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to reform the law, namely to reduce reliance on case law. 167 While the usage of
ambiguous or vague terms in the Act gives wide discretion to the court to
interpret their meanings, it also creates a heavy reliance on case law which the
Law Commission proposed to eliminate. The courts, too, do not give many
guidelines as to the meanings of the terms, more often than not repeating the
wording of the section and being content to apply the sections after reviewing all
relevant facts. 168 Justice Sian Elias also cautioned that the wide discretion
accorded to the court could lead to the possibility of the court importing the old
concept of recklessness into section 135 in order to give effect to the long title. 169
In order to determine whether these criticisms are well founded, the court‟s
decisions on this area will be examined. It will also look at the impacts of such
interpretations on protection accorded to creditors and on directors‟ discretion to
make business judgments.
10.4.2 Reckless Trading under Section 135 Companies Act 1993
10.4.2.1 Statutory Provisions
The title, reckless trading, in section 135 is quite misleading because it deals with
the director‟s duty not to carry on the business in a manner likely to create a
substantial risk of serious loss to creditors. 170 The reason for such a title is
probably due to the resemblance of the wording of the section to the High Court‟s
decision in Thompson v Innes. 171
167 The Law Commission, in its report, stated that since directors‟ duties are not contained in the
1955 Act, "they have to be gleaned from a large volume of complex case law"- see NZLC R9
1989 above n39 at [186].
168 Bos and Wiseman above n163 at 267.
169 Justice Sian Elias above n40 at 9.
170 See above n22 at 170.
171 (1985) 2 NZCLC 99463.
267