Steel & Tube appealing rich lister’s company claim
Directors beware: court had ruled parent company liable for subsidiary's debt.
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Hawke’s Bay
Steel products manufacturer Steel & Tube [NZX:STU] will fight a court ruling against it brought by NBR Rich Lister Sir David Levene’s investment firm.
Last year in the High Court at Wellington Justice Alan MacKenzie ruled in favour of Sir David’s company, Lewis Holdings, in the claim worth about $1.75 million.
The judge decided Steel & Tube’s parent company was responsible for its subsidiary – a ruling which could have implications for company directors who do not clearly separate parent companies from subsidiaries.
Steel & Tube spokeswoman Dian Robinson confirmed the appeal but declined to comment further.
NBR ONLINE understands David Chisholm, QC, has been instructed and the appeal is likely to be heard in the last quarter of this year.
Sir David’s investment firm Lewis Holdings had argued it would be equitable to make Steel & Tube liable for the actions of Stube and that Steel & Tube should pay for Stube’s lease after Stube fell into liquidation last year.
Lewis Holdings’ legal team used a rarely relied on provision in the Companies Act, which provides an exemption to the general rule that companies are separate legal entities distinct from their shareholders.
The judge noted that this particular part of the Companies Act, s271, had no equivalent in the common law world except for a similar provision in Ireland.
Lewis Holdings argued Steel & Tube’s conduct once it had abandoned Stube was in sharp contrast to how it had behaved in the two decades previously. It was submitted Stube and Steel & Tube were treated as part and parcel of one economic unit.
The court considered evidence of how the company was actually run and examined what the management of the firm was like beneath its formal legal structure.
Shares of Steel & Tube were unchanged this morning at $2.90 and have declined 5.56% over the last 52 weeks.
Victoria Young
Thu, 12 Feb 2015
Thu, 12 Feb 2015
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Steel & Tube appealing rich lister’s company claim
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