Commissioner of Inland Revenue v Buckland Investments Limited (in liquidation)
[2025] NZHC 2146
•4 August 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-001294
[2025] NZHC 2146
BETWEEN THE COMMISSIONER OF INLAND REVENUE
Plaintiff
AND
BUCKLAND INVESTMENTS LIMITED (IN LIQUIDATION)
Defendant
Hearing: 1 August 2025 Appearances:
V Young for the Plaintiff
Judgment:
4 August 2025
JUDGMENT OF ASSOCIATE JUDGE COGSWELL
This judgment was delivered by me on 4 August 2025 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors:
Inland Revenue, Auckland
IRD v BUCKLAND INVESTMENTS LTD (IN LIQ) [2025] NZHC 2146 [4 August 2025]
Introduction
[1] The liquidators of Buckland Investments Limited (in liquidation) (the company) have now concluded their investigations into the affairs of the company, and seek the approval of the fees charged in the management of the liquidation of the company.
[2] The memorandum filed by the liquidators sets out a summary of the liquidators’ fees by hours worked, staff level, and the average hourly rate, applied together with a breakdown by category of work performed.
[3] In addition, the memorandum attaches copies of the four six-monthly reports provided to creditors and shareholders as required by s 255 of the Companies Act 1993. The application for approval is made on the basis that all distributions have been made and the liquidators’ remuneration is sought, as the liquidators anticipate no further attendances required to finalise the liquidation of the company.
[4] The issue I have to consider is whether the Court is satisfied that the remuneration for which approval is sought reflects the fair value of services rendered by the liquidator to the creditors of the company.
Approach
[5] The Court’s power to approve liquidators’ remuneration is provided in s 284 of the Companies Act 1993. The principles that apply in considering applications for approval are set out in Re Roslea Path Ltd (in liq).1
[6] The Court held that in fixing a liquidator’s remuneration, it is determining the fairness and reasonableness of what is being charged when measured against the work undertaken and the result achieved. The Court held that fair and reasonable remuneration reflects the value of the services rendered to the creditors of the company and, if a surplus is achieved, its shareholders.
1 Re Roslea Path Ltd (in liq) [2013] 1 NZLR 207 (HC) at [102].
[7] The decision describes “value” as an elusive concept which goes beyond mathematical application of hourly rates to hours spent by individuals involved in administering a company’s affairs.2 The Court emphasised the need for a proportionate approach, both in terms of the remuneration paid but also the information required by the Court to justify the remuneration paid.3
[8] One of the suggested ways of ensuring that a reasonable and proportionate approach has been taken, is for the liquidators to voluntarily disclose in their six- monthly reports the amount of fees charged, such that creditors have an opportunity to ask questions as the liquidation progresses.4 The liquidators did that in this liquidation.
[9] The Court of Appeal in Madsen-Ries v Salus Safety Equipment Ltd (in liq recently confirmed the approach adopted in Re Roslea Path Ltd.5 The Court approved counsel assisting’s summary of the principles that apply to the determination of retrospective applications as follows:6
(a)Liquidators are fiduciaries and their fundamental obligation is a duty to account. There is a conflict between the interest of the liquidator (fiduciary) in receiving remuneration and the interest of the creditors (those to whom the fiduciary duties are owed) who bear the cost of that remuneration.
(b)Liquidators are officers of the Court and are subject to its general supervisory function. They must attend diligently to their tasks and make all proper reports and inquiries. They have the same responsibilities as barristers and solicitors.
(c)Liquidators must justify their claims for remuneration. They bear the onus in this regard and the benefit of any doubt due to inadequate information must be resolved in favour of the creditors.
(d)Fixing liquidators’ remuneration requires judicial judgment. It is more akin to an administrative task. It is implicit that the judicial officer can draw on his/her own experience in performing this role.
(e)In fixing liquidators’ remuneration the Court is making a determination of the fairness and reasonableness of the proposed fees compared to the work undertaken and results achieved. The focus is on the value of services rendered to the creditors of the company.
2 At [102].
3 At [108].
4 At [151].
5 Madsen-Ries v Salus Safety Equipment Ltd (in liq) [2022] NZCA 101.
6 At [15].
(f)The Court will consider whether there has been unnecessary work or over servicing as this would not represent time reasonably expended at a reasonable rate.
(g)A broad brush approach is acceptable provided that there is an exercise of judicial judgment as opposed to an arbitrary choice of amount.
(h)The process of fixing remuneration needs to be proportionate. It should not be unduly prescriptive; nor should it unnecessarily add costs to the creditors.
[10]The Court of Appeal held: 7
… even where there is no challenge to the liquidator’s remuneration this does not absolve the Court from the obligation to be satisfied that the remuneration approved reflects the value of the services rendered to the creditors of the company.
[11] I am therefore required to be satisfied that the remuneration reflects the value of the services rendered to the creditors of the company.
Background
[12] The company was incorporated on 20 May 2016 and operated as a business and coach transport services company in Auckland.
[13] The company was placed in liquidation on 14 September 2023 by order of the Court, pursuant to s 241(2)(c) of the Companies Act 1993. The Commissioner of Inland Revenue was the petitioning creditor.
[14] Janet Sprosen and Leon Francis Bowker were appointed joint and several liquidators of the company.
[15] On 21 November 2023, Janet Sprosen resigned as liquidator. Krystal Pihama was appointed liquidator jointly and severally with Leon Frances Bowker.
[16] The company had a sole director, Rajdeep Singh Sandhu. Mr Sandhu was also the sole shareholder, owning two parcels of shares.
7 At [54].
[17] The liquidators’ review of the company’s trading identified that on reconstruction of the company’s accounts, and after obtaining further information from third parties, the liquidators formed a view that the director had breached his duties. A letter of demand was issued for this claim. The director never responded to the demand, and the liquidators understand the director has now left the country.
[18] Secured creditors moved to repossess the remaining secured assets and realise them. After the outstanding secured debt was paid the surplus sale proceeds were distributed to the liquidators.
[19] The liquidators made a first and final distribution of $1,754.07 to Inland Revenue, representing 100 per cent of the petitioning creditor costs.
[20] The liquidators made a first and final distribution of $50,053.00 to the preferential creditor, Inland Revenue, representing 24 per cent of their preferential claim.
[21] There are no other funds available to make a distribution to non-preferential unsecured creditors.
[22] The liquidators notified Inland Revenue of the level of fees and expenses sought by the liquidators. Inland Revenue does not object to the liquidators’ fees and expenses claimed.
[23]The liquidators identified the following assets in the course of the liquidation:
(a)Motor vehicles (subject to GSA) - $261,209.
(b)Fixed assets - $3,913.
(c)Cash at bank - $3,500.
(d)Accounts receivable - $15,770.
[24] The liquidators received the following amounts during the course of the liquidation:
(a)Cash at bank - $3,500.
(b)Debtors - $15,770.
(c)Fixed assets - $3,913.
(d)Distribution from secured creditor - $72,802.
(e)Interest - $2,727.
[25]The liquidators admitted the following claims in the liquidation:
(a)Secured claims – $188,407. This claim has been met in full by the secured creditor.
(b)Preferential unsecured claims – $211,549. The sum of $50,053 has been paid towards that sum, being a distribution percentage of 24 per cent.
(c)Non-preferential unsecured – $121,356. There has been no distribution to non-preferential unsecured creditors, and no further funds available to meet any such claims.
Should the liquidators’ remuneration be approved?
[26] The liquidators have provided a breakdown of their time records and charges, which show that the hourly rates have been applied in accordance with those generally approved by the Court in accordance with the liquidator’s consent to act dated 6 September 2023.
[27] In total the liquidators have spent 126.19 hours, at a total cost of $44,458 excluding GST. The liquidators have incurred disbursements in the total amount of
$3,452.
[28] The liquidators calculate that the average hourly rate for the attendances on the liquidation by them and their firm totals $352, exclusive of GST. The liquidators state that a suitable level of staffing was employed according to the work required, and that a significant portion of the work undertaken in the liquidation was completed at the lower manager or analyst level.
[29] The time incurred by the liquidators and their staff is broken down further as follows:
(a)33 per cent was spent on general enquiries, initial discussion with the director and creditors, statutory reporting and administration of the liquidation; and
(b)67 per cent was spent on investigating, issuing claims, negotiating and attending on settlement of the liquidators’ claims in the liquidation.
[30] In the circumstances, I am satisfied that the categories of work undertaken by the liquidators were necessary to wind up the affairs of the company, and that the remuneration for which approval is sought reflects the fair value of services rendered by the liquidators to the creditors.
Result
[31] For the reasons set out above, the liquidators’ remuneration of $44,458 (excluding GST) is approved.
Associate Judge Cogswell
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