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 the benefit of the beneficiaries of the trust, rather than for the benefit of the trustees.

[8]                 The documents sought by Ms Forgan fall squarely within the joint interest exception to privilege and are therefore discoverable.

[9]                 Accordingly, there is an order that the respondents are to provide discovery of all legal advice that the current trustees received (Robyn Andrea Lee and Arthur Mathewson Lee) in relation to entering into guarantees  of  the  debts  of  Thermatech Ltd. That information is to be provided within three working days of the date of this Judgment.

Disclosure of Thermatech Ltd’s financial statements

[10]              The trustees allege that information held by Thermatech Ltd is not within their power and control meaning that Ms Forgan’s request amounts to an application for non-party discovery. I do not accept that submission for two reasons.

[11]              It follows that because Mr Arthur Lee is sole director and shareholder of Thermatech Ltd,   that   he   has    control    over    Thermatech Ltd’s    documents. Mr Arthur Lee resisting disclosure of documents within his actual control is therefore based on him relying on the capacity in which he has control of the documents, that is, as director of Thermatech Ltd, not as trustee.

[12]              Whether the capacity in which documents are held is relevant to whether      a party is obliged to disclose them was considered by Justice Asher in the Auckland

1      Lambie Trustees v Addlenan [2021] 1 NZLR 307.

High Court decision WHK (NZ) Ltd v Retail Media Ltd (in rec and liq), where Asher J said:2

[40]It is correct that the fifth and sixth defendants have been jointed to the proceedings in their  capacity  as  trustees.  I  also  entirely  accept Mr Farrand’s submission as to the fundamental distinction between  a person acting in his or her legal capacity as a trustee, and that person acting in their personal capacity. I accept Mr Scott has been joined in his capacity as a trustee.

[41]However, under r 8.18, which sets out the default terms of the discovery order, a party must make discovery of all documents in that party’s control which relate to a matter in question in the proceeding. There is no qualification in the rule that discovery must be limited to documents held by the party in the capacity in which that party is sued. Thus, on the  fact of it, r 8.18(2)  may extend to documents  held in  a party’s control even when the documents are held by that party in  a different legal capacity to that in which he or shed is sued.

[13]              Both standard discovery and tailored discovery require a party to discovery documents in that party’s control. ‘Control’ means possession of a document, a right to possess it or a right other than under the High Court Rules to inspect it. The question is whether the document, in a practical way is under the control of that party.3

[14]              I am satisfied that the issue of capacity is not relevant to whether a person is in possession of a document. Possession is simply a question of fact and had the High Court Rules 2016 (the Rules) intended to require that possession had to be in a certain capacity before a document had to be discovered, such would have been made express.

[15]              On this basis, Mr Arthur Lee is obliged to provide the discovery sought in relation to Thermatech Ltd.

[16]              The second basis put forward  is  one  I  only  need  comment  on  briefly.  Ms Forgan understands that the trustees in their capacity as trustees have guaranteed the indebtedness of Thermatech Ltd and Ms Forgan suggests that in that capacity they have a right to call for disclosure of Thermatech Ltd’s financial material. The authority for that proposition has not been provided but it is an unattractive stance for Mr Arthur Lee to take that where he has accepted the benefit of a Trust guarantee he

2      WHK (NZ)  Ltd  v  Retail  Media  Ltd  (in  rec  and  liq)  HC,  Auckland  CIV-2009-404-3898,  17 December 2009 at [40] and [41].

3      See B v B [1978] 3 WLR 624.

has apparently provided in his capacity as a trustee for his own benefit, to decline to disclose financial information relating to that guarantee.

[17]              In any event, I do not need to consider this issue further given the finding I have made in respect of capacity above.

[18]              Accordingly, there is an order that Mr Arthur Lee make discovery of Thermatech Ltd’s financial statements and documents showing the asset and liability position of Thermatech Ltd. That discovery is to be provided within three working days of the date of this Judgment.

Pre-commencement discovery

[19]              I have not lost sight of the fact that this is an application for pre-commencement discovery.  For the reasons given in Ms McGuigan’s memorandum of 8 May 2025,   I accept that pre-commencement discovery is required. The gist of the allegations made is that Mr Arthur Lee has put in jeopardy Trust assets by using Trust assets to benefit his own company. Ms Forgan’s anticipated proceeding will be to seek the removal of the trustees. I accept the information sought will be important to formulating a properly particularised claim in that regard. The fact that the trustees refuse to provide the information is some indication of itself that the information is important.

[20]Finally, I note no notice of opposition has been filed.

Costs

[21]              In addition to the above orders that I have made, there is an order that the Arthur Lee and Robyn Lee are to meet Ms Forgan’s solicitor-client costs in respect of this application. The reasons for that are the joint interest exceptions to privilege means the trustees’ refusal to provide the legal advice was unreasonable. I also consider it was unreasonable for Mr Arthur Lee to seek to refuse to provide plainly relevant information on the grounds of the capacity.

[22]              I also note that despite refusing to provide the information, the trustees did not file an opposition to seek to justify their refusal to provide the information. That failure being itself some indicator that the trustees recognise they could not properly resist the request.

Costs

[23]              If costs cannot be agreed, Ms McGuigan is to file a memorandum with the usual supporting information to allow costs to be quantified.

Associate Judge Lester

Solicitors:

Wynn Williams, Christchurch (for Applicant)

Shaun Cottrell Law, Christchurch (for Respondents)

Copy to counsel:
J McGuigan, Barrister, Christchurch