A recent interlocutory decision (Action Media Ltd v Mitchell  NZHC 3121) in ongoing litigation between the liquidators and the former director and shareholder of Action Media Ltd (In Liquidation) gives some guidance on the relationship between the liquidators' powers under section 261 of the Companies Act 1993 and their obligations to discover relevant documents under their control. The defendants had requested discovery from the liquidators of certain correspondence between the liquidators and the IRD, and of pre-liquidation correspondence between the company and the IRD. The liquidators had already made a request under section 261 for the pre-liquidation correspondence between the company and IRD but had received only some of it.
While the Court held that there was no obligation on liquidators "to spend time and money on speculative pursuit of documents" under section 261 at the defendants' behest, this situation was clearly distinguishable. Here, the documents sought were clearly relevant and the liquidator had already made a section 261 request, which meant that "the Liquidators have the power to seek enforcement of compliance with the notice thus a right to possess the correspondence." However, the liquidators only had the right to request company documents and could not request correspondence between IRD and the former director in relation to the director's personal affairs nor could they demand unredacted copies of IRD case notes on the matter. In a later interlocutory decision (available here), the trial ordered for February 2016 was adjourned to allow time for the discovery of the relevant IRD files in storage, as the contents would potentially benefit both parties.
The defendants also sought orders under section 286 of the Companies Act 1993 preventing the liquidators from continuing to issue section 261 notices to the first defendant, as the defendant alleged that the liquidators were no longer investigating any further claims. The Court dismissed this application. A later interlocutory application to clarify that decision was rejected (available here).
We understand that an appeal has been filed in respect of the conclusion that documents that are the subject of a section 261 notice are within the control of a liquidator for discovery purposes even when the third party has not complied with the section 261 notice.
See Court decision here.