It was intended to be the endgame in a $38 million dispute, but tipped over into detailed argument over level of fees charged by liquidators of Auckland used car importer Autoterminal. The High Court cut back fees billed by fifteen per cent, ruling the job had been overserviced by insolvency firm Khov Jones.
They saw the liquidation as a Rolls Royce, rather than a cheaper brand of car, Justice Brewer said. Given the keys, they took the car for a long drive, he commented, pruning back a fee invoice of $920,000.
Separately, Khov Jones claimed as an insolvency cost some $120,000 spent in preparation for the court hearing defending its fees. Justice Brewer reduced this cost recovery by 25 per cent. He was critical of affidavits filed in evidence by Khov Jones, amounting to hundreds of pages, collectively having some 9000 pages of attachments.
Autoterminal New Zealand Ltd was propelled into liquidation in 2021 for non-payment of a $38 million debt owed related company IBC Japan Ltd.
This debt arose from IBC’s supply of used cars from Japan.
IBC Japan grew out of a business relationship developed in the 1990s between American Robert Stone and New Zealander Hohua Hemi, known as Jojo. From small beginnings, it grew to a global enterprise exporting used cars from Japan.
The New Zealand leg of operations was governed by a vehicle supply agreement. Autoterminal New Zealand did not have pay IBC Japan for deliveries until vehicles supplied were sold in New Zealand and payment collected. This left IBC at the mercy of Autoterminal’s credit policy, a policy over which it had no control.
Commercial disputes between Mr Hemi and Mr Stone saw this debt balloon out to $38 million.
In July 2021, the High Court ordered Autoterminal pay the $38 million owed.
Months later, Autoterminal was in liquidation, with Auckland-based Khov Jones appointed liquidator assisted by Tauranga-based Thomas Rodewald.
Within weeks, a deal was done. IBC Japan took over all Autoterminal’s assets in satisfaction of the debt owed.
IBC agreed liquidators could pay all other Autoterminal creditors their full one hundred cents in the dollar, excluding a couple of debts believed linked to Mr Hemi.
This left calculation of liquidation costs as the only major expense reducing what IBC could salvage from Autoterminal.
IBC claimed Khov Jones overcharged.
Justice Brewer ruled Khov Jones spent too much time on the job.
Some of its work duplicated work done elsewhere. Legal advice on cross-border insolvency issues was disproportionate and only generated more hours unnecessarily spent analysing the advice.
In addition, more of the work could have been done by junior staff at a lower charge out rate, Justice Brewer said.
Khov Jones was held justified in charging for considerable time spent liaising with IBC Japan. Whilst it was Autoterminal’s major creditor, IBC Japan attempted to interfere excessively in conduct of the liquidation, Justice Brewer said.
Khov Jones spent about $191,000 in billable time engaging with IBC Japan and its lawyers.
Jones v. IBC Japan Ltd – High Court (30.08.24)
24.243