Forgan v Lee - [2025] NZHC 1121

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2025-409-175

[2025] NZHC 1121

BETWEEN
REBECCA LUCY FORGAN

Applicant

AND

ARTHUR MATHEWSON LEE and

ROBYN ANDREA LEW, as trustees of the Blackwood Bay Trust

First Respondents

ARTHUR MATHEWSON LEE and
ROBYN ANDREA LEE, as trustees of trust of unknown name (suspected to be the Snowdon Trust)

Second Respondents

Hearing: (On the papers)

Counsel:

J McGuigan, J I Taylor and I Whitticase for Applicant S Cottrell for Respondents

Judgment:

9 May 2025

JUDGMENT OF ASSOCIATE JUDGE LESTER

FORGAN v LEE [2025] NZHC 1121 [9 May 2025]

[1] The applicant, Ms Forgan, seeks pre-commencement discovery against the respondents.

[2] On 5 May 2025, Justice Eaton directed that Ms Forgan was to file her application for discovery prior to 5.00pm on 5 May 2025, which Ms Forgan did. The respondents were directed to file their notice of opposition by 3.30pm on 7 May 2025. No opposition was filed.

[3] The respondents in fact provided some of the discovery sought but declined to provide legal advice that the current trustees, Robyn Lee and Arthur Lee (the trustees), received in relation to them as trustees giving guarantees of the debts of Thermatech Limited. Thermatech Ltd is Mr Arthur Lee’s company. The second category the trustees declined to provide was Thermatech Ltd’s financial statements and documents showing the asset and liability position of Thermatech Ltd.

[4] In relation to the legal advice, the trustees claimed the information was privileged and therefore it did not have to be discovered. That is not in fact the case. Privileged documents still need to be listed but privilege can be claimed. However, as I will address below, the real issue is whether legal advice privilege can be claimed as against Ms Forgan as a beneficiary of the Blackwood Bay and Snowdon Trusts (the Trusts).

[5] As to the position of Thermatech Ltd, the respondents say Thermatech Ltd is a non-party and therefore Ms Forgan’s request is an application for non-party discovery. Ms Forgan notes that Arthur Lee is the sole director and shareholder of Thermatech Ltd.

Can a trustee claim privilege in respect of legal advice against a beneficiary?

[6] Trustees can only claim privilege as against beneficiaries of a trust if, what is known as the joint interest exception does not apply. The “joint interest” exception to privilege applies to both litigation privilege and legal advice privilege. If there is a joint interest in the advice, privilege cannot be asserted against those who hold the joint interest. Once it has been established that privilege exists, the relevant question

in determining privilege as against beneficiaries of a trust is if and when the joint interest privilege came to an end.1

[7] The documents which Ms Forgan seeks are for what might be called administrative advice, that is, advice not in relation to litigation by a beneficiary. The joint interest exception is predicated on the assumption legal advice acquired by the trustees is for…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Forgan v Lee

Details

AGLC: Forgan v Lee [2025] NZHC 1121
Case: [2025] NZHC 1121
Decision Date: 9 May 2025

CaseChat Overview and Summary

In the case of Forgan v Lee, the applicant, Ms Rebecca Lucy Forgan, sought pre-commencement discovery against the respondents, Arthur Mathewson Lee and Robyn Andrea Lee, who are trustees of the Blackwood Bay Trust and possibly the Snowdon Trust. Ms Forgan sought legal advice given to the trustees concerning guarantees of debts by Thermatech Limited, a company of which Mr Arthur Lee is the sole director and shareholder, and the financial statements of Thermatech Limited. The respondents argued that the legal advice was privileged and not subject to discovery and that they were not required to disclose Thermatech Limited’s financial statements as they were not in their control. The court had to determine whether the trustees could claim privilege against Ms Forgan, who is a beneficiary of the trusts, and whether Mr Arthur Lee, in his capacity as a trustee, was obliged to disclose documents held by him as director of Thermatech Limited.

The court held that the trustees could not claim privilege against Ms Forgan as the legal advice sought fell within the joint interest exception to privilege. The joint interest exception applies to both litigation privilege and legal advice privilege, meaning that if there is a joint interest in the advice, privilege cannot be asserted against those who hold the joint interest. The court found that the legal advice sought by Ms Forgan was for the benefit of the beneficiaries of the trust and therefore fell within the joint interest exception. Additionally, the court held that Mr Arthur Lee, as the sole director and shareholder of Thermatech Limited, had control over the company’s documents, and his refusal to disclose them was unreasonable. The court ordered the trustees to provide the legal advice and financial statements within three working days and directed that the trustees pay Ms Forgan’s solicitor-client costs for the application.

The court’s decision was based on the principles that the joint interest exception to privilege applies to trustees and beneficiaries, and that a party’s control over documents is not dependent on the capacity in which they hold them. The court emphasised the importance of pre-commencement discovery in cases where trustees may have endangered trust assets, and the refusal of the trustees to provide the information was seen as an indication of its importance. The court also noted the trustees’ failure to oppose the application as an acknowledgment of the strength of Ms Forgan’s position.

Orders