TOON (AS LIQUIDATOR OF INVESTACORP HOLDINGS LIMITED) v QUINN AND WELLS (AS TRUSTEES OF THE CA QUINN TRUST) [2021] NZCA 696

TOON (AS LIQUIDATOR OF INVESTACORP HOLDINGS LIMITED) v QUINN AND WELLS (ASTRUSTEES OF THE CA QUINN TRUST) [2021] NZCA 696 [17 December 2021]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA249/2020[2021] NZCA 696BETWEEN VICTORIA TOON (AS LIQUIDATOR OFINVESTACORP HOLDINGS LIMITED)AppellantAND CLIVE ANTHONY QUINN AND PHILIPSAMSON WELLS (AS TRUSTEES OFTHE CA QUINN TRUST)First RespondentsAND BRUCE JAMES THOMPSONSecond RespondentAND CAROLINE MARY THOMPSON ANDSTEWARTCO TRUSTEE SERVICESLIMITED (AS TRUSTEES OF THE CMTHOMPSON TRUST)Third RespondentsAND PAMELA ISABEL QUINNFourth RespondentHearing: 10 August 2021Court: Cooper, Brown and Courtney JJCounsel: G P Blanchard QC and T Nelson for AppellantS P Bryers for First RespondentsNo appearance for Second to Fourth RespondentsJudgment: 17 December 2021 at 10 amJUDGMENT OF THE COURTA The appeal is allowed.B The High Court judgment is set aside.C Ms Toon's remuneration is approved at $101,729. She is entitled to herlegal expenses as incurred.D The High Court's costs order is set aside. Ms Toon is entitled to costs inthat Court on a 2B basis.E Ms Toon is also entitled to costs in this Court for a standard appeal on aband A basis, plus usual disbursements. We certify for second counsel.____________________________________________________________________REASONS OF THE COURT(Given by Courtney J)Table of ContentsPara No.Introduction [1]Issues on the appeal [7]BackgroundA brief historical overview [10]The 2011 derivative proceedings and complaint to the Instituteof Chartered Accountants[15]The s 174 proceedings and the settlement agreement [18]Ms Toon accepts appointment as liquidator [20]The liquidation – April to June 2018 [23]The liquidation – July to August 2018 [36]Ms Toon responds to Mr Quinn's application and reaches afinal view on the fees issue – late August 2018 to December2018[47]Relevant principles [57]Issue 1: did the Associate Judge err in his finding as to the extentto which Ms Toon was entitled to investigate Mr Thompson'sclaims?The Associate Judge's findings [66]Was there error in these findingsWas it necessary to consider the correct legal positionas to the effect of the settlement agreement?[76]The effect of the legal advice [80]Issue 2: did the Associate Judge err in his finding as to the effectof Ms Toon's investigation on the liquidation?The Associate Judge's finding [89]Were these findings erroneous? [94]Issue 3: did the Associate Judge err in disallowing Ms Toon'slegal expenses?[110]Result [112]Introduction[1] In March 2018 Investacorp Holdings Ltd (IHL), a private, solvent company,was placed in liquidation. Victoria Toon was appointed as liquidator by the HighCourt. The liquidation order and Ms Toon's appointment were made by consent aspart of the settlement of a claim brought by a minority shareholder, Bruce Thompson,against the majority shareholders, Clive and Pamela Quinn, and interests associatedwith them.[2] One of the complaints in the litigation was that the Quinn interests had chargedIHL excessive professional, directors' and management fees. The settlementagreement encompassed "all matters at issue in, arising out of, or relating to" theproceeding. Notwithstanding the settlement agreement, Mr Thompson asked Ms Toonto investigate the fees issue that had been raised in the litigation. Ms Toon consideredthat she was entitled to investigate. Mr Quinn, however, contended that the settlementagreement precluded any further inquiry.[3] Mr Quinn was anxious to expedite the winding up and Ms Toon's investigationheld up the distribution of IHL's assets. In August 2018 the trustees of the CA QuinnTrust (Quinn Trust), a shareholder associated with Mr and Mrs Quinn, applied underss 286 and 284 of the Companies Act 1993 for a declaration that Ms Toon had breachedher professional duties to the company and directions that she cease investigating thematters raised by Mr Thompson and complete the liquidation.1 By December 2018Ms Toon had decided that action against the Quinns to recover the fees would not becost-effective. Nevertheless, the Quinn Trust maintained its application.[4] In March 2019, having distributed most of the company's assets, Ms Toonapplied to the High Court under ss 276(2) and 284(1)(e) of the Companies Act forapproval of her fees. The initial claim of $82,9402 plus GST and expenses was1 Although the Thompson interests were named as respondents in the application, they did not takesteps in the High Court or in this Court.2 Comprising $698,876.36 plus a further $14,000 to complete the liquidation and attend to legalmatters.subsequently amended to $101,729 plus GST and expenses and further legal expensesof $63,158 plus GST.3[5] Associate Judge Bell determined both applications together. He held thatMs Toon had breached her duties to collect and distribute the company's assetsreasonably and efficiently.4 Specifically, he held that Ms Toon's decision to pursueher investigation of Mr Thompson's complaints was a "wrong turn" and led to theliquidation costs being higher than they ought to have been.5 He made the directionssought by the Quinn Trust.6 In relation to Ms Toon's application, the Associate Judgefixed the remuneration to which Ms Toon was entitled at $28,000 plus GST togetherwith an allowance of $4,000 plus GST for accounting fees saved and $4,000 plus GSTfor legal fees.7[6] Ms Toon appeals.Issues on the appeal[7] The Associate Judge approached his decision by reference to the followingquestions:(a) In light of the settlement agreement made in 2017, should Ms Toonhave investigated Mr Thompson's complaints?(b) What were the effects of Ms Toon enquiring into Mr Thompson'scomplaints?(c) How much should Ms Toon receive for her remuneration?[8] The Associate Judge's conclusions on (a) and (c) are inconsistent and theparties disagree over exactly what the Associate Judge held. Further, the partiesframed the issues quite differently, putting different emphasis on whether the legal3 By an amended application filed on 9 August 2019.4 Quinn v Toon [2020] NZHC 816 at [147].5 At [125].6 At [148]–[149].7 At [146].effect of the settlement agreement was in issue and, if so, whether the Judge had erredin his conclusion.[9] It is, however, evident that the central issue is whether Ms Toon actedreasonably in pursuing Mr Thompson's complaint as she did. The respondents acceptthat if this Court concludes Ms Toon's conduct was justified, she will be entitled to herclaimed fee of $101,729. We therefore find it convenient to reframe the issues asfollows:(a) Did the Associate Judge err in his finding as to the extent to whichMs Toon was entitled to investigate Mr Thompson's claims?(b) Did the Associate Judge err in his approach to fixing the amount ofremuneration to which Ms Toon was entitled?(c) Did the Associate Judge err in disallowing Ms Toon's claim for legalexpenses?BackgroundA brief historical overview[10] IHL was incorporated by Mr R J Thompson in 1947. At the time relevant tothis litigation the shareholders were Mr Thompson's children Bruce Thompson,Pamela Quinn and Elizabeth Bakker, together with Pamela Quinn's husband, CliveQuinn, and trusts associated with Mr Thompson and Mr and Mrs Quinn. Mr and MrsQuinn controlled the company. They held 50.27 per cent of the shares and, followingMr Thompson's removal as a director in 2015, were the only directors. BruceThompson held 36.37 percent of the shares and Mrs Bakker 13.37 per cent.[11] The company owned a commercial building in Nelson St, in central Auckland,which was sold in 2013 for $3.25 million. The proceeds were invested partly in cashdeposits and partly in shares. The company also owned a half-share in a commercialbuilding in Papatoetoe, in partnership (the Kolmar Rd Partnership) with a companyassociated with Mr Quinn. That building was still owned by the Kolmar RdPartnership as at the date of IHL's liquidation but was sold shortly afterwards for $1.55million.[12] Mr Quinn was a chartered accountant by occupation and practised as QuinnChartered Accountants Ltd (QCAL). QCAL occupied part of the Kolmar Rd premisesuntil November 2014 and continued to pay rent until March 2015 when Mr Quinnretired. QCAL provided accounting services to IHL, for which it charged commercialrates.[13] Relations between the Quinns and Mr Thompson were acrimonious and hadbeen so for years. Mr Thompson held a long-standing view that Mr Quinn used hisposition as the company's accountant to benefit himself and his wife at the expense ofother shareholders. Conversely, Mr and Mrs Quinn felt that Mr Thompson failed toappreciate Mr Quinn's efforts to manage the company's affairs and did little to assistin that work.[14] A sense of the acrimony can be had from the minutes of the special meeting ofIHL held on 19 January 2015 at which a resolution removing Mr Thompson as adirector was passed. The minutes stated that the board "has been dysfunctional for thelast 20 years". Mr Thompson was described as, among other things, "not trustworthy[and] divisive". The minutes recorded that "[t]he Quinn shareholders consider[Mr Thompson] to be a delinquent and hostile Director looking only after his personalagenda at the expense of the other Shareholders" and described the relationshipbetween him and Mr and Mrs Quinn as "unworkable, unhealthy and intolerable".The 2011 derivative proceedings and complaint to the Institute of CharteredAccountants[15] In 2011 Mr Thompson brought a derivative proceeding against Mr and MrsQuinn alleging breaches of fiduciary duty and receipt of unauthorised remuneration.8He also alleged that QCAL had paid inadequate rent for the Kolmar Rd premises. Theformer claims failed but the claim for rent succeeded and the Quinn interests had torepay the company $291,358.98 Companies Act 1993, ss 131, 133 and 161.9 Investacorp Holdings Ltd v Quinn [2014] NZHC 2389.[16] There was a year between the hearing and the release of the judgment. Pendingthe decision, Mr Thompson made a complaint about Mr Quinn to the New ZealandInstitute of Chartered Accountants (NZICA). The Disciplinary Tribunal of theInstitute found that, by providing accounting services to the Kolmar Rd Partnershipand IHL when he was a director and shareholder of both, Mr Quinn had breached theInstitute's code of ethics. In reliance on undertakings offered by Mr Quinn, the penaltyimposed was censure and a costs award. Mr Quinn's undertakings included thatneither he nor his practice would prepare the year-end financial statements for eitherentity and that he would undertake routine accounting and administration work forthem without charge for the following 24 months.[17] Despite Mr Thompson's objections, Mr Quinn arranged for Mayston PartnersLtd, in which Mr Quinn's daughter and son-in-law were accountants, to assumeresponsibility for accounting services to the Kolmar Rd Partnership and IHL.The s 174 proceedings and the settlement agreement[18] In 2016 Mr Thompson brought proceedings under s 174 of the Companies Actalleging prejudicial and oppressive conduct by Mr and Mrs Quinn. He claimed thatsince 2013 Mr and Mrs Quinn and QCAL had charged IHL excessive professional andmanagement fees and that Mr and Mrs Quinn had charged excessive directors' fees.The only specific relief sought was an order for the liquidation of the company.Mr and Mrs Quinn did not oppose this outcome — but they wanted liquidation to bepostponed until after March 2018 to allow for the use of tax losses.[19] The parties reached a settlement during the course of the trial in May 2017.Although a party in the proceeding, IHL was not a party to the settlement agreement.The settlement agreement was drafted by Mr Thompson's lawyer and Mr Thompsonunderstood that it would not preclude him pursuing his concerns about the fees throughthe liquidator. The settlement agreement provided that the parties would agree to seekvarious consent orders immediately upon entry into the agreement, including theappointment of a liquidator by 1 April 2018. On the condition the consent orders weremade the parties agreed:(a) To settle all matters at issue in, arising out of, or relating to theProceeding, including the manner in which Investacorp is to be woundup and its assets distributed;(g) The Quinns will not charge any sums to Investacorp for their work (ofany description including without limitation directors work, propertymaintenance or management, leasing or sale commissions) oncompany matters or matters relating to the Kolmar Rd partnershipafter 31 March 2017, through Quinn Consultants Ltd (QCL)10 orotherwise.Ms Toon accepts appointment as liquidator[20] Mr Quinn approached Ms Toon to accept appointment as the liquidator of IHL.Ms Toon is an experienced insolvency practitioner with a speciality in solventliquidations. She was prepared to consider appointment. Mr Quinn sent Ms Toon anemail together with brief background notes which contained the essential informationabout the company. The only reference to the circumstances surrounding theliquidation was the statement that:All shareholders of Investacorp have signed a settlement agreement to resolveclaims made by the Thompsons under s 174 of the Companies Act, 1993.[21] Ms Toon agreed to accept appointment and sent a letter of letter of engagementdated 12 June 2017. She noted that, for the purposes of estimating costs, theliquidation was not a straightforward solvent liquidation. She commented that:I also do not know what the terms of the settlement agreement are but thedistribution to nine shareholders could be complicated, or not. I will also needto confirm whether I will correspond solely with only the directors or allshareholder groups which, from experience, can add significantly to the timeinvolved if there is any acrimony (double checking etc).[22] Ms Toon estimated the fees involved at approximately $5,000–$7,000. Allthe shareholders agreed that Ms Toon should be appointed. Mr and Mrs Quinn signedthe letter of engagement on 1 March 2018 and continued to provide Ms Toon withfinancial information about the company. The liquidation order and Ms Toon'sappointment as liquidator were made on 27 March 2018.10 QCAL later changed its name to Quinn Consultants Ltd (QCL).The liquidation — April to June 2018[23] The sale of the Kolmar Rd property settled within days of the liquidation.Ms Toon was therefore dealing with assets comprising cash (about $2.55 million) andshares (about $1 million). There were virtually no creditors.[24] On 12 April 2018 Ms Toon met with Mr Thompson and his wife.Mr Thompson wanted to discuss his concerns about the way that the company hadbeen managed, including the level of fees charged by Mr and Mrs Quinn. About afortnight later, Ms Toon met with Mr and Mrs Quinn. She told him aboutMr Thompson's concerns but Mr Quinn said that the fees issue had been settled.The tone of this meeting, and of other interactions between Ms Toon and Mr andMrs Quinn, were recalled and described differently by the parties. The differences inperceptions reflect the difficult dynamics that plagued the relationship betweenMs Toon and Mr and Mrs Quinn from an early stage.[25] At this point in the liquidation, the end of April 2018, Ms Toon's accrued feeswere $11,327.11[26] In May 2018 there were communications between Mr Quinn and Ms Toonregarding shares that the Quinn interests wished to take in specie. Mr Quinn wasalready concerned about progress. He viewed the liquidation as a straightforwardmatter of distributing the cash and shares. He pressed Ms Toon to explain the delayin making an interim distribution. Ms Toon pushed back. It is apparent from her emailto Mr Quinn of 21 May 2018, copied to Mr Thompson, that she felt under pressurefrom both Mr Quinn and Mr Thompson:As liquidator I have an obligation to satisfy both myself and all shareholdersthat all assets have been accounted for correctly. We believe that some fees have been charged in excess of the court ruling butare still confirming this. We will advise you as soon as possible but I mustagain remind you that you are not the liquidator. You have no authority todictate to me how I run this liquidation or when I make the distributions.I am very aware that the shareholders are litigious and I have advised you boththat I will be following the letter of the law in this liquidation and will not be11 The monthly accrued figures of Ms Toon's fees were provided by expert witness Mr Parsons whoundertook a full analysis of the time sheets.bullied by either side. I hope that I am now clear. Your continual emails areonly adding to the cost of the liquidation.[27] A week later, on 28 May 2018, Mr Quinn emailed Ms Toon again complainingthat the delays were causing loss to the shareholders and asking when the liquidationwould be completed and funds distributed. Ms Toon advised the shareholders that thecompany's stockbroker had been instructed to distribute the shares Quinn interests hadrequested in specie and to sell the remainder, the proceeds of which would form aninterim distribution of cash to the Thompsons and Mrs Bakker. An interim distributionof approximately $1.8 million was made on 11 June 2018.[28] Ms Toon also emailed Mr Quinn on 29 May 2018 with her concerns about thefees that the Quinns had charged IHL. She advised that she had reviewed the NZICAdisciplinary determination and said that:I had to be satisfied that there is some substance to [Mr Thompson's] queriesbefore I passed them on. I have not formed a conclusive opinion on thesematters as I wanted to be able to put them to you and hear your response first.We have also carried out some analysis on the fees and expenses you havecharged Investacorp since the High Court [judgment] dated [1] October 2014.I have attached our workings where you will see that we have calculated areasonable percentage of fees according to the [judgment]. We note that yourfees are considerably more than what we have calculated and we would bepleased to receive your comments and justification for the excess.For the 2015 and 2016 years you had previously agreed not to charge fees asper the NZICA agreement. It seems that instead of charging management feesyou charged directors fees for those periods instead. From the ruling it seemsthat NZICA wanted to ensure that you did not personally benefit from anyservices to the company.The accounting firm Mayston Partners was set up in the month following theruling. At the time of the ruling Tim [Mayston] was a director of the QuinnMayston firm and should have been advised by you of the ruling. Fromreading the decision I think NZICA intended for the accounting to beundertaken by an independent accountant, not your son-in-law and daughter.[Mr Thompson] has provided a letter from Tim dated 18 January 2016advising you that he does not feel he has an obligation to report to [MrThompson] and his wife. In fact, all Chartered Accountants have obligationsto all shareholders of a client company. An independent accountant wouldhave no problem reporting on the business to [Mr Thompson] if all matterswere transparent.[29] Attached to that email were emails from Mr Thompson to Ms Toon about theclaim of overcharging. They were couched in strong terms and alleged seriousmisconduct by the Quinns in relation to the fees they had been charging the companyand the engagement of Mayston Partners to take over preparation of IHL's financialstatements.[30] On 31 May 2018 Mr Quinn emailed Ms Toon. He declined to answer the issuesshe had raised. His main reason for declining to respond to these issues was that theyhad been settled by the settlement agreement.[31] At this point, the end of May 2018, Ms Toon's accrued fees stood at $20,074.[32] The next day, 1 June 2018, Mr Quinn's lawyer wrote to Ms Toon advising thatthe complaints by Mr Thompson were subject to the settlement agreement and thatMs Toon had no justification for reinvestigating them. A formal notice pursuant tos 286 of the Companies Act was attached, alleging failure by Ms Toon to comply withher duties as liquidator by failing to complete the liquidation and distribute the assetsin a reasonable and efficient manner and requiring compliance within five days, failingwhich proceedings would be commenced.[33] Ms Toon had previously mentioned the settlement agreement to her lawyer,Mr Taylor. On 6 June she sent him a copy and he advised that it was not binding onthe company. Mr Taylor's invoice and corresponding time sheet were produced at trialshowing two units (12 minutes) relating to research. Ms Toon's own time recordsshow five entries for "investigations and legal" which presumably related to the feesissue.[34] Otherwise, only a limited amount of work was undertaken during June 2018.Ms Toon received and reviewed the updated 2018 accounts from Mr Mayston. Mostof the other work done during that month was recorded by Ms Toon's associate,Ms Borrie and related to administrative work (described as management), taxation andasset realisation. Ms Toon was overseas towards the end of the month.[35] At the conclusion of June 2018 Ms Toon's accrued fees stood at $23,395.The liquidation — July to August 2018[36] There was much more activity in July 2018. In response to a query byMrs Bakker, Ms Toon advised that the liquidation could not be completed until the2018 and 2019 accounts had been filed and that could not happen until Mr Quinnresponded to Ms Toon's email of 29 May. Mrs Bakker's response did not express anyconcern about Ms Toon's actions regarding the fees but merely asked to see the draft2018 accounts. Mr Quinn continued to press Ms Toon for progress.[37] In mid-July Ms Toon was ill for several days, which accounted for a delay inher responses to Mr Quinn during the second week of July. On 16 July 2018,Mr Quinn requested a meeting of shareholders pursuant to s 258(2)(c) of theCompanies Act. Ms Toon responded on 19 July 2018 by email, attaching a letter tothe shareholders dated 18 July 2018 advising that "[a]fter considerable investigation Icannot approve the [draft 2018 financial statements] as they stand." She reiterated thatMr Quinn had not responded to the queries she had raised on 29 May 2018. She alsoattached her calculations showing a suggested amount of $106,545 written back inrelation to fees charged by Mr Quinn and said that "[o]nce this credit has beenprocessed we can proceed to finalise the financial statements and tax returns and afurther distribution can be made to shareholders in the next few weeks." Ms Toonconcluded with suggested dates for the shareholders' meeting.[38] Mr Quinn's response of the same day was short; he completely denied the"baseless allegations" and proposed 3 August 2018 for the shareholders' meeting. Insubsequent emails Mr Quinn advised of issues he wished to have added to the agendafor the meeting, including the settlement agreement.[39] In a separate letter also dated 19 July 2018 Ms Toon made a demand for all ofthe company records for the preceding five years. Mr Quinn saw no reason thatrecords going back five years should be needed. Ms Toon's response of 24 July 2018was brief and assertive: she did not need a reason. She also pointed out the criminalconsequences of non-compliance with her demand. In a covering email she referredagain to her queries relating to the financial statements that were not subject to theHigh Court proceedings.[40] On 26 July 2018 Ms Toon supplied a cash position statement showing totalrealisations of $3,623,078.14 and, after the 11 June distribution, funds on hand of$1,785,597.41. The next day Mr Quinn sent a lengthy response to the matters thatMs Toon had raised in her letter of 18 July 2018. There appears not to have been adirect answer to that letter.[41] As at the end of July 2018 Ms Toon's accrued fees stood at $27,304.[42] On 1 August 2018 Mr Quinn wrote in response to Ms Toon's letter of 24 July2018. He asserted again that the issues raised in the s 174 proceedings were fully andfinally settled by the settlement agreement.[43] The shareholders meeting was held on 3 August 2018. Ms Toon had Mr Taylorwith her. Mr and Mrs Quinn objected to him being there and they both leftimmediately. There was discussion about Mr Quinn's fees. After Mrs Bakker had alsoleft, the minutes record Ms Toon's advice that "if the shareholders could all agree toleave the professional expenses charged as they were then she would begin to finalisethe liquidation. If they could not agree then she would have to consider her next steps.[Mr Thompson] advised that he was not content to overlook the charges which hebelieved were excessive."[44] On 7 August 2018 the Quinns commenced proceedings against Ms Toon.[45] On 17 August 2018 Ms Toon made a further distribution of $1 million.[46] To that point, Ms Toon's accrued fees stood at $33,849.Ms Toon responds to Mr Quinn's application and reaches a final view on the fees issue— late August 2018 to December 2018[47] Ms Toon filed an affidavit in opposition to Mr Quinn's application on27 August 2018. She set out the steps she had taken in the liquidation in some detailand identified the matters still to be completed. These included obtaining the recordsnecessary to complete the 2018 financial statements, accounting for the proceeds ofthe Kolmar Rd sale (it appeared that $30,000 was still being held by Mr Quinn),finalising the 2018 financial statements for the Kolmar Rd Partnership, preparingthe 2019 financial statements and attending to a final tax return before requesting thatthe company be removed from the Companies Office Register and filing a final reportwith the Companies Office.[48] As at the end of August 2018 her accrued fees were $39,517.[49] There was little activity in September 2018 because of Ms Toon's personalcircumstances; her brother died on 7 September 2018 and she then became ill and wasnot back in the office until the end of September. As a result, Ms Toon could not attendto correspondence from Mr Quinn and documents sent by him, including documentsfrom the s 174 proceeding. As at the end of September 2018 Ms Toon's accrued feeswere $42,560.[50] Normal work associated with the liquidation, attending to statutoryrequirements, banking, tax matters and administration continued through October2018. But it is evident that a substantial amount of time was spent on the legalproceedings. Towards the end of the month Ms Toon asked Mr Quinn to account forsome $30,000 held from the sale of the Kolmar Rd property. Mr Quinn's responsewas to advise that he was awaiting the financial statements and a GST return in respectof the Kolmar Rd Partnership and on receipt of the latter would pay out the moneyheld. This he did on 30 October 2018. At the end of October 2018 Ms Toon's accruedfees stood at $47,216.[51] Only a small amount of work was undertaken during November 2018. Thisincluded correspondence with Mr Quinn and Mr Mayston regarding the 2018 financialstatements. Time was also spent on the legal proceedings. At the end of November2018 the accrued fees were $50,187.[52] In October 2018 Mr Parsons, an independent accountant who later gaveevidence in support of Ms Toon's application, conducted a routine practice reviewwith Ms Toon. He expressed the view that Ms Toon should not still be holding$800,000 and that the $106,545 at issue in relation to the fees was not material.Ms Toon had taken the view that the amount in issue, while not particularly large whenviewed against the company's assets, might nevertheless be regarded by Ms Bakker,whose financial position was more modest than the other shareholders, as substantial.However, Mr Parson's advice prompted Ms Toon to reconsider her position regardingthe fees that Mr Quinn had charged. She wrote to the shareholders indicating shehoped to make further distribution before Christmas. On 20 December 2018 Mr Taylorwrote on behalf of Ms Toon advising that, after further consideration of the fees issueand notwithstanding her view that Mrs Bakker's entitlement to the amount at issuewould be material to her, she had concluded that it would not be cost effective to takecourt proceedings to recover the fees. The same day Ms Toon made a further interimdistribution of $639,578.[53] On 24 December 2018 Ms Toon provided her second report and Statement ofRealisations and Distributions as at 26 September 2018. She noted the mattersdelaying completion of the liquidation as resolution of Mr Quinn's proceeding againsther, finalisation of the partnership affairs, finalisation of the 2018 and 2019 financialstatements and tax returns, IRD assessments and clearance.[54] To the end of December 2018 Ms Toon's accrued fees stood at $57,008.[55] The early part of 2019 seems to have been taken up largely with the 2019financial statements. These had not been finalised by 8 February 2019 whenMr Mayston resigned. Ms Toon took over the responsibility of producing thosefinancial statements, which she said was costly because the data had to be reformattedand Mr Quinn had queries. In addition, Kolmar Rd Partnership accounts, which hadnot been quoted for as part of the liquidation, had to be reviewed along with therelevant tax returns. Likewise, for the IHL 2019 financial statements and tax returnsmore time was required because Mr Mayston's work papers had not been provided,nor had the company's tax files. The 2020 tax returns would also need to be draftedand filed and, depending on the IRD's time frame, a further liquidator's report couldhave been needed.[56] The draft accounts for the 11 months to 28 February 2019 were circulated toshareholders on 1 March 2019. They showed $40,911 spent on legal expenses. Thisprompted requests by Mr Quinn for information. Mr Quinn was not satisfied with theresponse he received and advised that he did not accept the liquidator's claim for fees.Ms Toon provided information about the fees incurred on 22 March 2019. On29 March she filed her application for approval of fees of $68,940 together withdisbursements and further estimates of $4,000 for fees to complete the transaction and$10,000 to cover the legal costs of responding to Mr Quinn's application, which wasstill on foot.Relevant principles[57] The principal statutory duty of the liquidator is to realise and distribute thecompany's assets, or the proceeds thereof, in a reasonable and efficient manner.12The liquidator also owes fiduciary duties, which include acting impartially and in theinterests of all the shareholders.13[58] Under s 286 certain persons, including shareholders, may give notice to theliquidator requiring compliance with the liquidator's duties and, if the liquidator failsto comply, may apply to the court for orders. If the court is satisfied that there is orhas been a failure to comply, it may relieve the liquidator of the duty to comply whollyor in part, order the liquidator to comply, remove the liquidator from office or make aprohibition order.14 While the discretion to remove a liquidator from office isunfettered, factors relevant to its exercise include the liquidator's independence, theliquidator's resources, the wishes of the creditors and shareholders and the speed withwhich the liquidation can be carried out.15[59] The basis on which liquidators are remunerated is set out in ss 276–278 and284 of the Companies Act. Section 276 provides:276 Remuneration of liquidators(1) Subject to section 284(1)(e), every liquidator, not being an OfficialAssignee, appointed under paragraph (a) or paragraph (b) ofsubsection (2) of section 241 is entitled to charge reasonableremuneration for carrying out his or her duties and exercising his orher powers as liquidator.12 Companies Act, s 253.13 Mason v Lewis HC Auckland CIV-2010-404-8 at [27]–[29].14 Companies Act, s 286(3).15 Newman v Norrie [2014] NZHC 648, [2014] NZCCLR 15 at [50]–[51], citing Jacobsen CreativeSurfaces Ltd v Smiths City Ltd [1994] MCLR 28 at 32.(2) Unless the court otherwise orders, every Official Assignee who isappointed a liquidator under paragraph (a) of subsection (2) of section241 and every liquidator appointed under paragraph (c) of thatsubsection shall charge remuneration either—(a) of an amount equal to the amount fixed under section 277; or(b) at, or in accordance with, such rate or rates as may beprescribed under that section.[60] The liquidator's expenses and remuneration are payable out of assets of thecompany.16 The rates of remuneration are prescribed by regulation.17 These includehourly rates for work undertaken by different classes of people, rates prescribed byreference to the net value of the assets realised and rates prescribed in respect ofparticular functions or powers. No issue arises in this case as to the hourly ratesMs Toon charged for herself and her staff.[61] As part of the Court's supervisory function over liquidations, s 284 allowsthe Court to fix the liquidator's reasonable remuneration and to order the refund ofremuneration held to be unreasonable. Relevantly, s 284 provides:284 Court supervision of liquidation(1) On the application of the liquidator, a liquidation committee, or, withthe leave of the court, a creditor, shareholder, other entitled person, ordirector of a company in liquidation, the court may—(a) give directions in relation to any matter arising in connectionwith the liquidation:(b) confirm, reverse, or modify an act or decision of theliquidator:(c) order an audit of the accounts of the liquidation:(d) order the liquidator to produce the accounts and records of theliquidation for audit and to provide the auditor with suchinformation concerning the conduct of the liquidation as theauditor requests:(e) in respect of any period, review or fix the remuneration of theliquidator at a level which is reasonable in the circumstances:(f) to the extent that an amount retained by the liquidator asremuneration is found by the court to be unreasonable in thecircumstances, order the liquidator to refund the amount:16 Companies Act, s 278.17 Section 277.(g) declare whether or not the liquidator was validly appointed orvalidly assumed custody or control of property:(h) make an order concerning the retention or the disposition ofthe accounts and records of the liquidation or of the company.(2) The powers given by subsection (1) are in addition to any otherpowers a court may exercise in its jurisdiction relating to liquidatorsunder this Part, and may be exercised in relation to a matter occurringeither before or after the commencement of the liquidation, or theremoval of the company from the New Zealand register, and whetheror not the liquidator has ceased to act as liquidator when theapplication or the order is made.(Emphasis added.)[62] The principles applying to the fixing of liquidators' remuneration have beenthe subject of extensive consideration in the High Court in Re Medforce HealthcareServices Ltd (in liq)18 and Re Medforce Healthcare Services Ltd (in liq) (No 2)19 and,more recently, in Re Roslea Path Ltd (in liq).20 Those decisions canvassed the basisfor the remuneration of liquidators generally, including retrospective applications toapprove fees made under s 284(1)(e) (under which Ms Toon applied) and applicationsfor a refund of fees unreasonably retained under s 284(1)(f) (the nature of the Quinns'application). The same approach applies to both types of applications; the court'sfunction in either approving a claim for remuneration or ordering a refund of fees paidis to determine the reasonableness of the remuneration claimed.21[63] In Re Roslea Path a Full Court of the High Court (Heath and Venning JJ)observed that:[102] In fixing a liquidator's remuneration, the Court is making adetermination of the fairness and the reasonableness of what has been chargedwhen measured against the work undertaken and the result achieved. Fair andreasonable remuneration reflects the value of the services rendered to thecreditors of the company and, if a surplus were achieved, its shareholders."Value" is an elusive concept which goes beyond mathematical application ofhourly rates to hours spent by individuals involved in administering thecompany's affairs.18 Re Medforce Healthcare Services Ltd (in liq) [2001] 3 NZLR 145 (HC).19 Re Medforce Healthcare Services Ltd (in liq) (No 2) [2001] 3 NZLR 158 (HC).20 Re Roslea Path Ltd (in liq) [2013] 1 NZLR 207 (HC).21 At [101] and [170]–[172].[64] The Court approved the approach taken in previous cases of treating theassessment of liquidators' remuneration as analogous to a challenge to solicitors' fees.It referred as an example to Gallagher v Dobson, where the High Court discussed thefactors for identifying costs which were then set out in the New Zealand Law Society'sCosting and Conveyancing Practice Manual.22 These factors were:(a) the skill, specialised knowledge and responsibility required;(b) the time and labour expended;(c) the value or amount of any property or money involved;(d) the importance of the matter to the client and the results achieved;(e) the complexity of the matter and the difficulty or novelty of thequestions involved;(f) the number and importance of the documents prepared or perused;(g) the urgency and circumstances in which the business is transacted; and(h) the reasonable costs of running a practice.[65] The assessment of reasonable remuneration requires careful consideration ofthe proportionality of the remuneration claimed to the nature, complexity and extentof the work undertaken.23 Another aspect of proportionality, that of the informationrequired by the court to justify the claim to the remuneration claimed, is also to beconsidered but does not arise as an issue in this case.24 The focus in this case iswhether the amount was reasonable having regard to the nature of the liquidation.22 At [103], referring to Gallagher v Dobson [1993] 3 NZLR 611 (HC) at 615.23 At [108].24 At [108].Issue 1: did the Associate Judge err in his finding as to the extent to whichMs Toon was entitled to investigate Mr Thompson's claims?The Associate Judge's findings[66] Ms Toon's argument that the Associate Judge had erred proceeded on the basisthat the Associate Judge had found that she was not entitled to investigate Mr Quinn'sconduct at all. Mr Bryers submitted on behalf of the Quinn Trust that the AssociateJudge had accepted that Ms Toon was entitled to investigate but held that she shouldhave concluded at an early stage that no further action could be taken.[67] Analysis of the judgment shows that, in considering whether Ms Toon wasentitled to investigate Mr Thompson's complaint, the Associate Judge concluded thatshe was not.25 But when considering what remuneration was reasonable, the AssociateJudge concluded that she was entitled to investigate to the point of obtaining legaladvice and allowed 18 hours for that.26[68] The Associate Judge started from the position that:[78] A liquidator faced with differences between shareholders needs toknow whether they have been resolved. If they have been, the liquidator doesnot have to deal with them. [79] In a liquidation that is reinforced by the liquidator's principal dutyunder s 253 of the Companies Act to get in the assets of the company and todistribute them to creditors, then to shareholders "in a reasonable and efficientmanner". It is not reasonable or efficient to investigate disputes that havealready been resolved.[69] The Associate Judge had the benefit of expert evidence from Mr Bethell, whogave evidence for the Quinn Trust, and Mr Parsons. He referred to that evidence inconsidering whether Ms Toon should have investigated Mr Thompson's complaints:[80] [Mr Bethell and Mr Parsons] differed on whether the settlementagreement meant that Ms Toon did not have to investigate Mr Thompson'scomplaints. Mr Parsons assumed that the settlement agreement did not applybut did not give reasons, perhaps recognising that that involved questions oflaw and was not a matter on which he could give expert opinion evidence. Onthe other hand, Mr Bethell accepted that the settlement agreement applied,although he gave his opinion after having taken advice from in-house counsel.Neither suggested that the liquidator should completely ignore the25 Quinn v Toon, above n 4, at [103].26 At [128] and [132].shareholder making the complaint. Some preliminary inquiries would berequired to see what the complaint was and whether it was covered by anearlier agreement. Nor did Mr Parsons suggest that a liquidator was entitledto press on with an investigation of a complaint, even if it had already beenresolved in a settlement agreement.(Emphasis added.)[70] The Associate Judge then set out his own view of what a liquidator wouldunderstand to be the effect of the settlement agreement, which was that it resolved allmatters and would not allow further steps to be taken:[82] A liquidator reading the agreement would understand that the mattersthat the parties had been litigating had now been resolved. Because this wasa settlement agreement, earlier differences were not to be pursued anymore.[83] If the liquidator were provided with a copy of the pleadings in thes 174 proceeding, they would see that the matters the Thompsons had put inissue in that proceeding were now resolved. [84] Having worked that out, the liquidator would understand that incarrying out the liquidation they would not need to inquire intoMr Thompson's grievances because he had agreed not to pursue themanymore. Instead the liquidator could get on with getting the assets in anddistributing them to shareholders. In response to Mr Thompson's complaints,the liquidator could explain that those issues were now dead.[71] Ms Toon's position was that she was entitled to investigate the complaintbecause IHL was not party to and therefore not bound by the settlement agreement.The Associate Judge rejected this submission on the basis that, as a matter of law, thesettlement agreement acted as a bar to any action the liquidator might take against theQuinns. Relying on the decision in Re Duomatic Ltd, the Associate Judge held thatbecause all the shareholders had agreed not to pursue Mr Quinn in respect of the fees,Mr Quinn would have a defence to any claim brought by the company.27 TheAssociate Judge discussed the application of Re Duomatic in New Zealand and alsoconsidered whether the settlement agreement could be treated as a decision of thecompany itself and whether any claim by Ms Toon and the company against Mr Quinnwould be an abuse of process on the ground of res judicata. He considered that:[102] The shareholders' consent to the release of claims against the Quinns,the company's release by the shareholders' resolution and the abuse of processby Ms Toon in claiming against the Quinns over the matters settled in the27 At [88], referring to Re Duomatic Ltd [1969] 2 Ch 365 (Ch) at 373, and [93].agreement all give legal reasons why she cannot say that she was free toinvestigate possible breaches of duty by the Quinns and get them to acceptadjustments to their distributions on account of Mr Thompson's complaints.Ms Toon is not a lawyer and cannot be expected to know the legal rules onwhich these reasons are based. But a competent insolvency practitioner wouldhave recognised that the shareholders had settled their differences andtherefore she did not have to deal with those differences in the liquidation. Ifshe had obtained legal advice, I expect a competent lawyer would advise herthat the matters settled by the shareholders did not need to be reopened. Shesays she did consult a lawyer, but she did not give evidence what that advicewas. For all I know, she may have required the lawyer to support her indecisions she had already made. If she received inadequate advice from herlawyer, she can take it up with him.(Emphasis added.)[72] We note at this point that the Associate Judge's remarks towards the end ofthese passages were unfounded. They suggest that there was doubt over whetherMs Toon had, in fact obtained legal advice. But her evidence that she did so was notchallenged. It was also incorrect to say that Ms Toon had not given evidence as tonature of the advice, when she clearly did and was not challenged on it. Finally, therewas no basis at all on which to suggest that Ms Toon might have pressured her lawyerinto giving advice that would support her position.[73] Concluding his discussion on whether Ms Toon was entitled to investigateMr Thompson's complaints, the Associate Judge said:[103] I accept that there was no fraud or lack of good faith, but it musthave been clear to Ms Toon at the outset that nothing good could come ofreopening Mr Thompson's complaints when all the shareholders had made aformal agreement to bury the hatchet. She cannot say she did not know.Mr Quinn made it clear that he relied on the settlement and that she did nothave to investigate Mr Thompson's complaints. Her explanation fordisregarding him, that the company was not bound by the agreement, isunsound. As she could not hope to recover anything by investigating whathad already been settled, it was unreasonable and inefficient for her to take thematter any further once she knew of the settlement. No competent liquidatorwould have taken the matter up. It was against common sense.[104] Ms Toon's lawyer's letter of 20 December 2018 explains that shewould no longer pursue the Quinns for the proposed adjustment as it wouldnot be economic to do so. While that is correct, it does not excuse her earlierdecision to open her investigation into Mr Thompson's complaints. ByDecember 2018 her investigation had already run up considerable costs andtainted the liquidation.[74] To this point, therefore, the Associate Judge had expressed the firm view thatMs Toon ought not to have taken any steps to investigate Mr Thompson's complaint.Later, however, when assessing what reasonable remuneration would be, the AssociateJudge allowed 18 hours for dealing with Mr Thompson's complaints and commentedthat a liquidator not only could, but should, consider the complaints:[132] A liquidator was required to consider Mr Thompson's complaints andthe settlement agreement, and to check whether his complaints were coveredby the agreement. That would include obtaining information about the claimsin the s 174 proceeding, obtaining legal advice, telling Mr Thompson thatthe liquidator would take no further steps on his complaint and deal[ing] withany response from Mr Thompson. If Mr Thompson had been told clearly thathe could not revive complaints that he had settled, he would not have takenthe matter any further.[75] On the basis of these latter statements, the finding must be treated as being thatMs Toon was entitled to consider Mr Thompson's complaint and the settlementagreement to satisfy herself that the agreement precluded any further action.Was there error in these findings?Was it necessary to consider the correct legal position as to the effect of the settlementagreement?[76] The Associate Judge's findings were largely driven by his view, reached afterlengthy legal analysis, that the settlement agreement precluded any claim against theQuinns for the fees said to have been overcharged. Mr Blanchard QC, for Ms Toon,argued that the correct legal position was not in issue and the Associate Judge erred inundertaking an extensive analysis of the legal position. We agree.[77] The Associate Judge was not required to determine the correct legal positionbut, rather, to make an evaluative judgment as to what remuneration was reasonablein the context of the liquidation. To do that he had to decide whether the steps thatMs Toon took were those that a reasonably competent liquidator would have taken.[78] The Associate Judge had before him evidence from two experiencedliquidators. The effect of their evidence was that, in deciding whether the settlementagreement precluded investigation of Mr Thompson's complaint, a reasonablycompetent liquidator would have sought legal advice. Mr Bethell agreed incross-examination that a reasonable liquidator in Ms Toon's situation, facingcontentious parties with strongly held views and a history of litigation, would havetaken legal advice. He said that, had he been in that position, he would have reviewedthe settlement agreement, sought the view of his in-house legal advisor and wouldhave consulted an external lawyer.[79] For this reason, although we heard extensive submissions on the AssociateJudge's analysis of the effect of the settlement agreement, we do not see this as relevantto determination of the appeal and therefore do not consider it. We mean no disrespectto counsel, who, understandably, felt obliged to address the substance of the AssociateJudge's findings on this issue.The effect of the legal advice[80] The Associate Judge's conclusion at [132] that a liquidator in Ms Toon'sposition was entitled to "[obtain] legal advice [and tell] Mr Thompson that theliquidator would take no further steps on his complaint" was clearly predicated on theerroneous assumption that any legal advice a liquidator received in thosecircumstances would have justified declining to take further steps. As discussed,however, the evidence was that Ms Toon's lawyer had advised her that the settlementagreement was not binding on the company, with the result that she was entitled toproceed further. As a result of this error, the Associate Judge failed to direct hisattention to the question of what was reasonable for Ms Toon to do, having regard tothe legal advice she had actually received.[81] Mr Bryers argued that the legal advice was of limited importance becauseMs Toon had not, in fact, relied on it and, as a matter of law, Ms Toon was not entitledto seek remuneration on the basis that she had relied on legal advice.[82] As to the first argument, Mr Bryers pointed out the Mr Taylor's advice was notreferred to in evidence until Ms Toon was examined orally. The lack of reference tothe legal advice in the affidavit evidence is not significant because it was not apparentas an issue in either application and when Ms Toon gave evidence about consultingher lawyer it was not suggested to her that she had not relied on the advice shereceived. Mr Bryers also suggested that if Ms Toon wished to rely on legal advice asa reason for doing what she did, it was incumbent on her to produce the advice. Butgiven that Ms Toon's evidence was not challenged, and she was not asked to waiveprivilege in respect of it, that submission is not sustainable.[83] Mr Bryers also suggested that the quality of the legal advice ought to be viewedcautiously because Mr Taylor's time records suggested that he had only spent a shorttime on the matter. He accepted, however, that it was difficult to assert that Ms Toonought not to have relied on the advice simply because her lawyer did not spend verymuch time considering the issue.[84] Mr Bryers's second argument in relation to the legal advice was that Ms Toonought not to be entitled to claim remuneration on the basis that she acted on legaladvice. However, the cases on which he relied for this submission are not apt.[85] In Re Windsor Steam Coal Co (1901) Ltd the liquidator, having consulted thesolicitors of a major shareholder, settled a claim against the company that turned outto be invalid.28 The Court held that by declining either to apply to the Court fordirections or to obtain an extraordinary resolution of the shareholders sanctioning thepayment, the liquidator "acted entirely on his own judgment" and was therefore liableto repay the money.29 This was not a case that involved the liquidator seeking advicefrom their own lawyer and acting on it.[86] Re Home and Colonial Insurance Co Ltd also involved a liquidator settling aclaim against the company that turned out to be invalid.30 While the liquidator hadconsulted his lawyers, they were never asked to consider the particular question atissue and were not informed of key facts.31 In these circumstances the Court held,understandably, that the liquidator could not escape liability on the basis that hissolicitors failed to give him a warning.32 Again, this is not comparable to the presentcase.28 Re Windsor Steam Coal Co (1901) Ltd [1929] 1 Ch 151 (CA).29 At 160.30 Re Home and Colonial Insurance Co Ltd [1930] 1 Ch 102 (Ch).31 At 123–124.32 At 126.[87] Finally, in Austin Securities Ltd v Northgate & English Stores Ltd a claim wascommenced against a company and then not pursued for over two years.33 In themeantime, the company went into liquidation. Although the liquidators were awareof the claim, they failed to deal with it. When the claim was subsequently revived, thecompany applied to stay it for want of prosecution. This application was ultimatelyunsuccessful. Although the company's solicitors had advised the liquidator that thecreditor's claim was not pursued, the Court of Appeal of England and Wales held thatthe liquidators had nevertheless "woefully fallen down in their statutory duty".34 Evenif the solicitors had advised them wrongly, "they could not shield themselves behindthat mistake".35[88] By contrast, Ms Toon sought specific advice from her own lawyer, at the outsetof the liquidation, about whether she should investigate a potential claim on behalf ofthe company. The expert evidence was that it was reasonable for her to have done so.It must also, therefore, have been reasonable for her to have acted on the advice shereceived. In these circumstances, the relevance of the legal advice cannot bediscounted. But nor can it be the sole determining factor as to whether it wasreasonable to take action. That question also depends on the question of materiality.Issue 2: did the Associate Judge err in his finding as to the effect of Ms Toon'sinvestigation on the liquidation?The Associate Judge's finding[89] The expert evidence to the effect that a reasonably competent liquidator wouldhave taken legal advice meant that the real question for the Associate Judge waswhether the steps that Ms Toon took after receiving legal advice were reasonable,having regard to the questions of value and proportionality on which any assessmentof remuneration would be based. However, the Associate Judge did not proceeddirectly to that question. Instead, he explored the effect that Ms Toon's decision toinvestigate Mr Thompson's complaint had on the liquidation generally on the basisthat these effects could not be separated from other aspects of the liquidation.36 His33 Austin Securities Ltd v Northgate & English Stores Ltd [1969] 1 WLR 529 (CA).34 At 535.35 At 535.36 Quinn v Toon, above n 4, at [105].subsequent assessment of what remuneration was reasonable reflected his view thatMs Toon's wrong approach had affected many aspects of the liquidation.[90] The Associate Judge was highly critical of Ms Toon. He said, among otherthings:[106] Ms Toon bought into Mr Thompson's complaints. While she wentthrough the motions of giving the Quinns the opportunity to reply to herfindings, she did not show any interest in [Mr Quinn's] responses, includinghis reliance on the settlement agreement and his answers on the substance ofMr Thompson's complaints. She did not read the materials about the s 174proceeding sent to her by the Quinns' counsel. She had decided that theQuinns should accept the adjustment she had proposed and dragged the chainin making distributions to put some pressure on the Quinns to do what shewanted. [107] She viewed Mr Quinn with suspicion and as someone not to betrusted. That soured the liquidation. [108] She took a fault-finding approach when the circumstances did not callfor it. [91] The Associate Judge rejected the suggestion that the Quinns may have actedtoo aggressively, noting that a shareholder has few formal remedies when concernedabout a liquidation and that Mr Quinn had tried both a notice under s 286 and ashareholders' meeting, with no success.37[92] The Associate Judge concluded that:[113] The litigation with its associated effort, time and expense is also aconsequence of Ms Toon's wrong turning at the outset.[114] In summary, the effects of Ms Toon taking up Mr Thompson'scomplaint and wrongly pressing the Quinns to accept her proposed adjustmentwere extensive, led to a lack of co-operation, strained relationships betweenMs Toon and the Quinns, extra work that could have been avoided and addedenormously to the costs of the liquidation.[93] Later, in determining what reasonable remuneration would be, the AssociateJudge observed that:[124] Ms Toon's remuneration claim is too high because she spent time onunnecessary work, investigating Mr Thompson's complaints, and that hadother effects on the liquidation which added to its length and the time spent37 At [110].on it. It led to differences with the Quinns, pursuit of a fruitless claim againstthem, increased correspondence, the notice under s 286 of the Companies Act,the shareholders meeting, the application under s 286, requests forunnecessary documents, digging into past transactions that had nothing to dowith the liquidation (the sale of Nelson St), delays in completing accounts anddelays in distributions. None of this was reasonable or efficient. Nor did itgive value to the shareholders. She should not be paid for it.[125] In some cases fixing liquidators' remuneration, it is possible toseparate the good from the bad and to make deductions for those parts wherethe claim is excessive. But that is not possible here. Ms Toon took a wrongturn early in the liquidation and that affected much of what followed. Instead,I assess the matter afresh based on what a competent liquidator would likelycharge.(Footnote omitted.)Were these findings erroneous?[94] Mr Bryers supported the Associate Judge's conclusions and argued that therewere good reasons Ms Toon ought not to have pursued the fees write back,notwithstanding the legal advice. Essentially, they were that the history ofMr Thompson's complaints ought to have shown that there was no basis on which topursue them and that Ms Toon's assessment of the amount involved in the directors'and management fees issue was flawed.[95] Mr Bryers described Mr Thompson as having been obsessed with the feescharged by Mr Quinn to IHL for some two decades prior to the liquidation but, whengiven the opportunity to justify his complaints in the derivative action, he wasunsuccessful. The s 174 proceeding had ended in the settlement agreement thatpurported to settle both past and future remuneration, with the Quinns agreeing not totake further fees for the management of the company. In these circumstances it oughtto have been apparent that a court was unlikely to find merit in the complaints.[96] Mr Bryers submitted that the basis on which the liquidator assessed the valueof any potential claim was flawed because it assumed that the directors' fees andmanagement fees that could be charged were limited by the High Court's decision inthe derivative action,38 which assumption was incorrect. In relation to the years endedMarch 2015 to March 2017, Ms Toon's assessment was based on an assumption that38 Investacorp Holdings Ltd v Quinn, above n 9.the Quinns were not entitled to any payment for directors' fees or management feesbecause of the undertaking given by Mr Quinn to the NZICA Disciplinary Tribunal,but this was incorrect too because the Tribunal's jurisdiction was limited to accountingwork and fees and the undertaking was given in that context. Moreover, it was not forIHL to enforce the undertaking; at best it could have complained to the Tribunal.[97] Any assessment of past actions risks hindsight analysis. Care must be taken toensure that what is learned from the eventual outcome does not affect the assessmentof the liquidator's actions.39 We accept Mr Blanchard's submission that the criticismslevelled at Ms Toon rested to a significant degree on hindsight.[98] There is nothing in the evidence to suggest that Ms Toon had any warningabout the level of animosity that existed between Mr and Mrs Quinn andMr Thompson. Mr Quinn's initial letter of 8 June 2017 said nothing about thehistorical relationship between the parties. The accompanying background notes saidonly that "[a]ll shareholders of Investacorp have signed a settlement agreement toresolve claims made by the Thompsons under s.174 of the Companies Act, 1993."Ms Toon could not possibly have discerned from this statement the long history ofextreme mistrust and acrimony that existed between the Quinns and Mr Thompson.That she did not appreciate it is obvious from her letter of engagement in which shenoted that she would need to confirm whether she would be corresponding solely withthe directors or all the shareholder groups "which, from experience, can addsignificantly to the time involved if there is any acrimony".40[99] As a result, the first indication of difficulties between the shareholders camefrom Mr Thompson's approach to Ms Toon in April 2018. Although Mr Thompsonhad approached Ms Toon prior to her appointment he said that this was simply tosatisfy himself that she would act independently. That approach may have givenMs Toon some inkling that there had been disagreements between the shareholdersbut could in no way have signalled the depth of the animosity that existed between theparties.39 Re Windsor Steam Coal Co (1901) Ltd, above n 28, at 159.40 Emphasis added.[100] Following the meeting between Ms Toon and Mr and Mrs Quinn on 26 April2018, Mr Quinn provided a number of documents including copies of shareholderminutes from 2015. It does not appear that the minutes of the special resolutionreferred to earlier was among those documents. It would, however, have been obviousto her that there was some tension between the parties. Mr Quinn's response to theissues Mr Thompson had raised was to simply say that any increase in costs resultingfrom Mr Thompson should be billed to him directly. In fairness to Mr Quinn, hisresponse undoubtedly reflected a genuine belief that all matters had been settled.[101] For his part, Mr Thompson continued to press Ms Toon to pursue the mattershe had raised. Her evidence was that she felt threatened by the way he kept remindingher of her duties as liquidator. At this stage there was no way for Ms Toon to knowwhether there was substance to Mr Thompson's complaints and, if so, what the likelyamount involved was likely to be.[102] At the end of May 2018 Ms Toon had Mr Thompson's complaints, the HighCourt's decision in the derivative action and the NZICA decision. That informationdid not indicate that investigating the complaints would be a complete waste of time.To the contrary, the NZICA's finding might reasonably have her caused her someconcern. Ms Toon advised Mr Quinn in her email of 29 May 2018 of the basis onwhich she considered that there had been overpayments to the Quinns but expresslysaid that she had not formed a conclusive opinion and wanted to hear his responsefirst. At that point her calculation was that fees of $80,305 had been overcharged.[103] Mr Quinn could have addressed what he saw as flaws in Mr Toon's workingsbut elected not to. He was not obliged to respond but the fact that he did not meantthat Ms Toon had no reason to think that her assessment might be wrong. This provedunhelpful in the circumstances. When Mr Quinn served Ms Toon with a notice unders 286 of the Companies Act a few days later, she was caught between complaints thatappeared worthy of investigation and Mr Quinn's refusal to engage with her aboutthem. It was at that point that Ms Toon sought legal advice on the effect of thesettlement agreement. Even on the Associate Judge's finding, Ms Toon actedreasonably up to then. In our view, the various matters that Mr Bryers relies on, suchas the long history of Mr Thompson's complaints and his obsession with the feescharged by Mr Quinn, were not sufficiently known to Ms Toon when she beganinvestigating the complaints and her actions cannot be judged as if she had thatknowledge.[104] When Ms Toon wrote to the shareholders on 18 July 2018 setting out her viewregarding the overpayment of fees, which she now assessed at $106,545, Mr Quinnstill did not take the opportunity to correct what he saw as flaws in Ms Toon'sapproach. He did not do so until 27 July 2018, shortly before the shareholders'meeting. It was only with the benefit of Mr Quinn's letter of 27 July 2018 thatMs Toon had sufficient information to review and reconsider the value to the companyin pursuing this matter further. Only then could she have had a real sense ofMr Quinn's position and made the assessment as to whether her calculation on the feesissue was correct and, even if it was, whether it was worth pursuing. However, theshareholders' meeting did not proceed as planned because Mr and Mrs Quinn did notremain and within a few days Mr Quinn had started proceedings.[105] The circumstances as we see them can be summarised as follows. Ms Toonwas appointed without prior knowledge of the extent of animosity between theshareholders. One shareholder made serious complaints against a director regardingfees charged to the company. That director had previously been the subject of censureby the NZICA in connection with fees charged to the company. Review of thecompany's financial statements suggested that fees totalling more than $106,000 hadbeen overcharged. On one view the amount was not significant in the context of thecompany's assets. On another view, one of the shareholders was in a more modestfinancial position than the others and her share of the disputed amount might beregarded as material to her. That shareholder had not indicated that she wishedMs Toon to relinquish the issue. The director declined to engage on the basis that thesettlement agreement precluded that matter being investigated. But Ms Toon had legaladvice that the settlement agreement did not bind the company. The director alsothreatened legal proceedings. Eventually the director did provide a detailed responseto Ms Toon's questions. But within days the legal proceedings had been commenced.[106] In our view the Associate Judge wrongly assessed Ms Toon's conduct with thebenefit of hindsight and, as a result, came to unwarranted conclusions. In particular,Ms Toon did not take a wrong turn at the outset. The increasingly fractiousrelationship between her and Mr Quinn is not to be sheeted home to errors made byMs Toon. Rather, we see the way the liquidation unfolded as an unfortunate legacy ofMr Quinn's and Mr Thompson's dealings with one another over a very long time, andMs Toon was caught between them.[107] In our view Ms Toon was entitled to investigate Mr Thompson's complaintuntil she had sufficient information to satisfy herself that pursuing it would not be costeffective. It was not until she received Mr Quinn's detailed explanation at the end ofJuly 2018 that Ms Toon could have been expected properly to review the merits of thecomplaint against him. But Mr Quinn had issued proceedings in the first week ofAugust 2018 and she was entitled to give priority to responding to them.[108] Ms Toon's affidavit was filed at the end of August 2018. As discussed, littleoccurred in September 2018 because of Ms Toon's personal circumstances. It wouldtherefore have been reasonable for Ms Toon to have reviewed her conclusion andreached a view as to the materiality of the amount and the cost-effectiveness ofpursuing it by mid-October 2018. Ms Toon did not reach her view until December2018. However, the delay of six weeks or so did not add materially to the cost of theliquidation. Whenever the decision was made it would still have required the letter toshareholders that Mr Taylor sent on 20 December 2018.[109] Finally, we note that some of the legal costs in this case are the result ofMr Quinn's decision to pursue his s 286 application even after Ms Toon signalled thatthe fees issue would not be pursued. The reasonableness of Ms Toon's remunerationcould have been challenged in the context of her application for approval. Mr Quinn'sapplication made additional, serious allegations against Ms Toon, including that shehad breached her duty to act impartially between the shareholders, was "rude andaggressive", "very critical" and "emotional about the issue". The potential forreputational damage from such allegations meant that sustained opposition to theapplication was inevitable. For the reasons we have given, Ms Toon has beenvindicated in her opposition.Issue 3: did the Associate Judge err in disallowing Ms Toon's legal expenses?[110] The Associate Judge held that the $63,158 Ms Toon claimed for legal expenseswas not properly incurred. He considered that a "careful liquidator" would haveobtained legal advice to check that Mr Thompson's complaints had been resolved bythe settlement agreement, and that the lawyer may also have been required to deal withany responses from Mr Thompson, and allowed $4,000 (excluding GST) for that.41This conclusion reflects the same erroneous assumption discussed above at [80] thatany legal advice Ms Toon received would be to the effect that the company was boundby the settlement agreement.[111] Since we have held that Ms Toon acted reasonably in investigatingMr Thompson's complaints, it follows that the legal expenses she incurred in doing sowere also properly incurred and are payable out of the assets of the company.42Result[112] The appeal is allowed.[113] The High Court judgment is set aside.[114] Ms Toon's remuneration is approved at $101,729. She is entitled to her legalexpenses as incurred.[115] The High Court's costs order is set aside. Ms Toon is entitled to costs in thatCourt on a 2B basis.[116] Ms Toon is also entitled to costs in this Court for a standard appeal on a bandA basis, plus usual disbursements. We certify for second counsel.Solicitors:Heaney & Partners, Auckland for AppellantMcVeagh Fleming, Auckland for First Respondents41 Quinn v Toon, abve n 4, at [141]–[142].42 Companies Act, s 278.