Local companies and individuals with the ability to manage the court-ordered shutdown of PSL have all shied away from the job because it entails having to sell the Tiare Taporo vessel which has broken down several times on domestic voyages. And until such time the vessel is sold, the liquidator would be responsible for keeping it safe.
KPMG manager Mike Carr says the winding up of PSL would be a nightmare and the company is in a complete mess.
“It would require a massive amount of time to sort through and one would have to sell a boat. Who’s going to pay for doing all this work? The cost involved would be enormous.”
Carr says in the event of really bad weather when vessels move to the lee side of the island, the liquidator would have to fuel the Tiare Taporo and find a captain and crew to sail her to the western side.
“Why would you take on those challenges. The whole thing is sad but not surprising really, because shipping is a very difficult business.”
Carr confirmed KPMG would not be getting involved in the winding up of PSL. The winding-up petition was adjourned sine die on February 3 so a liquidator could be appointed.
On February 16 the court heard that counsel for the petitioners Apex Agencies Ltd and Porter Group Holdings Ltd, trading as TOA Petroleum and TOA Gas, had been unable to find any local person willing to take on the job.
Chief Justice Sir Hugh Williams noted that the Tiare Taporo could not be left without somebody having power to manage the vessel in the event of a cyclone.
Counsel Ben Marshall recommended that John Howard, Ross Fisk and David John Bridgman of PwC New Zealand be appointed as liquidators. The PwC team was accepted by other counsel representing Penrhyn island families, the former ship captain and a crew member and Bank of the Cook Islands. However, the PSL counsel had commented that the fees proposed to be charged by the liquidators seemed excessive.
The fee scale proposed by the PwC liquidators ranged from $420 - $450 an hour for directors and liquidators. Associate directors, managers and senior associates would charge $240 per hour, associates $160 per hour, and $110 an hour for support staff.
CJ Williams said while the court had approved the appointment of Fisk and Bridgman as liquidators it was not prepared to make the actual appointment until three additional matters are attended to.
(a) Since Fisk and Bridgman do not reside in the Cook Islands and PwC has no presence in the Cook Islands, to give the court jurisdiction over the actions of the liquidators it will be necessary, before they are appointed, for each of them to file an undertaking in court binding both themselves and PwC to carry out the liquidation of Pacific Schooners Ltd in accordance with the provisions of the Companies Act 1955 (NZ) as applied in the Cook Islands by the Companies Act (1970-71) and to be answerable to the court.
(b) For the liquidators to file in court a plan detailing what actions they propose to take to safeguard the “Tiare Taporo” and Avatiu Port in the event of a cyclone hitting Rarotonga.
(c) Filing an undertaking in the court that they, PwC and its staff are prepared to be paid for their services at a scale commensurate with the fees Cook Islands accountants would be likely to charge for the work involved.
Sir Hugh said it was the view of the court that the scale of fees proposed to be charged by Fisk, Bridgman and PwC would appear to be the fees chargeable by them for similar work in New Zealand.
“If so, that is not the appropriate scale since they will be Cook Islands’ liquidators operating in the Cook Islands and should thus be paid at Cook Islands’ rates.”
He said it was for the petitioners to liaise with Cook Islands’ accountants as to the scale of fees they would normally charge for liquidation work such as PSL, obtain the agreement of Fisk, Bridgman and PwC to be remunerated at that rate and to obtain the comments of other counsel involved in this matter as to the appropriate fees to be authorised by the court.
Marshall sought costs against PSL at 80 per cent of the $6,485.00 so far charged to the petitioners by way of legal fees, plus full recovery of disbursements.
He justified that application by submitting that the amount of work involved in the matter was substantial and that the respondent’s conduct had compelled the petitioners to proceed all the way to the hearing because they had failed to engage with the petitioners regarding this matter and had adopted a “head-in-the-sand approach”.
“Although the petitioners are entitled to an award of costs, no basis is made out for any significant increase in the award above that normally awarded in winding-up petitions in the Cook Islands,” said CJ Williams.
“The arguments put forward by Mr Marshall to justify an increase in costs to 80 per cent of the amount charged do not justify an increase in that range.
“It is well established that petitions to wind up companies based on default in complying with a notice under section 218 of the Companies Act 1955 are not debt collection exercises.
“They are an application to the court to make an order terminating the capacity of a company to continue to trade when it is indebted, insolvent and unable to pay its debts as they fall due in the ordinary course of business.”
The Chief Justice said the court was prepared to increase the normal order for costs in liquidation to a modest degree but, as it appeared that further legal work would be required on behalf of the petitioners and liquidators, it was not prepared to fix the costs at this stage. He said the petitioners would be entitled an order to be repaid their disbursements as fixed by the court Registrar.