In October 2018, Steel & Tube Holdings Limited (Steel & Tube) was fined $1.885 million for breaching the Fair Trading Act 1986 (Act), the largest ever fine imposed under the Act, for making false and misleading representations about its steel mesh products.
Steel & Tube had previously generated jurisprudence on pooling orders under the Companies Act 1993 when it was ordered to pay out a creditor in the liquidation of its subsidiary, Stube Industries Limited, as discussed in our October 2016 article.
In Commerce Commission v Steel & Tube Holdings Limited [2018] NZDC 21579, the District Court took into account the fact that Steel & Tube had pled guilty and co-operated with the NZ Commerce Commission (Commission). The increase in prescribed penalties in 2013 meant that the record fine was meted out despite these important mitigating factors reducing the starting point for the penalty (which would otherwise have been $2.9 million).
Steel & Tube had made various inaccurate representations as to the grade of its steel mesh, and to the effect that it had been independently tested, without having properly aged and tested it itself. To be sold as 500E grade steel, the mesh would have had to meet the Australia/New Zealand Standard for reinforcing steel, which it did not.
This will not be the final word on this matter, as both Steel & Tube and the Commission have appealed to the High Court. The decision nonetheless reinforces that senior management figures must adequately supervise their employees and have systems in place to comply with legislative or other standards. Responsibility in this context is non-delegable.