Linco Properties Limited v Townhouse Motel Limited (in liquidation)

[2022] NZHC 2314

IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY

I TE KŌTI MATUA O AOTEAROA TE TIHI-O-MARU ROHE

CIV-2020-476-000021

[2022] NZHC 2314

BETWEEN

LINCO PROPERTIES LIMITED

Plaintiff

AND

TOWNHOUSE MOTEL LIMITED

(In Liquidation) Defendant

Hearing:	On the papers
Counsel:	G Brown – Memorandum filed by Liquidator 1 September 2022
Judgment:	9 September 2022

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 9. September 2022 at 4.15 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

LINCO PROPERTIES LTD v TOWNHOUSE MOTEL LTD [2022] NZHC 2314 [9 September 2022]

[1]                 The liquidators of Townhouse Motel Ltd (in liq) apply for approval of their remuneration under s 284(1)(e) of the Companies Act 1993.

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

[3]                 The application is accompanied by copies of the liquidators’ initial report, six monthly reports and a draft final report to be lodged with the Registrar of Companies. The draft final report has been submitted on the basis that all distributions have been made and the liquidators’ remuneration approved.

[4]                 Townhouse Motel Ltd was incorporated on 3 May 2010. It carried on business as a motelier from leased premises at 29-31 Evans Street, Timaru. It ceased trading on 17 September 2020 upon appointment of the liquidators. The director of the company advised the liquidators that the insolvency was due to the Covid-19 pandemic, although it appears there may have been other reasons contributing to the company’s insolvency because it had rental arrears prior to the pandemic.

[5]                 The company was put into liquidation by order of the High Court and Geoff Brown and Lynda Smart of Rodgers Reidy (NZ) Limited were appointed joint and several liquidators. At the time of making of the order, the Court approved the rates of remuneration of the liquidators and staff working under their supervision.

[6]                 The liquidators have provided satisfactory details of the work undertaken in the liquidation. Apart from performing their statutory functions (including issuing statutory reports), they advise that upon appointment they attended the motel premises in Timaru and identified that the company’s director/shareholder and her family, were continuing to occupy the manager’s unit. The liquidators negotiated a period of time for the director to vacate the unit and surrender any tenancy that might exist, and she vacated within the negotiated time period. The liquidators then took steps to secure

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

the premises, including changing locks and arranging nightly security patrols and insurance cover.

[7]                 The liquidators undertook investigations into the affairs of the company which included interviewing the director and obtaining company records from the director, the company’s accountant and various third parties.

[8]                 The liquidators identified that the only assets owned by the company were the chattels used to operate the motel and its lease. The chattels were sold to the landlord in accordance with a requirement of the lease by private treaty and the sale price confirmed by an independent valuer.

[9]                 At the time the company went into liquidation the company had accepted a conditional offer to sell its leasehold interest and fixed assets. The liquidators liaised with the purchaser’s solicitor to determine the nature of the conditions and whether they were able to be met. The liquidators were unable to negotiate a revised sale and purchase agreement and the lease was disclaimed.

[10]              The liquidators’ review of the company’s records did not identify any economic claims or actions to take against the company’s director or other parties and there are no other avenues to recover or claim against third parties.

[11]              With the liquidators’ draft final report is a statement of realisations and distributions. It shows that there were total realisations of $16,380, made up principally of the proceeds of sale of the company’s assets and some cash held in the bank. From this the liquidators have had to pay GST, insurance, legal fees and substantial expenses to secure the motel premises. The balance shall go to paying the liquidators’ remuneration and expenses. There shall be no distributions to any other creditors in the liquidation.

[12]              I am satisfied a significant amount of work has been undertaken by the liquidators and they have concluded all avenues for recovery. I have seen and considered copies of the liquidators’ reports to the company’s creditors and shareholders. The liquidators’ initial report sets out the basis upon which the

liquidators would charge fees and the hourly rates that have been approved by the Court.

[13]              The liquidators have provided a breakdown of time records 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 $16,000.50 (plus GST). Due to insufficient recoveries, the liquidators propose to write-off $7,514.36 of this sum, representing 47 percent of the total.

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

$243.76 (excluding GST) but just $114.48 after the write-off. This is substantially less than is commonly charged for such work.

[15]              I am satisfied the work has been performed by staff at an appropriate level of seniority to ensure costs incurred were reasonable. The total time spent on the file was

65.64 hours of which 39 percent of time was of the liquidators, 41 percent was time of insolvency staff and the remaining time was for administration and support staff.

[16]              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, and the non-payment to creditors reflects the fact that the company had very few assets of value and no valid claims or avenues to pursue.

[17]              I am therefore satisfied the liquidators’ claimed remuneration reflects fair value for the services rendered to the creditors of the company and I will grant the application for approval as sought.

[18]              The liquidators have also claimed disbursements in the liquidation. The total amount of disbursements incurred was $1,375.59, but due to insufficient recoveries,

$524 will be written off representing 38 percent of the total. I am satisfied that the disbursements claimed are reasonable in nature and amount.

Result

[19]              I grant the application for approval of the liquidators’ remuneration in an amount of $8,486.14 (excluding GST) and expenses of $851.59.

O G Paulsen Associate Judge

Solicitors:
Rodgers Reidy (NZ) Limited, Christchurch (Liquidator contact: G Brown)