September 2007
47.71 Disclosure of information to the official receiver by solicitors – company
Under section 144, the official receiver as liquidator has a duty to take into his custody or control any property of the company. This includes all papers held by solicitors which belong to the company, including privileged material. It does not include papers about the company which belong to the solicitor.
Where a solicitor has been instructed by the company, and not the directors in their personal capacity, then the solicitor's duty of confidentiality is owed to the company. The official receiver in his/her capacity as liquidator can waive this confidentiality and authorise disclosure by the solicitor of information to him/her and/or someone else. The position is more complicated if the solicitor considers he/she also acted for the directors in their personal capacity, rather than as officers of the company. When a solicitor has acted for both a company and for the directors, he/she must give careful consideration to the confidentiality owed to the company and directors respectively. That will determine who may authorise any disclosure. Confidentiality can be overridden where the solicitor has been used to further a criminal or fraudulent purpose. This will depend on the individual facts and circumstances of each case. In Finers v Miro [1990] The Times 25 September, it was held that ‘privilege was lost by the criminal or fraudulent intent of the client, whether or not the solicitor was aware of the intent’.
Notes: [s144]
47.72 Disclosure of information to the official receiver by solicitors – bankruptcy
If a solicitor has acted for an individual client who becomes bankrupt the duty of confidentiality in some respects transfers to the trustee. Any papers belonging to the bankrupt relating to his/her property, which are in the solicitor's hands should be provided to the trustee on payment of any reasonable charge re: Konigsberg (a bankrupt) [1989] WLR 1257. The trustee is not entitled to material relating to the bankrupt’s personal affairs, as distinct from his or her property, unless the bankrupt consents.
47.73 Application by trustee for directions
On the official receiver’s application as trustee to court for directions, a solicitor may be ordered :
Notes: [s303(2)]
47.74 Information that belongs to the client
The following material/rights belong to the client, and may therefore be passed to the official receiver in his/her capacity as liquidator/trustee:
Documents prepared by the solicitor for the benefit of the client e.g. instructions and advice, and copies of letters written by the solicitor to third parties,
Unless otherwise arranged, the copyright in any papers sent by the client to the solicitor, even where ownership of the actual papers passes to the solicitor, and
Documents prepared by third parties during the retainer, and sent to the solicitor other than at the solicitor's expense.
It does not include material about the client which belongs to the solicitor.
47.75 Disclosure of information to the official receiver by licensed conveyancers
From time to time the official receiver as trustee may need to approach licensed conveyancers for information.
The Council of Licensed Conveyancers has advised its members to differentiate a bankrupt client's property and other affairs. In most cases the only material in a conveyancer's hands will be about the bankrupt's property, and can be delivered to the trustee.
If the file does not relate entirely to the property affairs of the bankrupt, the licensed conveyancer will strip the file of non property information. When delivering the file to the official receiver as trustee a note should be sent explaining that certain documents, the nature of which should be described, have been removed from the file. It would then be open to the official receiver to apply to the court for the missing papers to be delivered up.
A similar line is taken where the client is a failed company. The conveyancer will differentiate between material on the company's property affairs and any other held. The first will be delivered to the office holder, and the second if any, will only be made available under a court order.
If a trustee in bankruptcy requests the solicitor to hand over papers belonging to the bankrupt, they must be handed over even if there is a lien, or charge, over them. The exception to that is where title documents are held by way of security, as provided by section 349(2).
Notes: [s349]
47.77 Auditors/accountants and the duty of confidentiality
Accountants owe their duty of confidentiality to the company by whom they are engaged, rather than individual shareholders, notwithstanding that an auditor is appointed by the shareholders in general meeting or, in the case of a newly formed company, by the directors. This situation is unchanged when a company goes into liquidation. However, the liquidator will generally be able to enforce any of the company’s rights, and this will include the right to authorise its accountants/auditor to disclose material and information to the liquidator and third parties.
Where an individual employs an accountant a duty of confidentiality is owed to that individual. Where the individual becomes bankrupt, the duty of confidentiality vested in the individual transfers to his/her trustee, so far as the information relates to the property of the bankrupt.
47.78 Permitted disclosure by banks to the official receiver
Section 84 of the Banking Act 1987 lists certain parties, including the official receiver, to whom banks may disclose information and material where the disclosure would enable or assist the official receiver in ‘investigating the cause of failure of an authorised institution in respect of which a winding-up order or bankruptcy has been made’.
Section 85 allows disclosure ‘in connection with any proceedings in respect of an authorised institution or former authorised institution under Parts I - VII or IX - X1 of the Insolvency Act 1986’.
Under section 85 the banks may also disclose information to the official receiver ‘with a view to the institution or otherwise for the purposes of proceedings under the Company Directors Disqualification Act 1986 in respect of a director or former director of an authorised institution or former authorised institution’.
Onward disclosure by the official receiver is permitted with the consent of the bank concerned, and provided the disclosure is for the purpose of enabling and assisting the recipient to discharge a function specified in section 84. Before deciding whether or not to give its consent to disclosure, the bank shall take account of any representations made by the official receiver as to the desirability or the necessity for disclosure.
Notes: [Banking Act 1987 s84]
47.79(a) Private examination of solicitor/accountant/bank
The official receiver can apply to court under either section 236 or 366 for a solicitor, accountant or bank to give information or to produce documents and the solicitor, accountant or bank must comply except to the extent that the court upholds any claim of privilege.
Where the official receiver has been forced to apply under section 236/366 to obtain the solicitor, accountant or bank's co-operation, he may seek a costs order against the party in respect of the application.
Notes: [s236 or 366]
47.79(b) Disclosure of information by HMRC to the official receiver - duty of confidentiality
HMRC has a strict legal duty to maintain the confidentiality of the information it holds about its customers (taxpayers, national insurance contributors and tax credit applicants). This is based on a long established and fundamental principle (supported by case law) that information provided to HMRC is treated as being strictly confidential and is not disclosed to third parties without the individual’s consent. HMRC has always viewed this important protection of individual privacy as being vital in helping to ensure the trust and voluntary compliance of its customers. Enquiries by the official receiver should not put an HMRC official into a position of breaching the duty of confidentiality.
47.79(c) Provision of information by HMRC – company
HMRC’s statutory functions are the assessment and collection of tax and national insurance contributions and the administration and payment of tax credits. National insurance contributions work is dealt with primarily by the National Insurance Contributions Office (NICO). Except where indicated otherwise, in this chapter HMRC shall be taken to include NICO.
HMRC regards the liquidator of a company as standing ‘in the shoes of the company’ i.e. they have ‘become’ the company and therefore considers that it can disclose anything to the official receiver (acting in capacity of the liquidator) concerning the company’s affairs that it would have been able to disclose to the company.
Disclosure of information by HMRC will be limited to information about the company which it would ordinarily be aware of, e.g. correspondence between HMRC and the company, details of payments made (whether tax or national insurance contributions), reports of meetings between the company and HMRC etc. Internal HMRC documentation which the company would not be aware of and information about the directors’ personal affairs will not be disclosed by HMRC in response to a request from the official receiver acting in the capacity of a liquidator. Official receivers should therefore not seek this type of information.
Where HMRC has petitioned for the winding-up order or has supported the petition for winding up, enquiries for information should be sent to Enforcement & Insolvency Service, Durrington Bridge House, Barrington Road, Worthing BN12 4SE. Enquiries in all other cases should be sent to the local Debt Technical Office or taxpayer district office which last handled the company’s tax affairs.
47.79(d) Provision of information by HMRC - partnership liquidations
Partnership liquidations are dealt with by HMRC in the same way as company liquidations although the liquidator’s authority only covers the tax affairs of the partnership, including the involvement of a partner in the partnership, but not the (personal) tax affairs of a partner.
Bankruptcy
47.79(e) Disclosure where HMRC is the petitioning creditor
In cases where HMRC is the petitioning creditor in the bankruptcy, the following package of information will be provided in writing to the official receiver on or shortly after the bankruptcy order as a matter of routine:-
Therefore on receiving an HMRC petition bankruptcy case, there should be no contact made with HMRC about the case, by way of the usual initial enquiries. If the information package detailed above is not received, it should be pursued by contacting the Petitions and Transfers Team of the Centralised Activities Directorate (CAD) (of the Insolvency Service in Sunley House, Croydon).
47.79(f) Disclosure where HMRC is a supporting creditor
If HMRC is a supporting creditor in a bankruptcy, an information package referred to in paragraph 47.79(e) will be available to the official receiver on written request from Richard Lawler of HMRC, Enforcement & Insolvency Service , Durrington Bridge House, Barrington Road, Worthing, West Sussex BN12 4SE (01903 701043). Whether this enquiry is necessary, following information obtained from the petitioning solicitors, is a matter for local judgement but it is not expected that such an enquiry will be made in every case. The Petitions and Transfers Team of CAD should not be involved in this request.
47.79(g) HMRC is not the petitioning or supporting creditor or is not a creditor
If information is required from HMRC in any case in which it is not the petitioning or supporting creditor, or is not a creditor at all, that information will only be provided, and therefore should only be sought, when the official receiver holds a tax authority completed by the bankrupt (see paragraph 47.79(h)) or pursuant to an order of the court under section 369 of the Insolvency Act 1986 (Order for production of documents by Inland Revenue). On its own, section 366 of the Insolvency Act 1986 should not be used directly to obtain information from HMRC.
Notes: [s369]
47.79(h) General authority to disclose information – bankruptcy
In bankruptcy cases, after the bankrupt has completed the usual
Tax and National Insurance disclosure authority, form TNIDIS, a copy of that authority should be sent to HMRC the Inland Revenue when the first enquiry is made. HMRC will accept the form as the taxpayer's authority to release information about his/her affairs. Thereafter appropriate information should be given by HMRC without any difficulty. In practical terms, if enquiries are made of different parts of HMRC, a copy of the authority should be sent to each part at the commencement of the correspondence.
Notes: [Form TNIDIS]
47.79(i) Non surrender and non co-operation cases
In non surrender or non co-operation bankruptcy cases, the disclosure authority (Form TNIDIS) will not be available for submission to HMRC. In these circumstances the official receiver should proceed as detailed in paragraphs 47.79(e) to 47.79(g).
HMRC can be asked to supply (any) information it holds on the following: -
Whilst this list is not exhaustive, it should not be departed from routinely. Further, the list should not be used as a check-list whereby all the items listed should be sought on every occasion an enquiry is made to HMRC. It must be borne in mind that some items of information are more appropriately sought at different times in the administration of a case. For example, on making enquiries immediately following a bankruptcy order, it might not be necessary to request the bankrupt's date of birth if it has been supplied on preliminary examination (just to check that information).
In cases where HMRC has petitioned for the bankruptcy order, or has supported the bankruptcy petition, if information is required beyond that contained in the initial information package the official receiver must hold a written consent from the bankrupt or a court order under section 369 of the Insolvency Act 1986. Such requests for further information must be made to the Enforcement & Insolvency Service in Worthing quoting the appropriate reference number.
In cases where HMRC has not petitioned for bankruptcy or supported a bankruptcy petition or is not a creditor at all, to ask for the information described above the official receiver must hold a written consent from the bankrupt or a court order under section 369 of the Insolvency Act 1986.
47.79(k) Form of enquiry and the office to which it should be made
Enquiries other than those detailed in paragraphs 47.79(e) to 47.79(j) above should, in the first instance, be sought from the local Debt Technical Office or taxpayer district office (which last handled the insolvent’s tax affairs). These enquiries might relate to self assessment returns, assets and bank accounts.
The usual form of enquiry to HMRC will be in writing, either by letter, facsimile transfer or e-mail. Enquiries should not be made by telephone. If information is required urgently, e.g. in connection with an annulment or rescission of the bankruptcy order, the official receiver should emphasise the importance of getting the information quickly in the written request.
47.79(l) Enquiries about claims (only)
In all cases, enquiries about claims (only) should be made to HMRC at the Insolvency Claims Handling Unit (ICHU), Benton Park View, Longbenton, Newcastle upon Tyne, NE98 1ZZ (Tel. 0191 225 7072). ICHU will issue an itemised claim in every case, interim claims being followed by final and when there is no claim, a ‘no claim’ letter will be issued.
Enquiries of NICO should not be made when they relate to payment records, perhaps in connection with disqualification cases, but should be made to the local taxpayer service office or taxpayer district office. No enquiries should be made of HMRC relating to a bankrupt’s benefit payments or entitlements: such enquiries should be made of the Department for Work and Pensions. The only enquiries to be made of The Solicitor’s Office of HMRC will relate to the assessment and payment of petition costs.
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