Section 236 examination: where are we?

Background

We generally find insolvency practitioners are split into two camps in relation to Section 236 private examination. There are those who have found it to be a highly effective tool in encouraging, for example former directors, to disclose information about the company’s affairs, as well as providing appropriate documents. There are others who have practically found that the Section 236 process can be cumbersome, expensive, time consuming and sometimes not actually further investigations very much.

Precedent in Scotland

From the late 90s onwards there were a number of human rights related points taken by examinees in private examinations in Scotland. Practitioners will be aware of a helpful decision of Lady Paton in the liquidation of Tay Square Properties Limited that ultimately held there is no protection against self-incrimination in the Section 236 process; and in short questions posed within the scope of the section have to be answered.

Al Jeber v Mitchell

Following decisions in Scotland and England about the lack of protection against self-incrimination there has been extensive discussion about the purposes for which office holders may use information obtained at a private examination. Al Jeber is a decision of the English Court of Appeal of 30th July 2021. The important point to note is that the Court held that the person being examined under Section 236 before the Court was immune from being pursued by the liquidator in relation to the answers they gave under Section 236. The Court apparently took the view that while it is important full answers were given to questions, contrary to Scottish decisions, like the Tay Square Properties Limited case referred to above, Section 236 was a form of judicial proceedings (and therefore witnesses should be protected in relation to what they say).

The Scottish Position

Going forward one does not know for sure, but we have to assume that the Scottish Courts will follow this English decision. That may lead to a situation where insolvency practitioners are in the invidious position of discovering something in an examination but then having to rediscover the evidence in separate proceedings or in principal proceedings pursuing a claim. How this principle works out in different cases remains to be seen. For the time being, however, it is important to note that getting information, for example out of a former director, at a private examination may well not be enough to provide the evidence to be allowed to please a specific case in resultant claims.

Contact our Insolvency Lawyers Edinburgh, Wick and Aberdeen, Scotland

BBM Solicitors specialise in advising IP’s in both contentious and non-contentious matters (including transactional work). Contact: Eric Baijal (emb@bbmsolicitors.co.uk). This briefing note is current as at 13 September 2021 and is our understanding of the position described at that date. Legal advice ought to be taken before relying on its terms (particularly to ensure the law has not changed).