COMMISSIONER OF INLAND REVENUE v R T S T LTD (In Liquidation) [2022] NZHC 1600

COMMISSIONER OF INLAND REVENUE v R T S T LTD (In Liquidation) [2022] NZHC 1600 [6 July 2022]IN THE HIGH COURT OF NEW ZEALANDPALMERSTON NORTH REGISTRYI TE KŌTI MATUA O AOTEAROATE PAPAIOEA ROHECIV-2021-454-000022[2022] NZHC 1600UNDER the Companies Act 1993IN THE MATTER of the liquidation of R T S T LIMITED(In Liquidation)BETWEEN THE COMMISSIONER OF INLANDREVENUEPlaintiffAND R T S T LIMITED (In Liquidation)DefendantHearing: On the papersCounsel: J Sprosen – Memorandum filed by Liquidator of 31 May 2022Judgment: 6 July 2022JUDGMENT OF ASSOCIATE JUDGE PAULSENThis judgment was delivered by me on 6 July 2022 at 4.00 pmpursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:[1] There is before me an application of the liquidators of R T S T Ltd (inliquidation) (the company) for approval of their remuneration under s 284(1)(e) of theCompanies Act 1993.Background[2] The company was incorporated on 4 December 2014. It was put intoliquidation by order of the High Court on 24 June 2021 upon the application of theCommissioner of Inland Revenue. Vivian Judith Fatupaito and Luke Norman, both ofKPMG, were appointed joint and several liquidators. The Court approved the rates ofremuneration of the liquidators and staff working under their supervision at that time.[3] On 8 March 2022, Janet Sprosen was appointed as replacement liquidator forMs Fatupaito.[4] The application before me is accompanied by a copy of the liquidators' firstand second reports, along with a draft final report to be lodged with the Registrar ofCompanies. The draft final report was prepared on the basis that all distributions hadbeen made and the liquidators' fees approved by the Court.[5] The liquidators have provided a summary of the work that was undertaken inthe liquidation.[6] The company operated as a supermarket at Dannevirke. The closure of theManawatu Gorge resulted in customer numbers declining. The business was sold inMarch 2019, at a significant loss.[7] The company's documents were obtained from the company's director,accountant, solicitor and third parties, including information regarding the sale of thebusiness.[8] The liquidators identified an overdrawn shareholder's current account whichwas repaid during a financial year. They made enquiries with the directors and theiraccountant and verified the funds introduced. The funds were applied to thecompany's liability to a secured creditor.[9] The liquidators undertook investigation into potential claims in the liquidationand into potential assets of the company that might be available to pay creditors.Importantly, two vehicles were identified as being owned by the company as at thedate of liquidation. Both vehicles were subject to security interests. The liquidatorsnotified the secured creditor of the liquidation. The vehicles were uplifted and soldby the secured creditor. The secured creditor applied the sale proceeds to the secureddebt and distributed the surplus funds to the liquidators.[10] The liquidators have also attended to administrative tasks, includingcorresponding with creditors and attending to statutory reporting requirements.[11] The liquidators anticipate distributions of $1,051.85 to the Commissioner,representing 100 percent of its costs in putting the company into liquidation, and afurther $16,763.28 representing 19 percent of the Commissioner's preferentialunsecured creditors claim. There will be no funds available to make a distribution tonon-preferential unsecured creditors.Legal principles[12] The principles that apply in considering such applications are set out in thedecisions of Re Roselea Path Ltd (in liq),1 and Madsen-Ries v Salus Safety EquipmentLtd (in liq)2, which I have considered.[13] I am required to be satisfied the remuneration sought by the liquidators reflectsthe fair value of the services rendered to the creditors of the company. I am sosatisfied.[14] The liquidators have concluded that all avenues for recovery have beenpursued and the liquidation can be concluded.[15] I have seen and considered copies of the liquidators' reports to the company'screditors and shareholders. These reports set out the basis upon which the liquidatorswould charge fees and the hourly rates that have been approved by the Court. The1 Re Roselea Path Ltd (in liq) [2013] 1 NZLR 207 (HC).2 Madsen-Ries v Salus Safety Equipment Ltd (in liq) [2022] NZCA 101.second liquidators' report stated the amount of fees that had been incurred to that dateand invited creditors' feedback in respect of those fees.[16] The liquidators have provided a breakdown of time records and remunerationin the memorandum filed confirming the hourly rates applied were as approved by theCourt. It is clear that work has been performed by staff at an appropriate level ofseniority to ensure the costs incurred were reasonable. The remuneration sought canbe broken down as follows:17 percent by the liquidators/director7 percent by manager or senior managers64 percent by analysts and senior analysts12 percent by support staff[17] The total hours worked were 44.30 for an average hourly recovery rate of$308.26, which appears reasonable given the work that was undertaken and therecovery that was made.[18] The liquidators sought approval from the Commissioner for the level of feesand expenses claimed. The Commissioner has confirmed that it has reviewed theliquidators' memorandum to the Court and reviewed their remuneration claim and issatisfied as to the charges and the result of the liquidation.[19] Finally, although the unsecured creditors who will receive no payment in theliquidation, given the size of the Commissioner's preferential unsecured claim, thefees sought will have no effect on those unsecured creditors.Result[20] I am satisfied the liquidators' remuneration reflects the value of the servicesrendered to the creditors of the company and I grant the application for approval ofthe liquidators' fees as sought in an amount of $13,656 and expenses of $1,223.20._______________________O G PaulsenAssociate JudgeSolicitors:KPMG, Auckland (Liquidator: J Sprosen)