The company, a Rodney Wayne hair salon, was moved into liquidation on May 5, 2010. As part of his work, Levin sued the company's director Stephen Just, who eventually went bankrupt.
While the judge didn't say it was wrong to sue Just, he said "the liquidators made their case more complex than it needed to be. They sued for breaches of three separate duties under the Companies Act, when they needed to sue for only one."
His judgment, dated June 18, described the action as "heavy-handed" and "inefficient."
Still high
Putting aside the litigation, the judge said the amount claimed was still high.
The judge noted that while the lawyers and the Inland Revenue Department would get some money, the proposed fee would leave no funds for unsecured creditors.
He said that the liquidator's claims, in six-minute units, were for jobs such as open mail, clear in-tray and distribute mail, approve invoice for payment, among others.
"These charges are for routine clerical work. This explains the many hours claimed but at a low average hourly rate."
"I do not accept that it is reasonable for liquidators to charge separately for these steps. These matters are generally absorbed as part of the costs of running an insolvency practice."
He said there were too many people working on the file with a footnote listing 35 people that worked on it. The judge noted the liquidators charged for time spent for one person passing it onto another.
He reduced the liquidator's fee to $120,000, stating "that sum takes away padding and inefficiencies in their claim but leaves them with an amount that is still relatively high for such a liquidation."
Salus case
In a separate ruling dated June 17, associate judge Bell said Levin's request for $91,600 in fees for the liquidation of contract safety firm Salus Safety Equipment was too high.
The judge sought further information after initially deciding the amount sought was large for a business with few assets.
According to the decision, the liquidator threatened to sue for Companies Act breaches, but the directors settled.
"The liquidators made a major recovery without the costs of legal proceedings and without incurring any legal expenses," the judgment said.
However, the judge said the money claimed was "out of kilter" with what he has seen in comparable cases, and that the liquidator recorded large amounts of time on routine tasks.
"These charges appear to be padding," the judge said.
"If this liquidation had gone to smaller insolvency practice, I am satisfied the liquidation could have been completed in a shorter time," and said the job should have been done for $30,000.
In both decisions, the judge noted and apologised for delivering his decisions very late. Levin had asked the court to approve his costs for the Salus liquidation in 2018 and the Green Securities job in 2019.
The liquidator did not respond to an emailed request for comment.
Tough approach
Chapman Tripp partner Michael Arthur said it was a "fairly tough" approach taken by the court.
"The liquidator actually got a pretty good return for creditors and it is quite critical of them. In a way, it doesn't really allow for the fact that when you are in the middle of a liquidation you don't really know how things are going to unfold. It's easier to have hindsight."
Arthur said the rulings probably won't make liquidators less likely to take on claims against directors, despite the judge's criticisms.
The lawyer said that while under the new insolvency practitioner licensing regime, the courts will still have their role of approving costs in court appointed-liquidations, the changes mean fees can be better scrutinised, especially in shareholder-appointed liquidations, where the courts don't monitor the costs.
"The impact it will have is every insolvency practitioner needs to be licensed and that will make them subject to complaints and disciplinary process, so, as a consumer or a creditor to a liquidation, you can make a complaint," he said.
Despite a delayed start due to the covid-19 pandemic, Parliament decided to bring in the Insolvency Practitioners Regulation Act 2019 on Sept 1.
Individuals will have one year to apply for licensing, with full implementation enforced from 2021.
- BusinessDesk
