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has to decide at which end the director stands and the contribution ordered will
increase with the degree of culpability. By granting an order which is both punitive
and compensatory on directors whose blameworthiness is high, directors are deterred
from committing the reckless/wrongful trading. 185
Commentators have expressed their reservations on culpability as a factor relevant
for the purpose of determining the amount of the contribution. 186 Culpability is
associated with intention and there is a possibility for the court to include a punitive
element in making the award. This, critics argue, should not be so since the purpose
of the section is compensatory and therefore only causation matters. Adrian Walters
suggests that the court should not automatically award a nominal sum if the director
lacks blameworthiness, instead it should be taken as a mitigating factor. 187 This can
be seen in the decision of Re Produce Marketing Consortium (No 2) 188 when the
court awarded the sum of ₤75,000 owing to the director‘s lack of culpability instead
of the whole sum of ₤107,946 as claimed.
In New Zealand, shareholders can also initiate a derivative action against a director
for breach of sections 135 and 136, under section 165. The director‘s liability if it is
brought as a derivative, will be higher than if it is brought under section 301. This is
because section 301 confers discretion on the court and once the court has
determined the link between the loss and the director‘s action, it would reduce the
amount depending on the degree of culpability. 189 On the other hand, such discretion
is absent in a shareholder‘s derivative action and the court would have to compensate
the creditors based on the amount of the loss.
185 Lower v Traveller [2005] 3 NZLR 479 at 498.
186 Adrian Walters ―Enforcing Wrongful Trading - Substantive Problems and Practical Disincentives‖
in Barry A K Rider (Ed.) The Corporate Dimension (Jordon Publishing Ltd, Bristol, 1998) 145 at
152-153; Noonan and Watson above n117 at 41-42.
187 Walters, ibid at 152.
188 [1989] BCLC 520.
189 Noonan and Watson above n117 at 42.
352