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objective test but has a wide discretion as regards the amount of remedy to be
granted under section 301. 157
The Court of Appeal in Lower v Traveller 158 looked at the increase in the company‘s
liabilities between the dates when trading should cease and the date that trade finally
ended, to decide on the suitable amount. The purpose of awarding the sum was
compensatory and the figure determined was fixed as the ceiling, which the court
could reduce depending on the three factors it should consider. The court
acknowledged that the method of assessing loss used in the case was not the only
option available and its decision was reached after considering other factors
involved. Due to uncertainties faced by the judge in estimating the company‘s
financial position had it ceased trading at the time it should, the calculation adopted
should be conservative. 159 As such, the court uses a broad sum approach and made
discounts for any uncertainties such as unproven claims.
The calculation in Fatupaito v Bates 160 is made by referring to a statement of assets
and liabilities between the date of receivership (or date of reckless trading) and the
date of liquidation. The court regarded the sum based on erosion of capital of the
company as being appropriate because it yielded the net figure and excluded the
deficit which existed prior to the involvement of the receiver/shadow director.
Anderson J in Nippon Express (New Zealand) Ltd v Woodward, 161 regarded section
275(1)(b)(ii) 162 as essentially penal in nature although the aim of the provision is
157 Mason v Lewis[2006] 3 NZLR 225 at 234.
158 [2005] 3 NZLR479 at 498.
159 [2005] 3 NZLR479 at 498.
160 [2001] 3 NZLR 386 at 407.
161 (1998) 8 NZCLC 261,765 at 261,778
162 Section 275(1)(b)(ii) is a predecessor to section 301.
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