Commissioner of Inland Revenue v RBTC Limited

[2024] NZHC 3127

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2019-409-357

[2024] NZHC 3127

UNDER

the Companies Act 1993

IN THE MATTER

of the liquidation of RBTC LIMITED

BETWEEN

THE COMMISSIONER OF INLAND REVENUE

Plaintiff

AND

RBTC LIMITED

Defendant

Hearing:	On the papers
Judgment:	25 October 2024

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 25 October 2024 at 10.30 am pursuant to rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:

THE COMMISSIONER OF INLAND REVENUE v RBTC LIMITED [2024] NZHC 3127 [25 October 2024]

Introduction

[1]                 The liquidators of RBTC Ltd (in liquidation), Elizabeth Helen Keene and Luke Norman, have applied under s 284(1)(e) of the Companies Act 1993 (the Act) for approval of their remuneration of $46,224. Originally the Court had appointed Ms Keene and Vivian Judith Fatupaito as joint and several liquidators of the company. Mr Norman was appointed upon the resignation of Ms Fatupaito on 8 March 2022.

[2]                 The company was incorporated on 16 January 2009 and operated as a pest and weed control service in the Canterbury region. It was put into liquidation by the High Court on 3 October 2019. Upon the making of the liquidation order, the liquidators’ rates of remuneration were approved subject to s 284 of the Act.

[3]                 The liquidators have provided copies of their first to tenth liquidators’ reports, along with a draft final report prepared on the basis that their remuneration had been approved by the High Court.

[4]                 The liquidators have undertaken a significant amount of work. Initially they were unable to contact the company directors but understood that the company continued to trade. Efforts to locate the directors were ultimately successful, and information was requested from the company directors, accountant and third parties to understand the company’s financial position and affairs. That information was assessed to determine available assets, including potential recoveries and claims.

[5]                 There were concerns arising in the liquidation because of threats to destroy company assets and because the company’s assets included guns which were in the possession of company officers. Ultimately the company’s assets were recovered and sold at auction, although the assets were not substantial in number or value.

[6]                 The liquidators identified a claim for overdrawn shareholders’ current accounts, which claims were settled by agreement and the amounts owing paid.

[7]                 The liquidators identified no further claims that could be pursued for the benefit of creditors and have finalised the liquidation. They consider there will not be any other claims in the liquidation which would result in recovery to creditors.

[8]                 The liquidators anticipate that the petitioning creditor’s costs will be paid in full and that there will be a first and final distribution to the Commissioner of Inland Revenue amounting to $65,259, representing 84 per cent of its preferential claim. There will be no funds available to make distributions to unsecured non-preferential creditors, which I understand are owed $57,334.

Legal principles

[9]                 The Court’s power to approve liquidators’ remuneration is provided in s 284 of the Act. The principles that apply are set out in the full High Court decision, Re Roslea Path Ltd (in liq).1 The Court of Appeal in Madsen-Ries v Salus Safety Equipment Ltd (in liq) recently confirmed the approach adopted in Re Roslea Path Ltd.2 The Court approved counsel assisting’s summary of the principles that apply to the determination of retrospective applications as follows:3

(a)Liquidators are fiduciaries and their fundamental obligation is a duty to account. There is a conflict between the interests 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.

(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.

1      Re Roslea Path Ltd (in liq) [2013] 1 NZLR 207 (HC) at [102].

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

3 At [15].

(h)The process of fixing remuneration needs to be proportionate. It should not be unduly prescriptive; nor should it unnecessarily add costs to creditors.

[10]The Court of Appeal held:4

… 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.

Discussion

[12]              I am satisfied the liquidators have pursued all avenues for recovery and that the liquidation should be concluded.

[13]              The creditors of the company were made aware in the liquidators’ first and subsequent reports of the liquidators’ and support staffs’ hourly rates approved by the Court. They have also been advised on a progressive basis of the work that has been performed and the charges made in each reporting period.

[14]              The liquidators have provided a breakdown of time records and remuneration claimed. I am satisfied that the work was done by staff at appropriate levels to ensure that costs were limited and reasonable. The majority of the work was carried out by staff at analyst and support staff level. The average hourly recovery rate for all work undertaken was $311.06, which I consider reasonable and consistent with what is charged in the market.

[15]              While there was no recovery for unsecured non-preferential creditors, that is not a reflection upon the work undertaken by the liquidators.

[16]              I am satisfied that work undertaken was necessary and the remuneration claimed appropriate and reasonable. I note that the Commissioner of Inland Revenue

4 At [54].

has confirmed there is no objection to the liquidators’ claimed remuneration which is significant in circumstances where its preferential claim has not been fully paid.

Result

[17]I grant the application for approval of the liquidators’ remuneration totalling

$46,224 excluding GST.

O G Paulsen Associate Judge

Solicitors:
Inland Revenue Legal Services, Christchurch

Copy to:
E Keene, KPMG