Saunders & Co Lawyers v Land Homes Limited (in liquidation)

[2022] NZHC 2268

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2020-409-000371

[2022] NZHC 2268

BETWEEN

SAUNDERS & CO LAWYERS

Plaintiff

AND

LAND HOMES LIMITED (IN LIQUIDATION)

Defendant

Hearing:	On the papers
Counsel:	G Brown – Memorandum filed by Liquidator 1 September 2022
Judgment:	7 September 2022

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 7 September 2022 at 10.30 am pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

SAUNDERS & CO LAWYERS v LAND HOMES LTD (in liq) [2022] NZHC 2268 [7 September 2022]

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

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

[3]                 Land Homes Ltd was incorporated on 10 May 2017 and operated as a builder of residential homes. It ceased trading in late 2019. The director of the company advised the liquidators that the insolvency was the result of a combination of factors including rapid growth, design and resource consent issues leading to delays in completing builds, and adverse media coverage.

[4]                 The company was put into liquidation by order of the High Court on 1 October 2020 and Geoff Brown and Lynda Smart of Rodgers Reidy (NZ) Ltd were appointed joint and several liquidators. At the time of making the order, the Court approved the rates of remuneration of the liquidators and staff working under their supervision.

[5]                 The liquidators have provided satisfactory details of the work undertaken in the liquidation. In summary, upon their appointment, the liquidators conducted an initial investigation into the affairs of the company. This included interviewing the director and obtaining the company’s records from the director, the company’s accountant and third parties. The liquidators were unable to identify any assets owned by the company. They learned that prior to the liquidation a number of assets were stolen from the company. They confirmed that Police complaints and insurance claims had been lodged in respect of those matters. The liquidators identified a debt that was due to the company but it was written off as not recoverable as the debtor had a right of set-off under s 310 of the Companies Act.

[6]                 The liquidators’ review of the company’s financial records did not identify any economic claims or actions to take against the company’s director and did not identify other avenues to recover or claim against third parties.

[7]                 With the liquidators’ draft final report is a statement of realisations and distributions which show total realisations of $18,246. From this, the court costs of the petitioning creditor have been paid in full. The balance shall go to paying the liquidators’ remuneration and expenses. There shall be no distributions to any other creditors in the liquidation.

Legal principles and their application

[8]                 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 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.

[9]                 A significant amount of work has been undertaken. The liquidators have stated that all avenues for recovery have been pursued and the liquidation can be concluded.

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

[11]              The liquidators have provided a breakdown of time records and remuneration in their memorandum which shows the hourly rates to be applied are at a discount on those approved by the Court. At the Court approved rates the liquidators’ remuneration would be $12,336 (plus GST). Due to insufficient recoveries the liquidators propose to write off $2,620.46 of this sum representing 21 percent of the total time incurred by the liquidators.

[12]              The proposed remuneration, before write-offs, represents an average hourly rate of just $219.38 (excl GST) and just $172.79 (excl GST) after write-offs. This is less than is commonly charged for such work.

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.

[13]              I am satisfied that work has been performed by staff at an appropriate level of seniority to ensure the costs incurred were reasonable. The total time spent on the file was 56.23 hours of which 34 per cent was time of the liquidators, 28 per cent was time of insolvency staff, and 38 per cent was time of administration and support staff.

[14]              While the secured and unsecured creditors will not receive any payment in the liquidation, this is in circumstances where the liquidators have found the company has no assets and no valid claims or avenues to pursue.

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

[16]              The liquidators have also claimed disbursements in the liquidation. I understand these are claimed on an “as paid” basis with no mark-up. The total amount of disbursements is $2,041.89, but $529 will be written off representing 26 per cent of the total. I am satisfied this is appropriate.

Result

[17]              I grant the application for approval of the liquidators’ remuneration in an amount of $9,715.54 (excl GST) and expenses of $1,485.89.

O G Paulsen Associate Judge

Solicitors:

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