Fees charged by courtappointed liquidator cut by judge

WELLINGTON: Deloitte liquidator David Levin has come under scrutiny for charging excessive fees in two liquidations.

Associate Judge Roger Bell last month released two judgement reducing what he wanted for costs in the liquidation of Green Securities and Salus Safety Equipment by 25% and 67% respectively.

When a liquidation is courtappointed, practitioners must have their fees approved by the High Court.

In the Green Securities liquidation, Mr Levin wanted $159,044 in remuneration, but the judge said $120,000 was more appropriate.

The company, a Rodney Wayne hair salon, was moved into liquidation on May 5, 2010.

As part of his work, Mr Levin sued the company’s director, Stephen Just, who eventually went bankrupt.

While the judge did not say it was wrong to sue Mr 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 judgement, dated June 18, described the action as ``heavyhanded'' and ``inefficient''.

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 sixminute units, were for jobs such as opening mail, clearing intrays and distributing mail, and approving an 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 — a footnote listed 35 people who worked on it. The judge noted the liquidators charged for time spent for one person passing it on to another.

He reduced the liquidator’s fee to $120,000.

``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.''

In a separate ruling dated June 17, Associate Judge Bell said Mr 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 judgement said.

However, the judge said the money claimed was ``out of kilter'' with what he has seen in comparable cases. ``If this liquidation had gone to smaller insolvency practice, I am satisfied the liquidation could have been completed in shorter time,'' and said the job should have been done for $30,000.

The liquidator did not respond to an emailed request for comment. — BusinessDesk