Norris v PR Law Queenstown no 1 Trustees Limited (in liq)

[2020] NZHC 1746

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CIV-2019-425-000001

[2020] NZHC 1746

UNDER

the Companies Act 1993

IN THE MATTER

of liquidation of PR Law Queenstown No 1 Trustees Limited

BETWEEN

JAY NORRIS

Plaintiff

AND

PR LAW QUEENSTOWN NO 1

TRUSTEES LIMITED (In Liquidation) Defendant

Hearing:	Determined on the papers
Counsel:	J W A Johnson for the liquidators
Judgment:	17 July 2020

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 17 July 2020 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

NORRIS v PR LAW QUEENSTOWN NO 1 TRUSTEES LTD (In Liquidation) [2020] NZHC 1746 [17 July 2020]

The application

[1]    The liquidators of PR Law Queenstown No 1 Trustees Ltd (PR Law) apply for an order fixing their remuneration under s 284(1)(e) of the Companies Act 1993. They have obtained the agreement to their remuneration of 98.7 per cent of the creditors in value. Associate Judge Lester ordered service of the application on the two creditors (representing 1.3 per cent of creditors in value) who have not agreed to the liquidators’ remuneration. They have both indicated they will not be opposing the liquidators’ application. The application therefore proceeds unopposed.

Background

[2]    The quantum of the liquidators’ remuneration is large. To explain why, it is necessary to set out some background.

[3]    On 4 April 2019, Brendon James Gibson and Natalie Gytha Burrett were appointed liquidators of PR Law with their remuneration subject to s 284 of the Companies Act 1933.1

[4]    PR Law’s assets were owned in its capacity as trustee of the Stuart Norris Family Trust. The principal asset was shares in a privately-owned tourism business, but the sale of the shares has been a complex process and opposed at various times by the settlor of the Trust, by trustees appointed by the settlor and more latterly by creditors.

[5]    As a result there were Court proceedings. An application for directions as trustee was brought by PR Law in June 2019. That application concerned, amongst other things, the sale of the shares. Consent orders were agreed in September 2019 which allowed the shares to be sold following a sale process. Further disagreement arose in February and March 2020. An offer for the shares was received by the liquidators but opposed. The matter was set down for an urgent hearing on 23 March 2020 but, prior to the hearing, the offer was withdrawn due to the COVID-19

1      Norris v PR Law Queenstown No 1 Trustees Ltd HC Invercargill CIV-2019-425-1, 4 April 2019.

pandemic. Another offer was received in May 2020. This offer was opposed by three creditors. An urgent hearing was held on 4 June 2020.

[6]    On 18 June 2020, Cull J released a final judgment in which her Honour directed that the shares could be sold.2 Cull J did not consider it was appropriate to determine the issue of the liquidators’ remuneration in that proceeding.3 Cull J made a preservation order in relation to the proceeds of sale pending further order of the Court.

[7]    Following the release of the judgment, the liquidators and all but the two creditors reached an agreement which provided that:

(a)the liquidators would discount their fees and expenses; and

(b)the liquidators’ fees and expenses would be paid in preference to the creditors, with the balance to be distributed to the creditors on a pari passu basis.

[8]    The terms of the agreement are set out in a joint memorandum of counsel dated 19 June 2020 which was filed in the proceeding before Cull J. The quantum of the liquidators’ fees and expenses, and the estimated distributions to creditors, were set out in an appendix to that memorandum. On 22 June 2020, Cull J released a minute discharging the preservation order in these terms:4

Accordingly, I order that the Preservation Order at para [58](h) of the final judgment in these proceedings be discharged, to allow for a distribution of the sale proceeds, once received, in accordance with the parties’ agreement.

[9]On 29 June 2020 the liquidators made this application.

2      An interim judgment was released on 12 June 2020.

3      PR Law Queenstown No 1 Trustees Ltd (in liq) v Norris & Ors [2020] NZHC 1397 at [54]-[56].

4      PR Law Queenstown No 1 Trustees Ltd (in liq) v Norris & Ors HC Invercargill, CIV-2019-425- 66, 22 June 2020 at [4].

Discussion

[10]   The liquidators seek the Court’s approval to fees of $140,000 and Goods and Services Tax. They have also incurred expenses (principally legal and expert’s fees). The liquidators’ fees (as well as some of the legal expenses) have been discounted. In the case of the liquidators the discount on “actual costs” is $22,583 or 14 per cent.

[11]   Under s 284(1)(e) the Court must be satisfied that the amount claimed is reasonable. The liquidators submit that the purpose of the Court supervision of liquidators’ remuneration is to protect the interests of creditors5 and as in this case approximately 98.7 per cent of the creditors (by value) have agreed that the liquidators are entitled to be paid their remuneration there is no need for the Court to adopt a protective role. The approval of the majority of the creditors does not absolve the Court from making its own assessment of the reasonableness of the liquidators’ remuneration. However, the Court must approach the matter pragmatically and efficiently.6

[12]   I have had regard to the principles set out in Re Roslea Path Ltd (in liq).7 In respect of retrospective applications for approval of liquidators’ remuneration the Court said:8

In relation to retrospective applications, we have authorised a modified procedure, based on a voluntary disclosure regime, the purpose of which is to inform creditors/shareholders of remuneration deducted, from time to time and their rights to challenge the amounts. If no challenge were brought by the time the retrospective application were made the Court is likely to approve fees charged with a minimum of inquiry… . If that new procedure were not adopted, in determining the “value” of the work undertaken, the Court is not entitled to fix a fee on an arbitrary (“broad brush”) basis but must exercise a judicial judgment on the fee to be approved, bearing in mind the onus placed on the liquidator to justify remuneration…

[13]   I am satisfied that the liquidators’ claims are reasonable. The liquidators are known to the Court as specialist insolvency practitioners. The liquidators’ rates (and the rates of staff engaged on assignments relating to the liquidation) are set out in the

5      Re Roslea Path Ltd (in liq) [2013] 1 NZLR 207 (HC) at [106] and [118].

6 At [112].

7      At [138]-[158] and [187].

8      At [187](c).

liquidators’ first statutory report. The liquidators’ second and third statutory reports provided details of the work performed by the liquidators and their staff, a breakdown of hours worked by author type, the hourly rates applied as well as disbursements incurred. I have also considered the description of the work performed in Counsel’s memorandum. The judgment of Cull J sets out the history of the litigation which raised complex issues requiring extensive work from both the liquidators and experienced counsel.

[14]   Overwhelmingly the creditors (by value) have accepted the liquidators’ claims as reasonable. Those include a law firm and an accountancy firm who the Court can expect are in a position to challenge the legitimacy of the liquidators’ claims if that was justified. The two creditors who have not agreed represent only 1.3 per cent of creditors by value. Each had the opportunity to raise any issue of concern with the Court and neither has done so. Those creditors are a law firm and a Queens Counsel who were similarly well placed to respond if they considered the liquidators’ claimed remuneration was not reasonable.

[15]   Finally, whilst it is the case that the creditors will receive payment of only a small proportion of what is owed to them, the judgment of Cull J makes it clear that this situation has come about by circumstances beyond the liquidators’ control and, I note, the liquidators have agreed to discount their remuneration.

Result

[16]   Under s 248(1)(e) of the Companies Act 1993 I approve the liquidators’ remuneration as set out at Appendix 1 of counsel’s memorandum of 29 June 2020.

O G Paulsen Associate Judge

Solicitors:

Wynn Williams (J W A Johnson), Auckland (Liquidators’ Solicitor)