High Court weighs whether in-house lawyers for liquidators pose independence risk
New Zealand's High Court dismissed a director's application to debar liquidators from using their own in-house counsel on 10 April 2026.
In Vijay Holdings Limited (In Liquidation) v Vinod Kumar [2026] NZHC 904, Associate Judge Taylor found that the Waterstone model was lawful, and that liquidators Damien Grant and Adam Botterill lawfully instructed in-house lawyers from Waterstone Insolvency Limited to conduct proceedings against director Vinod Kumar.
Vijay Holdings entered liquidation on 6 November 2020. Grant, the principal and a director of Waterstone, and Botterill, a shareholder and director, appointed the firm's in-house lawyers, Ms Kelly Cocks and Ms Brooke McLeish, to pursue claims against Kumar under ss 135, 136, and 137 of the Companies Act 1993 for alleged breaches of directors' duties. Vijay carried unsecured creditor claims totalling $1,471,320.64.
Kumar sought an order debarring the in-house lawyers and compelling the liquidators to engage external counsel. He argued that the arrangement breached the Lawyers and Conveyancers Act 2006 (LCA) and the Lawyers and Conveyancers Act (Conduct and Client Care) Rules 2008, and that the liquidators' direct financial stake in Waterstone undermined their independence under the RITANZ Code of Professional Conduct.
Kumar contended that the in-house lawyers provided regulated services to Vijay as a member of the public, breaching s 9 of the LCA and Rules 15.1 and 15.2.3, because Vijay did not employ them. He also submitted that the model breached s 10(4), as the in-house lawyers effectively operated as a law firm servicing multiple clients. He further contended that the liquidators' shareholding in Waterstone gave them a direct financial interest in maximising legal fee generation.
Vijay's counsel, Daniel McLellan KC, argued that the in-house lawyers provided services to their employers, the liquidators, and not to Vijay as a public client. He submitted that s 10(1)(c) of the LCA expressly permitted this arrangement, and that, alternatively, s 10(2)(b) applied because the liquidators qualified as statutory officers under the Companies Act. The Restructuring Insolvency and Turnaround Association of New Zealand (RITANZ), appearing as an intervening party, supported Vijay's position.
Associate Judge Taylor dismissed the application. On costs, the judge directed that costs should follow the event in favour of Vijay, but deferred the final determination, directing counsel to endeavour to agree on costs and, failing agreement, to file memoranda for a decision to be made on the papers.
The court found that the in-house lawyers provided regulated services to the liquidators as their employers, not to any "client or member" of Waterstone, and that Rule 15 therefore had no application. Upon appointment, the liquidators assumed exclusive control over decisions to engage lawyers, stepping into the shoes of Vijay's directors, and the company retained no residual power to act independently.
The court held that even if Vijay were treated as "the public," s 10(2)(b) applied because the liquidators clearly qualified as statutory officers under the Companies Act. The court also found s 10(4) inapplicable, as the in-house lawyers provided services only to the liquidators and held no lawyer-client relationship with any other party.
The court rejected the argument that Waterstone committed an offence under s 24(1) of the LCA by providing litigation services without being an incorporated law firm, finding that s 24(1) applies only to non-lawyers, making Waterstone's corporate status irrelevant. The court also found Arena Alceon NZ Credit Partners LLC v Grant [2025] NZHC 1360, on which Kumar substantially relied, of limited assistance, as that decision concerned liquidator impartiality rather than the lawfulness of using in-house counsel.
On the independence question, the court found no breach of the Code. Citing Tietjens v Quigley [2015] NZHC 3276, it held that earning income from fee-generating staff did not itself constitute a conflict of interest. The court noted that the liquidators' remuneration, including fees charged by the in-house lawyers, remained subject to court review under ss 284(1)(e) and (f) of the Companies Act.
