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That the management did not differentiate between the companies and did not
maintain proper documentation between the companies made it difficult to ascertain
the validity of certain inter-loans or inter-payments. The court concluded that the
companies were sub-divided into separate groups, but for convenience purposes the
activities were not, and there was no indication to suggest that one set of
shareholders was preferred over the others. It should be noted that the companies‟
actions must be observed as a whole in order for them to be of any significance, and
not in isolation. 153
e) Other Matters the Court deems Fit 154
The courts have wide discretion to determine features worth contemplation before
granting the order. In Mountfort v Tasman Pacific Airlines of NZ Limited, 155 the
court found that as a result of the subsidiary directors‟ breach of duty, the holding
company improved its financial position. The subsidiary, meanwhile, was left with
substantial bad debts and its unsecured creditors were left without compensation.
The court granted the order because to do otherwise would have been to permit the
holding company to take advantage of its own wrongdoing.
In addition to considering whether directors had breached their duty, the judge also
considered the solvency test as the relevant factor. The court held that engaging in
insolvent trading justified the departure from the separate legal entity and the making
of the pooling order. Baragwanath J, however, set the limitations on the use of
insolvency as justifying the making of the order; firstly by permitting the pooling
order to the extent required to restore the solvency of the subsidiary; 157 secondly,
153 Re Dalhoff and King Holdings Ltd (in liq) [1991] NZLR 296 at 305-306.
154 Section 272(2)(e).
155 [2006] 1 NZLR 104 at 118.
157 Mountford v Tasman Pacific Airlines of NZ Limited [2006] 1 NZLR 104 114; see also Gunasekara
and Toy above n99 at 25.
105