Commissioner of Inland Revenue v R T S T Limited (in liquidation)

[2022] NZHC 1600

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE

CIV-2021-454-000022

[2022] NZHC 1600

UNDER

the Companies Act 1993

IN THE MATTER

of the liquidation of R T S T LIMITED (In Liquidation)

BETWEEN

THE COMMISSIONER OF INLAND REVENUE

Plaintiff

AND

R T S T LIMITED (In Liquidation) Defendant

Hearing:	On the papers
Counsel:	J Sprosen – Memorandum filed by Liquidator of 31 May 2022
Judgment:	6 July 2022

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 6 July 2022 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

COMMISSIONER OF INLAND REVENUE v R T S T LTD (In Liquidation) [2022] NZHC 1600 [6 July 2022]

[1]                  There is before me an application of the liquidators of R T S T Ltd (in liquidation) (the company) for approval of their remuneration under s 284(1)(e) of the Companies Act 1993.

Background

[2]                  The company was incorporated on 4 December 2014. It was put into liquidation by order of the High Court on 24 June 2021 upon the application of the Commissioner of Inland Revenue. Vivian Judith Fatupaito and Luke Norman, both of KPMG, were appointed joint and several liquidators. The Court approved the rates of remuneration of the liquidators and staff working under their supervision at that time.

[3]                  On 8 March 2022, Janet Sprosen was appointed as replacement liquidator for Ms Fatupaito.

[4]                  The application before me is accompanied by a copy of the liquidators’ first and second reports, along with a draft final report to be lodged with the Registrar of Companies. The draft final report was prepared on the basis that all distributions had been made and the liquidators’ fees approved by the Court.

[5]                  The liquidators have provided a summary of the work that was undertaken in the liquidation.

[6]                  The company operated as a supermarket at Dannevirke. The closure of the Manawatu Gorge resulted in customer numbers declining. The business was sold in March 2019, at a significant loss.

[7]                  The company’s documents were obtained from the company’s director, accountant, solicitor and third parties, including information regarding the sale of the business.

[8]                  The liquidators identified an overdrawn shareholder’s current account which was repaid during a financial year. They made enquiries with the directors and their accountant and verified the funds introduced. The funds were applied to the company’s liability to a secured creditor.

[9]                  The liquidators undertook investigation into potential claims in the liquidation and into potential assets of the company that might be available to pay creditors. Importantly, two vehicles were identified as being owned by the company as at the date of liquidation. Both vehicles were subject to security interests. The liquidators notified the secured creditor of the liquidation. The vehicles were uplifted and sold by the secured creditor. The secured creditor applied the sale proceeds to the secured debt and distributed the surplus funds to the liquidators.

[10]              The liquidators have also attended to administrative tasks, including corresponding with creditors and attending to statutory reporting requirements.

[11]              The liquidators anticipate distributions of $1,051.85 to the Commissioner, representing 100 percent of its costs in putting the company into liquidation, and a further $16,763.28 representing 19 percent of the Commissioner’s preferential unsecured creditors claim. There will be no funds available to make a distribution to non-preferential unsecured creditors.

Legal principles

[12]              The principles that apply in considering such applications are set out in the decisions of Re Roselea Path Ltd (in liq),1 and Madsen-Ries v Salus Safety Equipment Ltd (in liq)2, which I have considered.

[13]              I am required to be satisfied the remuneration sought by the liquidators reflects the fair value of the services rendered to the creditors of the company. I am so satisfied.

[14]              The liquidators have concluded that all avenues for recovery have been pursued and the liquidation can be concluded.

[15]              I have seen and considered copies of the liquidators’ reports to the company’s creditors and shareholders. These reports set out the basis upon which the liquidators would charge fees and the hourly rates that have been approved by the Court. The

1      Re Roselea Path Ltd (in liq) [2013] 1 NZLR 207 (HC).

2      Madsen-Ries v Salus Safety Equipment Ltd (in liq) [2022] NZCA 101.

second liquidators’ report stated the amount of fees that had been incurred to that date and invited creditors’ feedback in respect of those fees.

[16]              The liquidators have provided a breakdown of time records and remuneration in the memorandum filed confirming the hourly rates applied were as approved by the Court. It is clear that work has been performed by staff at an appropriate level of seniority to ensure the costs incurred were reasonable. The remuneration sought can be broken down as follows:

17 percent by the liquidators/director

7 percent by manager or senior managers 64 percent by analysts and senior analysts 12 percent by support staff

[17]The total hours worked were 44.30 for an average hourly recovery rate of

$308.26, which appears reasonable given the work that was undertaken and the recovery that was made.

[18]              The liquidators sought approval from the Commissioner for the level of fees and expenses claimed. The Commissioner has confirmed that it has reviewed the liquidators’ memorandum to the Court and reviewed their remuneration claim and is satisfied as to the charges and the result of the liquidation.

[19]              Finally, although the unsecured creditors who will receive no payment in the liquidation, given the size of the Commissioner’s preferential unsecured claim, the fees sought will have no effect on those unsecured creditors.

Result

[20]              I am satisfied the liquidators’ remuneration reflects the value of the services rendered to the creditors of the company and I grant the application for approval of the liquidators’ fees as sought in an amount of $13,656 and expenses of $1,223.20.

O G Paulsen Associate Judge

Solicitors:
KPMG, Auckland (Liquidator: J Sprosen)