PR LAW QUEENSTOWN NO 1 TRUSTEES LIMITED (IN LIQUIDATION) v NORRIS [2020] NZHC 1397

PR LAW QUEENSTOWN NO 1 TRUSTEES LIMITED (IN LIQUIDATION) v NORRIS [2020] NZHC 1397[18 June 2020]IN THE HIGH COURT OF NEW ZEALANDINVERCARGILL REGISTRYI TE KŌTI MATUA O AOTEAROAWAIHŌPAI ROHECIV-2019-425-000066[2020] NZHC 1397BETWEEN PR LAW QUEENSTOWN NO 1TRUSTEES LIMITED (IN LIQUIDATION)ApplicantAND S P M NORRISFirst RespondentJ S TAPPER-NORRISSecond RespondentA K H YOUDAThird RespondentK NORRIS BY HIS LITIGATIONGUARDIAN J NORRISFourth RespondentA L JOHNSFifth RespondentK8 TRUSTEES LTDSixth RespondentK9 TRUSTEES LTDSeventh RespondentHearing: 4 June 2020Counsel: J W A Johnson and W L Porter for the ApplicantJ Crowther for the First RespondentA J B Holmes for the Second RespondentG Blanchard for the Seventh RespondentJudgment: 18 June 2020FINAL JUDGMENT OF CULL J[1] PR Law Queenstown No 1 Trustees Ltd (in liq) (the Company) seeks urgentdirections under s 66 of the Trustee Act 1956, in its capacity as trustee to acceptunconditionally an offer of sale of a company asset, namely a parcel of shares.Because the offer of sale expired on Friday 12 June 2020, I issued an interim judgment,together with an appendix containing the confidential commercial details of theproposed transaction. This is the final judgment, released for publication, with alldetails of the transaction anonymised and that appendix removed.Background[2] The Company is a corporate trustee of the Stuart Norris Family Trust (theTrust). In May 2017, Mr Norris, the settlor of the Trust, and the Company entered intoa relationship property settlement agreement with Mr Norris' former partner,Minimum standard Norris, under which Mr Norris and the Company jointly andseverally agreed to pay Ms Norris $2,600,000 by 31 October 2017.[3] Payment was not made. Ms Norris applied for an interim charging order overshares (the Verbena Shares) that the Trust owned in a company which I will refer to asVerbena Ltd (Verbena).1 This application was granted by the High Court in August2018.[4] On 4 April 2019, the Company was put into liquidation on the application ofMs Norris. She remains the Company's principal creditor. The day before, Mr Norrisemailed the chairman and legal counsel of Verbena asking them to transfer the VerbenaShares to another entity. They did not comply without further information beingprovided. On 9 April, Mr Norris's then solicitors wrote to Verbena suggesting thatanother entity, K8 Trustees Ltd (K8 Trustees), be appointed trustee of the Trust.[5] On 18 June 2019, the Company applied to this Court for directions under s 66of the Trustee Act 1956 in its capacity as trustee relating to its ability to sell the VerbenaShares. The Company wanted to sell the Verbena Shares to meet the liabilities it hadincurred in its capacity as trustee and to pay the costs of liquidation.21 This is a fictitious name to protect all commercial and confidential interests in this matter.2 Under the Companies Act 1993, s 253.[6] On 4 August 2019, Mr Norris purported to offer the Verbena Shares for sale onbehalf of K8 Trustees. When this was brought to the Court's attention, an urgenthearing was set down. Two days before the hearing, on 26 August 2019, Mr Norrisfiled an affidavit in which he conceded that K8 Trustees had not been correctlyappointed and explained that he had earlier that day appointed K9 Trustees Ltd(K9 Trustees) as a trustee.[7] The following day, the parties reached an agreement which was formalised byway of consent orders. In so far as they are relevant to the current issue, these ordersare:3(a) the appointment of K9 Trustees as a trustee on 26 August 2019confirmed;(b) K9 Trustees and the Company were confirmed as the current and validtrustees of the Trust;(c) the Verbena Shares owned by the Trust could be released by the trusteesfor the purposes of meeting the Trust's liabilities, including theliquidators' fees, costs and disbursements;(d) the sale process for the Verbena Shares was to be the joint decision ofthe trustees, including the price per share and the number of shares sold;(e) the sale process of the Verbena Shares was to be conducted by thetrustees in consultation with the management of Verbena and inaccordance with the provisions of the Verbena constitution; and(f) in the event of disagreement, leave to apply to the Court within48 hours' notice was reserved.3 P R Law Queenstown No 1 Trustees ltd (in liq) v Norris HC Invercargill CIV-2019-425-66, 5September 2019. The remaining orders concerned the issue of costs and directions that Mr Norrisis not interfere with the sale process.The first offer[8] Further disagreement arose. Since the consent orders, the liquidatorsundertook a process to sell the Verbena Shares. They negotiated with Verbena toobtain relevant information, contacted existing shareholders and parties referred tothem by Verbena, gauged the interest of large investment institutions, and contactedtheir colleagues overseas to try and find purchasers. The Company provided evidenceto say that interest in the Verbena Shares has been very limited.[9] On 26 February 2020 the Company received an offer from a prospectivepurchaser (the first offer) that was sufficient to discharge the Company's liabilities infull, including the costs of liquidation. The Company's co-trustee, K9 Trustees, didnot agree to proceed with the first offer. K9 Trustees suggested that the trustees waitto receive an offer from a UK-based entity of which little is known. Despitesuggestions that the UK offer was just around the corner, it was not made. TheCompany had until 31 March 2020 to obtain Court approval or the consent of K9Trustees before the first offer expired.[10] An urgent hearing was set down before me on 23 March 2020 to determinewhether the first offer should be accepted. Initially, the Company sought an order thatthe trustees accept the first offer to allow the liquidators of the Company to pay itscreditors and the costs of the liquidation. A decision needed to be made before31 March 2020, which is when the Company was required to satisfy a condition withthe prospective purchaser.[11] After the filing of initial submissions for that hearing but before the hearingitself, the outbreak of COVID-19 occurred. The Company filed a furthermemorandum, dated 19 March 2020, seeking a wider order, that the Company and K9Trustees sell the Verbena Shares on any terms that the liquidators certify are, in theirview, the best terms that are reasonably obtainable in the circumstances. It submittedsuch an order was necessary because of the possibility that the purchaser may seek tochange the terms of the offer in the current climate. The new memorandum also askedthat, if the Court was satisfied the orders sought were appropriate, to make those ordersas soon as possible, with reasons to follow.[12] K9 Trustees was joined as a party to the proceeding.4 In the weekend prior tothe hearing, Mr Norris and K9 Trustees filed a memorandum agreeing to the first offerfor the sale of shares and set out the reasons as to why they were not able to agree toan earlier date. They opposed the amended order sought by the liquidators, identifiedat [10], on the grounds that, if granted, the wider order would allow the liquidators,being one of the two co-trustees of the Trust, to act in a unilateral manner without theneed to involve or obtain the approval of K9 Trustees.[13] Just prior to the hearing, the first offer was withdrawn by the prospectivepurchaser. The applicant filed a memorandum notifying the Court of the developmentand pressed for the wider orders.[14] I issued a minute on 24 March 2020 indicating my provisional views at thetime.5 I considered that the amended orders gave too wide a power to the liquidators,when they represented only one co-trustee and when the liquidators had a significantpersonal interest in recovering their fees, which were in excess of $400,000. Giventhe circumstances, I was minded to appoint an independent share valuer to provide theCourt with a view on any future potential offer for the sale of shares. Counsel wishedto obtain further instructions as to the appropriate course of action and indicated theywould file memoranda by Friday 27 March. Following the COVID-19 response atalert level four on 25 March 2020, no further steps were taken.[15] On 31 March 2020, the parties notified the Court that they agreed that adviceshould be sought regarding the value of the Verbena Shares before any offer isaccepted. The joint memoranda noted that options were being actively explored bythe parties and that should a further offer be made, the applicant will seek the adviceof David Vance of Deloitte, if he were willing to accept the appointment. Given therapidly changing environment under the COVID-19 pandemic restrictions, the partiessought leave to apply to the Court on 48 hours' notice subject to the applicability ofthe pandemic levels of alert.4 P R Law Queenstown No 1 Trustees Ltd (in liq) v Norris HC Invercargill CIV-2019-425-66, 11March 2020, pursuant to High Court Rules 2016, r 4.56.5 P R Law Queenstown No 1 Trustees Ltd (in liq) v Norris HC Invercargill CIV-2019-425-66, 24March 2020.Current applicationThe second offer[16] The Company has since received a further offer of purchase for the VerbenaShares, from the same purchaser (the second offer). Again, the Company filedmemoranda seeking an urgent hearing to determine the issues. The applicant seeksthe following directions:(a) the Company may accept the second offer unconditionally;(b) the Company and K9 Trustees must give notice in accordance withVerbena's constitution that the Verbena Shares are being offered onterms consistent with the second offer;(c) if any offers arise from Verbena's pre-emptive rights process on thesame terms as the second offer, those offers must be accepted by theCompany and K9 Trustees;(d) the Company and K9 Trustees must take all steps required to give effectto the directions given by the Court;(e) Mr Norris must not interfere with the process giving effect to the saleof the Verbena Shares and must take all necessary steps to give effectto the sale; and(f) the proceeds received from the sale must be paid into a bank accountcontrolled by the liquidators of the Company used to partially dischargethe Company's trustee indemnity in respect of the costs of liquidationof the Company and the costs the Company incurred in its capacity astrustee.[17] The latter part of the order sought in (f) relied on the consent orders dated5 September 2019 made by Nation J.6 In addition, the Company seeks an order thatthe interim charging order obtained by Ms Norris on 20 August 2018 be discharged.[18] The Company submits each direction is required to address the proceduralsteps that must be undertaken to give effect to the sale of the Verbena Shares and theCompany wishes to avoid having to seek further directions in relation to this process.Regarding the final direction sought, it was submitted that as Ms Norris is anunsecured creditor of the Company and ranks behind the liquidators in terms of thestatutory priorities in schedule 7 of the Companies Act 1993, the interim chargingorder should be discharged to allow the second offer to proceed.[19] The second offer is open until close of business on Friday 12 June.[20] Mr Norris formally opposes the second offer being accepted but has taken nosteps and appears to have withdrawn. However, Ms Norris, a non-party, has nowinstructed Counsel to appear to prevent the Verbena Shares from being sold at anundervalue. She opposes the sale of Shares by the liquidators for an amount whichwill recover little more than the liquidator's own costs. Ms Norris also opposes thedischarge of her charging order. K9 Trustees were not represented and did not appearat the hearing.Share valuation[21] In support of the Company's urgent request for a hearing and in accordancewith the process suggested by this Court and agreed by the parties, the value of theVerbena Shares have been independently assessed by David Vance, from Deloitte.Mr Vance filed affidavit evidence, annexing his valuation of the Company's interestin Verbena and his opinion on the potential offer of sale of the Shares.[22] Mr Vance's view is that the second offer is at the top end of the range of theVerbena's Share value, and it should be accepted. He provided a detailed valuation ofthe Verbena Shares which, because of its commercial sensitivity, is not repeated in its6 See [7] of this judgment.entirety in this judgment. The relevant information to assist the parties is summarisedin Appendix I to this judgment, which will be confidential to the parties only.[23] As the applicant has identified, the complicating factor is that Verbena ispresently undertaking a capital raising process in an effort to weather the COVID-19crisis. While this process may provide an opportunity to sell the Verbena Shares, thereare risks involved in electing to pursue this rather than accepting the second offer,those being:(a) if the capital raising process fails and Verbena is forced into liquidation,rendering the Verbena Shares valueless; or(b) existing shareholder value may be diluted as part of the capital raisingprocess.[24] In his second affidavit, Mr Vance confirmed his initial position and added thata liquidator's decision as to whether to sell assets must consider two aspects. First,there is a requirement to obtain the best price obtainable in the circumstances faced atthe time an asset is being dealt with. This does not mean on the day of sale but aroundthe time of sale. Importantly, it does not mean that a liquidator is required to hold anasset for a considerable time to get the maximum price that may be achieved. Theimportant distinction is that the circumstances being faced by the liquidator must beconsidered. Second, a liquidator, where possible, should test the market for assets thatare to be sold.[25] In outlining what his approach would likely be in the situation, given hisextensive experience as a liquidator, Mr Vance said:13. In my opinion I would be satisfied to sell the shares having confidencethat the market had been tested. In addition I would weigh up the benefit toselling the shares now in a hibernation, pre recapitalisation state againstwaiting at least two years to see firstly whether a recapitalisation was possibleand then more importantly whether [Verbena] could be turned aroundprofitably. Experience has confirmed that "a bird in the hand is better thantwo in the bush" in a financially stressed position and in the absence of anyother information I believe that I would look to complete a sale now ratherthan wait for the outcome of the recapitalisation process or wait a furtherperiod to see if the turnaround is successful. If there was information thatconfirmed that the recapitalisation deal was secure and underwritten andwould provide the required Capital then I would still be looking to continueto sell now rather than risk the failure of [Verbena] from an unsuccessfulturnaround.14. I am not aware of such certainty existing around the recapitalisation.To protect against the position where this failed I would, should I be theliquidator, continue with securing a sale of the shares now.[26] Ms Norris engaged Mr Roderick White, a financial analyst, to review andcomment on the first two affidavits provided by Mr Vance. Mr White made thefollowing comments:(a) Mr Vance's assessment is observational in nature and not a formalevaluation exercise. He had limited information from which he hascarried out indicative calculations in order to assess an appropriatevalue. The assessment should be recognised for what it is – anindicative estimate based on limited information.(b) Mr Vance's key assessment is of an estimated issue price for theVerbena Shares, derived from estimates of equity requirements and apercent of shares purchased by a new shareholder at a certainpercentage. Mr White says the estimate of equity requirements reliedon is incorrect, and he is unclear as to the basis for the certainpercentage figure Mr Vance adopts.(c) Verbena issued a formal update to all shareholders updating them onthe company's recapitalisation efforts, including valuation. It recordsa "pre-money" value of the shares which in a range two to four timeshigher than which Mr Vance adopted.Legal principles[27] The Company initially sought the Court's sanction of the sale of the VerbenaShares, as assets held by the trustees, to satisfy the trustee's right to be indemnifiedfor the costs it had incurred as a trustee, including the costs of liquidation.7 In thissituation, the right of indemnity related to liabilities incurred but not yet paid. The7 Trustee Act 1956, s 38(2); and Gibson v Norris & Ors [2019] NZHC 1348 at [20].Company sought to pay the liabilities out of trust assets, through the sale of theVerbena Shares. It sought to be exonerated for those liabilities on the basis of theconsent orders issued by Nation J in 2019 (outlined above at [6(c)]).[28] Under s 66 of the Trustee Act 1956, a trustee may apply to the Court fordirections concerning any property subject to a trust, or respecting the management oradministration of any such property, or respecting the exercise of any power ofdiscretion vested in the trustee. Section 66 is designed to remove doubts regarding thepropriety of a course of action contemplated by a trustee and should be used only forrelatively minor matters connected to the management of the trust.8 This Court hasheld that s 66 cannot be used to determine substantive issues, such as resolving acontest between the trustees.9[29] While a number of authorities confirm that the section should not be used ifthe facts are unclear or a breach of trust is alleged, and that in such cases fullproceedings should be initiated to determine the matters,10 there have been instanceswhere the High Court has been prepared to resolve factual disputes on a s 66application.11[30] In Re Estate of Marshall, the trustees of a family trust made an application tothe Court for the power to purchase a farm property.12 The application was made underanother provision, which would have given the trustees unrestricted powers ofinvestment. However, the Judge held that the proceedings should be reconstituted asan application for directions under s 66. The Court ruled that the proposed investmentwas prudent and reasonable, thus providing the trustees with maximum protection fortheir actions.8 Neagle v Rimmington [2002] 3 NZLR 826 (HC) at [23].9 Neagle v Rimmington, above n 8, at [23]-[24], citing Dal Pont and Chalmers (eds) Equity & Trustsin Australia and New Zealand (2nd ed, Law Book Co of Australasia, Pyrmont, 2000) at 667-669and Melville v NRMA Insurance New Zealand Ltd & Ors HC Wellington CP70/01, 17 April 2002.10 Neagle v Rimmington, above n 8; and Melville v NRMA Insurance New Zealand Ltd & Ors, aboven 9.11 Walker v Collins HC Christchurch CIV-2007-409-2209, 25 February 2009 at [75].12 Re Estate of Marshall HC Christchurch M575/88, 12 December 1988.Parties' positionsApplicant's position[31] The Company's view is that the prudent and reasonable course is to accept thesecond offer. It says that trustees with equitable liens, such as the Company, byanalogy with liquidators, have no obligation to hold assets so long as they are sold onthe best terms reasonably obtainable at the time of sale. 13 The second offer, it says,represents the best terms that are reasonably obtainable in the circumstances, asconfirmed by Mr Vance. Therefore, it says the Company should be entitled to proceedwith the second offer and asks that the Court make a direction to that effect.[32] The Company submits that parallels can be drawn with the obligation onreceivers and liquidators when selling a company's assets. When disposing of acompany's assets, liquidators are under an obligation to obtain the best pricereasonably obtainable at the time of sale.14 A court will not usually interfere with aliquidator's discretion as to sale price unless it can be shown that the liquidator is notacting in good faith or is acting unreasonably.15 The Company submits that, like aliquidator acting in accordance with their duties, a trustee seeking to enforce itsindemnity should be required to obtain the best price reasonably obtainable at the timeof sale.[33] Applying these principles, the Company submits that it has made a commercialdecision that now is the appropriate time to sell the shares, and the Court should makea direction to that effect.Non-party's opposition[34] Ms Norris opposes the directions sought. She says the Company appears toseek the orders to have the Court approve a sale at a price which will likely cover only13 The equitable lien is said to arise because the Company has a right of indemnity for costs incurredas a trustee out of the property of the Trust, such as the Verbena Shares. The property of the Trust(the Shares) is charged with payment of the Trust's liabilities, including the liquidators' fees, costsand disbursements and the Company therefore has an equitable lien over the Verbena Shares tothe extent of its liabilities.14 Insolvency Law & Practice (Thomson Reuters, online ed) at [CA253.02(2)].15 At [CA253.02(2)], citing Leon v York-o-matic Ltd [1966] 1 WLR 1450 (Ch).the liquidator's fees, in circumstances where they have chosen to proceed with a salein the middle of a global pandemic. Ms Norris says she wishes to see the VerbenaShares sold but does not wish for them to be sold at an undervalue.[35] Ms Norris does not accept that the valuation prepared by Mr Vance is accuratebecause Mr Vance's assessment relies heavily upon the price in the second offer anda valuation carried out a third party for the purpose of recapitalisation of Verbena.Ms Norris says that Mr Vance has incorrectly assumed that the third party had valuedthe present value of the Verbena Shares, pre-capitalisation, at a certain value. She saysthe third party in fact valued the present value of the Verbena Shares higher, as a recentcommunication to the shareholders shows. She submits that Mr Vance needed toupdate his valuation accordingly.[36] The Company filed a memorandum responding to Ms Norris' concern. It statedthat Mr Vance reviewed the shareholder update referred to by Ms Norris prior toproviding his share valuation and, having since read Ms Norris's memorandum,confirms he stands by his views expressed in his initial valuation. Mr Vance addedthat if he was in the same position as the liquidators of the Company, he would proceedto sell the Verbena Shares as outlined at [24] above.AnalysisSale of the Verbena Shares[37] The Company has applied for directions under s 66 of the Trustee Act 1956 inits capacity as trustee. The Company has done so because their co-trustee, K8Trustees, and later K9 Trustees, refused to sell the Verbena Shares to allow theCompany's debts to be paid. Due to opposition by Mr Norris and K9 Trustees, theCompany was not able to accept the first offer which would have seen all of theCompany's creditors paid. Mr Johnson, Counsel for the Company, takes issue withMs Norris' challenge that this is an application by the liquidators of the Company. Iaccept Mr Johnson's submission that the Company's creditors have no standing in anapplication that relates to the Company's recourse to trust assets in its capacity astrustee. For that reason, I did not permit Counsel for a creditor of the Company to takean active part in this proceeding.[38] At the time that the Company received its first sale offer, Verbena was in avulnerable financial position and there were questions raised by its auditors as towhether it could continue as a going concern. This was prior to the global pandemicof COVID-19.[39] When the first offer was withdrawn on the morning of the hearing scheduledbefore me on 23 March 2020, I was concerned that the applicant had a significantpersonal interest in recovering their fees and that, before the Court could sanction anyfuture proposed sale of the Verbena Shares, there should be independent advice as tothe appropriate share price before the Court and an expert view expressed on thepotential offer of sale of the Shares. As recorded above, these concerns were recordedin my minute.16 The applicant followed my provisional suggestions and obtained theadvice of Mr Vance on the receipt of the second offer. This proceeding came beforeme as a matter of urgency and this decision is being delivered urgently before thesecond offer expires at close of business on Friday 12 June 2020.[40] This application for directions under s 66 of the Trustee Act seeks this Court'ssanction on a course of action proposed by trustees, where there is no real doubt as tothe nature of the trustees' powers but because the decision is "momentous" the trusteeswish to obtain the blessing of the Court before the proceeding.[41] The English authorities confirm that "blessing orders" from the Court in thesecircumstances is available to trustees, but the Court ought not be asked to act uponincomplete information. It should be given all the material necessary to enable theCourt to oversee or sanction the proposed course advanced by the trustees.[42] In a helpful recent decision Re Honoris Trust, Fitzgerald J made directionsunder s 66, where the trustees considered a proposed distribution would be"particularly momentous" because it would result in a distribution of the entire trustestate.17 Fitzgerald J emphasised that where directions are sought for an "approval"16 P R Law Queenstown No 1 Trustees Ltd (in liq) v Norris above n 5, at [6].17 Re Honoris Trust [2017] NZHC 2957, [2018] 3 NZLR 160.of a decision already made, the Court can make such direction only after "scrupulousconsideration" of the evidence. The Judge stated:18[55] The proper approach to applications such as the present one has beenwell-canvassed in English and other overseas decisions. Given the potentialfor disadvantages to beneficiaries resulting from "blessing" orders ifimproperly made, it is paramount that applicant trustees provide the court withall relevant facts, documents and information when making an application.Further, it is imperative that when considering such an application, a judgeonly make the orders sought after "scrupulous consideration" of the evidence.The court will not rubber stamp such applications, and if the court is left indoubt, then it may withhold its approval.[56] Hart J in Public Trustee v Cooper stated that, when considering anapplication for blessing orders, the court should consider the followingmatters:(a) First, has the trustee in fact formed the opinion which the court isasked to bless?(b) Second, is the opinion formed one at which a reasonable body oftrustees, properly instructed as to the proper meaning of any relevantprovisions of the trust deed, could properly have arrived?(c) Third, is the opinion vitiated by any conflict of interest under whichany of the trustees might have been labouring?[57] Millet J (as he then was) in Richard v Mackay sounded a note ofcaution in relation to the court's approach to such applications, both in termsof the consequences of orders being made on them and the scope of the court'srole in relation to them:It must be borne in mind that one consequence of authorising thetrustees to exercise a power is to deprive the beneficiaries of anyopportunity of alleging that it constitutes a breach of trust and seekingcompensation for any loss which may flow from that wrong.Accordingly the court will act with caution in such a case whenevaluating the possibility of risk and it will need to satisfied that theproposed transaction is not imprudent. But the appropriateness of thetransaction is essentially for the trustees to decide, and different mindsmay have different views on what is appropriate in particularcircumstances.[43] I record that Mr Holmes, Counsel for Ms Norris, relied on the authority that allnecessary information must be provided to the Court to enable that "scrupulousconsideration" of the evidence.19 Here, he contends that Mr Vance's valuation isinadequate and is not in the interest of the Trust's creditors or beneficiaries. He warns18 Footnotes omitted.19 Marley and Ors v Mutual Security Merchant Bank and Trust Co Ltd [1991] 3 All ER 198 (PC) at201.that courts in commercial situations such as this cannot rely on an abstract value forthe Verbena Shares because, in this case, Verbena is the only entity that has all theinformation. The position is constantly changing, and on that basis, Mr Holmes seeksthat the Court does not make the directions and orders sought.[44] I have carefully considered the evidence from Mr White and Mr Vance. Thefirst issue is the basis upon which Mr Vance gave his advice. I had indicated that theCourt should be provided with a view from an independent share valuer, whether it bea liquidator or otherwise, such as Mr Vance from Deloitte, to provide the Court withhis view on any potential offer of sale of the Verbena Shares. Mr Vance has beencross-examined on his assumptions and the figures he used. He describes hisassessment as an "indicative valuation exercise". He candidly acknowledged in cross-examination by Mr Holmes:I would have preferred to have more information than what I had, than whatwas provided, in that it would be easier or more straight forward if you hadaccess to the Board and various financials to be able to be able to test variousaspects.He acknowledged that the third party who conducted the valuation of Verbena's shareshad more detailed information available to it in making its assessment than he did.[45] Despite that, Mr Vance did not agree with the third party's apparent conclusionthat the shares in Verbena were valued two to four times more than the second offer.He gave his reasons, which were the illiquidity of Verbena and that the third party'svaluation is likely based on a 100 percent shareholding, which is not an insignificantamount such as the share parcel held by the Company. As such, it did not alter hisfigures for the value of Verbena Shares that the Trust holds, being a small parcel ofVerbena's overall shares. In addition, there was the uncertainty of the two major stepsto be undertaken in respect of Verbena, namely the recapitalisation and therestructuring and recovery, with the projected date for the increase in share value to besome two or more years away. In his view, that would bring the current valuationcloser to the second offer and his valuation.[46] In relation to the estimate of equity requirements, Mr Vance took the figure inthe third party overview and rounded it to the nearest million, which I considered wasa reasonable approach in the circumstances. In relation to the shareholding percentagefigure he adopted, for a likely investor, Mr Vance explained that he used that figurebecause the description of the likely new investor would require at least that amountof shareholding or five percent lower. I accept that is a reasonable basis on which toapproach the issue. Mr Vance acknowledged that if he used the alternative figuresfrom the third party instead, the value of the Verbena Shares would increase at themargins, but the real question was when that figure would increase.[47] Prior to this hearing commencing, a confidential affidavit was filed advisingthat with the recapitalisation of Verbena, there was likely to be a completerestructuring of the company. An offer was likely to be made to existing shareholdersto sell their existing ordinary shares at the same price per share as contained in thesecond offer to the Company.[48] When questioned by me, Mr Vance confirmed that the trustees should not wait,as there is risk that if the recapitalisation does not take place, or there was a freshoutbreak of COVID-19, or if Verbena announced that they will wait a year before itwill undertake any further company business, the opportunity to sell the VerbenaShares will be lost. He was of the view that there is not likely to be any uplift on thecurrent offer now and he did not recommend waiting "for a week or two or three orhowever long it takes to put this offer to shareholders and then just get exactly thesame." Given the risks of potential recapitalisation and the restructuring of the sharesin Verbena, Mr Vance could see, from his experience as a liquidator, no "upside bywaiting". He acknowledged that after a year there may be more certainty but if thetrustees do not sell now at the current share offer price, the recovery of value of theVerbena Shares will not be increased for another two years, in June 2022.[49] Just prior to issuing this interim judgment, the Court was provided with furtherinformation that as recently as 6 June 2020, the trustees received a further shareholderupdate and shareholder presentation from Verbena. Mr Vance has confirmed thatnothing in these documents necessitates a change in the evidence he had previouslygiven. He remains of the same view that the second offer should be accepted.[50] On the evidence before me, I am satisfied that the Company has reached itsconclusion that the second share offer should be accepted on a reasonable and properbasis. As they did in respect of this second offer, it is a matter for the trustees to decideto further negotiate with the prospective purchaser to achieve a higher price.[51] I approve the Company accepting the second offer of purchase, havingconsidered the evidence before the Court and my own inquiries of Mr Vance as to theadvisability of waiting for a better offer. He evidence was clear and I accept it. Hewas firmly of the view that "a bird in the hand is worth two in the bush" and correctlyobserved as was evident at the time I first heard this application, that "the bird" hasalready flown once before when, after delay by the Company, the first offer waswithdrawn. The second offer has now been made and Mr Vance, with his considerableexperience as a liquidator, advised the Court that he would grasp this sale. I considerthat this is a wise and prudent course particularly in the circumstances post-COVID-19 and the economic position Verbena currently is experiencing.[52] I accept that the Company has taken reasonable steps to obtain the best pricepossible. The risks in waiting for something better are too high and the worst outcomeis that there will be nothing if the sale is not made. I therefore conclude that theCompany may accept the second offer on the current terms. The directions appear atthe end of this interim judgment.[53] I turn then to deal with the Company's application that the proceeds receivedfrom the sale can meet the costs the Company incurred in its capacity as trustee andthe costs of liquidation of the Company.Costs[54] During the hearing, I advised the parties that the Company's application inrespect of the costs of liquidation and the costs incurred by the Company as trusteeswould not be made as part of this hearing. This hearing was concerned with whetherthe trustees could proceed to accept the second offer and where the proceeds shouldbe placed.[55] The issue arising on the recovery of liquidators' costs and fees when they areperforming the duties of a trustee requires further and careful consideration. EdwardsJ in Camray Farms Ltd v BL (Nature Sunshine) Trustee Ltd reinforced the distinctionto be drawn between the recovery of liquidators' costs and fees under the CompaniesAct 1993 and the rules of equity that apply when a trust is wound up.20 The Judgeobserved:21[72] Another consequence of recovery being "qua trustee" is that aliquidator will only be indemnified out of trust assets for costs and expensesif those costs and expenses are reasonably incurred. That is consistent withthe limitations that exist generally on the trustee's right of indemnity.Although the source of that obligation is in equity, it is, in any respect,consistent to with the recovery of liquidators' costs pursuant to statute.[56] For the above reasons, those issues should be addressed after any sale proceedsfrom the Verbena Shares are obtained and secured, until further order of the Court.Interim charging order[57] I now turn to deal with the Company's application to discharge the chargingorder which Ms Norris obtained over the assets of the Trust. This is not a straightforward matter as the charging order, as I understand it, is over the assets of the Trust,not the trustee Company. Again, the question as to whether the Trust assets are theproperty of the Company in liquidation needs to be clarified before this Court makesany order that may prefer one party over other unsecured creditors or provideindemnity for the costs incurred by the Company as a trustee.[58] As I have approved that the Company may sell the Verbena Shares, the interimcharging order must be discharged for the purposes of enabling the second share offerto be accepted. In making that order however, I consider an order should be made forthe preservation of the sale proceeds until further order. Rule 7.55 of the High CourtRules 2016 enables an order to be made for the preservation of any property.Accordingly, once the sale proceeds are paid into the bank account as directed, theyshould be secured by an order to preserve them until further order of the Court. I makesuch an order at the conclusion of this judgment.20 Camray Farms Ltd (in liq) v BL (Nature Sunshine) Trustee Ltd [2019] NZHC 2536.21 Footnotes omitted.Directions and orders[59] Accordingly, under s 66 of the Trustee Act I make the following directions andorders:(a) the Company may accept the second offer unconditionally by givingthe purchaser notice that the Court has directed that the Company mayproceed;(b) the Company and K9 Trustees (or any other person who is for the timebeing a co-trustee of the Trust) must give notice in accordance withVerbena's constitution that the Verbena Shares are being offered onterms consistent with the second offer;(c) if any offers arise from Verbena's pre-emptive rights process on thesame terms as the second offer, those offers must be accepted by theCompany and K9 Trustees (or any other person who is for the timebeing a co-trustee of the Trust);(d) the Company and K9 or any other person who is for the time being aco-trustee of the Trust) must take all steps required, and must sign anydocumentation including but not limited to a share transfer form, to giveeffect to the directions;(e) Mr Norris must not interfere with the process giving effect to the saleof the Verbena Shares and must take all steps necessary, and must signany documentation necessary, to give effect to the sale of the Shares;(f) the proceeds received from the sale must be paid into a bank accountcontrolled by the liquidators of the Company;(g) the interim charging order over the Company's Trust assets isdischarged.(h) to preserve the Trust property, the sale proceeds from the sale of theVerbena Shares shall be secured in the bank account controlled by theliquidators of the Company and shall not be removed, transferred ordistributed without further order of the Court;(i) the non-disclosure and confidentiality order, made on 4 June 2020, inrespect of all material, affidavits, evidence and any documentsproduced or referred to in the hearings of 23 March and 4 June 2020,shall be extended to the further material filed on 8 June and all suchmaterial evidence and documents shall be used only for the purposes ofthis proceeding and not be disclosed to any third parties; and(j) the Court file in this proceeding shall not be searched, copied orinspected without the leave of a Judge or an Associate Judge.[60] Leave is granted to Counsel to seek amendments to the wording of the abovedirections/orders if they need further clarification or specificity in the circumstances.Leave is also granted to the parties to bring to the Court's attention any inadvertentdisclosure of confidential material in this judgment.Cull JSolicitors:Wynn Williams, Auckland for the ApplicantStainton Chellew Lawyers, Auckland, for the Second RespondentK3 Legal Ltd, Auckland for the Seventh Respondent