KATORIA TRUSTEE LTD v TOON [2022] NZHC 3037

KATORIA TRUSTEE LTD v TOON [2022] NZHC 3037 [22 November 2022]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2016-404-000697[2022] NZHC 3037UNDER the Companies Act 1993BETWEEN KATORIA TRUSTEE LIMITED (as trusteeof the CA QUINN TRUST)ApplicantAND VICTORIA TOONFirst RespondentBRUCE JAMES THOMPSONSecond RespondentCAROLINE MARY THOMPSON andSTEWARTCO TRUSTEE SERVICESLIMITED as trustees of the CM ThompsonTrustThird RespondentPAMELA ISABEL QUINNFourth RespondentHearing: 18 October 2022Appearances: S P Bryers for the ApplicantJ Alexander for the First RespondentJudgment: 22 November 2022JUDGMENT OF ASSOCIATE JUDGE GARDINERThis judgment was delivered by me on 22 November 2022 at 12.00 p.m.pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate.......................................Introduction[1] The applicant applies for an order for inspection of legal advice the firstrespondent, Victoria Toon (the Liquidator), obtained in her role as liquidator ofInvestacorp Holdings Limited (in liquidation). Alternatively, the applicant applies fora direction requiring the Liquidator to provide a copy of the legal advice. It says itwants to see the advice to determine whether to make a claim against the author forproviding erroneous legal advice resulting in loss to Investacorp and its shareholders.[2] The Liquidator opposes the application. She says that there is no good reasonfor the applicant to inspect the legal advice, and furthermore it is protected by legaladvice privilege.[3] The application raises three main issues:(a) Who owns the privilege in the legal advice?(b) Has the privilege been waived?(c) Does the applicant have a good reason for inspecting the advice?[4] As a preliminary point, I record that the application was originally brought byClive Anthony Quinn and Philip Samson Wells as trustees of the CA Quinn Trust (ashareholder of Investacorp associated with Mr Quinn and his wife, Pamela Quinn).Mr Quinn and Mr Wells have subsequently resigned as trustees and have been replacedby Katoria Trustee Limited (Katoria) as trustee. The directors of that company areMr and Mrs Quinn. An order is sought pursuant to r 4.52 of the High Court Rules2016 substituting Katoria as applicant for Messrs Quinn and Wells. The Liquidatordoes not oppose that application provided Mr Quinn confirms he is still liable for costs.Mr and Mrs Quinn agree to ensure that Katoria pays any costs award made against it.On that basis, I order that Katoria Trustee Limited is substituted as applicant in thisproceeding.Background[5] The background to this application is found in the judgment of the Court ofAppeal concerning an application under ss 286 and 284 of the Companies Act 1993for a declaration that the Liquidator breached her professional duties to Investacorp;and the Liquidator's application for approval of her remuneration under ss 276(2) and284(1)(e) of the Companies Act.1[6] The proceedings arose out of the liquidation of Investacorp. At the time of theliquidation, the shareholders in Investacorp were three siblings (Pamela Quinn,Bruce Thompson and Elizabeth Bakker), Clive Quinn, and interests associated withMr Thompson and Mr and Mrs Quinn.2[7] There was considerable longstanding acrimony between Mr and Mrs Quinnand Mr Thompson (including in relation to directors' fees charged by Mr and MrsQuinn).3[8] In 2016, Mr Thompson initiated proceedings under s 174 of the CompaniesAct.4 In May 2017, a settlement was reached to which the directors and shareholderswere parties but Investacorp was not.5 Investacorp was placed in liquidation and theLiquidator was appointed.6[9] Acting on legal advice, the Liquidator investigated the possibility of recoveringthe allegedly excessive fees charged by Mr and Mrs Quinn to Investacorp.7[10] In August 2018, the trustees of the CA Quinn Trust (Quinn Trust) appliedunder ss 286 and 284 of the Companies Act for a declaration that the Liquidator hadbreached her professional duties to the company and directions that she ceaseinvestigating the matters raised by Mr Thompson and complete the liquidation.81 Toon v Quinn [2021] NZCA 696 [CA Judgment].2 CA Judgment at [1].3 At [13].4 At [18].5 At [19].6 At [20]–[21].7 At [33].8 At [44].[11] In December 2018, the Liquidator decided it would not be cost effective tocommence proceedings against the Quinns.9 In March 2019, having distributed mostof the company's assets, the Liquidator applied for approval of her fees. The hearingtook place in September 2019.[12] The High Court determined both applications together. The Court held that theLiquidator had breached her duties to collect and distribute the company's assetsreasonably and efficiently.10 Specifically, Associate Judge Bell held that theLiquidator's decision to pursue her investigation of the fees charged by the Quinnswas a "wrong turn" and led to the liquidation costs being higher than they ought tohave been.11 He made the directions sought by the Quinn Trust for the Liquidator tocomplete the liquidation.12 In relation to the Liquidator's application, the AssociateJudge concluded, given his earlier finding, that her fees ought to be lower than whatshe had applied for.13[13] The Liquidator appealed this Court's decision. The Court of Appeal allowedthe appeal, finding that the Judge erred in engaging in a lengthy legal analysis ofwhether the May 2017 settlement agreement precluded any claim against the Quinnsin relation to the fees they had been charging the company.14 The Court of Appealfound that the Judge was "not required to determine the correct legal position, but,rather, to make an evaluative judgment as to what remuneration was reasonable in thecontext of the liquidation". To do that, "[the Court] had to decide whether the stepsMs Toon took were those that a reasonably competent liquidator would have taken".15Both experts had given evidence that it was reasonable to get legal advice. TheLiquidator did this and relied on the advice to proceed.16 The Liquidator had givenevidence that her lawyer had advised her that the settlement agreement was not bindingon the company, with the result that she was entitled to proceed further.179 CA Judgment at [3].10 Quinn v Toon [2020] NZHC 816 at [147].11 At [125].12 At [148]–[149].13 At [146].14 CA Judgment at [76].15 At [77].16 At [80].17 At [50].[14] The Court concluded:18Ms Toon sought specific advice from her own lawyer, at the outset of theliquidation, about whether she should investigate a potential claim on behalfof the company. The expert evidence was that it was reasonable for her tohave done so. It must also, therefore, have been reasonable for her to haveacted on the advice that she received. In these circumstances, the relevanceof the legal advice cannot be discounted. But nor can it be the soledetermining factor as to whether it was reasonable to take action. Thatquestion also depends on the question of materiality.[15] The Court said that: 19 the real question for the Associate Judge was whether the steps that MsToon took after receiving legal advice were reasonable, having regard to thequestions of value and proportionality on which any assessment ofremuneration would be based.[16] The Court found that the Judge wrongly assessed the Liquidator's conduct withthe benefit of hindsight, and that "the liquidation unfolded as an unfortunate legacy ofMr Quinn's and Mr Thompson's dealings with one another over a very long time, andMs Toon was caught between them".20 They concluded:21In our view Ms Toon was entitled to investigate Mr Thompson's complaintuntil she had sufficient information to satisfy herself that pursuing it wouldnot be cost effective.[17] The Court concluded that the Liquidator could not have been expected toproperly review the merits of the complaint before receiving Mr Quinn's detailedexplanation at the end of July 2018. For various reasons, the Liquidator did not reachher view until December 2018, but the delay did not add materially to the cost of theliquidation. Accordingly, the High Court judgment was set aside and the Liquidator'sremuneration was approved.[18] The applicant applied for leave to appeal to the Supreme Court. Theapplication was unsuccessful.2218 CA Judgment at [88].19 At [89].20 At [106].21 At [107].22 Quinn v Toon [2022] NZSC 53.Legal principles[19] The application is made under ss 256 and 284 of the Companies Act.[20] Section 256 relevantly provides:256 Duties in relation to records(1) The liquidator of a company must—(a) keep accounting records and other documents of the liquidation andpermit those records, and the records and other documents of thecompany, to be inspected by—(i) any liquidation committee appointed under section 314, unless theliquidator believes on reasonable grounds that inspection would beprejudicial to the liquidation; and(ii) if the court so orders, a creditor or shareholder;...[21] Section 284 relevantly provides:284 Court supervision of liquidation(1) On the application of the liquidator, a liquidation committee, or, with theleave of the court, a creditor, shareholder, other entitled person, or director ofa company in liquidation, the court may—(a) give directions in relation to any matter arising in connection withthe liquidation:(b) confirm, reverse, or modify an act or decision of the liquidator:(c) order an audit of the accounts of the liquidation:(d) order the liquidator to produce the accounts and records of theliquidation for audit and to provide the auditor with such informationconcerning the conduct of the liquidation as the auditor requests:(e) in respect of any period, review or fix the remuneration of theliquidator at a level which is reasonable in the circumstances:(f) to the extent that an amount retained by the liquidator asremuneration is found by the court to be unreasonable in thecircumstances, order the liquidator to refund the amount:(g) declare whether or not the liquidator was validly appointed orvalidly assumed custody or control of property:(h) make an order concerning the retention or the disposition of theaccounts and records of the liquidation or of the company.[22] The applicant explains that it relies on s 284 for procedural reasons becausethat section enables the Court to direct the Liquidator to provide a copy of the legaladvice to the applicant, rather than the applicant being required to attend and inspectthe Liquidator's records to find the advice.[23] The basis upon which the Court will allow a creditor or shareholder to inspectaccounts and records under s 256(1)(a)(ii) was discussed by the Court of Appeal inLevin v Lawrence.23 The Court endorsed the "good reason" test adopted by ToogoodJ in the High Court decision: 24[T]here must be some good reason for the Court to order inspection incircumstances where the statutory scheme does not ordinarily permit it. Thetest of "good reason" does not require any further elaboration; whether theCourt will exercise its discretion to order access to the records will depend onthe particular circumstances of each case.(citations omitted)[24] The Court of Appeal said that, while no inflexible rules can or should be laiddown, the "good reason" test may be elaborated as follows:25(a) Mere suspicion or assertion by a creditor that a liquidator has notundertaken – or is not undertaking – the liquidator's statutory taskproperly is not sufficient.(b) It is not permissible for a creditor or shareholder to apply merely inorder to embark on a fishing expedition – in order to sift through theaccounts and records of the liquidator to see if that might turnsomething up.(c) At a minimum, the applicant must put forward some persuasive,tangible or concrete reasons why inspection should be required. Anexample might be where the creditor, from its own dealings with the23 Levin v Lawrence [2013] NZCA 394, (2013) 11 NZCLC 98-018.24 At [29].25 At [53].company in liquidation, has a genuine concern about a particular aspectof the company's affairs. If the liquidator declined to investigate thisarea, or declined to say whether it had been investigated, the s256(1)(a)(ii) threshold would be crossed.[25] Before applying this test to the present application, it is necessary to addressthe submissions made concerning the privileged character of the legal advice. Thesesubmissions focused on two questions: who owns the privilege; and whether theprivilege has been waived. I note however that these issues are not determinative. Theapplicants must establish a good reason for inspecting the document, whether it isprivileged or not.Who owns the privilege in the legal advice?[26] Katoria submits that the legal advice related to a matter raised during theliquidation, and to a potential avenue for recovery of company assets (ie a claimagainst the directors). Therefore, it submits that the legal advice was obtained andreceived by the Liquidator as agent for Investacorp and for the purpose of theliquidation. Accordingly, the privilege attaching to the legal advice is held byInvestacorp, not the Liquidator personally.[27] Katoria relies on comments by the Supreme Court in Mana Property TrusteeLtd v James Developments Ltd.26 When determining an application by a third partyfor costs against both the company in liquidation and the liquidators personally, theSupreme Court dismissed the application for costs against the liquidators personallyand stated:27The party to the litigation is the company, not the liquidator, even in the caseof a proceeding commenced against the company after its liquidation. It wastherefore James itself which was the successful appellant in the Court ofAppeal and the unsuccessful respondent in this Court. The liquidators weremerely its agents in relation to the litigation, having taken over the conduct ofits affairs from its director.26 Mana Property Trustee Ltd v James Developments Ltd [2010] NZSC 124, (2011) 2 NZLR 25.27 At [9].[28] In contrast, the Liquidator contends that the privilege belongs to her personally.She says that she was the client and points to the invoices marked for the attention of"Corporate Restructuring Ltd". Alternatively, the Liquidator submits that she andInvestacorp jointly hold the privilege. She says that joint privilege cannot be waivedby one client under s 66 of the Evidence Act 2006.28 Therefore, unless the companyand the Liquidator both waive privilege, the advice will not be made available.[29] The Liquidator refers to Body Corporate 194481 v Mason, where the Courtordered disclosure of the liquidator's documents subject to a number of conditions,including that the liquidators were "not required to make available for inspectiondocuments for which they or the company can claim privilege". 29[30] In reply, Katoria refers to several authorities that discuss privilege in an agencysituation, including Robert v Foxton Equities Ltd and Brandlines Ltd v Central ForkliftGroup Ltd.30 These authorities confirm that where a third party agent seeks advice fora principal (the client), privilege will extend to communications between the agent andthe principal's solicitor.[31] Katoria submits, relying on R (on the application of) Ford v Financial ServicesAuthority,31 that there is no evidence that the Liquidator communicated with thelawyer in a personal capacity, or that she made clear to the lawyer that she was seekingthe advice in a personal capacity rather than in her role as liquidator of Investacorp.[32] Katoria further submits that the Liquidator cannot claim sole privilege in legaladvice obtained for the purpose of carrying out her duties, and that either the privilegebelongs to the principals for whom the Liquidator was carrying out those duties, or theprivilege is jointly held between the principals and the Liquidator. In this respect, theapplicant argues that Bunting v Buchanan was wrongly decided.32 In that case, thisCourt held that where legal advice is obtained as performance of a liquidator'sstatutory duty (as distinct from performance of a duty to the company) or to enable the28 Messenger v Stanaway Real Estate Ltd [2014] NZHC 2103 at [55].29 Body Corporate 194481 v Mason [2016] NZHC 2858 at [14].30 Robert v Foxton Equities Ltd [2014] NZHC 726; Brandlines Ltd v Central Forklift Group Ltd HCWellington CIV-2008-485-2803, 11 February 2011.31 R (on the application of) Ford v Financial Services Authority [2012] 1 All ER 1238.32 Bunting v Buchanan [2013] NZHC 1921.liquidator to carry out that duty, the privilege belongs to the liquidator and not to thecompany.[33] Finally, Katoria relies on the Supreme Court decision of Lambie Trustee Ltd vAddleman.33 In that case, the beneficiary of a trust sought disclosure from the trusteesof legal advice obtained by the trustees. The Court held that the joint interest exceptionto legal professional privilege applied to legal advice relating to the generaladministration of the trust. In so doing, the Court said:34The joint interest exception to legal professional privilege is engaged incircumstances in which the joint interest in legal advice is less direct than inthe case of joint privilege. Thus a company and its shareholders may share ajoint interest in legal advice obtained by the company35 despite the companynot being an agent of the shareholders, and those shareholders not having adirect proprietary interest in the assets of the company.36[34] From this, the applicant submits that the shareholders have a joint interest inthe legal advice obtained by the Liquidator acting as agent for Investacorp. As jointinterest privilege can only be claimed against a third party, not between the partieswho hold the privilege, the shareholders are entitled to the information held by theLiquidator.[35] In my assessment, the general principles concerning legal professionalprivilege in an agency context, or a trustee context, do not necessarily apply to legaladvice procured by a liquidator. As the authors of Heath and Whale observe, aliquidator "has a unique legal status." The liquidator's relationship with the companyis not a normal agency position because the liquidator controls the principal (thecompany) and has statutory duties under the Companies Act which are focussed on33 Lambie Trustee Ltd v Addleman [2021] NZSC 54.34 At [72].35 See for instance Gouraud v Edison Gower Bell Telephone Co of Europe (1888) 57 LJR 498 (Ch);W Dennis and Sons Ltd v West Norfolk Farmers' Manure and Chemical Co-Operative Co Ltd[1943] Ch 220 (Ch) at 222–223; and BBGP Managing General Partner Ltd v Babcock & BrownGlobal Partners [2010] EWHC 2176 (Ch), [2011] Ch 296 at [58].36 As is noted in Hodge M Malek (ed) Phipson on Evidence (19th ed, Sweet & Maxwell, London,2018) at [24-02], a shareholder has no right to see documents held by a company. So in practice,the joint interest exception applies only where, in litigation between a company and shareholder,the company attempts to resist discovery in respect of legal advice on grounds of legal professionalprivilege.protecting the interest of creditors.37 The liquidator's position, while sometimesreferred to as a trustee, is better described as that of a statutory agent whoseresponsibilities are to perform obligations under the Act, and to distribute propertydivisible among creditors in accordance with statutory priorities.38[36] In my view, the question of who "owns" the privilege in legal advice obtainedby a liquidator is determined by the purpose for which that advice is obtained. Theremay be circumstances where a liquidator obtains legal advice for personal reasons, forexample concerning their potential personal liability for their actions as liquidator.However, where the purpose of the legal advice is to assist the liquidator to determinewhether to pursue litigation for the company against its directors to recover funds todistribute to creditors (and potentially shareholders) consistent with their statutoryduty, the legal advice is not procured by the liquidator in their personal capacity.Rather, the advice is procured by the liquidator in their unique capacity as liquidatorof the company. In this capacity, they are both agent of the principal (the company)and the directing mind of the principal for the duration of the liquidation.[37] Accordingly, privilege in the legal advice is held by the Liquidator in hercapacity as liquidator of Investacorp, and can only be waived by the Liquidator in thatcapacity. Investacorp has no independent ability to waive privilege as it is under thecontrol of the Liquidator. The applicants, as individual shareholders of Investacorp,are separate again and plainly do not hold the privilege either solely or jointly with theLiquidator. This critical distinction between the liquidator, the company and theshareholders in a liquidation context is reflected in ss 256 and 284.Has the privilege been waived?[38] The applicant makes a further and alternative argument: that any privilege inthe legal advice was waived by the Liquidator when she voluntarily disclosed theexistence and contents of the legal advice in support of her application to the Court forapproval of her remuneration. It says that in doing this, the Liquidator has, in termsof s 65 of the Evidence Act:37 Paul Heath and Michael Whale (eds) Heath and Whale on Insolvency (online ed, LexisNexis) at[22.3], referring to Dunphy v Sleepyhead Manufacturing Co Ltd [2007] 3 NZLR 602 (CA).38 Heath and Whale at [22.3].(a) voluntarily produced or disclosed a significant part of the privilegedcommunication in circumstances which are inconsistent with the claimof confidentiality; and(b) acted to put the allegedly privileged communication at issue in theremuneration claim proceeding.[39] Against that, the Liquidator submits that the Court of Appeal held that she hadnot waived privilege in the legal advice:39[80] The Associate Judge's conclusion at [132] that a liquidator in Ms Toon'sposition was entitled to "[obtain] legal advice [and tell] Mr Thompson that theliquidator would take no further steps on his complaint" was clearly predicatedon the erroneous assumption that any legal advice a liquidator received inthose circumstances would have justified declining to take further steps. Asdiscussed, however, the evidence was that Ms Toon's lawyer had advised herthat the settlement agreement was not binding on the company, with the resultthat she was entitled to proceed further. As a result of this error, the AssociateJudge failed to direct his attention to the question of what was reasonable forMs Toon to do, having regard to the legal advice she had actually received.[81] Mr Bryers argued that the legal advice was of limited importance becauseMs Toon had not, in fact, relied on it and, as a matter of law, Ms Toon was notentitled to seek remuneration on the basis that she had relied on legal advice.[82] As to the first argument, Mr Bryers pointed out the Mr Taylor's advicewas not referred to in evidence until Ms Toon was examined orally. The lackof reference to the legal advice in the affidavit evidence is not significantbecause it was not apparent as an issue in either application and when Ms Toongave evidence about consulting her lawyer it was not suggested to her that shehad not relied on the advice she received. Mr Bryers also suggested that if MsToon wished to rely on legal advice as a reason for doing what she did, it wasincumbent on her to produce the advice. But given that Ms Toon's evidencewas not challenged, and she was not asked to waive privilege in respect of it,that submission is not sustainable.[40] In reply, Mr Bryers for the applicant submits that the Court of Appeal'scomments regarding waiver were a response to his submission that the Liquidatorcould not rely on advice if she did not produce it. The issue of waiver was not raisedin argument, and the Court's finding was made without the benefit of any submissionson the issue. He submits that the Court did not consider whether the Liquidator'sreliance on the legal advice constituted a waiver pursuant to s 65 of the Evidence Act.39 CA Judgment.[41] I do not accept this submission. If the applicant considered that the Liquidatorhad waived privilege in the legal advice by referring to it during the High Courthearing, the time to make that argument was then — or if not then, before the Courtof Appeal. The fact that the applicant did not make this argument in the Court ofAppeal suggests that it did not consider that privilege had been waived. Moreimportantly, it is implicit in the Court of Appeal's response to the submission that theLiquidator must produce the document that the Court considered that the Liquidatorhad not waived privilege by referring to the advice in her oral evidence during theHigh Court hearing. It is not open to me to revisit that issue now.[42] I now turn to the main issue: whether the applicants have a good reason forinspecting the document.Do the applicants have a good reason for inspecting the legal advice?[43] The applicant says that it has provided a good reason, namely, to ascertainwhether a claim may be made against the legal advisor for faulty legal advice. Further,it is relevant that Investacorp (and therefore the shareholders) have paid for the legaladvice and yet that advice is being withheld from them.[44] The Liquidator submits that there is no further utility, in the context ofoversight of the liquidation (which s 256 is directed at), for the applicant to be providedwith the legal advice. The liquidation is nearly complete, and the Liquidator has beenheld by the Court of Appeal and the Supreme Court to have complied with her dutiesand been entitled to her remuneration and legal costs.[45] The Liquidator also submits that the merits of the potential claim against thelegal advisor are relevant. The Liquidator maintains that it is not reasonably arguablethat the Liquidator's legal advisor owed a duty of care to the applicant as a shareholderof Investacorp. Further, the Liquidator does not accept that the legal advice waswrong.[46] The Liquidator also submits that there is no need for the applicant to receivethe privileged advice in order to decide whether to take legal action against the legaladvisor. She says that it is clear from their submissions that they have formed theirown views about the legal advice. She submits that it is not uncommon for plaintiffsto sue legal advisors without a copy of the legal advice.40[47] I note at this point that Katoria appears to rely on the Supreme Court's decisiondismissing its application for leave to appeal where it said:41There was, in fact, no dispute that the settlement agreement was binding onInvestacorp, and that the legal advice obtained by Ms Toon to the contrary waswrong, so we do not see the proposed appeal as triggering any requirement toevaluate the legal consequences of the settlement agreement. Nor do we seeany risk of a miscarriage of justice in the way the Court of Appeal addressedthe settlement agreement.we accept that the proposed appeal would raise an issue as to the limits, ifany, on the extent to which a liquidator can claim remuneration for workcarried out and expenses incurred on the basis of erroneous legal advice andthat this is an issue of commercial significance which could be worthy ofconsideration. But we do not see this case as an appropriate vehicle forconsideration of the issue because the advice itself is not in evidence and thedecision of the Court of Appeal was based on an evaluation of what theliquidator did, which was essentially a factual assessment in light of the expertevidence before the Court.[48] Mr Alexander for the Liquidator clarified, with reference to the Liquidator'ssubmissions in the Court of Appeal and in the Supreme Court on the application forleave to appeal, that the Liquidator has always denied that the legal advice she receivedwas wrong.42[49] Further, the Liquidator submits that the application is an abuse of process. TheLiquidator has offered to disclose the legal advice to the applicant in exchange for theQuinns agreeing to fully release and indemnify the Liquidator. The Quinns haverefused the Liquidator's proposal and are expressly not ruling out further proceedingsagainst her. The Liquidator says that she has reasonable grounds to believe that the40 For example, where the defendant seeks contribution from the plaintiff's lawyer. Unless theplaintiff waives privilege, the claim proceeds without the defendant seeing the legal advice.41 Quinn v Toon [2022] NZSC 53 at [13]–[14].42 Appellant's submissions in the Court of Appeal dated 6 July 2021 at [27]; First Respondent'ssubmissions in the Supreme Court dated 1 March 2022 at [5](a).applicant will use the legal advice to try to relitigate issues between the parties whichhad been finally determined by both the Court of Appeal and the Supreme Court.[50] In reply, the applicant submits that it is premature to determine whether and towhom the legal advisor owed a duty of care. It submits that preventing a party fromhaving an opportunity to consider whether a claim is viable is contrary to the basicprinciples of justice.[51] The applicant submits that there has been a substantial diminution of thecompany's assets resulting from the costs of the Liquidator's "unnecessaryinvestigation" of matters settled by the shareholders and the directors. The Liquidator,however, declines to explore a possible avenue for recovering her costs from thesolicitor who provided her with the incorrect legal advice. The applicant maintainsthat it is apparent from the Supreme Court's decision in respect of the Liquidator'sremuneration that production of the legal advice is essential to determine whether thereis a viable claim.[52] As to the Liquidator's suggestion that the applicant will use the legal advice totry to relitigate issues between the parties, Mr Quinn deposes:43I do not agree that Ms Toon has a reasonable basis for her fear that theapplicant will use the legal advice to bring a new proceeding against her, andto relitigate matters finally determined by the Court of Appeal and theSupreme Court. The former trustees and the applicant have accepted thedecision of the Court of Appeal in relation to Ms Toon's remuneration, but Ibelieve that it is unjust as a result that Investacorp has become liable for asubstantial sum of money, which has significantly reduced the amount offunds available to the shareholders following the liquidation. As has beenmade clear in the correspondence between the parties' lawyers, the applicanthas no interest in making a claim against Ms Toon, but it is considered that ifMs Toon has no responsibility for carrying out an unnecessary investigationinto the matters settled by the shareholders, then the solicitor whose adviceMs Toon relied upon to carry out the investigation has a potential liability forthe losses that resulted.43 Affidavit of Clive Anthony Quinn sworn 27 June 2022 at [7]–[8].The applicant considers that it is unreasonable for Ms Toon to require a releaseand indemnity as a condition of supplying the legal advice. While thedirectors of Katoria Trustee Limited have no grounds for suspecting that thelegal advice would give rise to a claim against Ms Toon, it is also the case thatthe directors do not know, for example, whether Ms Toon's evidence as to thecontents of the advice was correct.[53] I am not satisfied that the applicant has a good reason for obtaining the legaladvice. If its sole reason for inspecting the legal advice is to determine whether totake legal action against the legal advisor, by way of derivative action for example, itcould have accepted the Liquidator's offer to disclose the legal advice in exchange fora full release and indemnity.[54] I infer from the rejection of that proposal that the applicant wants to leave thedoor open to further legal action against the Liquidator. Mr Quinn's evidence onlylends support to this inference when he says that the directors do not know, forexample, whether the Liquidator's evidence as to the contents of the advice wascorrect.[55] At the hearing, I questioned Mr Bryers on why the applicant had not acceptedthe Liquidator's offer to provide the legal advice based on an undertaking from theapplicant. Mr Bryers stated that the problem is that the applicant does not know whatthe advice says. He clarified that if the Liquidator's evidence as to what the advicesaid turns out to be completely accurate, the Quinns will have no grounds to bring anaction against her. However, if the evidence the Liquidator gave is not accurate, thisgives rise to two problems: one, that the Liquidator has obtained judgment based onincorrect evidence; and two, that the solicitor would likely have a defence to theQuinns' claim. It would mean that the "whole case" (which I take to mean the twoapplications heard by Associate Judge Bell and appealed to the Court of Appeal) was"centred on an incorrect basis."[56] I infer that the real reason for this application is the applicant's desire to testthe evidence the Liquidator gave in the High Court (that she received legal adviceabout the settlement agreement and the advice was that the settlement agreement wasnot binding on Investacorp).44 This is not a good reason in terms of s 286 of the Act44 CA Judgment at [80].and it is a misuse of the s 286 procedure. The time to challenge the Liquidator'sevidence was during the High Court hearing. The Court of Appeal recorded that theapplicants did not take that opportunity; and the Court accepted the Liquidator'sevidence. The Court of Appeal stated:45We note at this point that the Associate Judge's remarks towards the end ofthese passages were unfounded. They suggest that there was doubt overwhether Ms Toon had, in fact, obtained advice. But her evidence that she didso was not challenged. It was also incorrect to say that Ms Toon had not givenevidence as to the nature of the advice, when she clearly did and was notchallenged on it. Finally, there was no basis at all on which to suggest that MsToon might have pressured her lawyer into giving advice that would supporther position.[57] Later, the Court stated:46The evidence was that Ms Toon's lawyer had advised her that the settlementagreement was not binding on the company, with the result that she wasentitled to proceed further.[58] For these reasons, I find that the applicant has not established a good reasonfor inspection of the legal advice under r 286 or for an order that a copy of the advicebe provided to it.Result[59] The application is dismissed.[60] The Liquidator has been the successful party and would ordinarily be entitledto an award of costs on a Category 2B basis, together with disbursements as fixed bythe Registrar. The Liquidator has requested an uplift because of the 23 pages ofwritten submissions by the applicant. I do not consider that the length of the writtensubmissions justifies an uplift. The Liquidator's submissions were no more than13 pages and the hearing took no more than the scheduled half-day.45 At [72].46 At [80].[61] If the parties cannot agree on costs, they have leave to file memoranda of up tofive pages on that issue, and I will determine costs on the papers._______________________________Associate Judge GardinerSolicitors:HC Legal Ltd, AucklandMcVeagh Fleming, AucklandS P Bryers, AucklandG Blanchard KC, Auckland