The decision in Webb & Anor v Eversholt Rail Ltd & Anor is a significant reaffirmation of the limits of the information gathering powers available to liquidators under sections 235 and 236 of the Insolvency Act 1986 (“IA 1986”). At its core, the appeal centred on whether liquidators, faced with a company with no records, could demand every document connected with its business. The court’s firm answer was no, unless the liquidators could demonstrate a reasonable requirement. The decision serves as a corrective to any presumption that the IA 1986 grants liquidators a licence to demand “everything forever”. Alex Jay and Jack Barlow examine the decision.
The background to the dispute
Eversholt Rail (365) Ltd (365) operated as a special‑purpose vehicle within the wider Eversholt group, holding and leasing a fleet of 160 vehicles, including 40 trains. 365 had no employees, no independent systems and no separate email domain. Its sister company, Eversholt Rail Ltd (ERL), held all its records in accordance with a services agreement dated 25 February 2010 (the Services Agreement).
After 365 entered creditors’ voluntary liquidation in August 2019, its liquidators discovered that it possessed almost no corporate documents of its own. As such, the liquidators began seeking documents from ERL and Norton Rose Fulbright (NRF), who were solicitors to certain companies in the group, including ERL. ERL and NRF supplied some documents but resisted others where requests were too broad.
At an impasse, the liquidators issued an application under sections 235 and 236 IA 1986, seeking copies of all documents “relating to” the business or affairs of 365 from ERL and NRF. This primary request was supplemented by more specific categories for ERL, some of which were time-limited, but others were widely framed. They also sought summaries of NRF’s legal advice relating to 365. Insolvency and Companies Court (ICC) Judge Burton dismissed the application, and the liquidators appealed.
Three key issues
The High Court considered three key issues, as follows:
- Whether liquidators are entitled to “everything forever” when reconstituting the company’s knowledge
The liquidators primarily argued that, because all of 365’s operational records were held within ERL and because the statutory purpose of sections 235–236 includes allowing liquidators to reconstitute a company’s knowledge, they were entitled to all documents without needing to justify each category through a “reasonable requirement” test.
- Whether the Services Agreement created or enhanced an entitlement to wide disclosure
Alternatively, ERL’s contractual obligation to retain and make available records for 365 under the Services Agreement strengthened the liquidators’ claims. They contended that ERL’s role as a service provider, recognised by section 235(3)(c) IA 1986, meant that the court should apply a more generous threshold when determining what should be provided.
- Whether the court should have granted narrower orders or resolved privilege issues
Finally, the liquidators argued that even if the global disclosure request was too broad, the judge should have made an order for narrower, time‑limited categories, such as those relating to the years 2017–2019, and should have determined NRF’s privilege claims, especially in light of ERL’s concession that privilege could not be asserted for advice obtained for 365’s benefit.
The court’s resolution of each issue
The court held as follows:
- No automatic entitlement to “everything forever”
The High Court firmly rejected the suggestion that liquidators may bypass the statutory “reasonable requirement” threshold simply because reconstituting a company’s knowledge is an important underlying purpose of sections 235 and 236. Section 235 expressly requires a reasonable requirement and case law establishes that section 236 is subject to the same standard.
Reconstituting knowledge may, in some cases, justify extensive disclosure. But only where evidence establishes that breadth as reasonably required. Here, the liquidators’ evidence did not explain why they needed all documents. The judge’s evaluative finding on this point, the court held, was unimpeachable.
- The Services Agreement did not displace the statutory test
While the Services Agreement formed part of the factual background, it did not entitle the liquidators to full disclosure simply because ERL had contractually undertaken to retain certain records. The Services Agreement required ERL to maintain “material” documents, whereas the liquidators sought all documents “relating to” 365.
Moreover, the court rejected the argument that ERL’s service provider status lessened the statutory threshold. The liquidators still needed to demonstrate a reasonable requirement for the documents sought, which they had not done.
- No requirement to craft alternative orders; privilege issues were hypothetical
The court agreed with ICC Judge Burton that the narrower orders were never properly advanced as alternatives. Rather, the liquidators argued their case entirely on the basis of an all‑encompassing request. As such, the judge was not obliged to refashion their application for them, and any decision to carve out alternative forms of relief would have been a case management decision that was not properly challengeable on appeal.
As for privilege, the issue was premature. Privilege becomes relevant only where a reasonable requirement to inspect particular documents has been established. Since no such requirement was made out, there was no need to interfere with the judge’s refusal to rule on privilege disputes in abstraction.
Conclusion
The judgment confirms that even where corporate records are held entirely by a third‑party service provider, liquidators must justify the extent of the disclosure they seek. The Insolvency Act does not permit blanket disclosure requests untethered from the reasonable need requirement. The decision reinforces that the “reconstitution of knowledge” is a purpose, not a substitute, for meeting the statutory test, and it emphasises judicial reluctance to endorse unfocused, catch‑all applications under sections 235 and 236.
