability of the privilege against self-incrimination was raised, the appeals would raise the further issue whether even if the privilege was not available, it would be unfair or oppressive to allow questioning under s. 236 while criminal proceedings were pending; but he said that that issue did not arise in Mr. Maxwell's case as no criminal charges had been brought and Hoffmann J.'s decision on the second point was not challenged. Dillon L.J. held that the privilege against self-incrimination was not available on a public or private examination either in personal or corporate insolvency. But (at p. 30H) he referred to remarks made by Woolf L.J. in the British & Commonwealth case in this court to the effect that ss. 234 – 237 made clear the importance that Parliament attached to office-holders being able to perform their functions in an effective and expeditious manner and that the court must use the powers conferred by those sections to assist office-holders and must not use them in a way which would frustrate the intent discernible from the 1992 Act. Woolf L.J. had then said ([1992] Ch. 342 at p. 384G):

"At the same time the fact that exercise of those powers is capable of having an onerous and oppressive effect upon those against whom the orders are made must not be ignored."

Dillon L.J. expressed his agreement with that. There is nothing therefore in his judgment which supports the view that the oppression to directors in ordering an examination under s. 236 can be ignored or that the balancing exercise involving the weighing of that factor need not be undertaken in the case of directors.

38. Stuart-Smith and Mann L.JJ. reached the same conclusion as Dillon L.J. on the privilege against self-incrimination. At p. 63B Mann L.J. referred to the public interest in ensuring that an office-holder obtains information requisite to the discharge of his duties. He continued:

"The important individual interest of the potential examinee in being spared from oppression is protected by the discretion of the court as to whether to make an order under section 236. The abrogation of the privilege is a factor which may be taken into account at that stage."

Plainly, therefore, Mann L.J. did not think that the fact that the examinee was a director with the obligation to provide information under section 235 was determinative and that the existence of proceedings against the examinee was irrelevant to the balancing exercise.

39. I am not able, therefore, to derive from the Bishopsgate case the conclusion which the judge reached that in the case of insiders the rule that oppression is a major factor to be put in the scales against the making of a s. 236 order must be put to one side. Nor in my judgment do the authorities support the judge's view that the existence or fear of civil proceedings will not even be a major factor in the exercise of discretion in many cases. On the contrary: it is oppressive to require a defendant accused of serious wrongdoing to provide what amount to pre-trial depositions and to prove the case against himself on oath. But that oppression may be outweighed by the legitimate requirements of the liquidator. I conclude that the judge, with all respect to him, overstated the position in paragraphs 53 and 57 of his judgment.
40. I turn to the exercise of discretion. I accept Mr. Heslop's submission that in view of the conclusion which the judge reached on the significance of the status of the potential examinee, the judge's exercise of discretion was flawed, the oppression factor having gone out of the window on the judge's approach. Even in para. 73 of the judgment the judge does not recognise the need to take account of oppression in the balancing exercise. It follows that in my judgment this court will have to exercise the discretion afresh.
41. Mr. Heslop prayed in aid two factors as weighing against an order for examination: oppression and the risk that the information obtained on examination may come into the hands of, and be used by, regulatory or prosecuting authorities.
42. In response to questions from the court Mr. Heslop accepted that he could not mount a separate challenge based on the right to a fair trial under Art. 6 of the European Convention on Human Rights, though he invoked what he called the spirit of the Human Rights Act 1998 as supporting his point on oppression. He said that an order for examination against an examinee who was already being sued created the possibility that the liquidators would obtain an unfair advantage in the action so that there would not be equality of arms. He suggested that an examination, once ordered, would be conducted as the liquidators wished, with no notice in advance of the areas to be the subject of the examination and that although the examinee can be legally represented, such representative has little power to intervene. He contrasted that with the procedure now adopted in company inspections where those being questioned by the inspectors are notified in advance of the case they have to meet.
43. For my part I do not think it right to assume that the examination would be conducted in any way unfairly or oppressively. As Slade J. said in Castle New Homes [1979] 1 WLR at p. 1092H the court in ordering an examination does not give carte blanche to the questions which may be asked of the witness at the examination, and if a particular line of inquiry is oppressive or if there are good reasons why particular questions should not be answered it is the right and duty of the court to limit the enquiry. The procedure is now governed by the Insolvency Rules 1986. By r.9.4(1) the liquidator may put such questions to the examinee as the court may allow and by r.9.4(5) the examinee may be represented by a legal representative who may put to him such questions as the court may allow for the purpose of enabling him to explain or qualify any answers given by him and may make representations on his behalf. The court therefore has control and if it thought that a line of questioning was unfair, for example if there had been no prior notice of it and the court thought such notice appropriate, it could stop such questions until the examinee was in a proper position to answer them.
44. What use may be made at the trial of answers given in the examination will be subject to the control of the trial judge. It is not inconceivable that a challenge on Art. 6 grounds to the use of particular answers may be mounted then.
45. I return to oppression (in the technical sense used in the authorities) as a factor. Mr. Heslop rightly accepted that the liquidators were acting in good faith in seeking an order for examination. He did not dispute that the liquidators wanted the examination for the purposes of the liquidation but he said that inevitably the examination would include matters which went to the heart of the Chancery action. He pointed to the expressed willingness of Mr. Rastogi and Mr. Jain to assist the liquidators and he submitted that in some areas in which the liquidators wanted to ask questions of his clients, they were prepared to provide answers without the need for examination under s. 236. He stressed the seriousness of the allegations against his clients. He pointed out that the liquidators had enough knowledge to opt from the outset for court proceedings rather than seek a s. 236 order and that they were able to plead detailed Particulars of Claim. He submitted that in all the circumstances the order for examination was oppressive.
46. I accept that an order for examination is not indispensable in relation to some matters indicated in the Statement of Grounds in view of Mr. Rastogi's and Mr. Jain's limited offer to cooperate. But I have no doubt that considerable areas remain, questions on which will only be answered in the near future if the examination order stands, in particular relating to missing monies and the trading system. I do not accept that when the liquidators sought an order for examination knowing that the answers obtained may go to issues in the litigation, they did so for a collateral purpose. The liquidators, acting in good faith as is conceded, seek the information for the purposes of the liquidation and in particular to get in the assets of the Company. Nor do I accept that the liquidators, having opted for court proceedings against Mr. Rastogi and Mr. Jain are thereby precluded from obtaining a s. 236 order against them. The liquidators did so, as the judge found, in order to obtain the preemptive orders not available under the 1986 Act. However, for the reasons given in Cloverbay I accept that to require defendants accused in civil proceedings of serious wrongdoings to give answers to questions, from those bringing those proceedings, which go to issues in the proceedings is oppressive.
47. I am less impressed by Mr Heslop's second factor. In the light of the decision of the European Court of Human Rights in Saunders v UK [1996] EHRR 313 a new s. 433 of the 1986 Act was introduced by s. 48 Youth Justice and Criminal Evidence Act 1999 and this prohibits the use in criminal proceedings of a statement made by a person in pursuance of a requirement under the 1986 Act when the proceedings are against that person. But the section does not give what Mr. Heslop called "derivative use immunity". It is possible that the police or the Serious Fraud Office may be able to obtain access to transcripts of the examination and use that material to help construct a criminal case against the examinee. Whether access will be given is in the control of the courts. I doubt if it would be right for the courts to widen the effect of s. 433 when Parliament has chosen not to do so. As a factor, this risk does not seem to me to be of very great weight.
48. As against those factors must be set the following. First, Mr. Rastogi as the chief executive officer and Mr. Jain as an executive director with particular responsibility for trading not only owed fiduciary duties to the Company but, as the judge aptly said, are "the most crucial sources of information relating to what went on inside [the Company]", and were "its brains". They are obliged to cooperate with the liquidators, who are accountants with no prior knowledge of the Company. Second, the estimated deficit is very large: some $350 million, the crash occurring with remarkable suddenness. Third, the liquidators want the answers to their questions as soon as possible so that they can act quickly, for example, in respect of outstanding receivables and missing monies. There is no prospect of obtaining answers quickly in the course of the trial. No date has yet been fixed for it and the trial is unlikely to occur for at least 12 months. Fourth, this is not a case where all the documents and computer files of the Company are available intact to the liquidators. On the contrary, the evidence is that the Company's records are deficient. Few of the available documents relate to transactions within the period of 3 to 6 months prior to the provisional liquidation, and, more sinisterly, according to the personal assistant to Mr. Rastogi and Mr. Majumdar, Mr. Jain and two employees were engaged in "cleaning up" transaction files in a six-week period in February and March 2002, that is in the period shortly after PwC resigned as auditors. That work appears to have included the shredding of documents. Further a large volume of files has been deleted from the computers in the directors' offices. Fifth, the disclosure made by Mr. Rastogi and Mr. Jain of their personal assets is of assets with a gross value of less than £2.5 million, a small sum in comparison with the Company's deficit. It is far more important for the liquidators to obtain information as to the Company's assets than that they should succeed in proceedings against Mr. Rastogi and Mr. Jain.
49. In the Bishopsgate case considerations similar to those recited above (save for the fourth factor) caused Hoffmann J. to conclude that the court would be justified in exercising its discretion to require Mr Maxwell to do something which an ordinary litigant in his position could not normally be required to do. That judge said that he could not think of a stronger case in which a liquidator should be entitled to require assistance and information than from a director of the company who was closely involved in the affairs of the company and owed a fiduciary duty in respect of dealings with its assets, when Parliament has considered the provision of information so important that it had deprived the director of the privilege against self-incrimination.
50. On conducting the balancing exercise I have no doubt but that the scales come down in favour of making the order. This is a case where the legitimate requirements of the liquidators to obtain speedy information from those who have run the Company and the other considerations set out in para. 48 above outweigh the oppression to Mr. Rastogi and Mr. Jain in being required to submit to a private examination. Like the judge I conclude that the need for making the order is overwhelming. For these reasons I would dismiss the appeal.

Mance L.J. :

51. I agree with both the reasons given and the conclusions reached by Peter Gibson LJ, and add only a few words of my own.
52. The making of an order under s.236 of the Insolvency Act 1986 always involves the exercise of a discretion, to be exercised in the light of all the circumstances of the particular case. That the person proposed to be examined is or was an officer of the company, and so within the scope of s.235, is, Mr Heslop acknowledges, one material factor in the exercise of that discretion. Sir Nicolas Browne-Wilkinson V-C in Cloverbay Ltd. v. BCCI Ltd. [1991] Ch. 90 at pp.102G-103C stated explicitly that the case for ordering an examination under s.236 will usually be stronger in relation to an officer of the company than it would be against a third party.
53. The relationship between the proposed examination under s.236 and any current civil litigation against the proposed examinee is another factor requiring consideration. The judge was wrong to suggest that an officer within the scope of s.235 falls, in this regard, into an entirely different category of persons, in relation to whom any "tactical disadvantage in civil proceedings" to which such an examination might lead "must be put on one side". Sir Nicholas Browne-Wilkinson V-C in Cloverbay at p.103E-F was giving general guidance, covering officers of the company as well as third parties.
54. Some of the difficulty which arises in this area seems to me to stem from a use of language, which I do not find entirely natural. Peter Gibson LJ refers to it in paragraph 45 as "technical". The description "oppressive" is most familiar in the context of a conclusion or judgment, when it indicates an unjust use of power. In the Vice-Chancellor's remarks in Cloverbay at p.103E-F, the word is however used to denote a factor to be weighed in the balance when arriving at a conclusion; in that context the Vice-Chancellor observes that the "oppression" may be outweighed by "the legitimate requirements of the liquidator". "Legitimate oppression" is not, I feel, an easy concept. This terminological difficulty would disappear if, instead of the description "oppressive", one were to substitute at the weighing stage some other word or phrase, such as "draconian", or even "prima facie oppressive", and treat the ultimate test as being whether an order for examination would be oppressive or unfair. Other dicta do, I think, avoid this difficulty (see e.g. re J T Rhodes Ltd. [1986] 2 B.C.C. 22,284 (Hoffmann J), Bishopsgate Investment Ltd. v. Maxwell [1993] Ch 1, 15A and 30H per Dillon LJ and In re British & Commonwealth plc (Nos. 1 and 2) [1993] AC 426, 439D, per Lord Slynn.
55. The liquidators' first function was and is to take into their custody or under their control the assets of the company and things in action to which the company is or appears to be entitled: see s.144 of the 1986 Act. To that end they need to know the nature and location of the company's assets, including any rights of action against third parties that the company may possess. The power under s.236 is available not merely to enable a liquidator to "reconstitute" the company's knowledge of its affairs (although that is often a very important purpose), but also to enable it to obtain information bearing on its affairs and assets although it would not have enjoyed such information if the liquidation had not supervened: In re British & Commonwealth plc (Nos. 1 and 2) (above). In a balancing exercise in that case which the House of Lords approved, Hoffmann J took into account inter alia "the public interest in having the whole matter investigated and the need of the administrators to find out the true financial position of the company and the truth of the representations made concerning it": see [1993] AC, at pages 434A and 440A-B).
56. For liquidators to seek an examination under s.236 in order to gain advantage, or to ascertain whether or not they have a claim, in current civil litigation against the proposed examinee seems bound to offend against elementary fairness. Not surprisingly, there are authorities refusing applications made in such circumstances. Cloverbay itself was a case where the aim was to examine two of BCCI's officers in order to ascertain whether the company had a good claim against BCCI, or whether BCCI had a good defence, in separate legal proceedings. It differed therefore from the present case, both in that the order was sought against third parties and in the avowed purpose for which it was sought. Re Metropolitan Bank (Heiron's Case) (1880) 15 Ch D 139 exemplifies a refusal for a similar reason to allow examination in relation to a director - the liquidator wished to examine him in order to ascertain whether it was worth proceeding with a civil action already commenced against him.
57. There is a critical difference between an application made for such a purpose and an application for examination required in order to enable the liquidator to fulfil his general duties as liquidator to reconstitute, investigate and understand the company's affairs and to get in its assets. This distinction is drawn even in relatively early authority, such as re Spiraflite Ltd. [1979] 1 WLR 1096, where at p.1100B-C Megarry J said:

"What must primarily be considered is why the liquidator is seeking the order. The essence of the matter is that the powers given by the section are given to the court in order to enable the liquidator the better to discharge his functions as such: they are not given in order to enable a liquidator to improve his prospects of litigation success by giving him rights that other litigants lack, even if he is a liquidator."

Megarry J also suggested that, once proceedings had been commenced, "the effect of making an order under the section would normally be [unless it was suspended] to improve the liquidator's position qua litigant", and that "in many cases there will be much overlapping and …. it will be impossible wholly to disentangle motives and purposes", but went on:

"I do not, of course, say that an order under the section will always be refused once the writ has been issued or served, any more than I say that it will always be granted if no writ has been issued or served. In every case the court must be astute to avoid the section being used in any oppressive, vexatious or unfair way".

58. The decision in Cloverbay dispelled the notion that a primary test of the availability of the section is whether or not the liquidator has reached a firm decision to sue. Further, in examining the availability of the section for the purpose of reconstituting the state of knowledge that the company should possess (not the only purpose for which the section is available, as Bishopsgate Investment Ltd. v. Maxwell (above) later made clear), the Vice-Chancellor drew a distinction similar to that made by Megarry J between applications for the (impermissible) purpose of improving the position in current civil litigation against the proposed examinee and applications for a permissible purpose which may at the same time have the result of improving the liquidator's position in other respects: see at p.102D-E.
59. The decision in Bishopsgate Investment Ltd. v. Maxwell concerned (inter alia) applications by a provisional liquidator in relation to Mr Kevin Maxwell as a former director of Bishopsgate Investment Ltd., for the furnishing of information under s.235 and for an oral examination under s.236. The circumstances were that "very large sums of money appeared to have been removed from the common investment fund without explanation"; further, although a substantial proportion of the funds had been physically accounted for, in many cases third parties were claiming rights as pledgees and, in addition, "very large sums indeed, at least by any ordinary standards, remain entirely unaccounted for" (see pp.471d and 472h-I). Mr Maxwell sought unsuccessfully at both instances to resist such applications, by reference to the privilege against self-incrimination. It was held that ss.235 and 236 abrogated any such privilege. At first instance it was also argued that "requiring Kevin Maxwell to answer would put him at an unfair disadvantage in relation to litigation which the provisional liquidator has already commenced against him to hold him accountable for the losses from the company": [1992] BCLC 470, 473c. Hoffmann J said:

"Mr Kevin Maxwell as a director of this company was closely involved in dealings with the assets and it does not seem unreasonable to suppose that he should be able to furnish the liquidator with information about what has happened to them. Obviously, in the case of untraced assets the sooner the liquidator obtains such information as he can get, the better".

Hoffmann J distinguished Cloverbay (and indeed British & Commonwealth) as cases where the court was concerned with an application against a third party, rather than a director. He also underlined at p.473j the significance in the present context of the abrogation of the privilege against self-incrimination:

"And if it is the case that Parliament has considered the provision of this information so important that it has deprived the director of the privilege against self incrimination then there seems to me to be no grounds for refusing the provisional liquidator the assistance of the court."

60. The conclusion of Hoffmann J that "it would not be oppressive for Mr Maxwell to be questioned if the privilege is not available" was not challenged on appeal: [1993] Ch per Dillon LJ at p.15A – and Dillon LJ added at p.17B that:

"I have no doubt at all that, apart from the privilege against self-incrimination, Bishopsgate by its provisional liquidators and Mirror Group are entitled to receive from Mr Maxwell any information he has on the respective matters I have indicated above [viz what has happened both to the untraced assets and to assets traced into the hands of third parties claiming rights of security over them] about which they seek to question him by the respective proceedings between him and them".

61. The appellants base their resistance to examination under s.236 on the current civil proceedings brought against them by the liquidators on behalf of the company in the Chancery Division. In those proceedings, it is already alleged that the appellants were party to a bogus scheme of trading, with compliant counterparties, for the purpose of procuring receivables financing from independent banks, with the monies so raised being then misapplied. The proceedings were the vehicle by which the liquidators then obtained freezing orders over the appellants' assets. It is of some note, however, that the orders were not based on any proprietary claim to any particular assets; nor was relief sought with a view to ascertaining the location of assets. Mr Heslop QC for the appellants submits nonetheless that the application under s.236 and the proceedings in the Chancery Division cannot be "disentangled", and that it would be wrong and oppressive to make any order under s.236.
62. There is no justification for any suggestion that the purpose of the examination under s.236 is to obtain any advantage in the current civil proceedings. That is also to view the matter from the wrong perspective. The nature of the application and the evidence in its support shows that its purposes are both more fundamental and more wide-ranging. They are to reconstitute the company's records, to understand its affairs and, with that understanding, to identify its assets wherever they may be, including any causes of action against anyone whoever they may be. It is true that, in the course of any examination on these matters, information may well be forthcoming that will bear on, or expand the scope of, the current civil proceedings against the directors. But that will be an incidental consequence or effect of an examination which is needed in order to enable the liquidators to perform their functions generally: see re Brook Martin & Co. [1993] BCLC 328 at p.335. While any effect on the civil proceedings should be taken into consideration when deciding whether to make an order for examination, I have no doubt that in this case the need to have an examination, if the liquidators are to fulfil their functions generally, outweighs any such consideration.
63. The circumstances of the present case make it, as I see it, a paradigm case for the exercise of powers under s.236, in the terms set out in Peter Gibson LJ's judgment at paragraph 10, against the two relevant former officers of the company. In summary, the company collapsed, very suddenly, with a huge deficit (some $250 million) in circumstances where its apparent assets consist of non-performing claims against counter-parties to transactions, who all or almost all appear to have no more than a shadow existence. The company's files lack any substantial documentation for transactions during the months prior to its collapse; there is evidence of a large-scale "shredding" operation in the six-week period after the company's auditors resigned (because of the company's directors' failure to satisfy them as to the genuineness of transactions with six of the counterparties); and a large volume of files has been deleted from the company's computers. The liquidators, as outsiders without previous knowledge of or involvement with the company, are without the documentation or computerised information which would ordinarily be expected to exist. Mr Rastogi as an executive director and chief executive officer and Mr Jain as another executive director with overall supervision of the trading activities of the company may be expected to be able to explain the company's transactions and what has become of the company's assets. Either their examination will confirm that the company had developed, as the appellants have asserted, a substantial and genuine global business, which has been brought to its knees by the apparently simultaneous collapse of the company's many counterparties; or, alternatively, if this is not the position, the liquidators will be enabled to understand the true nature of the company's transactions, and to know or investigate the real whereabouts of the company's previous assets and of any current assets, including claims, that it may have acquired as a result of such transactions; on this latter hypothesis, it is very possible that the liquidators may acquire information justifying claims by the company in a number of different directions against third parties, including even innocent holders of the company's assets, presently quite unknown to the liquidators. An examination is in any event essential in order for the liquidators to perform their central functions as liquidators.
64. I therefore agree that this appeal must fail.

Hale L.J.:

65. I agree.
ORDER: Appeal dismissed with costs; The costs of the appeal are to be the subject of a detailed assessment on the standard basis if not agreed; We refuse to interfere with the orders as to costs made by the judge below; Permission to appeal to the House of Lords refused. (Order does not form part of the approved judgment)