Liquidation and treatment of third party information/documentation received

Once appointed a liquidator will be keen to get an understanding of the operation of a company, how it has been trading etc. That will involve a trawl through company information and files. In some cases, such a deep dive may uncover wrongdoing and/or information concerning other entities and so a liquidator may ask him/her/itself “what am I allowed to do with this documentation?”. In this article I briefly (and non exhaustively) explore the issue.

The first question to consider is whether the information uncovered is actually in the insolvent company’s possession and control (rather than for example being information which belongs to an officer or employee which has simply been left at the company offices). This may be fairly obvious.

Next, assuming the issue of control is such that the information may belong to the company, is to consider whether any special quality attaches to the documents which might restrict a liquidator’s capacity to deal with and use those documents. Questions to ask are:

1. Are the documents either a matter of broad public record company information (for example publicly available company information). This is a relatively straightforward consideration.

2. Do the documents possess any quality of confidentiality or privilege (in the legal sense) so as to fall outside any issue of confidence or breach of confidence. These are much more difficult qualities to assess than whether a document is publicly available. Each of these is considered below:

Privilege

Privilege is chiefly a right to resist disclosure. Where disclosure has occurred but this has been through inadvertence, mistake or the improper obtaining of information a court can injunct future use of the information so obtained so as to safeguard the privilege.

Unlike in circumstances of purely confidential information there is no balancing act to be conducted. If a liquidator comes across privileged material this should not be passed to others UNLESS it is clear that privilege has been waived. Unlike confidentiality, privilege can be used as a basis for non-disclosure outside of the context of litigation and in response to statutory obligations as well. Privilege is not a liquidator’s to waive. If any material appears likely to be privileged it should not be read.

Confidentiality

Notice of Confidential Status

A liquidator must assess whether there is an express agreement that information is confidential. Is there a signed confidentiality agreement or the like? If not then any liability or obligation of confidence would be founded upon notice that information was confidential.

In order for information to be confidential it must satisfy the following general descriptions:

(a) There must be some value to the party claiming confidentiality (not necessarily commercial) in the information being treated as confidential;

(b) The information must be such that a reasonable person in the position of the parties would regard it as confidential; and reasonableness, usage and practices in the relevant sector (for example, industrial or professional) are to be taken into account.

This would likely cover commercially sensitive private information. An individual need not receive confidential information because of, or from, a relationship of confidence. It can apply to anyone receiving information with notice that the information is confidential. Unless and until documents are reviewed, whether they contain confidential information or not will not be known.

Misuse of confidential information

In order for there to be a valid complaint of breach of confidence there must be misuse of confidential information.

There cannot be misuse where a party has a positive legal obligation to disclose information to a third party (Toulson and Phipps on Confidentiality 4^th Ed at 5-054).

Confidence may therefore be overridden by a duty to pass information to forms of prosecuting or regulatory authorities.

Further, another purpose for which it may be necessary for confidants to refer to information otherwise confidential is in order to establish or protect their legal rights against other parties or to defend themselves (Toulson and Phipps at 5-169)

Damian Molyneux is a director of M&P Legal specialising in, amongst other things, liquidations. He can be contacted on dpm@mplegal.im This article does not constitute legal advice, specific advice should be sought for individual circumstances.

Damian acknowledges (with thanks) the assistance of James Saunders of New Square Chambers.

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