RESERVE BANK OF NEW ZEALAND v CBL INSURANCE LIMITED [2018] NZHC 999

RESERVE BANK OF NEW ZEALAND v CBL INSURANCE LIMITED [2018] NZHC 999 [18 May 2018]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2018-404-306[2018] NZHC 999BETWEEN RESERVE BANK OF NEW ZEALANDPlaintiffAND CBL INSURANCE LIMITEDDefendantHearing: 7 May 2018Appearances: S Barker and B R McKinnon for the Plaintiff (by telephone link)N S Gedye QC and I J Thain for the Interim LiquidatorsM Heard and C Upton for Mr Harris and Mr Hutchison, directorsof the DefendantJ E M Lethbridge for Elite Company Limited, a contingentcreditor of the DefendantJudgment: 18 May 2018(RE-ISSUED) RESERVED JUDGMENT OF ASSOCIATE JUDGE SMITH[1] On 9 May 2018 I gave a reserved judgment in this matter, on an application byMr Harris and Mr Hutchison for discovery of certain documents held by the plaintiffor the interim liquidators. Having regard to the broad confidentiality and "no searchof the Court file" orders made by the Court on 23 February 2018 (as subsequentlyvaried), I directed that the judgment was not to be disclosed beyond the parties andtheir solicitors and counsel, pending my determination of whether parts of thejudgment might need to be redacted to maintain consistency with the existingconfidentiality orders. I invited counsel to advise me by 11 May 2018 if theyconsidered that any part of the judgment should be redacted, so that the judgment couldbe issued publicly as soon as possible thereafter.[2] Counsel for the plaintiff and the interim liquidators have since advised thatthey do not seek any redactions to the judgment, and no other party has advised that itconsiders any redaction necessary or appropriate.[3] The judgment refers to certain further particulars of the statement of claim,filed by the plaintiff on 7 May 2018, but I do not apprehend that there is anything inthe particulars document (which is also referred to in this judgment) that might beconfidential in terms of the Insurance (Prudential Supervision) Act 2010 (the IPSA).I note too that the particulars document effectively now forms part of the plaintiff'sstatement of claim in the liquidation claim, and on 20 March 2018 Courtney J madean order that the statement of claim would no longer be subject to the confidentialityorders earlier made by the Court. There appears to be nothing in the grounds ofopposition to the liquidation claim raised by Messrs Harris and Hutchison (also set outin the judgment), or in the grounds advanced by the parties for and against the makingof the discovery orders sought, that might justify redaction on the grounds ofconfidentiality or commercial sensitivity. Nor does the part of the judgment in whichI address the question of whether the interim liquidators did or did not consent to thevariation orders made on 28 February 2018 call for any confidentiality protection.[4] The judgment is accordingly now re-issued, without any redactions. Theexisting orders for confidentiality and "no search of the Court file" are to remain inplace pending further order of the Court.Background[5] This is an application by Mr Harris and Mr Hutchison, who are directors of thedefendant (CBL), for discovery of certain documents held by the plaintiff (the Bank),or by the interim liquidators of CBL.[6] On 23 February 2018, the Bank applied for an order putting CBL intoliquidation. At the same time it applied for an order on an ex parte basis appointingKare Johnstone and Andrew Grenfell (the interim liquidators), as interim liquidatorsof CBL. Orders were made by Courtney J on 23 February 2018 appointing MsJohnstone and Mr Grenfell as interim liquidators.[7] The substantive liquidation claim was advertised, and it was called before meon 27 April 2018. In advance of that hearing, Mr Harris and Mr Hutchison filed anotice of appearance indicating their intention to oppose the liquidation claim. TheBank raised an issue over whether Mr Harris and Mr Hutchison had standing to opposethe liquidation claim, they being only two directors on CBL's six-member board. Anotice of appearance was also filed by Elite Insurance Company Limited (Elite), acontingent creditor of CBL, although that notice of appearance was filed after the timeprescribed for filing such notices by r 31.19 of the High Court Rules.[8] A third notice of appearance was filed by LBC Holdings (New Zealand)Limited (LBC Holdings), CBL's sole shareholder, but the Bank says that this noticewas also defective in that it did not state whether the party filing opposed or supportedthe liquidation claim.[9] While pointing out these claimed deficiencies in the notices of appearance, theBank did not oppose Mr Harris and Mr Hutchison and Elite (collectively "the opposingparties") opposing the liquidation claim on a provisional basis, with arguments overtheir entitlement to oppose, or their lateness in taking steps, to be the subject ofargument at a defended hearing of the liquidation claim. I made a directionaccordingly at the hearing on 27 April 2018, and directed that the substantiveliquidation claim was to be heard over two days on 5 and 6 June 2018.[10] I also directed that the opposing parties were to file provisional statements ofdefence by 7 May 2018.[11] The opposing parties both raised concerns over whether they had sufficientinformation relating to the affairs of CBL to properly defend the liquidation claim.Various categories of documents were sought from the Bank and/or the interimliquidators, and the Bank and the interim liquidators have been prepared to providesome further information. I allowed further time for the parties to consider whatfurther documents might be provided to the opposing parties, and directed counsel tofile a joint memorandum by 1 May 2018, setting out any agreed positions on theprovision of further information by the Bank to the opposing parties (including LBCHoldings), and a proposed timetable for the filing of affidavits and submissions for thesubstantive hearing.[12] The parties were unable to agree on the extent of further disclosure the Bankand the interim liquidators should make, and I convened a telephone conference on 4May 2018 to deal with that issue and the timetable for the filing of affidavits andsubmissions for the substantive hearing.[13] In advance of the conference on 4 May 2018, the Bank advised bymemorandum that it would not now rely on one of the grounds for liquidation pleadedin its statement of claim. Specifically, the Bank said it would no longer rely on CBL'salleged inability to pay its debts.1 The Bank confirmed that the liquidation claimwould proceed on the other pleaded grounds, namely alleged failure by CBL tomaintain the solvency margin required by the Bank under the provisions of theInsurance (Prudential Supervision) Act 2010 (the IPSA) and alleged failure by CBL tocomply with a direction given by the Bank under the IPSA on 29 January 2018. Thealleged failure to comply with the Bank's direction was said to constitute a seriousfailure to comply with a direction or other requirement imposed under the IPSA.2[14] The Bank maintained its pleading in its statement of claim that CBL should beput into liquidation on "just and equitable" grounds, under s 241(4)(d) of theCompanies Act 1993 (the Act) and/or under s 151(2)(d) of the IPSA.[15] At the conference on 4 May 2018, I enquired of Mr Barker whether the Bank,in its application for a liquidation order based on just and equitable grounds, wouldrely on any matters additional to the alleged failure to maintain the solvency marginand serious failure by CBL to comply with the Bank's directions. Mr Barkerconfirmed that the Bank would rely on additional matters under the "just andequitable" head. I directed the Bank to provide further particulars of its claims for a1 A ground for a liquidation order under both s 241(4)(a) of the Companies Act 1993 and s 151(2)(a)of the Insurance (Prudential Supervision) Act 2010.2 Failure of an insurer to maintain a required solvency margin, and serious failure by the insurer tocomply with any direction or other requirement imposed under the IPSA, constitute separate,stand-alone, grounds for the making of a liquidation order under s 151(2)(b) and (c) respectivelyof the IPSA.liquidation order on just and equitable grounds by midday on 7 May 2018. Thoseparticulars were duly filed and served by the Bank on 7 May 2018.[16] In the course of the telephone conference on 4 May, I gave certain directionsfor the filing of affidavits and written submissions. I also extended the time for theopposing parties to file their provisional statements of defence, to 15 May 2018. Inview of counsel's advice that further information was being provided by the interimliquidators to the opposing parties, I adjourned the conference to a chambers hearingat 2.15 pm on 7 May 2018 to deal with the requests by the opposing parties for furtherdisclosure of documents by the Bank and the interim liquidators.[17] In the event, Elite's request for further disclosure was resolved by agreementbetween the parties, subject only to the possibility that further disclosure requestsmight be made arising out of the further particulars of its claim provided by the Bankon 7 May 2018.[18] Some parts of the request for documents made by Mr Harris and Mr Hutchisonwere resolved, and I heard argument from counsel on the disputed categories ofdocuments at the hearing on 7 May 2018. I now give judgment on the request fordiscovery by Mr Harris and Mr Hutchison.Documents requested by Mr Harris and Mr Hutchison[19] The requests for documents made by Mr Harris and Mr Hutchison, and therespective responses of the Bank and the interim liquidators, were helpfully set out ina table produced by Mr Barker and Mr Gedye for the hearing on 7 May 2018. Ireproduce that table below, with some amendments made by counsel at the hearing:Category Requests by Mr Harris and Mr Hutchison Response of the Bank Response of interimliquidators1 Latest accounts and financial information,including information held by [CBL's] auditorsand independent actuaries.Has provided [CBL]solvency return to 31 Dec 17Will provide financialstatements to 28 FebDoesn't consider it hasanything else relevantAgreed – to 28 Feb2 Valuations or draft valuations for any [CBL]assets prepared by the interim liquidators or anyother party within the last six monthsThese documents are in thepossession of the [interimliquidators]The Bank understands that[Messrs] Harris & Hutchisonhave all valuations. [Theinterim liquidators and theBank] have committed toprovide the draft Finity non-French construction businessvaluation subject to provisionof undertakingsSame as [the Bank]Agreed.Already covered to extentsought, by order made onElite's request re non-French constructionbusiness.Nothing else soughtunder this head.3 Offers and letters of interest received by theinterim liquidators for any [CBL] assets or forassumption of any [CBL] liabilitiesIn possession of [the interimliquidators]If there is anything in thiscategory, it would beconfidential and requireconditions takinginstructions4 Communications between the interim liquidatorsand any parties regarding purchase of [CBL]assets or assumption of [CBL] liabilitiesIn possession of [the interimliquidators]Same as [category 3above]5 Communications between the interim liquidatorsand any parties regarding the recovery of assetsIn possession of [the interimliquidators]Same as [category 3above]6 Documents relating to or evidencing the extent ofthe [CBL's] business providing insurance cover inNew Zealand and therefore engaging the IPSAregime. These should include (without limitation)details of how many current New Zealand policyholders there are, the premiums paid by thosepolicy holders (including what part of the[The] Bank has providedwhat it has, being insurerreturns and [the Bank's]overview documentDisclosure isunnecessary, as [MessrsHarris and Hutchison]should already have anydocuments they needunder this head.premiums are unexpired) and any extant claimsunder those policiesCategory Requests by Mr Harris and Mr Hutchison Response of the Bank Response of interimliquidators7 Analysis of the merits or costs to [CBL] of exitingthe part of [CBL's] business that engages the IPSAregimeDoesn't exist Nothing exists8 Communications between the interim liquidatorsand [the Bank] (or Buddle Findlay) in relation to[CBL] (including prior to the interim liquidators'appointment). [Mr Harris and Mr Hutchison]understand that Buddle Findlay has advised both[the Bank] and the interim liquidators but actsprincipally for the former (separate counselhaving now been instructed for the interimliquidators). Obviously the interim liquidators are(or should be) independent from [the Bank] andhave differing interests and duties. It isanticipated that there may be some legitimatelyprivileged communications between the interimliquidators and Buddle Findlay, but much of whatwill have been communicated will have been anormal incident of the interim liquidators'execution of their independent duties and will notbe privileged[The] Bank to provideredacted reports from the[interim liquidators]All other documentsirrelevant or privileged[The interim liquidatorsare] checking redactions(if any) on reports; as tocommunicationsgenerally, would need tosee [Mr Harris and MrHutchison's] pleading toknow relevance; giventhat the documents couldcome from [the Bank],may take the view that it'sbetween the parties; needto find out [the Bank's]position; if they are notopposed, [the interimliquidators'] onlyobjection would be inrelation to the task ofidentifying relevance.9 Communications between [the Bank]/BuddleFindlay and the interim liquidators relating to [theBank's] application to vary the confidentialityorders on 28 February 2018, including anycommunications evidencing the interimliquidators' consent to the variation. Suchcommunications cannot be privileged. Even ifthey were, any privilege has been waived by theinterim liquidators, who have provided Mr Harriswith an account of their view of eventsIrrelevant [Seen] as a subset of[category 8 above].Discovery in liquidation claims – legal principles[20] Rule 31.22 of the High Court Rules provides that, when a statement of defencehas been filed in a liquidation proceeding and the hearing of the proceeding has beenadjourned for the allocation of a hearing date on a defended basis, the proceeding is tocontinue as if it were an ordinary proceeding commenced under Part 5 of the HighCourt Rules. In this case, no formal statements of defence have yet been filed by MrHarris and Mr Hutchison and Elite, but the Bank and the interim liquidators haveaccepted that some level of discovery should be provided to the opposing parties,particularly as Mr Harris and Mr Hutchison set out the substance of their oppositionto the liquidation claim in a detailed letter from their solicitors dated 30 April 2018.[21] I am satisfied that there is jurisdiction to order any discovery that may beappropriate, and there was no dispute between counsel over the broad principles to beapplied.[22] In the latter regard, I note first that in Nemesis Holdings Ltd v North HarbourIndustrial Holdings Ltd,3 Wallace J noted that there may be a policy question as tohow readily discovery should be granted at the later stage, when a liquidationproceeding is going forward on a defended basis. His Honour referred, by way ofexample, to a risk that the defendants would endeavour to delay winding-upproceedings by seeking detailed discovery from the plaintiffs. However, His Honouraccepted that that concern might be counterbalanced by the need to have the full factsbefore the Court. Wallace J suggested that the Court should retain a discretion as towhether or not to grant discovery when proceedings are defended.[23] The question of the extent of discovery to be ordered in a liquidation claim wasrecently considered by Associate Judge Osborne in Commissioner of Inland Revenuev Elementary Solutions Ltd.4 The Associate Judge referred to the judgment of WallaceJ in Nemesis Holdings, and accepted that the Court retains a discretion to orderdiscovery in liquidation proceedings. His Honour noted that his experience of theCourt's practice in recent years is that the Court has exercised its discretion to orderdiscovery generally only in exceptional cases.[24] The Associate Judge went on to consider, by way of analogy, the practice inrelation to discovery on originating applications made under Part 19 of the High CourtRules (where there is no express entitlement to discovery of documents), referring to3 Nemesis Holdings Ltd v North Harbour Industrial Holdings Ltd HC Auckland M116/89, 14 April1989; (1989) 1 PRNZ 379 at 384.4 Commissioner of Inland Revenue v Elementary Solutions Ltd [2017] NZHC 2411.the Court of Appeal decision in Manchester Securities Ltd v Body Corporate 172108,where the Court recognised that a conservative approach should be adopted towardsdiscovery in originating applications brought under Part 19 of the Rules.5[25] In Elementary Solutions Ltd, Associate Judge Osborne adopted the followingprinciples:6(a) The Court has a discretion to order discovery.(b) The documents sought must be capable of supporting the applicant'scase or adversely affecting the opponent's case.(c) Any orders for discovery should be subject to the proportionality andpracticality requirements identified in r 8.2 of the Rules and shouldaccord with the objective of "just, speedy and inexpensivedetermination" under r 8.2 of the Rules.(d) The approach to discovery in originating applications should beconservative.(e) Discovery will be appropriate in marginal cases where the party makesout an outline case but the Court encounters genuine difficulty indetermining, without documentary evidence which is likely to assist,whether the threshold test is satisfied.[26] In the event, Mr Heard, Mr Barker and Mr Gedye were all content that Iapproach the matter by applying the principles identified by Associate Judge Osbornein Elementary Solutions Ltd. I accept that that is appropriate, and I will proceedaccordingly.5 Manchester Securities Ltd v Body Corporate 172108 [2015] NZCA 29.6 At [36] and [37].The Bank's case for liquidation, and Mr Harris and Mr Hutchison's opposition[27] The Bank's case for making a liquidation order under s 151(2)(b) of the IPSAwas stated in its statement of claim as follows:Failure to maintain solvency margin6. By direction dated 25 July 2017 [CBL] was required by the Bank tomaintain a minimum solvency margin of 170% until further noticepursuant to IPSA and the solvency standard for non-life insurancebusiness 2014.7. On 15 November 2017 [CBL] and its appointed actuary advised theBank pursuant to section 24 of IPSA that it was likely that [CBL]would be unable to maintain the solvency margin of 170%, imposedunder licence conditions as at 31 December 2017.8. On 20 February and 21 February 2018 [CBL] and the appointedactuary for [CBL] advised the Bank pursuant to section 24 of IPSAthat [CBL's] solvency margin had fallen below 100%, in breach of acondition of its licence to conduct insurance business.[28] The Bank's case for liquidation under s 151(2)(c) of the IPSA was pleaded asfollows:Serious failure to comply with direction9. By letter dated 29 January 2018 the Bank modified an earlier directiondated 22 November 2017 in the following terms:"[CBL] must prior to entering into any transaction or series of relatedtransactions involving payment or transfer of assets of NZ$5 millionor greater consult with [the Bank] about its circumstances and aboutthe transaction or any other actions or proposed actions it intends totake in resolving its difficulties. "Consult" means providing [theBank] with sufficient information for [the Bank] to form an informedview on the proposed transaction; receiving feedback from [the Bank]and having regard to that feedback before entering into thetransaction."10. Between 14 and 16 February 2018, in breach of the above direction(as modified) [CBL] made the following payments or series of relatedpayments totalling in excess of NZD55 million:(a) NZD4,197,400 to United Specialty Insurance Company(USA) on 14 February 2018;(b) NZD4,458,857.00 to United Specialty Insurance Company(USA) on 14 February 2018;(c) NZD4,458,857.00 to United Specialty Insurance Company(USA) on 15 February 2018(d) NZD42 million to Alpha Insurance A/S (Denmark) on 16February 2018; and11. Such payments each constituted a serious failure to comply with thedirection set out in paragraph 9 above, including the payments at10(a)-(c) (inclusive) as a series of related payments.[29] In addition to those grounds for liquidation, the Bank also relies on the just andequitable ground for liquidation. In its particulars document dated 7 May 2018, theBank pleaded certain alleged deficiencies in solvency returns submitted by CBL to itfrom 31 December 2014 and 30 June 2015. The Bank also pleaded certain issuesrelating to liability settlement agreements entered into between CBL and AlphaInsurance, and between CBL and CBL Insurance Europe DAC, and the allegedprovision of excess reinsurance security to United Speciality Insurance. For thepurposes of the present judgment it is unnecessary to refer to these particulars, as itwas accepted by counsel at the hearing on 7 May 2018 that further documents andinformation will be provided by the Bank in support of these particulars, including byway of an affidavit to be provided by the Bank by 11 May 2018. The issue of discovery(if any) arising out of the Bank's further particulars filed on 7 May 2018 wasaccordingly adjourned for further consideration if necessary.[30] One aspect of the Bank's further particulars document is, however, relevant tothis judgment, and it is a pleading that, as at 28 February 2018, CBL's liabilitiesexceeded its assets by not less than NZD38,000,000 (on the premise that CBL hadceased to write new insurance business by that date).[31] The grounds of opposition advanced by Mr Harris and Mr Hutchison were setout as follows in a letter from their solicitors dated 30 April 2018:Grounds for opposition7. Your letter claims a lack of awareness of the grounds on whichliquidation is opposed. This is surprising given the materials nowexchanged, but to clear the matter up so it no longer distracts yourclients from meeting their obligations, we can summarise the keygrounds for opposition as follows:The IPSA grounds(a) The [Bank's] statement of claim relies upon two specific IPSAgrounds. These are grounds, but liquidation remains discretionary.(b) The IPSA grounds are engaged by the tiny fraction of [CBL's]business which writes New Zealand insurance (we understand it to beaccepted that it is approximately 1%, but on Mr Harris's evidence it iseven less).(c) If [CBL] ceased that tiny fraction of its business, there would be nocomponent of [CBL's] ongoing business that engaged the IPSAregime.(d) [CBL] can and should exit that part of its business. It can do so swiftlyand economically and without liquidation, and without any preferenceto current creditors.(e) [The Bank] and the interim liquidators both believe it should exit thisbusiness (as is self-evident from the steps they are taking), but theinterim liquidators appear to be delaying doing so, possibly to keepthe existence of that business live as a liquidation ground.(f) The New Zealand insurance component of [CBL's] business beingeasily ended, there is no basis on which the discretion should beexercised in favour of liquidation when it is not supported by anyshareholders or creditors.The Companies Act grounds(g) [The Bank's] statement of claim pleads s241(4)(a) and (d) of theCompanies Act, being:(i) Inability to pay debts;(ii) Just and equitable grounds.(h) [Mr Harris and Mr Hutchison] contend that [CBL] is solvent (youalready have Mr Harris's affidavit on that issue, as well as the accountsunderlying his view), and that the only just and equitable grounds evenarguable (or pleaded) were the IPSA grounds which can and shouldbe cured without further damaging creditor and shareholder interests.(i) In any event, once it is recognised that IPSA compliance can beaddressed by terminating that part of [CBL's] business, the obviousjust and equitable approach is to allow solvency questions to beaddressed in the normal way – by the actual owners and creditors of[CBL].Discussion and conclusions[32] I will address each of the nine categories of documents listed in the table atparagraph [15] of this judgment.Categories 1, 2 and 7[33] No further discovery is sought in these categories. In respect of category 1, theBank and/or the interim liquidators have agreed that copies of CBL's financialstatements as at 28 February 2018 are to be provided, and that should be done by 11May 2018. There is no basis for any further order in respect of category 1 documents.[34] Subject to the agreement to provide a copy of the Finity report on the non-French construction business (made in the context of Elite's application for furtherdiscovery, and to be provided by 15 May 2018), the Bank and the interim liquidatorssay that there are no further valuations or draft valuations to be provided. There istherefore no basis for any discovery order in respect of the category 2 documents.[35] The same is true in respect of category 7. I record the advice of the Bank andthe interim liquidators that no documents exist in this category. Mr Harris and MrHutchison have not produced any evidence to the contrary.Categories 3, 4 and 5[36] Counsel dealt with these three categories together, so I will do likewise.[37] Addressing first category 3, I accept that any offers or letters of interest theinterim liquidators may have received (whether for the purchase of CBL's assets or forthe assumption of all or part of its liabilities) may be relevant to the value of CBL, and(at very least) to the contention in the Bank's particulars document that CBL'sliabilities exceeded its assets by NZD38 million as at 28 February 2018. If and to theextent an offer or expression of interest was materially higher (or lower) than thecorresponding book value of CBL's relevant assets (or liabilities, as the case may be)as at 28 February 2018, the difference would arguably provide a more accurate pictureof the relevant current market value, and would be relevant to the extent of the allegedexcess of liabilities over assets. That in turn would arguably be relevant to the exerciseof the Court's discretion whether to order liquidation.[38] The Bank and the liquidators do not deny that there are or may be documentsin category 3, and I think it would be unsatisfactory (and unfair to Mr Harris and MrHutchison if they are permitted at the hearing to be heard on their notice of appearanceand provisional statement of defence), if at the hearing of the liquidation claim theinterim liquidators were holding offers or expressions of interest which were notdisclosed, and which were at levels which showed that CBL's financial position wasmaterially better than the interim liquidators had hitherto assumed. The interimliquidators' principal concern on this category appears to be over the extremecommercial sensitivity of any offers or expressions of interest – Mr Gedye noted thatthere is a relatively small worldwide market for assets such as those held by CBL, andthat Mr Harris and/or Mr Hutchison, or interests associated with them, may themselvesbe potential bidders for those assets. Mr Gedye submitted in those circumstances thatany disclosure of offers or expressions of interest held by the interim liquidators shouldbe disclosed only to the solicitor and counsel for Mr Harris and Mr Hutchison, on theirfirst undertaking in writing not to disclose the documents to their clients (or to anyother party) pending further order of the Court.[39] It seems to me that there is no issue of proportionality involved here (there areunlikely to be a great number of offers or expressions of interest received by theinterim liquidators since their appointment), but any offers or expressions of interestthat do not materially differ from the figures for the relevant assets or liabilitiesadopted by the interim liquidators in the financial statements as at 28 February 2018may be unlikely to support the case Mr Harris and Mr Hutchison are advancing, oradversely affect the Bank's case. On the other hand, offers or expressions of interesttending to confirm the financial position advanced by the Bank would tend to supportits position, and be relevant to that extent.[40] I think the documents sought here are in the "marginal case" category referredto at paragraph [21](e) of this judgment, and that the appropriate course is to orderdiscovery of the category 3 items, with identification and disclosure of the discovereddocuments to be restricted in the first instance to the solicitors and counsel for MrHarris and Mr Hutchison, on their first providing a written undertaking to the interimliquidators that the documents will not be disclosed to Mr Harris or Mr Hutchison (orto any other person) without the leave of the Court. There will be an order accordingly,with copies of the documents discovered to be provided to the solicitor for Mr Harrisand Mr Hutchison by 11 May 2018.[41] I am not prepared to order discovery of any of the documents in categories 4and 5. In my view these categories are far too broad. For example, it is difficult tosee how communications between the interim liquidators and any parties regardingthe purchase of CBL (or assumption of CBL liabilities) falling short of actual offers orexpressions of interest (i.e. the category 4 documents) could advance the case for MrHarris and Mr Hutchison, or damage the Bank's case, and I think discovery as broadas that sought would also be disproportionate. Adopting a conservative approach inaccordance with principle (d) in Elementary Solutions Ltd, I decline to make the ordersought in respect of the category 4 documents.[42] The same considerations apply, with greater force, to the documents sought incategory 5. The request is far too broad, and it is not at all clear how the discoverysought will or might advance the case for Mr Harris or Mr Hutchison or damage theBank's case. This request seems to be bordering on fishing. I decline to orderdiscovery of the documents in category 5.Category 6[43] I am not satisfied that discovery of these documents is necessary. Mr Harris'and Mr Hutchison's case on this issue was set out at paragraph 7(a) to (f) of theirsolicitors' letter of 30 April 2018,7 and there appears to be no significant issue over therelative size of that part of CBL's business that was subject to prudential supervisionunder the IPSA, when compared with the rest of CBL's business. Mr Harris and MrHutchison say that it was less than one percent of CBL's global business, and MrHarris' affidavit sworn on 27 April 2018 shows that he is aware of the approximateannual premiums paid on the New Zealand insurance business, and the approximatenumber of outstanding claims on the New Zealand business.[44] Whether CBL's business providing insurance cover in New Zealandrepresented, say, 0.75% of its global business, or (say) three or four percent seemsmost unlikely to affect the decision that the Court will be required to make on thesubstantive liquidation claim, and is accordingly unlikely to materially support thecase for Mr Harris and Mr Hutchison, or damage the Bank's case. In those7 The relevant paragraph is reproduced at [27] above.circumstances the discovery sought would also be disproportionate. I decline to orderdiscovery of the category 6 documents.Categories 8 and 9[45] Again, counsel dealt with these two categories together. I will do the same.Counsel's submissions[46] Mr Heard submitted that both categories are relevant to the question of whetherthe interim liquidators should be appointed liquidators on any final liquidation orderthe Court might make. He referred to what he described as the "extraordinary co-operation" between the Bank and the independent liquidators, in circumstances where(he submitted) the interim liquidators were obliged to act independently of the Bank.The category 8 documents, being communications between the interim liquidators andthe Bank or its solicitors in relation to CBL, are primarily concerned with the need forthe liquidators to be truly independent.[47] Mr Heard referred to the statement of Courtney J in her minute of 1 March2018 (in which the Judge varied the confidentiality orders that had been made on theappointment of the interim liquidators), that the interim liquidators consented to theproposed variations. That statement is alleged to have been incorrect.[48] Mr Gedye submitted that the documents in categories 8 and 9 have no possiblerelevance to the issues with which the Court will be concerned at the substantivehearing. Discovery of documents in these categories would effectively allow acollateral attack on the interim liquidators, and their alleged lack of independence wasnot a ground that was advanced by Mr Harris and Mr Hutchison in their solicitors'letter of 30 April 2018. If the issue is raised in the provisional statement of defence tobe filed by Mr Harris and Mr Hutchison, it may be the subject of a strike-outapplication.[49] Mr Gedye submitted that the identity of the liquidators will become an issueonly if and when the Court makes a liquidation order. If the independence of theinterim liquidators is still a live issue on 5 June, the Court could if necessary deal withthe "liquidation or no liquidation" issue first, and adjourn the matter to a furtherhearing to address the question of who should be appointed liquidators. Mr Gedyeexpressed concern that allowing this issue in by directing discovery on it couldsubstantially increase the length of the hearing. The two days allocated for 5 and 6June might not be enough.[50] Mr Gedye also submitted in respect of the category 8 documents that therequest is oppressive. Mr Harris and Mr Hutchison will have all the reports from theinterim liquidators to the Bank (in the context of the discovery request made by Elite),and any redactions to those reports are likely to be minor.[51] Specifically on the category 9 documents, Mr Gedye also submitted thatwhether the independent liquidators did or did not consent to the application to varythe confidentiality orders is irrelevant to the issue of whether or not CBL should beplaced in liquidation. It is now an historical matter, and of no relevance.[52] Mr Barker adopted Mr Gedye's submissions, submitting that the documents inthese two categories are not relevant, and that it would be premature to order theirproduction in advance of any decision on whether there is to be a liquidation order.[53] In reply, Mr Heard submitted that the question of who should be appointedliquidator should be heard with the substantive liquidation claim. He emphasised thatMessrs Harris and Hutchison have no desire to extend or delay the hearing; they wishto have all matters resolved as fairly and expeditiously as possible. The discovery issought at least in part to ensure that Mr Harris and Mr Hutchison do not advancefurther the arguments (essentially, lack of independence of the interim liquidators)which have so far been advanced, without a more detailed factual basis.Discussion and conclusions on categories 8 and 9[54] The Bank's statement of claim does expressly seek an order appointing MsJohnstone and Mr Grenfell as liquidators, so to that extent the issue is one that arises,or will arise, on the pleadings. It is also the case that the appointment of a liquidatoris the means by which a company is put into liquidation.8[55] Mr Heard is also correct in submitting that independence will be an importantquality the Court will require of any liquidator who might be appointed. The learnedauthors of Heath and Whale on Insolvency note that the Court has a broad discretionin the matter of who is to be appointed liquidator, and that a matter of "primeconsideration" is that the liquidator is independent and must be seen to beindependent.9[56] The alleged lack of independence is presumably an alleged lack ofindependence from the Bank. In support, Mr Heard points to the fact that the samesolicitors (Buddle Findlay) acted until very recently for both the Bank and the interimliquidators, and to Mr Harris' contention that the Bank wrongly advised the Court thatthe interim liquidators consented to the variation orders sought by the Bank on 28February 2018. Less clearly a ground of alleged lack of independence, but includedat paragraph 7(e) of the letter dated 30 April 2018 from the solicitors for Messrs Harrisand Hutchison, is their apparent concern that the interim liquidators favour the makingof a final liquidation order, an outcome they oppose.[57] As to the last of those possible grounds, Ms Johnstone did swear an affidaviton 26 April 2018 in support of a request for an urgent hearing of the liquidation claim,in which she outlined a number of difficulties and issues the interim liquidators haveencountered since their appointment that she considered would be better dealt with ifcertainty were provided in the form of a final liquidation order. But I do not considerit arguable for Messrs Harris and Hutchison that any opinion Ms Johnstone and/or MrGrenfell might have on that question would be relevant to the question of whether theywould act independently if appointed final liquidators.[58] Nor at this stage do I consider there is sufficient in the issue of the interimliquidators' consent (or not) to the making of the variation orders on 28 February 2018to justify the broad discovery sought in these categories. If there were any8 Companies Act 1993, s 241(1).9 Heath and Whale on Insolvency, (looseleaf ed, LexisNexis NZ Ltd), at [20.15].misrepresentation of the interim liquidators' position on the variation application (anissue I do not find it necessary to decide for the purposes of the present discoveryapplication), the misrepresentation would presumably have been an act of the Bank orits solicitors, and not an act of the interim liquidators. And particularly if the interimliquidators had no concern with the variation orders made on 28 February it is not atall clear (at least not clear enough to justify an order for discovery of the category 8and 9 documents) that disclosure of the documents relating to the 28 February 2018variation orders would show anything about the interim liquidators' independence.Applying the tests in Elementary Solutions Ltd, it is not clear how the discovery ofthese documents would be likely to support the case of Messrs Harris and Hutchison,or damage the Bank's case, on the issue of the identity of any liquidators who mightbe appointed.[59] It is even less clear how the category 8 and 9 documents might be relevant tothe principal issue in the proceeding, which is whether or not CBL should be put intoliquidation. On any view of it, the identity of any liquidators who might be appointedis subsidiary to that main issue, and I take that into account in determining, in theconservative exercise of my discretion, that the cost and time likely to be expended onthis issue if discovery orders were made as sought would probably be disproportionateto any benefits the discovery might provide. I also take into account the fact that MrHarris says that he already has the interim liquidators' account of their view on the 28February 2018 consent issue. Subject to any issues of admissibility that might arise,it will presumably be open to Mr Harris to cover that in his affidavit for the substantivehearing. And if the matter is not resolved to his satisfaction in the reply evidence, itwill be open to Messrs Harris and Hutchison to raise their concerns with the Judge atthe hearing. If further information is then required, that can be addressed by the Judgeat the hearing.[60] In the end, I think there is insufficient in what has been advanced in respect ofthe consent issue over the 28 February 2018 variation orders, or in the interimliquidators using the same instructing solicitors in the earlier stages of theproceeding,10 to provide Messrs Harris and Hutchison with the necessary10 Especially given the decision of the interim liquidators to instruct independent senior counselbefore the first call of the liquidation claim."springboard" to justify the discovery sought in these categories. The application fordiscovery of the documents in categories 8 and 9 is refused.Associate Judge SmithSolicitors:Buddle Findlay, Wellington for the PlaintiffLee Salmon Long, Auckland for the directors of the DefendantLowndes, Auckland for the contingent creditor of the Defendant