squid-deb-proxy and VirtualBox: Failed to create host name resolver

[Colin Law]

I am trying to use squid-deb-proxy with the client running in a Ubuntu
12.04 virtualbox VM on an 11.10 host, with the server on a separate
machine.  Running native 12.04 as a client on a third machine works ok
but when I do an update or upgrade from the VM I get

Failed to create host name resolver: Invalid host name

I assume this is coming from the proxy client. It carries on to do the
update, but not using the proxy.  Nothing is logged in
/var/log/squid-deb-proxy/access.log on the server and I cannot find a
client log.  Google has not helped either.

I would be grateful for any help.

Colin