Liquidators can't demand "everything forever" says English High Court

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Background

When a railway company called Eversholt Rail (365) Limited (365) went into liquidation, its liquidators faced an unusual problem: 365 held virtually no documents of its own. All records were held by its sister company, Eversholt Rail Limited (ERL), which had provided all administrative services under a services agreement.

The liquidators had received some documents from both ERL and its lawyers but they were not satisfied and applied to court seeking all documents related to 365's business. The judge dismissed the application on grounds that the liquidators had not made out a proper case for information of the width sought (see our Alert).

Appeal

On appeal, the liquidators argued they were entitled to request all documents relating to the company without any time limit ("everything forever") – simply because they needed to reconstitute the company's corporate knowledge. They sought extremely broad categories of documents, essentially unlimited except by their relationship to the business.

Decision

The judge ruled that liquidators must establish a "reasonable requirement" for documents they seek under insolvency law, even when reconstituting corporate knowledge. Whilst the liquidators wanted to be in the same position as if the company had held its own records, they had to work within the actual circumstances they faced. The judge found the liquidators hadn't demonstrated why such wide-ranging requests were justified.

Key takeaways

The law requires liquidators to show they "reasonably require" information, not just that they want it. Simply needing to reconstitute company knowledge isn't automatically sufficient justification. Liquidators must make focused, justified requests rather than blanket demands, even in challenging circumstances.