Ranolf Company Limited (Ranolf) was created for the sole purpose of acting as a trustee of the Ranolf Trust (Trust). This was the only activity Ranolf performed and its only asset was its right of recourse to the Trust assets under indemnity.
Ranolf was put into liquidation in 2014. Earlier this year, Ranolf brought this proceeding in the High Court seeking various orders to enable it to recourse to the Trust property to meet the claims of its creditors and its liquidators' costs.
While the Court held that s 38 of the Trustee Act 1956 entitled the liquidators of Ranolf to be paid out of the Trust assets, Gilbert J held the sum the liquidators had claimed as their costs ($502,787.48) was not reasonable, especially given Ranolf only owed a total of approximately $130,000 to four creditors.
Gilbert J considered that the sum was "extraordinary" and "hard to comprehend", especially given that none of Ranolf's creditors had yet been paid. His Honour stated that the liquidators were only permitted to recover costs that were reasonable and necessarily incurred during a liquidation. The Court considered that the liquidators should have pursued a simpler recovery under the indemnity, because that was the only remedy afforded by the Trust deed. Instead they chose to pursue other claims at considerable cost.
The Court ultimately allowed the liquidators costs of $145,925.25.
See Court decision here.