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Liquidator's fat big-city fees questioned in High Court

By Deborah Hill Cone

Friday 30th August 2002

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JOHN WALLER: Criticised over fees
A master of the High Court has fired a broadside at the business community, criticising the naivete of spending big money to liquidate little companies.

The comments feature in a June case where a big-city accountancy firm was singled out for charging high fees to liquidate a small company in the provinces.

In the High Court at Napier, Master David Gendall heard an application by John Waller and Colin McCloy as interim liquidators requiring the payment of unpaid fees and expenses for work done four years ago as interim liquidators of Hawke's Bay-based investment firm Trans Capital.

Mr Waller and Mr McCloy were later replaced by Napier liquidator John Managh & Associates by Trans Capital's shareholders.

Master Gendall granted Mr Waller and Mr McCloy about $45,000 in fees they were seeking but used the case to make some strongly worded comments about the appointment of liquidators.

"[I feel] a concern that on occasions in the past in New Zealand, I believe there may well have been a lack of sophistication in the commercial community to some degree in the selection of liquidators and the incurring of liquidation fees. A result, in my view, is that at times this has impacted detrimentally on creditors generally and our broader business community," Master Gendall said.

Mr Managh's lawyer, Magnus Macfarlane, asked: "Given that the interim liquidation of Hastings companies here, acknowledged by all parties as being intensive, was nevertheless in reality straightforward, was it entirely necessary to engage the top-of-the-range expertise of PricewaterhouseCoopers to carry it out?"

The master said the registrar of companies would have appointed Mr Waller and Mr McCloy and has considerable experience, but went on to express his own view.

Experienced liquidators who were partners in chartered accountancy practices in Napier, Palmerston North, Hamilton and other provincial centres had charge-out rates significantly lower than that charged by their counterparts in Auckland and Wellington, Master Gendall observed.

"The choice of liquidator, therefore, may have a significant impact upon the fees charged and the final result. The court must be mindful at all times of obligations to the general body of creditors for whose primary benefit the liquidation funds are collected," Master Gendall said.

"In my view considerably more care needs to be taken in these areas. This is particularly so for small and medium-sized companies where the level of assets and activity of a liquidating company may not justify the employment of more highly priced liquidation techniques from the main centres."

Master Gendall, who is based in Wellington, also drew attention to the lack of detail in the information provided by PWC showing the time it had spent as interim liquidator of Trans National.

"I must record my disappointment at the quality of the information provided in the printout from the PricewaterhouseCoopers time records. This ... in my view is scarcely adequate," Master Gendall said.

The computer printout time records on their own were of little help to ascertain what work was undertaken by which staff member and on what date, Master Gendall said.

Master Gendall said the bulk of the interim liquidator's work was not carried out by Mr Waller and Mr McCloy but by other PWC staff members.

The master said he did not understand the reasons for the four-year delay for the matter to be heard.

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