P M FINNIGAN AND B VAN DELDEN LIQUDATORS OF EXLBR LIMITED (IN LIQUIDATION) AND COMMISSIONER OF INLAND REVENUE [2016] NZHC 2454

P M FINNIGAN AND B VAN DELDEN LIQUDATORS OF EXLBR LIMITED (IN LIQUIDATION) AND COMMISSIONER OF INLAND REVENUE [2016] NZHC 2454

The Court declined to order that the applicants' solicitor/client costs of the application be treated as an expense of the liquidation because allowing the costs to be so treated would improperly advantage the applicants (by creating a preferential claim) to the potential detriment of other creditors including the...

Source-derived case information.

Citation
[2016] NZHC 2454
Parties
Applicant (liquidator): P M Finnigan; Applicant (liquidator): B Van Delden; Interested Party: Commissioner of Inland Revenue; Company (in Liquidation): EXLBR Limited (in liquidation)
Court
High Court
Jurisdiction
New Zealand
Judgment Date
14 October 2016
Procedural Posture
Application Under the Companies Act 1993 for Appointment of Liquidators and Consequential Costs Determination / Interlocutory Application Determined on the Papers; Appointment Confirmed and Costs Application Reserved and Then Decided
Outcome
Applicants' appointment as liquidators confirmed as from 28 July 2016; application to treat solicitor/client costs of the appointment application as an expense of the liquidation refused.
Legal Topics
Liquidator Appointment, Disqualification of Liquidators (s 280), Costs in Liquidation, Preferential Claims
Company Law Insolvency Civil Procedure Tax Law Liquidator Appointment Disqualification of Liquidators (s 280) Costs in Liquidation Preferential Claims

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Parties

P M Finnigan

Applicant (liquidator)

B Van Delden

Applicant (liquidator)

Commissioner of Inland Revenue

Interested Party

EXLBR Limited (in liquidation)

Company (in Liquidation)

Procedural Posture

Application Under the Companies Act 1993 for Appointment of Liquidators and Consequential Costs Determination / Interlocutory Application Determined on the Papers; Appointment Confirmed and Costs Application Reserved and Then Decided

Legal Issues

  1. 1 Whether persons who within two years provided professional services to the company are disqualified under s 280(1)(ca) from acting as liquidator without court order
  2. 2 Whether costs on a solicitor/client basis of an application to regularise a defective appointment can be treated as an expense of the liquidation
  3. 3 Whether an innocent oversight by liquidators justifies ordering their legal costs as a liquidation expense that ranks ahead of statutory preferential claims

Ratio Decidendi

The Court declined to order that the applicants' solicitor/client costs of the application be treated as an expense of the liquidation because allowing the costs to be so treated would improperly advantage the applicants (by creating a preferential claim) to the potential detriment of other creditors including the Commissioner; an innocent oversight in accepting an appointment does not ordinarily entitle liquidators to recover costs that reduce the dividend available to creditors.

Court Disposition

Applicants' appointment as liquidators confirmed as from 28 July 2016; application to treat solicitor/client costs of the appointment application as an expense of the liquidation refused.

Orders

  • Applicants appointed as liquidators of EXLBR Limited (in liquidation) effective 28 July 2016.
  • Application for an order that the applicants' solicitor/client costs of this application be an expense of the liquidation is refused.