Auckland insolvency specialist Victoria Toon walked unwittingly into a family scrap when she took on the job of winding down a solvent property investment company. Shareholders related by both blood and marriage had been at each other’s throats for nearly twenty years. Majority shareholder, former chartered accountant Clive Quinn, soon turned his attention to Ms Toon, unsuccessfully challenging fees and expenses she charged for the company’s liquidation.
Investacorp Holdings Ltd owned a commercial building in Auckland’s central business district and half share in commercial premises at Papatoetoe. Interests associated with Mr Quinn held a controlling 50.2 per cent stake in Investacorp; the minority holding being family interests of fellow investor Bruce Thompson. Mr Quinn is married to Mr Thompson’s sister. Mr Quinn occupied Investacorp’s Papatoetoe building, paying rent. Investacorp paid fees to Mr Quinn’s accounting practice for tax and management services provided.
The High Court was told of a history of bad blood between Mr Thompson and Mr Quinn. Mr Thompson alleged Mr Quinn was milking money out of Investacorp, charging excessive fees for his professional services. A 2011 court case saw Quinn interests ordered to pay Investacorp $291,300 compensation following arguments that Mr Quinn was paying below market rentals for use of the Papatoetoe office. Mr Thompson complained to the New Zealand Institute of Chartered Accountants about Mr Quinn’s conflict of interest in charging professional fees to Investacorp whilst also being a director and shareholder. The Institute censured Mr Quinn and he agreed to stop. Evidence was given that Mr Quinn then handed on the work to a chartered accounting firm run by relatives; his daughter and son-in-law. He then took steps to augment his remuneration from Investacorp by increasing directors’ remuneration. Quinn interests used their voting majority to fire Mr Thompson as a director in 2015.
In the face of legal action taken by Mr Thompson to force liquidation of Investacorp, the two sides signed a settlement document agreeing to wind up their company with Ms Toon appointed liquidator. Mr Thompson was of the view that the settlement agreement required Ms Toon as liquidator to investigate the level of fees received by Mr and Mrs Quinn. By contrast, the Quinns were of the view that their settlement agreement precluded any enquiry; a quick cashing-up of company assets and distribution to shareholders was all that was required. Mr Thompson soon alerted Ms Toon as to his view of the deal.
With $3.6 million banked from realisation of company assets, final distribution was delayed as Ms Toon faced down Mr Quinn’s blank refusal to hand over company records. Finally forced to hand them over and learning that Ms Toon had decided it was uneconomic to challenge any excessive fees allegedly taken, he sued Ms Toon complaining that she had charged too much in liquidation fees for what should have been a quick liquidation. She should have ignored Mr Thompson’s allegations, he said. Mr Quinn challenged steps she had taken and the level of legal fees incurred.
The Court of Appeal ruled it was proper for Ms Toon as liquidator to take an independent line, following up on Mr Thompson’s allegations. Investacorp was not a party to the settlement agreement between shareholders. The Court approved her fees of some $101,700 for work as liquidator spread across four years.
Toon v. Quinn – Court of Appeal (17.12.21)
22.022