NZLII Home | Databases | WorldLII | Search | Feedback

Court of Appeal of New Zealand
You are here:  NZLII >> Databases >> Court of Appeal of New Zealand >> 2016 >> [2016] NZCA 366

Database Search | Name Search | Recent Decisions | Noteup | LawCite | Download | Help

Steel & Tube Holdings Limited v Lewis Holdings Limited [2016] NZCA 366 (1 August 2016)

Last Updated: 18 August 2016

IN THE COURT OF APPEAL OF NEW ZEALAND
BETWEEN
 Appellant
AND
 First Respondent BORIS VAN DELDEN AND PERI MICAELA FINNIGAN (AS LIQUIDATORS OF STUBE INDUSTRIES LIMITED) Second Respondents
Hearing:
20 April 2016
Court:
Harrison, Wild and Kós JJ
Counsel:
D Chisholm QC and P Niven for Apppellant K Crossland and J S Langston for Respondents
Judgment:


JUDGMENT OF THE COURT

  1. The appeal is dismissed.
  2. The appellant must pay the respondents’ costs for a standard appeal on a band A basis, together with usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Kós J)

[1] When should a parent company that has put its subsidiary into liquidation nonetheless be liable to the subsidiary’s creditors?
[2] The appellant Steel & Tube Holdings Ltd (STH) is parent to a group of companies. One wholly owned subsidiary is Stube Industries Ltd (Stube).
[3] Stube is the lessee of industrial land at Mount Wellington from the first respondent lessor, Lewis Holdings Ltd (Lewis).
[4] In 2013 STH put Stube into liquidation by shareholder’s resolution. The liquidators disclaimed the lease as an onerous property.
[5] Lewis then claimed from the liquidators damages consequent on disclaimer of the lease and sought an order under s 271(1)(a) of the Companies Act 1993 (the Act) that STH pay those damages as a company related to Stube.
[6] In the High Court, MacKenzie J made such an order, finding it just and equitable that STH pay the whole amount of Lewis’s claim.[1]
[7] STH appeals against the order that it is liable to pay Lewis’s claim.

Factual background

[8] Stube was previously called Healing Industries Ltd (Healing). It was the lessor of a 9146 m2 site at 15 Fisher Crescent, Mount Wellington, on which it operated a metalisation plant. This involved fabricated steel being grit or sand blasted and then painted to improve its resistance to corrosion. The lease was registered and perpetually renewable for 21year terms. It was renewed in 1988 at $61,560 plus GST per annum.
[9] The original lessor was the Auckland Harbour Board, succeeded by Ports of Auckland Ltd. As a consequence the lease is subject to the Public Bodies Leases Act 1969.
[10] In the 1980s STH acquired Healing and transferred the metalisation business to one of its divisions, Robt Stone & Co. The Healing brand ended. Healing was renamed Stube on 3 July 1991. Stube granted an informal sublease for STH to occupy the property, on which it continued metalisation through its Robt Stone & Co division. From this point onwards Stube was a shadow of its former self. Its only ongoing assets and liabilities were the ground lease, the informal sublease to STH, and a superannuation scheme.
[11] In 1996 Ports of Auckland sold its freehold interest in the land to Gabador Investments Ltd, subject to the lease to Stube. Gabador was a subsidiary of Lewis and later amalgamated with Lewis.
[12] In 1998, STH sold the metalisation plant and Stube sublet the land to Mt Wellington Metalisation 1998 Ltd. That business did not prosper. The metalisation plant was shut down. The sublease from Stube to Mt Wellington terminated in 2003.
[13] The land was contaminated as a result of the metalisation undertaken on the site since 1962. From 1996–2005 STH paid approximately $1.5 million to decontaminate the land and remove the buildings. The site became predominantly bare land.
[14] In addition to paying for the remediation, STH paid all rental and rates owing on the property pursuant to the lease between Stube and Lewis between 2003–2013.
[15] In 2008, STH granted a licence over the land to Carr & Haslam Ltd to use the property for the storage of vehicles and cargo for a monthly rental of $1,000.
[16] The lease was due to expire in 2009. Lewis gave a lessor’s notice on 12 March 2009 inquiring whether Stube would renew the lease and advising a rental of $195,000 plus GST per annum for the ensuing 21-year period. Lewis noted a response was required within two months.
[17] STH then failed to give notice that Stube did not wish to renew the lease. As a consequence of this mistake, cl 6 of sch 1 of the Public Bodies Leases Act deemed Stube to have accepted renewal of the lease at the rent specified in the lessor’s notice. Lewis gave notice on 18 May 2009 that Stube had accepted renewal of the lease for a further term of 21 years.
[18] STH initially protested. It requested an extension of time to give notice it was not renewing and indicated Stube was not in a financial position to renew. After taking legal advice and discussing alternative arrangements with Lewis, STH/Stube accepted renewal had occurred. Stube’s directors executed authority for the renewed lease to be registered.
[19] STH continued to pay the rent on behalf of Stube until 2013. As Stube’s sole shareholder, STH passed a special resolution on 4 June 2013 putting Stube into liquidation. The liquidators disclaimed the lease as an onerous property under s 269 of the Act.
[20] Lewis then claimed from the liquidators for the loss of the right to future rent under the lease, and sought orders under s 271.

Section 271 of the Act

[21] It is convenient at this point to explain the role of s 271. Section 271 creates an exception to the general principle that a subsidiary company is a legal entity separate from its parent.[2] It allows the High Court to order the parent company to pay claims made against the subsidiary in liquidation.
[22] The predecessor to s 271 was introduced by the Companies Amendment Act 1980, following a recommendation of the 1973 Report of the Special Committee to Review the Companies Act (the Macarthur Report).[3] The Committee was concerned that at least two well-known public companies had recently abandoned subsidiaries. It considered it was inequitable for a holding company to be able to benefit from losses of a subsidiary in structuring its tax affairs but then be able to walk away from the subsidiary and leave creditors with unpaid debts. It considered this inequity could be remedied by giving the High Court power to order the holding company to meet claims by the subsidiary’s creditors.[4]
[23] Section 271 provides:

271 Pooling of assets of related companies

(1) On the application of the liquidator, or a creditor or shareholder, the court, if satisfied that it is just and equitable to do so, may order that—

(a) a company that is, or has been, related to the company in liquidation must pay to the liquidator the whole or part of any or all of the claims made in the liquidation:

(b) where 2 or more related companies are in liquidation, the liquidations in respect of each company must proceed together as if they were 1 company to the extent that the court so orders and subject to such terms and conditions as the court may impose.

(2) The court may make such other order or give such directions to facilitate giving effect to an order under subsection (1) as it thinks fit.

(3) This section is subject to section 139(4) of the Reserve Bank of New Zealand Act 1989.

[24] The order in this case was made under s 271(1)(a). Section 271(1)(b) addresses the different situation where related companies are both in liquidation.
[25] STH is a company “related to” Stube because it owns all the shares in Stube.[5]
[26] The issue for the High Court was whether it was just and equitable to order STH to pay Lewis’s claim against Stube. Section 272 provides guidance on that issue:

272 Guidelines for orders

(1) In deciding whether it is just and equitable to make an order under section 271(1)(a), the court must have regard to the following matters:

(a) the extent to which the related company took part in the management of the company in liquidation:

(b) the conduct of the related company towards the creditors of the company in liquidation:

(c) the extent to which the circumstances that gave rise to the liquidation of the company are attributable to the actions of the related company:

(d) such other matters as the court thinks fit.

(2) In deciding whether it is just and equitable to make an order under section 271(1)(b), the court must have regard to the following matters:

(a) the extent to which any of the companies took part in the management of any of the other companies:

(b) the conduct of any of the companies towards the creditors of any of the other companies:

(c) the extent to which the circumstances that gave rise to the liquidation of any of the companies are attributable to the actions of any of the other companies:

(d) the extent to which the businesses of the companies have been combined:

(e) such other matters as the court thinks fit.

(3) The fact that creditors of a company in liquidation relied on the fact that another company is, or was, related to it is not a ground for making an order under section 271.

[27] We agree with MacKenzie J’s observation that s 271 requires the Court to balance two policy considerations. First, respect for the separate corporate identity of the company in liquidation. Second, avoiding the mischief that can result from an overly strict application of separate corporate identity.[6] We also agree with the Judge that it is inherent in the rationale of separate legal identity that the subsidiary company will be a separate commercial entity. As MacKenzie J put it:[7]

Its business will be conducted in such a way that the company is not a mere “front” for a business actually carried on by others. The “corporate veil” shields the substance of the company and its business from the shareholders who own the company. It does not, if the company is a mere façade, shield that façade from the operators of the business which is carried on in its name.

High Court decision

[28] The Judge undertook a detailed factual assessment of the case before him in terms of the four guidelines in s 272(1), namely:

The extent to which STH took part in the management of Stube

[29] The Judge found that the STH group acted as a single unit, with trading activities carried on through divisions, rather than through subsidiaries. The directors of Stube, Messrs Calavrias and Candy, did not separate their management of Stube from their management of STH’s divisions.[8] Mr Calavrias was the chief executive officer of STH and Mr Candy the chief financial officer. Mr Calavrias was a director of STH until 2009.
[30] Messrs Calavrias and Candy did not structure their decision making in a manner that acknowledged the separate commercial existence of Stube. They did not hold formal board meetings for Stube or discuss Stube’s business with a conscious appreciation they were Stube’s directors.[9] Although they were entitled by Stube’s constitution to act in the best interests of STH, that did not entitle the directors to ignore the separate interests of Stube or conflate them with STH’s interests. The directors of Stube were in breach of s 131(1) thereby.[10] Furthermore, renewal of the lease (even by mistake) engaged ss 129 and 136 of the Act, which also had not been complied with.[11]
[31] Stube’s directors did not consider whether Stube would be able to perform its obligations when authorising Stube to incur them, in breach of the duty in s 136 of the Act. The directors considered only the obligations of the group. Their management of Stube was undertaken in their capacities as chief executive officer and chief financial officer of STH. They ignored that Stube did not have the financial capacity to trade without the support of STH, and did not implement appropriate legal arrangements to support Stube.[12] As MacKenzie J put it:[13]

In reaching that conclusion, I have taken into account and given full weight to the well established practice of appointing senior managers of a holding company as directors of subsidiaries, to which I have referred at [26]. Nothing which I have said is intended to suggest that practice is inappropriate. But, as I have observed, when that practice is adopted, the directors must approach their duties as directors in a way which recognises the separate legal personality of the two entities. They must conduct the affairs of the subsidiary as a separate board. They must ensure that there are appropriate legal and commercial arrangements in place to recognise and give effect to the separate legal status of the subsidiary. The ability of the directors to act in the best interests of the parent does not obviate the need to have regard to the separate legal status of the subsidiary.

[32] The Judge considered there to be no evidence of the independent management of Stube. The Judge gave a number of examples from the evidence where STH was involved in the management of Stube. These included, in loosely chronological order:
[33] Overall, the Judge considered there to be no evidence of the independent exercise of management of Stube. Stube was a puppet of STH’s, devoid of capacity to conduct its own affairs.[26]

Conduct of STH towards Lewis as creditor of Stube

[34] The Judge found STH’s conduct was such to indicate to Lewis that STH stood behind Stube and was taking responsibility for the leased property.[27] The Judge approached this on the basis of an estoppel. He said:

[73] One relevant consideration is the extent to which Lewis has relied upon [STH’s conduct], and altered its position in reliance on it, or has had its position altered by STH’s conduct. The principal matter for examination on this aspect is the renewal of the lease.

[35] The Judge said it was irrelevant and a matter of speculation whether Lewis would have been worse off if the lease had not been renewed in 2009. The fact that if events had transpired differently and the lease was not renewed there would have been no claim against Stube was not relevant to the question of whether an order was just and equitable.[28]
[36] MacKenzie J considered it was relevant that STH indicated to Lewis, through conduct, that Stube was not treated as a separate legal entity to STH.[29] STH did this by leaving Stube unable to pay rent without support.[30]
[37] The Judge rejected a submission STH’s payment of the rent and remediation costs on behalf of Stube should tell in its favour. Over the long run it had not been demonstrated that STH was a net contributor to Stube.[31] And it was possible, although unclear, that STH was legally responsible to pay for the remediation.[32]
[38] Overall, STH’s conduct in indicating to Lewis it stood behind Stube weighed in favour of making an order.

The extent to which the liquidation of Stube is attributable to the actions of STH

[39] The Judge said this factor favoured an order because STH had deliberately ceased funding Stube and passed a shareholder’s resolution to appoint a liquidator. The circumstances giving rise to the liquidation were entirely attributable to STH withdrawing its support of Stube.[33]

Other factors as the Court thinks fit

[40] The Judge considered a number of other factors in his overall assessment. Two are relevant to this appeal.
[41] First, the Judge said that STH as a publicly listed company ought to have known better. Its failure to ensure the legal requirements applying to Stube’s separate legal identity could not readily be ignored or excused.[34]
[42] Secondly, he rejected a suggestion that the absence of a guarantee by STH to Lewis was a factor weighing against making an order. An order under s 271 is not analogous to a parent guarantee because Lewis will only obtain damages for disclaimer of the lease, not necessarily full rental for the remainder of the 21-year term of the lease.[35]

Result

[43] In light of the matters under s 272(1), the Judge said it was just and equitable to make an order under s 271(1)(a). The order was for the total amount of Lewis’s claim for damages against Stube. STH’s role in the management of Stube was total; accordingly the Judge refused to make any proportionate reduction.[36]
[44] The Judge was unable to reach a view as to the quantum of the claim at the time of assessment of liability. In a subsequent judgment he quantified damages at $750,000 based on the period of time Lewis was likely to be deprived of rental income.[37]

Issues on appeal

[45] For STH Mr Chisholm QC raised the following issues in oral and written submissions:
[46] We will address these issues in turn.

Did STH’s conduct cause any loss to Lewis, and if so, should the absence of causation or detrimental reliance by Lewis tell against an order?

[47] Mr Chisholm focussed on this issue in his oral submissions. He submitted that STH did not cause Lewis loss in any relevant sense. In the “but for” scenario where STH meticulously ensured Stube was treated as a separate legal entity, the mistaken renewal would still have occurred and Lewis would be in the same position of having a lessee without any income. If the renewal had not occurred, then Lewis would have been worse off, not better off, because the still contaminated land would have been difficult to market to a new lessee. So Lewis did not suffer any loss caused by STH.
[48] As a separate but related submission, Mr Chisholm submitted Lewis had not detrimentally relied on STH’s conduct. He suggested the Judge did not complete the estoppel-type analysis we have referred to at [34] above. Lewis did not detrimentally rely on STH’s conduct because the nature of a perpetual lease is such that Lewis could not have taken any action to alter its position.
[49] When pressed by the Court where in the Act the concepts of causation and detrimental reliance come from, Mr Chisholm pointed to the reference in s 272(1)(c) to whether the circumstances giving rise to the liquidation are attributable to the parent company’s actions.[38] He also suggested it could not be just and equitable to make an order in the absence of causation given legal and equitable causes of action are generally premised on some wrongful or disentitling conduct causing loss.
[50] We accept it is difficult to say Lewis detrimentally relied on STH’s conduct. STH represented by ongoing conduct that it stood behind Stube and would pay the rental. But if it had not, Lewis would likely have been in the same position of having to hope that someone (STH or Stube) paid the rent as it fell due. The risk that the lessor takes in a perpetual lease is that the creditworthiness and solvency of the lessee may vary over time. The fact a lessee is in financial difficulty is not grounds justifying cancellation of the lease in the absence of persisting non-payment.[39] In short, Lewis could not have altered its position in reliance on STH’s conduct — it was stuck with the perpetual lease.
[51] The question whether STH’s breaches of the Act in failing to distinguish between itself and Stube caused loss to Lewis is more complex. It is speculative whether Stube would also have renewed by mistake if STH had been meticulous in differentiating itself from Stube. It is also difficult to assess whether Lewis would have been worse off had Stube given notice that it did not wish to renew the lease in 2009. Regardless of when the lease ended, Lewis would have been left with a nonincome producing block of land, requiring considerable development to become income producing. In the absence of a finding by MacKenzie J as to whether Lewis suffered loss,[40] we are not ourselves prepared to reach a conclusion on causation. That is because it is unnecessary in any event to do so.
[52] Even if we assume that causation and detrimental reliance are absent here, we do not consider that to be determinative of whether a s 271(1)(a) order should be made.
[53] First, the Macarthur Report contemplated exactly this sort of situation of a parent abandoning its subsidiary when recommending the Court be given the power contained in s 271. STH has abandoned its subsidiary after, it seems, extracting some benefit from Stube’s retained tax losses. Mr Candy gave evidence that Stube’s revenue and expenses were treated as STH’s for tax purposes. There is nothing in the legislative history to suggest the causation and detrimental reliance are necessary ingredients in making an order.
[54] Secondly, the language of “attributable” in s 272(1)(c) does not import a wide-reaching causation inquiry. The section requires inquiry into whether the liquidation is attributable to STH’s actions. That is a narrower and more neutral question than whether there is disentitling conduct causing damage. The Judge made a realistic finding that the liquidation was due entirely to STH’s actions in withdrawing its financial support of Stube.[41] The section did not require him to go further and assess whether STH acted wrongfully in withdrawing support. Causation of loss may be a relevant aspect of conduct addressed under s 272(1)(b), but is by no means a prerequisite for relief under s 271(1)(a).
[55] Thirdly, we consider the Judge correctly focussed on the extent to which there was “amalgamation by conduct”, under s 272(1)(a). That was the dominant factor here. The evidence analysed by the Judge shows STH was extensively involved in the management of Stube to such an extent Stube was treated no differently from any division of STH. It appears the only reason Stube was not amalgamated with STH like most of STH’s other subsidiaries is that would have triggered winding up of the Healing superannuation scheme. In reality, however, Stube was treated no differently to the other subsidiaries that were amalgamated with STH. In particular, STH treated the land and lease as its own. That overwhelms the absence of causation or detrimental reliance.

Was STH’s conduct disentitling?

[56] Mr Chisholm submitted the Judge erred in considering as disentitling conduct that Stube’s directors had breached their duties by:

He said the directors did not breach these duties because the lease was renewed by deeming provision, not by agreement of the directors. The directors had instructed the relevant company officer that the lease was not to be renewed. Further, the directors did not breach their duty in s 136 because they could rely on the reasonable expectation of ongoing shareholder support from STH.

[57] It is important to consider the Judge’s finding of breaches of ss 129 and 136 in context. In assessing STH’s conduct towards Lewis as a creditor of Stube, the Judge said:

[83] ... s 271 is not limited to situations where there has been a deprivation of assets from the company in liquidation. There may be other disentitling circumstances. I consider that STH’s actions in relation to the lease fall within that description.

[84] Stube had for many years been unable to pay the rent without STH’s support. It had no legally enforceable arrangements for support. If the directors of Stube had consciously entered into a contract to renew the lease, they would have been incurring an obligation, which the directors could not have had reasonable grounds to believe Stube would be able to perform from its own resources or by recourse to legally enforceable financial arrangements, as required by s 136 of the Act. Furthermore, the renewal of the lease was a major transaction which should not have been entered into unless approved by a special resolution, under s 129 of the Act. STH, as shareholder, did not pass a resolution authorising the transaction. Nor did it take any steps to put in place legally enforceable funding arrangements to enable Stube to meet its obligations. Sections 129 and 136 apply to a transaction deliberately entered into. They do not cease to apply, even if I was to accept the proposition that the renewal was the result of a mistake by Stube.

[85] STH and the directors of Stube did not comply with those provisions, and STH continued to pay the rent. Its conduct towards Lewis in relation to the renewal was such as would reasonably lead Lewis to believe that Stube was not treated as a legal entity distinct from STH. That conduct is directly relevant to s 271(1)(b). It weighs in favour of an order.

[58] On our reading of this passage, whether there was a breach of ss 129 or 136 was neither here nor there. The essential reasoning is captured in the final three sentences of [85]. STH’s actions in relation to the renewal of the lease indicated to Lewis that Stube was not treated as a separate legal entity. That conclusion does not depend on there being a breach of ss 129 and 136. Section 271 does not refer to pejorative concepts such as “disentitling conduct”. The presence of such elements may weigh in favour of an order, but their absence does not positively point in the other direction. That would be an unjustified gloss on the criterion of “just and equitable”.

Was STH a net contributor to Stube prior to liquidation and, if so, should that weigh in its favour?

[59] In written submissions, Mr Chisholm said STH was a net contributor to Stube prior to liquidation by paying rent to Lewis and for the remediation. He said the Judge erred in finding those contributions may have been offset by STH’s earlier decision to remove Stube’s sources of income when it ended the Healing brand.
[60] We do not consider that the payment of remediation costs or rent should weigh in STH’s favour.
[61] Mr Joubert, one of STH’s company solicitors, gave evidence that STH paid the remediation for its own reasons, not solely out of charity to Stube. STH was concerned that it may be found liable to pay the remediation as the polluter. It was concerned also about the negative publicity that might follow if it left a contaminated site.
[62] As to the rent paid, we accept the Judge’s finding that STH made these payments to keep alive the lease and the option of developing the land for its own commercial benefit.[42] It cannot be said there was no benefit to STH when retaining the lease may have been in its favour had it found a method for extracting value.
[63] Accordingly these financial contributions do not weigh in STH’s favour. Rather, the payment of rent supports the Judge’s conclusion that STH was extensively involved in the management of Stube and undertook a de facto amalgamation. STH sought to extract value by treating Stube’s asset as its own.

Should responsibility for actions taken by Stube’s directors be attributed to STH?

[64] Mr Chisholm submitted the conduct of Messrs Calavrias and Candy should not be attributed to STH. STH owed no duty to take reasonable care that Stube’s directors discharged their duties to Stube and so cannot be liable for the directors failing to adequately distinguish between Stube and STH.
[65] We consider this requires an artificial approach to the attribution of responsibility in light of the policy of s 271. As we have indicated, it is not necessary to focus on disentitling conduct or breaches of director’s duties. The language, for example, of s 272(1)(a) requires consideration of the extent to which STH has taken part in the management of Stube. That mandates a detailed consideration of in what capacity the relevant persons were acting, rather than a focus on whether those persons were acting in a disentitling manner. The Judge’s assessment correctly focussed on the failure by Messrs Calavrias and Candy to distinguish between their role as directors of Stube and as chief executive officer and chief financial officer of STH.[43]

Did the Judge err in considering the extent to which the businesses were combined?

[66] Mr Chisholm submitted the extent to which the businesses were combined was not relevant to whether an order should be made under s 271(1)(a). That factor is expressly stated as relevant to an order under s 271(1)(b), so by implication must be excluded from consideration in s 271(1)(a) cases.
[67] We reject this submission. The Judge’s consideration of the extent to which the businesses were combined was entwined with his analysis of STH’s involvement in the management of Stube. It would be artificial to separate those inquiries. In cases where a parent is involved in the management of a subsidiary, there will inevitably be some combination of businesses.

Did the Judge err in considering STH’s status as a publicly listed company?

[68] Mr Chisholm submitted the Judge erred in relying on STH’s status as a publicly listed company in concluding its ignorance of the requirements of separate legal personal cannot be readily excused. The listing rules for the New Zealand Stock Exchange do not impose any relevant obligations on STH in terms of maintaining separate corporate personality.
[69] We do not consider the Judge attached undue significance to STH’s status as a publicly listed company. His point simply was that a company economically significant enough to be listed on the stock exchange ought to be aware of the obligation on all groups of companies (listed or otherwise) to structure their affairs in accordance with the principle of separate corporate personality. That must affect whether it is just and equitable to make orders under s 271.

In determining that STH was to pay 100 per cent of Lewis’s claim, did the Judge ignore relevant factors?

[70] Mr Chisholm submitted the Judge’s analysis of the proportion of Lewis’s claim STH was to pay was not thoroughly considered. The Judge should have rebated the proportion to a nominal level because:
[71] This aspect of the appeal is an appeal against the exercise of discretion. Once the Judge was satisfied that it was “just and equitable” to make an order, he had a discretion to order STH to pay “the whole or part of” Lewis’s claim. Accordingly, our focus is on whether the Judge has proceeded on an error of principle, has failed to consider a relevancy, has considered an irrelevancy, or is plainly wrong.[44]
[72] We do not consider the Judge erred in not considering the matters to which Mr Chisholm referred.
[73] First, the absence of causation or detrimental reliance by Lewis is not a significant factor in this case. The decisive factors here are the total extent to which Stube was absorbed into STH without consideration given to its separate corporate personality, and the ongoing representations by STH to Lewis that it stood behind and supported Stube.
[74] Secondly, as we have already explained, s 271 is not focussed on disentitling conduct.[45] It is about what is just and equitable as between the parent company and the subsidiary’s creditors. An absence of culpability by STH does not necessarily justify a rebated position. But here STH’s consistent failure to comply with the requirements of the Act to treat Stube as a separate legal and corporate entity justified the Judge’s adverse culpability assessment.
[75] Thirdly, in terms of culpability it may have been appropriate to reduce the proportion if there were evidence Lewis had some responsibility for its loss. This is not such a case, however. Lewis did not fail to take any step that would have diminished its loss. And the Judge found Lewis did not act unreasonably as lessor.[46] No attempt has been made to challenge that finding.
[76] Fourthly, the failure by Lewis to seek a parent guarantee is not relevant. Patently s 271 orders are likely to be sought and made in the absence of such guarantee. Mr Chisholm’s submission would lead in effect to an automatic discount in the absence of a parent guarantee. That cannot have been the legislature’s intention.
[77] Finally, as we have indicated above, STH’s contributions in paying the rent and for the remediation were for its own benefit and are neutral in the assessment of what is just and equitable.[47] They must equally be neutral in considering what proportion an order should be for.
[78] We therefore agree with MacKenzie J’s order that STH pay the full amount of Lewis’s claim. The Judge’s analysis was entirely appropriate given the total extent of STH’s involvement in the management of Stube, and the de facto amalgamation that had occurred.

Result

[79] None of the grounds of appeal has persuaded us that it was not just and equitable to make an order under s 271(1)(a) and for the full amount of Lewis’s claim.
[80] Accordingly, the appeal is dismissed.
[81] The appellant must pay the respondents’ costs for a standard appeal on a band A basis, together with usual disbursements.






Solicitors:
Buddle Findlay, Wellington for Appellant
Shieff Angland, Auckland for Respondents

[1] Lewis Holdings Ltd v Steel & Tube Holdings Ltd [2014] NZHC 3311, [2015] 2 NZLR 831 [High Court decision].

[2] Salomon v A Salomon & Co Ltd [1987] AC 22 (HL); Lee v Lee’s Air Farming Ltd [1961] NZLR 325 (PC); Companies Act 1993, s 15.

[3] Final Report of the Special Committee to Review the Companies Act (March 1973).

[4] At 159–160.

[5] Companies Act, s 2(3)(b).

[6] High Court decision, above n 1, at [19].

[7] At [20].

[8] At [30].

[9] At [34].

[10] At [32]–[33].

[11] At [84]–[85].

[12] At [39].

[13] At [40].

[14] At [41]–[42].

[15] At [42].

[16] At [51].

[17] At [43]–[44].

[18] At [46].

[19] At [49].

[20] At [46].

[21] At [50].

[22] At [52]–[54].

[23] At [60].

[24] At [61].

[25] At [62].

[26] At [65].

[27] At [71].

[28] At [77]–[78].

[29] At [85].

[30] At [84].

[31] At [80]–[82].

[32] At [80].

[33] At [86] and [88].

[34] At [94].

[35] At [103].

[36] At [115].

[37] Lewis Holdings Ltd v Steel & Tube Holdings Ltd [2015] NZHC 2189 at [101].

[38] Reference was also made to s 301 of the Act, but we do not see it offering any assistance on this issue.

[39] Property Law Act 2007, s 245(1).

[40] See High Court decision, above n 1, at [77].

[41] At [88].

[42] At [58]–[60].

[43] At [28]–[29].

[44] May v May (1982) 1 NZFLR 165 (CA) at 170.

[45] See above at [54].

[46] High Court decision, above n 1, at [98].

[47] See above at [60]–[63].

NZLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback
URL: http://www.nzlii.org/nz/cases/NZCA/2016/366.html