Parbery v Heat Exchanger Services Limited HC Christchurch CIV 2009-409-2624

[2010] NZHC 1189

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2009-409-002624

BETWEEN  JULIAN DAVID PARBERY Plaintiff

ANDHEAT EXCHANGER SERVICES LIMITED

First Defendant

ANDJAMES PARBERY Second Defendant

Judgment:      9 July 2010

JUDGMENT OF ASSOCIATE JUDGE DOHERTY

as to Costs

[1]      An interim liquidator was appointed in respect to the first defendant by order of the Court on 10 November 2009.  In a judgment of 22 June 2010 I made an order for the appointment of a final liquidator on the grounds that it was just and equitable that the first defendant be wound up.    I note the first defendant is solvent and has traded profitably.   I note also that the shareholders are the plaintiff and second defendant together with their family interests.

[2]      My judgment set a timetable for the disposition of costs, both as to the proceeding and in respect of the interim liquidation.   As to the latter, the interim liquidator has filed an application.  As to the former, both the plaintiff and second defendant  have  filed  memoranda  (plaintiff:  15  pages  plus  affidavit  with  seven

exhibits – second defendant: 11 pages plus affidavit with seven exhibits).

PARBERY V HEAT EXCHANGER SERVICES LIMITED AND ANOR HC CHCH CIV-2009-409-002624  9

July 2010

Costs as between plaintiff and second defendant

[3]      My judgment noted that there had “complete breakdown of the relationship between not only the shareholders but the directors”.  The original application was fought “tooth and nail”, but I appointed the liquidator because a proposed settlement had not been implemented and the parties agreed that there would ultimately be no opposition to the application.

[4]      That has not stopped the plaintiff and the second defendant from accusation and counter-accusation.  They cannot agree that the sun comes up in the morning. The only thing they can agree on is that neither of them wants to fully recompense the interim liquidator, who has been forced to referee their squabbling.

[5]      The reality is that the plaintiff and second defendant are now asking the Court to referee on their claim and counterclaim as to each other’s conduct through the medium of costs applications.  It is impossible to do this on the affidavits.  If this matter had gone to hearing, the Court would of necessity have had to come down on one side or the other, and might therefore be in a position to apportion a “winner”. But that is impossible to do now, and I do not intend to try.

[6]      The  plaintiff  and  second  defendant’s  conduct  toward  each  other  and  the resultant effect of their behaviour on the first defendant means they deserve to bear their own costs.  There are no orders for costs as between the two of them.

Interim liquidator’s costs

[7]      The interim liquidator seeks payment of his costs (actual recorded time at the hourly rates in accordance with regulation 28 of the Companies Act 1993 insolvency regulations 1994) thus:

Interim liquidator costs	$42,419.25
Consultants’ fees	$46,904.60
Unpaid legal fees	$3,379.25
Total	$92,703.10

[8]      In an affidavit, Mr Parke, a deputy Official Assignee on behalf of the interim liquidator deposed that in view of the competing complaints and demands from the plaintiff and second defendant he was obliged to give particular care and attention to the administration of the liquidation.  Mr Parke detailed the works carried out by the interim liquidator, which were unremarkable in the context of such matters other than what he described as thus:

A good level of monitoring was considered prudent given the allegations and disputes involved.   After the initial period, we settled on a regime which included:

a)Daily  cashbook  entry  and  budget  forecast  was  prepared following receipt of the previous days’ Kiwibank trading account statement.

b)       Approval of payables was required.

c)        Open   line   contact   with   Gayle   Lord   [office   manager] concerning payables and other financial and administrative issues.

d)       Monitoring of wages twice monthly.

e)        Review of all trial balances on a monthly basis. f)  Attending to check invoices against payments. g)        Monthly review of BNZ account reconciliation.

The interim liquidator also saw fit to instruct HFK Limited, chartered accountants,  who  have  experience  in  the  insolvency  field  to  advise  the interim liquidator in relation to the running of the interim liquidation, and in particular an assessment of the cashflow and balance sheet solvency of the company.  HFK provided a report in December 2009.

[9]      The interim liquidator was required to deal with specific issues including Court  appearances,  an  application  to  the  Court  by  the  parties  for  directions concerning his running of the company, and an employment issue stemming from the suspension of the plaintiff and his wife as employees.

[10]     Solicitors were instructed in relation to the employment investigation.  Given the complexity of the issue and the nature of claim and counterclaim between the plaintiff and second defendant I think it entirely reasonable that was done.

[11]     Both the plaintiff and second defendant complained about many of these matters.   They thought that many of the interim liquidator’s actions were not warranted and/or appropriate (eg it was unnecessary to make the interlocutory application  for  directions  as  to  interim  costs;  it  was  inappropriate  that  he  get involved  in  the  employment  complaints  and  attending  a  mediation  in  respect thereof).

[12]   In particular, the second defendant complains that whilst “There has undoubtedly been some considerable expense incurred by the [interim liquidator] in identifying and addressing (or attempting to address) the disputes between the plaintiff and the second defendant… ultimately, the interim liquidation has not in any material sense resolved or even contributed to the resolution of those disputes.”

[13]     Whilst the second defendant accepts that the parties’ conduct added to cost, he is not prepared to pay for it.   On the other hand, the plaintiff submits that the second defendant ought to be solely liable to pay those costs relating to the employment issue.

[14]     This  interim  liquidation  has  already  been  the  subject  of  a  judgment  of Associate Judge Doogue following an initial claim for costs (Parbery v Heat Exchanger Services Ltd (in interim liq) HC Christchurch CIV-2009-409-2624, 18

March 2010).  The principles and approach in approving the issue of a liquidator’s remuneration was considered in that judgment.  I adopt Associate Judge Doogue’s reasoning in that regard and also his analysis and opinion on the worth of the work which formed the basis of the charges he was dealing with at that time.  I will not repeat that exercise.

[15]     In his judgment Judge Doogue approved fees of $30,000 (from a total bill rendered  of  $38,399.36),  which  included  legal  and  consultants’  fees.     This represented  an  approximate  20  per  cent  discount  of  the  amount  claimed.    He approved the rates charged on an hourly basis.  I see no reason to change that.

[16]     He said, at [28]:

I  consider  that  the  future  charges  at  the  rates  sought  are  reasonable. However, in the end, it must be emphasised that hourly rates are only part of the picture. It will be the overall aggregate total that ultimately has to be approved by the Court. In that regard, the OA will no doubt appreciate that after  an  initial  settling  down  period,  it  should  be  possible  for  him  to supervise the operation of the company with a rather lighter hand than was necessary at the outset of the interim liquidation.

[17]     It is clear from what has gone on since the delivery of that judgment that, rather than a lighter hand, perhaps a heavier one was necessary because of the continuing conduct of the parties.   I am not inclined to quibble with the amount claimed by the interim liquidator.  Nor do I quibble with the consultants’ fees (HFK Limited was not involved again after the initial report and that firm’s fees were approved by Associate Judge Doogue), particularly bearing in mind the legal issues surrounding the employment of the plaintiff and his wife.   There does, however, need to be an adjustment for the amount discounted by Judge Doogue which has not flowed through in the interim liquidator’s application.   The total sought therefore needs to be adjusted downwards by $8399.36.  That is, to $84,303.74.

[18]     The plaintiff submits the second defendant should pay those costs of the interim liquidator incurred in investigating the employment allegations, but those allegations have not been determined one way or the other and it is difficult to determine the merits.  The interim liquidator was in my view entitled to make his own decision as to the merit of embarking upon the investigation.  His explanation (through Mr Parke) that the continuing payment of remuneration to both the plaintiff and his wife whilst they were adding no value to the company required his attention. On the information available to me I am inclined to agree, and to my mind the interim liquidator’s decision to inquire into the circumstances seems entirely sensible and appropriate.

[19]     The interim liquidator has also filed an affidavit from a Mr Hollis of the firm Price Waterhouse Coopers.   Mr Hollis is an experienced private sector liquidator. He gives an opinion on the level of fees rendered by the interim liquidator and a comparison of similar liquidations for which his firm has charged similar levels of fees.   He also opines that some types of work necessary for the interim liquidator

were “unusual in terms of a standard insolvency assignment”.  In Mr Hollis’ view the remuneration sought for the work done by the interim liquidator himself “is entirely reasonable”.

[20]     Having reviewed the basis of charging, the narration and nature of amount of work involved, the timekeeping records, and accepting that the actions of the interim liquidator post-March 2010 have been with the benefit and guidance of the judgment of Associate Judge Doogue, I approve pursuant to s 284(1)(e) of the Companies Act

1993 the remuneration of the interim liquidator (which includes the consultants’

fees) at $84,303.74.  This should be paid by the first defendant.

Associate Judge Doherty

Solicitors:

Parry Field, Christchurch

Official Assignee, Christchurch

Anthony Harper Lawyers, Christchurch
Graeme Skeates Law, Auckland

(Counsel: C T Patterson, Auckland)