At-a-glance case summaries provided by the Gatehouse Chambers' Insolvency Team, featuring:
- Dale v BDO LLP [2025] EWHC 446 (Ch)
- Carvill-Biggs and another Reading [2025] EWCA Civ 619
Read the latest CRI Cases Alerter authored by Alice Whyte and Phillip Patterson below.
Dale v BDO LLP [2025] EWHC 446 (Ch)
The High Court granted an application pursuant to Insolvency Act 1986 ss 235 and 236 and issued an order against BDO for delivery up of audit files prepared in respect of the company's 2018 and 2019 accounts (the Audit Files).
Shortly before the company's spectacular collapse into insolvency in 2021, it became apparent that the 2018 and 2019 accounts had been significantly misstated in respect of profit before tax. Profit before tax was estimated to have been overstated by around £5.3m in the 2019 accounts and by £14.8m in the 2020 half-year results.
The joint liquidators made an application for BDO to disclose the audit files to establish the reasons behind the company's collapse into insolvency, in part in order to ascertain whether BDO and/or management had discharged their duties to the company.
In applying ss 235 and 236, the court considered whether delivery up of the audit files was a "reasonable requirement", including the burden and any potential oppression that may fall upon BDO.
BDO challenged the application on the basis that the request to see all of BDO's audit files lacked sufficient specificity in that the suspected misstatement was in respect of the long-term contracts but the Audit Files cover all aspects of BDO's work on the Group's overall financial statements. BDO pointed to the fact that the documents belong to BDO and were not within the Company's control prior to administration. Further, BDO said the joint liquidators were seeking an unfair and unwarranted advantage which would not be available to other litigants by circumventing the professional negligence pre-action protocol which was "carefully calibrated by the courts to protect potential defendants whilst providing potential claimants with such information as they truly need".
This was balanced against the fact that the Audit Files would provide a unique record of how BDO carried out its function as auditor, how it exercised professional scepticism, and how it interrogated the evidence provided to it by the Company.
The court concluded that there was a likelihood that the Audit Files capture in a self-contained arena all of the information provided by the Company to enable the audits to be performed. The potential oppression caused to BDO in providing the Audit Files, knowing that their disclosure may lead to litigation being commenced against them, did not dissuade the court from allowing the application.
Carvill-Biggs and another Reading [2025] EWCA Civ 619
Court of Appeal, Civil Division (Lady Justice King, Lord Justice Nugee and Lord Justice Snowden)
FACTS
Rose Cottage Farm Limited (the Company) was incorporated by the Appellant, Mr Reading to acquire a parcel of land (the Land). Mr Reading was the sole director of the Company. The Company was placed into administration by the holder of a qualifying floating charge which had provided lending for the acquisition and development of the Land. The floating charge holder had previously appointed receivers over the Land pursuant to the fixed charge it also held and they had commenced possession proceedings. The joint administrators of the Company (the Joint Administrators) issued an application seeking declarations that the Land was legally and beneficially owned by the Company and alleged that the Appellant occupied the land as a trespasser. Various legal grounds were put forward for the Company and/or Joint Administrators to obtain such a declaration. Those grounds appear ultimately to have been misconceived, however, it is apparent from the transcript of the judgment at first instance that the application came to be premised solely upon s 234 of the Insolvency Act 1986. Counsel for Mr Reading at that hearing argued that s 234 did not apply because he had divested all proprietary interest in the Land when he had granted a mortgage in favour of the secured lender. This argument was rejected and HHJ Klein ordered possession of the Land to be delivered up to the Joint Administrators.
HELD
On appeal, Lord Justice Snowden allowed the appeal, finding that s 234 of the Insolvency Act 1986 did not permit the Joint Administrators to obtain an order for possession. As a result of the actions taken by the LPA receivers prior to the commencement of the administration, the Respondents had nothing capable of being delivered up in the form of an equitable or legal interest in the Land. The analysis of Lord Hoffman in Buchler v Talbot in the context of liquidation applied here. The Land fell outside the scope of s 234 of the Insolvency Act 1986. Snowden LJ further considered that it would likely have also been a misuse of s 234 (were there in any event a power) to pursue duplicative proceedings in respect of the same asset for the benefit of the same ultimate party. The appeal was allowed.
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