Commissioner of Inland Revenue v HKT Holdings Limited (in liquidation)

[2024] NZHC 83

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CIV-2017-425-087

[2024] NZHC 83

UNDER

the Companies Act 1993

IN THE MATTER

of the liquidation of HKT

HOLDINGS LIMITED (IN LIQUIDATION)

BETWEEN

THE COMMISSIONER OF INLAND REVENUE

Plaintiff

AND

HKT HOLDINGS LIMITED (IN LIQUIDATION)

Defendant

Hearing:	(On the papers)
Judgment:	5 February 2024

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 5 February 2024 at 2.45 pm pursuant to rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:

THE COMMISSIONER OF INLAND REVENUE v HKT HOLDINGS LIMITED [2024] NZHC 83 [5 February 2024]

[1]                 The liquidators of HKT Holdings Limited (in liquidation) apply for approval of their remuneration under s 284(1)(e) of the Companies Act 1993.

[2]                 The issue for me is whether I am satisfied the remuneration sought by the liquidators reflects the fair value of the services rendered to the creditors of the company.1

[3]                 The liquidators’ application is accompanied by copies of their 12 statutory reports, including a draft final report to be lodged with the Registrar of Companies which has been prepared on the basis that all distributions have been made and the liquidators’ remuneration approved.

[4]                 HKT Holdings Ltd was incorporated on 27 February 2006 to acquire livestock for dairy farming. The directors advised the liquidators that the company had cashflow issues which resulted in the withdrawal of funding and the sale of its livestock assets. The company was put into liquidation on the application of the Commissioner of Inland Revenue by the High Court on 12 October 2017 for failing to meet its tax obligations in respect to goods and services tax, associated penalties and interest.

[5]                 The High Court appointed Vivian Judith Fatupaito and Andrew John Hawkes as the joint and several liquidators of the company. At the time of making the order for liquidation the High Court approved the rates of remuneration of the liquidators and staff working under their supervision.

[6]                 On 10 June 2019, Elizabeth Helen Keene was appointed joint and several liquidator upon the resignation of Andrew John Hawkes. In late March 2022, Janet Sprosen was appointed joint and several liquidator upon the resignation of Vivian Judith Fatupaito. Then, on 21 November 2023, Kristal Pihama was appointed joint and several liquidator upon the resignation of Janet Sprosen.

[7]                 The liquidators have provided satisfactory details of the work undertaken by them in the liquidation. Upon appointment the liquidators spoke with the directors of

1      Re Roselea Path Ltd (in liquidation) [2013] 1 NZLR 207 (HC); Madsen-Reis v Salus Safety Equipment Ltd (in liquidation) [2022] NZCA 101.

the company and gained an understanding of the business. They were advised by the directors that the company had acquired livestock for dairy farming. Information was requested from third parties to determine whether there were any assets of the company available to the liquidators and/or other potential claims to be made in the liquidation.

[8]                 The  liquidators  reviewed  documentation  provided  by  the   Bank   of   New Zealand which had security interest over the company’s assets and were advised that prior to liquidation the company had sold the farm and assets under the direction of the Bank of New Zealand.

[9]                 The liquidators then investigated whether the company held shares in various agri-cooperatives. The proceeds received from redemption of shares in one of the agri-cooperatives was paid to the liquidators. The liquidators also identified that funds from shares redeemed prior to the liquidation were paid to the directors’ bank account. Arrangements for repayment by weekly instalments were made, although no formal arrangements agreed in this respect.

[10]             The liquidators also identified potential voidable transactions to a trust in which the directors were trustees. Information relating to the transactions was requested from the company’s former accountant and it was identified that the transactions were lease payments to the trust for use of the farm. The farm had been sold by the Bank of New Zealand prior to liquidation and as such the trust had no further assets upon which recovery could be made.

[11]             The liquidators also identified there was a breach of duties claim against the directors for trading whilst insolvent. Ultimately this claim was settled.

[12]             The liquidators advise there will be no funds available to make a distribution to the Commissioner for the petitioning creditor’s costs, nor to preferential creditors or to non-preferential unsecured creditors.

[13]             I am satisfied that a significant amount of work was undertaken by the liquidators and they have concluded all avenues for recovery.

[14]             The liquidators have provided a record of breakdown of time and their remuneration, which shows the hourly rates to be applied are at a very substantial discount on those approved by the Court. At the Court-approved rates, the liquidators’ remuneration would be $51,357.00 (plus GST). The liquidators propose to write off

$26,459.33 due to the insufficient recoveries, which represents more than 50 per cent of the total fees that would otherwise have been incurred.

[15]The proposed remuneration, before write-offs, represents an hourly rate of

$299.46 (excluding GST), but just $145.18 after write-offs. This is substantially less than is commonly charged for such work.

[16]             I am satisfied that the work has been performed by staff at an appropriate level of seniority to ensure that costs incurred were reasonable. The total time spent by the liquidators and staff amounted to 171.5 hours, of which 20.75 hours of time was of the liquidators, 38.80 hours of time was of managers, 89.45 hours of time was of analysts and 22.5 hours of time was of administration and support staff.

[17]             Whilst the creditors of the company will not receive any payment in the liquidation, I am satisfied that the work undertaken by the liquidators was necessary to wind up the affairs of the company. The absence of payment to the creditors reflects the fact that the company had no assets and there are no other avenues for recovery to be pursued.

[18]             I am satisfied that the liquidators’ claim to remuneration reflects fair value for the services rendered to the creditors and I will grant the application for approval as sought.

[19]             I note also that the Commissioner of Inland Revenue has confirmed their approval to the fees of the liquidators.

Result

[20]             I grant the application for approval of the liquidators’ remuneration in the amount of $24,897.67 (excluding GST).

O G Paulsen Associate Judge

Solicitors:
Inland Revenue, Legal and Technical Services, Christchurch.