Jackson v Kerr
[2021] NZHC 1413
•15 June 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-000812
[2021] NZHC 1413
BETWEEN NEALE JACKSON
NATALIE GYTHA BURRETT
ApplicantsAND
GEORGE CHARLES DESMOND KERR
Respondent
Hearing: 26 May 2021 Appearances:
M Arthur and J Marcetic for the Applicants
G Blanchard QC and S Nicholson for the Respondent
Judgment:
15 June 2021
JUDGMENT OF WALKER J
This judgment was delivered by me on 15 June 2021 at 3 pm Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
NEALE JACKSON v GEORGE CHARLES DESMOND KERR [2021] NZHC 1413 [15 June 2021]
[1] The applicants are the receivers of Pyne Holdings Limited (“PHL”) appointed by BNZ under a General Security Agreement. Mr Kerr, the respondent, is the sole director of PHL.
[2] The receivers seek two categories of documents from Mr Kerr in his capacity as director, said to enable them to undertake their duties as receivers and to protect and realise PHL’s assets:
(a)all books, records, documents and information in PHL’s possession or control, being personal property of PHL over which they have been appointed receivers (“PHL documents”); and
(b)all books, records, documents and information in Mr Kerr’s possession or control relating to the assets of PHL (“PHL Asset documents”). Specific assets are identified in the receivers’ originating application in an inclusive rather than exhaustive manner.
[3] The originating application came before Lang J. Mr Kerr opposed production of the PHL documents. He did not oppose the request to produce PHL Asset documents generally, but refused to provide privileged documents prepared for the purposes of advising on, settlement of, or defence of, claims by BNZ for payment under a Facility Agreement dated 26 November 2008. Partial orders were made by consent in the following terms:1
(a)Mr Kerr was to advise the receivers by 12.00 pm on 14 May 2021 whether:
(i)PHL currently owns, legally or beneficially, any shares in Pyne Gould Corporation; and
(ii)if so, how those shares are held.
1 Jackson v Kerr HC Auckland CIV-2021-404-000812, 12 May 2021 (Minute of Lang J).
(b)Mr Kerr was to provide all of the books, records, documents and information in his possession or control relating to the assets of PHL by
5.00 pm on 18 May 2021, except for documents that are:
(i)confidential and subject to legal professional privilege in favour of PHL; and
(ii)were prepared for the purposes of advising on, settlement of, or defence of, any claims by BNZ for payment including any privileged legal advice given to PHL in relation to communications with BNZ concerning potential settlement in 2019 and 2020.
[4] For the purpose of this application, the documents in sub-paragraph (b) above may conveniently be labelled “documents subject to litigation privilege”.2 The two substantive issues now requiring determination are whether the receivers are entitled under s 12 of the Receiverships Act 1993 to:
(a)the PHL documents (being a broader category of documents) unfettered by considerations of necessity, reasonableness and oppression; and
(b)the PHL Asset documents, notwithstanding claims of privilege by PHL where that privilege is litigation privilege arising in respect of claims by BNZ (the appointer of the receivers) against PHL and others.
[5] The receivers argue that they have an unfettered entitlement to the PHL documents under the Receiverships Act and that legal professional privilege does not shield against the disclosure of privileged documents to the receivers, as agents of PHL. They acknowledge however that there may be restrictions on the use of privileged documents.
2 This label corresponds to the privilege for preparatory materials for proceedings provided in s 56 of the Evidence Act 2006. However, strictly speaking the Evidence Act is not engaged in this application as s 53(5) provides that the Act “does not affect the general law governing legal professional privilege, so far as it applies to the determination of claims to that privilege that are made neither in the course of, nor for the purpose of, a proceeding”.
[6] Broadly speaking, Mr Kerr counters that the production of PHL documents spanning many years is oppressive, unreasonable and unnecessary. Further, he says that PHL should not be forced to disclose documents protected by litigation privilege where that privilege arises in relation to BNZ’s claims as that would undermine, if not entirely abrogate, the privilege.
Background
[7] BNZ alleges that PHL owes approximately $67.7 million under facilities extended to PHL and arising under PHL guarantees. PHL is defending those claims on the basis that the debt is time barred under the Limitation Act 2010; the principal and interest claims are in error; and the bank caused the loss by failing to consent to certain land sales in 2019.
[8] The receivers were appointed on 29 April 2021 pursuant to a general security deed which granted BNZ a security interest over all of PHL’s present and after acquired property and all personal property over which PHL has rights, whether now or in the future (the “Secured Property”).
[9] It is thought by the receivers that PHL’s main asset is a significant shareholding in a separate company, Pyne Gould Corporation (hereafter “PGC”). There is a relatively complex company structure at issue. For the purposes of this application, this is depicted below:
[10] Of particular relevance, PHL is the sole shareholder of Australasian Equity Partners GP No. 1 Limited (“AEP”), which is the general partner of Australasian Equity Partners Fund No 1. Limited Partnership (“AEPLP”).
[11] The most recent financial statements for PGC show that AEP, as general partner of AELP, owned 65.74% of the shares in PGC.
[12] On 30 April 2021, the day after the receivers were appointed, they wrote to Mr Kerr asking him to provide information about PHL and its assets, and in particular, any shares held in PGC. They gave a deadline which expired at 5.00 pm on 3 May 2021. Although solicitors for the receivers and those for Mr Kerr exchanged correspondence, Mr Kerr provided none of the information or documents sought by
the receivers. I pause here to note that Mr Kerr currently resides in the United Kingdom.
[13]The receivers filed the present application on 7 May 2021.
[14] On 12 May 2021, at the first mention of this matter, Lang J made the aforementioned orders by consent for Mr Kerr to advise the receivers by 14 May 2021 of any shares PHL owned legally or beneficially in PGC and, by 18 May 2021, to provide all information or documents in his possession or control relating to the assets held by PHL, with the exception of documents subject to legal professional privilege arising out of claims made by BNZ against PHL and others.
[15] On 14 May 2021, counsel for Mr Kerr wrote providing some information about PHL’s interest in 14.14% of the shares in PGC. By 19 May 2021, Mr Kerr had not provided any information or documents to the receivers as required by 18 May 2021 pursuant to the Court’s order and was seeking an extension of time. That resulted in a further application on the part of the receivers. That application is not before this Court and was subsequently resolved.
The General Security Deed
[16]The material part of the General Security Deed (“GSA”) is clause 2.1:
Clause 2.1 Security:
As continuing security for compliance with the Secured Obligations, the Chargor grants the Secured Party:
(a)a charge in and over the Secured Property;
(b)in addition to the security granted under paragraph (a), assigns by way of security to the Secured Party all Secured Property which constitutes present or future rights or things in action (but expressly excluding any leasehold interest in land); and
(c)in addition to the security granted under paragraph (a), agrees to mortgage to the Secured Party all Secured Property which constitutes present or future interests in any real property.
Clause 2.2 PPSA:
The security granted under this clause 2 in relation to personal property:
(d)is a security interest for the purposes of the PPSA; and
(e)is taken in all of the Chargor’s present and after acquired property.
[17]Key definitions in the GSA are:
Secured Obligations means all obligations for the payment or repayment of the Secured Indebtedness and the other Obligation and includes any part thereof.
Secured Property means all the Chargor’s present and after-acquired property and all personal property in which the Chargor has rights, whether now or in the future, and references to the Secured Property include references to any part of the Secured Property.
Personal property means any personal property or any rights in any personal property, in either case to which the [Personal Property Securities Act 1999] applies.
[18] The Personal Property Securities Act 1999 (“PPSA”) defines “personal property” as including chattel paper, documents of title, goods, intangibles, investment securities, money and negotiable instruments.3
Legal principles
[19]As to jurisdiction, s 12 of the Receiverships Act (“the Act”) states that:
(1)A grantor and, in the case of a grantor that is a body corporate, every director of the grantor, must—
(a)make available to the receiver all books, documents, and information relating to the property in receivership in the grantor’s possession or under the grantor’s control:
…
(2) On the application of the receiver, the court may make an order requiring the grantor, or if the grantor is a body corporate, a director of the grantor to comply with subsection (1).
[20]“Property” is defined in the Act in wide terms:4
property includes—
(a)real and personal property:
3 Section 16(1).
4 Section 2(1).
(b)an estate or interest in real or personal property:
(c)a debt:
(d)any thing in action:
(e)any other right or interest
[21] Property in receivership means property in respect of which a receiver is appointed.5 Thus s 12 stipulates that a director of the grantor must make available to the receiver all books, documents, and information relating to the property in respect of which a receiver is appointed, which in this case is all PHL’s present and after- acquired property and all personal property in which PHL has rights.
[22] As a preliminary “quasi-jurisdictional” point, Mr Blanchard QC acknowledges a recent High Court decision about the nature of the obligation in s 12 which is expressly to “make available” the relevant materials. He does not seek to argue that an order to physically provide documents is outside the provision. Rather, he pragmatically concedes for the purposes of this application that s 12 is broad enough to enable the Court to make an order requiring Mr Kerr to deliver the documents as opposed to merely making them available.6
[23] Section 12(1) of the Act is expressed in mandatory terms but s 12(2) is not. It provides that the court may make an order requiring compliance with s 12(1). This imports a discretion. There is no specific guidance in the Act about what a court should take into account in the exercise of its discretion. This means that it is the purpose and scheme of the Act which must inform and guide a court.
[24] In R v Graham, Dobson J stated that a receiver’s primary duty is to realise the company’s assets in the interests of the secured creditor, but the power to manage the property in receivership also enables receivers to function as managers.7
5 Section 2(1).
6 See Whitley v Ribble Ltd (formerly Ground Support (WGTN No. 1) Ltd) [2017] NZHC 1884 where Moore J stated he was less certain s 12 of the Act is the correct provision under which to make orders to provide material rather than make it available, but treated the application as one made under s 34 of the Receivership Act instead.
7 R v Graham HC Wellington CRI-2010-085-2538, 8 July 2011 at [106] citing Peter Blanchard and Michael Gedye Private Receivers of Companies in New Zealand (3rd ed, LexisNexis, Wellington, 2008) at [10.09].
[25]The powers of receivers are set out in s 14 of the Act:
(1)A receiver has the powers and authorities expressly or impliedly conferred by the deed or agreement or the order of the court by or under which the appointment was made.
(2)Subject to the deed or agreement or the order of the court by or under which the appointment was made, a receiver may—
(a)demand and recover, by action or otherwise, income of the property in receivership:
(b)issue receipts for income recovered:
(c)manage the property in receivership:
(d)insure the property in receivership:
(e)repair and maintain the property in receivership:
(f)inspect at any reasonable time books or documents that relate to the property in receivership and that are in the possession or under the control of the grantor:
(g)exercise, on behalf of the grantor, a right to inspect books or documents that relate to the property in receivership and that are in the possession or under the control of a person other than the grantor:
(h)in a case where the receiver is appointed in respect of all or substantially all of the assets and undertaking of a grantor that is a body corporate, change the registered office or address for service of the body corporate.
[26] Clause 11 of the GSA deals with the appointment of a receiver. It provides in clause 11.2 that every receiver appointed under clause 11.1 is deemed to be the agent of PHL. Clause 11.3 provides:
Rights of Receiver: Any Receiver will ( in addition to any statutory powers vested at any time in the Receiver or in receivers and/or managers generally) during the Receiver’s appointment, have all the rights which the Chargor itself may have in relation the Secured Property including without limitation, all rights and powers mentioned in clause 10 as if references to the Secured Party were to the Receiver (and whether or not any such powers are yet exercisable, or have been exercised, by the Secured Party).
[27] Clause 10 of the GSA refers to the ability to do anything and exercise any right which PHL could do or exercise in relation to the Secured Property. The non- exhaustive list of powers includes possession of property and carrying on the business.
[28]Section 18 of the Act sets out the general duties of receivers:
18 General duties of receivers
(1)A receiver must exercise his or her powers in good faith and for a proper purpose.
(2)A receiver must exercise his or her powers in a manner he or she believes on reasonable grounds to be in the best interests of the person in whose interests he or she was appointed.
(3)To the extent consistent with subsections (1) and (2), a receiver must exercise his or her powers with reasonable regard to the interests of—
(a)the grantor; and
(b)persons claiming, through the grantor, interests in the property in receivership; and
(c)unsecured creditors of the grantor; and
(d)sureties who may be called upon to fulfil obligations of the grantor.
(4)Where a receiver appointed under a deed or agreement acts or refrains from acting in accordance with any directions given by the person in whose interests he or she was appointed, the receiver—
(a)is not in breach of the duty referred to in subsection (2); but
(b)is still liable for any breach of the duty referred to in subsection (1) and the duty referred to in subsection (3).
(5)Nothing in this section limits or affects section 19.
Issue one: are the receivers entitled to all the PHL documents?
[29] The first issue is whether the receivers are entitled to all of the company’s books, records, documents and information, or whether that entitlement is in any way fettered by considerations of necessity, reasonableness or oppression.
[30] Mr Blanchard submits that an order seeking “all” documents in PHL’s possession or control is unreasonable and the lack of specificity across the 13 year period snice PHL’s incorporation makes the request oppressive.8 The discretion in s 12(2) should therefore be exercised against the making of an order to produce the
8 PHL was incorporated on 2 July 2008.
PHL documents. He challenges any portrayal of PHL’s position as “complex”. On the contrary, he says, PHL is a holding company and the position is straightforward:
(a)Prior to 2011, PHL held a 13.19% share in PGC.
(b)In 2011, that shareholding along with other shareholdings in PGC was transferred to a limited partnership, Australasian Equity Partners GP No. 1 Limited (as indicated above, “AEP”), in return for a proportionate interest in that partnership.
(c)In 2021, following a request from a third party, the PGC shares held by AEP are being distributed in specie back to the limited partners. PHL will hold 14.13% of PGC’s shares.
[31] However, I am unpersuaded by the respondent’s arguments on this point. I have concluded that the receivers are entitled to the PHL documents. My reasons follow.
[32] First, I accept that the Court has a discretion whether to make orders under s 12. But the simple, absolute statutory obligation on directors in s 12(1) is limited only by reference to the required relationship of the material to property in receivership. This suggests that the discretion is narrow. There would need to be a compelling reason to exercise the discretion against making an order. In this case there is no evidence of a compelling reason. Inviting the Court to infer oppression on the basis of the 13 year period since PHL’s incorporation is insufficient.
[33] The submission that PHL’s asset position is straightforward does not assist Mr Kerr’s opposition. I accept the submission that it is internally inconsistent to describe PHL’s position in that way but characterise an order to produce documents as oppressive.
[34] The reason why s 12 is worded in such an absolute manner is precisely because receivers require a complete understanding of the company’s affairs, past and present, for the purpose of the receivership. There is also an information imbalance or
asymmetry which means that any precondition requiring receivers to particularise document requests could impede the receivership, as receivers are simply not in a position to identify which documents they require. Only the company’s directors have the full picture. Receivers cannot delegate responsibility to the directors to identify assets.
[35] Any inconvenience arising from the manner in which company records might be kept cannot make production oppressive. The directors have duties under the Companies Act 1993. It is incumbent upon them to sensibly organise company records.
[36] Supporting this conclusion is the right of the receivers under the GSA to possession of PHL’s books, records, documents and information, as assets over which they are appointed. This is because the receivers were appointed by BNZ pursuant to BNZ’s charge in and over all of PHL’s personal property.9 The books, records and physical documents of a company are personal property under the PPSA.10
[37] Finally, the English cases referred to me in which the courts exercised a discretion do not assist as the statutory scheme is different with no equivalent absolute obligation on directors to make documents available.
[38] In conclusion, the receivers have a statutory entitlement to documents relating to the secured property. A relationship to property in receivership is the only prescription. In short, where PHL’s books and documents are included in the property over which the secured creditor holds security, a receiver is entitled to custody of them.11 This was a prospect once PHL granted the security in the terms that it did. That prospect has eventuated.
9 The Security Deed defines “personal property” as “any personal property or any rights in any personal property, in either case to which the PSSA applies”.
10 Whitley, above n 6, at [65].
11 Blanchard and Gedye Private Receivers of Companies in New Zealand, above n 7, at [10.31].
Issue two: privileged documents
[39] The second issue focuses on a sub-set of documents in respect of which litigation privilege is asserted. These documents are described by the respondent in the following terms:12
1.2.2Documents that are:
(a)confidential and subject to legal professional privilege (including any joint or common interest privilege) in favour of PHL; and
(b)were prepared to advise on, settle, or defend, any claims made by BNZ for payment under the facility agreement dated 26 November 2008 (being the Lothian facility guaranteed by PHL), the cash advance facility dated 28 May 2010 (whereby PHL was the borrower), or any related security agreement, including any privileged legal advice given to PHL in relation to the settlement communications with BNZ in 2019 and 2020.
[40] Mr Blanchard confirmed to the Court that both elements (a) and (b) above are to be understood conjunctively. These documents were generated over a relatively confined period since apprehension of the litigation but there is no evidence about the volume of material at issue. It is also suggested that, in some instances, the privilege may be jointly held by Mr Kerr in his personal capacity, by PHL and by other entities.
[41] There are two primary objections to providing these documents. First, Mr Blanchard submits they fall outside the ambit of the express terms of s 12 of the Act because the documents do not relate to the property in receivership. Mr Arthur’s riposte is that these communications may describe or explain asset transactions and the current position of PHL’s assets. This is but one of the respects in which they relate to the property over which the receivers are appointed. Mr Arthur confirmed to the Court that the receivers are not seeking post-receivership documents.
[42] Secondly, Mr Blanchard submits that to the extent that the receivers rely on BNZ’ contractual rights to these documents under the GSA or have to piggy-back on BNZ’s rights then, by extension, BNZ would also be entitled to the documents. Mr Blanchard describes that as an absurd result. BNZ would be entitled to PHL’s
12 No issue is taken with any other category of privileged documents.
privileged legal advice about the claims pursued by BNZ, including advice already given and any future privileged communications.13 On receipt by the adversary in the litigation, the privilege would be destroyed.
[43] Mr Blanchard submits that the only permissible definition of “personal property” must therefore exclude privileged communications in respect of a dispute with the secured party to avoid abrogating legal professional privilege. Alternatively, if the privileged documents themselves constitute property subject to the receivership, then the Court should exercise its discretion to decline production. He adds that Mr Kerr is willing to have an independent barrister review the documents to confirm their subject matter and whether they have any relationship with any PHL property, which he denies.14
[44] The starting point is the proposition that receivers generally have the legal right to control both the documents containing PHL’s privileged advice and the decision as to whether PHL waives or preserves that privilege.15 This is because, once appointed, decisions affecting PHL’s property are made by the receivers in PHL’s name. Receivers are agents of the company that grants the security, both pursuant to s 6 of the Act and pursuant to the GSA. They have the power to engage in legal proceedings in the name of the company and to compromise claims by and against the company. Legal advice obtained by the company is its property. If PHL has obtained legal advice, that is an asset of the company and the receivers are entitled to it as agents of the grantor.16
[45] Whether or not a receiver’s exercise of powers for the company extends to upholding or waiving privilege in its name was discussed by Dobson J in Graham:17
In granting the security that the then directors did, they were committing the company to the prospect of control in relation to all its assets transferring to receivers appointed by the grantee, so that decisions affecting the property of a company would be made by the receivers, in its name. That does not
13 This objection is answered by Mr Arthur who clarified that the receivers are not seeking post- receivership documents.
14 Mr Blanchard’s proposal is that a retired High Court Judge review this material to ascertain what, if any, should be provided to the receivers.
15 An exception to this may arise where the privilege in question is jointly held with others.
16 See Richmond Equities Ltd v Interfauna Trading Company (N.Z.) Ltd (1988) 4 NZCLC 64,666.
17 Graham, above n 7, at [112] and [113].
constitute any abrogation of privilege, but rather recognises that the persons entitled to decide about it, has moved from the directors to the receivers.
[46] This position is recognised in a practical way by r 8.1.2 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008. The rule provides that the confidentiality obligation between a lawyer and a client company extends to receivers and liquidators of that client company, allowing the receivers to resist disclosure of such privileged information to third parties.
[47] Receivers do not however have an unfettered ability to waive privilege. It could only be done for a proper purpose. The fact that PHL may hold a privilege jointly with others in respect of certain documents would not stand in the way of the receivers of PHL having access to those documents but would restrict the receivers’ ability to waive privilege.
[48] The inter-related question is whether there is an entitlement, express or implied, to withhold from the receivers material protected by litigation privilege where the security holder is the adverse party to the litigation.
[49] Mr Kerr’s objection rests on the proposition that the receivers may, inadvertently or not, disclose privileged material to the BNZ to assist in ongoing proceedings between BNZ and PHL. But this objection presupposes either that BNZ and the receivers are synonymous or that the receivers have some obligation to disclose to BNZ.
[50] The first point can be dealt with peremptorily. The receivers are independent of BNZ and have expressly disavowed any intention to disclose these documents to the security holder. They have offered an undertaking not to disclose. BNZ and the receivers cannot be considered synonymous.
[51] The second point, about any interpretation of the Security Deed contractually entitling BNZ to privileged documents, has merit. It could in theory place the receivers in an invidious position.
[52] However, there is also a short answer to this. If the receivers’ entitlement depends on the security holder’s rights to PHL documents as “personal property”, the security holder’s rights should be interpreted in a narrower manner to exclude communications protected by privilege in these particular circumstances. By circumstances, I mean where the privilege is litigation privilege arising because the apprehended proceedings are claims by the secured party. This is because legal professional privilege “is a fundamental condition on which the administration of justice as a whole rests”.18 It is unlikely that it would have been intended that BNZ would be entitled to take possession of such communications. Had it been so intended, then it would have had to be stated unambiguously. This would be consistent with authorities in which statutory obligations of disclosure to third parties are interpreted in a way that impliedly excludes the provision of privileged communications.19
[53] But this is not the basis on which the receivers make this application. They do not rely on a position directly derived from BNZ’s rights in clause 10 of the Security Deed. They rely on the statutory entitlement in s 12 principally and clause 11.3 only to the extent that it informs the question of the meaning of property in receivership. An order made under s 12 does not mean that privilege is waived or that BNZ is entitled to the privileged material. This follows from the observation that a receiver appointed under the Act is, by virtue of s 6(3), the agent of the company that granted the security, unless the document creating the power for appointment of a receiver expressly provides otherwise.
[54] I accept Mr Blanchard’s submission that there may be a residual discretion remaining with the directors to bring a proceeding (or defend a proceeding) without the receiver’s consent and in that sphere, the rights and entitlement to privilege and its waiver may logically need to stay with the directors.20 However, this is not an answer to the question of the receivers’ entitlement to documents relating to property in receivership, including privileged material distinct from the entitlement of the security holder to access such material.
18 R v Derby Magistrates’ Court ex p B [1996] 1 AC 487 (HL) at 507 as cited in B v Auckland District Law Society [2003] UKPC 38, [2004] 1 NZLR 326 at 344.
19 See, for example, Commissioner of Inland Revenue v West-Walker [1954] NZLR 191 (CA).
20 Paramount Acceptance Co Ltd v Souster [1981] 2 NZLR 38 (CA).
[55] I find some support in principle from the decision of the English Court of Appeal in Sutton v GE Capital Commercial Finance Ltd, though the context and issue were different.21 Administrative receivers had obtained privileged material during the receivership and passed the information to GE Capital Commercial Finance Limited (“GE”), the entity which appointed them. That entity was making a claim against a related party to the company in administrative receivership. The question was whether this amounted to a waiver of privilege entitling GE to make use of the material in the litigation. The director of the company sought an injunction to prevent its use.
[56] This was not a case in which “privilege” was raised as an objection to disclosure to receivers. The order sought was for the return of documents the receivers had passed to the security holder. The documents had been requested by the receivers in reliance on their powers under the Insolvency Act 1986 (UK). The Court of Appeal said the jurisdiction for such an order was for the return of confidential communications in equity. But such jurisdiction to restrain use would not be exercised unless the person seeking the order would be able to claim privilege from disclosure when the material was in their position in the first place.
[57] The first issue was whether in dealing with the documents as they did, the receivers were acting within their powers. As receivers, they were statutory office holders entitled to apply to the court for the delivery of property (including papers) to which the company appears entitled.22 Chadwick LJ held that those powers may only be invoked for a legitimate purpose and the Court had a discretion to make or refuse an order to make sure that the powers were not abused. In this instance, the wide terms of the security under which the receiver was appointed entitled the receiver to documents belonging to the company. This was because they were encompassed within the floating charge on “all the remainder of the undertaking, property rights and assets of the Company whatsoever and wheresoever, both present and future”.23
[58] The fact that the receivers immediately disclosed the materials to the security holder without any consideration as to its contents or to the question of whether
21 Sutton v GE Capital Commercial Finance Ltd [2004] EWCA Civ 315, [2004] 2 BCLC 662.
22 See Insolvency Act 1986 (UK), ss 234–236.
23 Sutton, above n 21, at [34].
disclosing the documents served the interests of the company meant however that the disclosure was unauthorised and could not amount to a waiver of the subsisting privilege.
[59]The following points of principle can be taken from the judgment:
(a)The statutory powers requiring provision of documents are given to enable better discharge of function and not to improve the litigation success of a third party.
(b)If the true purpose of the receivers in requesting documents is to assist the security holder in its litigation, the receivers would be exceeding their powers.
(c)There is no suggestion that privileged documents could be withheld from receivers if the request was within their power.
(d)There may even be circumstances in which an administrative receiver may properly disclose to the appointing creditor privileged communications obtained under statutory powers if properly for the purposes of the office held or otherwise warranted in the interests of justice.24
[60] In conclusion, the receivers are entitled to privileged material which relates to property in the receivership for the sole purpose of use in their functions of getting in, protecting and realising the assets. While the claims by BNZ do not constitute property in and of themselves, there is an entitlement to the documents as “personal property” of PHL and it is conceivable that this material relates in some way to property in the receivership. However, there is no absolute entitlement to disclose the privileged material to BNZ. This would, at least prima facie, be an improper exercise of their powers.25
24 Re a Company No 005374 of 1993 [1993] BCC 734 (Ch) per Harman J as cited in Sutton, above n 21, at [40].
25 See Sutton, above n 21.
[61]Accordingly, I make the following orders/directions:
(a)The respondent deliver, by electronic or other means, to the receivers within seven days, all books, records, documents and information of PHL or under PHL’s control, being personal property of PHL over which the applicants have been appointed receivers.
(b)The respondent deliver, by electronic or other means, to the receivers within seven days, all books, records, documents and information in his possession or control relating to assets of PHL, such assets including but not limited to the assets set out at paragraph 1.1(a)(ii) of the originating application dated 7 May 2021.
(c)The books, records, documents and information to be delivered include documents created before the date of receivership that are confidential and subject to legal professional privilege (including any joint or common interest privilege) in favour of PHL and were prepared to advise on, settle, or defend any claims made by BNZ including any privileged legal advice given to PHL in relation to the settlement communications with BNZ in 2019 and 2020.
(d)The receivers are not to disclose to BNZ without leave of this Court any documents that are confidential and legally privileged (or information in such documents which is confidential and legally privileged) if prepared for the purposes of advising on, settlement of, or defence of, any claims by BNZ for payment including any privileged legal advice given to PHL in relation to the settlement communications with BNZ in 2019 and 2020.
(e)The parties have leave to apply for further directions and orders.
Costs
[62] At the hearing, the receivers orally amended their application to include a claim to costs. As the successful party, they are entitled to an award of costs. In the event the parties are unable to agree costs, memoranda not exceeding five pages may be filed and served within 28 days of this judgment.
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Walker J
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