LEWIS HOLDINGS LTD v STEEL & TUBE HOLDINGS LTD [2014] NZHC 3311

LEWIS HOLDINGS LTD v STEEL & TUBE HOLDINGS LTD [2014] NZHC 3311 [18 December 2014]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYCIV-2013-485-6104[2014] NZHC 3311UNDER Part 18 of the High Court RulesIN THE MATTER of ss 271(1)(a) and 272(1) of theCompanies Act 1993BETWEEN LEWIS HOLDINGS LIMITEDFirst plaintiffBORIS VAN DELDEN and PERIMICAELA FINNIGANSecond plaintiffsAND STEEL & TUBE HOLDINGS LIMITEDDefendantHearing: 20-24 October and 4-7 November 2014Counsel: K J Crossland and J S Langston for PlaintiffsS A Barker and P J Niven for DefendantJudgment: 18 December 2014INTERIM JUDGMENT OF MACKENZIE JI direct that the delivery time of this judgment is11.30 am on the 18th day of December 2014.Solicitors: Shieff Angland, Auckland, for Plaintiffs.Buddle Findlay, Wellington, for DefendantTable of ContentsIntroduction [1]The s 271 claim [2]History [2]Renewal of the ground lease [7]The legislation [11]The application of the legislation [13]The matters in s 272(1) [23](a) The extent to which STH took part in the management of Stube [23](b) The conduct of STH towards Lewis as a creditor of Stube [66](c) The extent to which the circumstances that gave rise to the liquidation of Stube are attributable to the actions of STH [86](d) Such other matters as the Court thinks fit [89]The outcome of the s 271 application [109]Determination of the amount of Lewis' claim under s 307 [117]Result [146]Introduction[1] The plaintiff, Lewis Holdings Ltd (Lewis), is the owner of a property at 15 Fisher Crescent, Mt Wellington, Auckland. Lewis purchased the property in about 1996 from Ports of Auckland Ltd. The property was subject to a perpetually renewable ground lease which had originally been granted under the Public Bodies Leases Act 1969. At the time of purchase, the lessee was Stube Industries Ltd (Stube), a wholly owned subsidiary of the defendant Steel & Tube Holdings Ltd (STH). The then current 21 year term of the lease expired in 2009. The lease was renewed in 2009. Stube was put into liquidation by a shareholders' resolution on 4June 2013. On 10 June 2013 the liquidators appointed by the shareholders disclaimed the lease as onerous property, under s 269 of the Companies Act 1993 (the Act). Lewis filed a proof of debt with the liquidators who were subsequently replaced by the second plaintiffs (the liquidators). Lewis and the liquidators claim against STH, under s 271(1)(a) of the Act, that STH pay to the liquidator the wholeof Lewis' claim in the liquidation. By an amendment to the statement of claimwhich I allowed during the hearing, the plaintiffs also seek a decision from the Court under s 307 of the Act on the amount of Lewis' claim.The s 271 claimHistory[2] Stube, previously called Healing Industries Ltd (Healing), acquired its interest in the property in September 1979. By the mid-1980s, Healing had become a wholly owned subsidiary of EMCO Group Ltd (EMCO). EMCO was acquired by STH in 1985. Healing operated a metallisation plant on buildings erected on the land. The plant prepared the surface of fabricated steel products by blasting with grit or sand, then painting the steel to improve its resistance to corrosion. In 1988 STH decided to dispose of non-strategic assets, poorly performing businesses and non- mainstream businesses. That included the metallisation business. The metallisation plant was transferred in around 1990 to Robt Stone & Co Ltd, which amalgamated with STH and became a division of STH. STH occupied the property under an informal sublease from Stube. On that transfer of its metallisation business, the Healing brand and business ended and the only ongoing assets and liabilities of the company were the ground lease and associated informal sublease, and a superannuation scheme. Healing changed its name to Stube to reflect this change. From that time, Stube had no employees and management was effectively shifted to the property manager at STH.[3] The situation when Lewis purchased the property in early 1996 was that Stube had the ground lease, which had been renewed for a 21 year term from 1 December 1988, while the buildings and plant on the land were operated by Robt Stone, a division of STH. 1[4] In 1998, STH sold the metallisation plant under a management buy-out. A new company, Mt Wellington Metalisation (1998) Ltd was formed. Stube and that company entered into a deed of lease in relation to the plant and a deed of sublease1 It seems that the buildings and plant Robt Stone acquired as part of the transfer of the businesswere owned by STH, so that Stube's interest in the land was limited to the lessee's interest in theland itself.in relation to the land in April 1998. The new company did not prosper, and the metallisation plant was shut down. The sublease was terminated in 2003.[5] The metallisation process caused contamination of the land over the years in which it was operating. STH undertook decontamination work in 1996 and 1997, at a cost of approximately $900,000. That remediation work did not extend to the building itself, or the soil beneath the building. On the termination of the sublease in 2003, it was clear that considerable contamination still existed. STH carried out further remediation work at a cost of some $418,000 after that time. In that process, the buildings and plant were removed and the site was reduced to predominantly bare land.[6] After the closure of the metallisation plant and the remedial work, STH investigated options for the land. The possibilities it considered included using the land for a division of STH, or selling the lessee's interest in the land.Renewal of the ground lease[7] Lewis' interest in the property is managed by Quadrant Properties Ltd (Quadrant). The previous term of the perpetually renewable ground lease, which had commenced on 1 December 1988, expired on 1 December 2009.2 In early 2009, Quadrant obtained a valuation to assess the rental for the next 21 years. Mr Beecroft, the senior property and portfolio manager for Quadrant, wrote to the directors and shareholders of Stube on 12 March 2009 advising a rental of $195,000 plus GST per annum for the ensuing 21 year period. In his letter, which was copied to Mr Jenkins, the in-house counsel for STH, he said:Under Schedule 1 of the Public Bodies Leases Act 1969, as owner of the ground lessee's interest in the above property, we wish to remind you thatyou must notify us in writing whether you will accept a new lease at the amount advised above within 2 calendar months of receiving this notice.This notice is important and we suggest you take professional legal or valuation advice on a timely basis.2 There had been a new lease entered into in 1999 to effect a small boundary adjustment. That lease did not affect the expiry of the 21 year term.[8] Mr Jenkins checked the Public Bodies Leases Act. Unfortunately, he did not notice that, under cls 5 and 6 of sch 1, if the lessee does not give notice that it does not desire to accept a renewal of the lease, it is deemed to have agreed to accept a renewal of the lease at the rent specified in the lessor's notice. Mr Jenkins did not give a notice under cl 5. The lease was therefore deemed to be renewed at the rental of $195,000 per annum. Mr Beecroft wrote on 18 May 2009 advising that Stube was deemed to have agreed and accepted a renewal lease for a further 21 years at that rent. Mr Jenkins sought advice in May and July from external lawyers. Legal professional privilege is claimed by STH for the content of that advice. In November 2009, the formal documentation for the lease renewal was executed and registered.[9] STH continued to pay the rent for which Stube was liable under the lease, as it had done previously, until 2013. In May 2013, Mr Taylor and Ms Elrick, who were then the Chief Executive Officer and Chief Financial Officer/Company Secretary of STH, prepared a paper for the STH board, to approve placing Stube into liquidation. They noted that there had been an earlier recommendation in 2012, as to the future of Stube and the lease, which had not been adopted by the board. The board paper contained the following recommendation:It is recommended that, unless the Board wishes to revisit its December 2012 decision to cease providing financial support to Stube, the Board:(a) notes that the director of Stube has made significant but unsuccessful efforts to exit Stube from the Fisher Crescent lease;(b) approves the placing of Stube into liquidation and authorises Dave Taylor to sign the necessary special resolution of the shareholder under section 241(2) of the Companies Act;(c) authorises Dave Taylor and/or Janie Elrick to select a liquidator and do or perform any act, matter or thing which in their opinion ought to be done or performed to give effect to the liquidation of Stube.[10] Ms Elrick resigned as the sole director of Stube on 31 May 2013. On 4 June 2013 a special resolution was passed putting Stube into liquidation.The legislation[11] Section 271(1) of the Act provides as follows:(1) On the application of the liquidator, or a creditor or shareholder, the Court, if satisfied that it is just and equitable to do so, may order that—(a) a company that is, or has been, related to the company in liquidation must pay to the liquidator the whole or part of any or all of the claims made in the liquidation:(b) where 2 or more related companies are in liquidation, the liquidations in respect of each company must proceed together as if they were 1 company to the extent that the court so orders and subject to such terms and conditions as the court may impose.[12] Guidelines for making an order under s 271(1)(a) are provided in s 272(1) which provides:(1) In deciding whether it is just and equitable to make an order under section 271(1)(a), the court must have regard to the following matters:(a) the extent to which the related company took part in the management of the company in liquidation:(b) the conduct of the related company towards the creditors of the company in liquidation:(c) the extent to which the circumstances that gave rise to the liquidation of the company are attributable to the actions of the related company:(d) such other matters as the court thinks fit.The application of the legislation[13] It is convenient to discuss the application of the legislation to the facts of this case by addressing each of the four matters listed in s 272(1). Before doing so, some broader comments on the approach to pooling orders under the legislation are appropriate.[14] Our company law is firmly grounded in the principle that a company is a legal entity in its own right separate from its shareholders. That principle is expressly stated in s 15 of the Act. It continues the well-established common law principle first established in Salomon v A Salomon & Co Ltd,3 and confirmed in New3 Salomon v A Salomon & Co Ltd [1897] AC 22 (HL).Zealand in Lee v Lee's Air Farming Limited.4 It is a corollary of that principle that the shareholders are not generally liable to meet the obligations incurred by the company beyond the extent of their liability to the company for payment of the share capital.5[15] Section 271 creates an exception to that general principle. It had its origin in a recommendation in the 1973 Macarthur Committee Final Report of the Special Committee to Review the Companies Act, responding to a submission that in at least two recent cases well-known public companies had abandoned subsidiaries.6[16] Section 271 has not been frequently invoked. It is, apart from a similar provision in Ireland, unique to New Zealand in the common law world, so no assistance is available from other similar jurisdictions. All but one of the authorities to which I was referred are cases under s 271(1)(b), not s 271(1)(a).[17] The most comprehensive discussion of the approach to be adopted in applying s 271 is the decision of Baragwanath J in Mountfort v Tasman Pacific Airlines of NZ Ltd.7 He noted the reluctance, in common law jurisdictions without a pooling provision, to extend the narrow range of exceptions in s 15. He noted the tension between:(a) the separate legal identity of companies, and the right of commercial enterprises to run their businesses through subsidiary and related companies as they see fit; and(b) the mischief that can result from an unyielding application of separate corporate identity.[18] He held that to carry an unyielding application of separate corporate identity across into the construction of ss 271 and 272 would defy the legislative policy.84 Lee v Lee's Air Farming Limited [1961] NZLR 325 (PC).5 Companies Act 1993, s 97.6 Macarthur Committee Final Report of the Special Committee to Review the Companies Act(Ministry of Justice, March 1973).7 Mountfort v Tasman Pacific Airlines of NZ Ltd [2006] 1 NZLR 104 (HC).8 See especially [63] to [74].[19] I do not propose to embark on a detailed analysis of the competing principles involved. In the end, what is required is an application of the statutory criteria in s 272(1) to the facts of this case as I determine them to be. In applying the criteria I must balance two policy considerations inherent in the legislation which weigh on different sides of the scales. The first is that the separate corporate identity of the company in liquidation is to be respected. The second is that s 271 is directed to the mischief that an overly strict application of that separate corporate identity may cause.[20] In applying the first policy consideration, that the separate corporate identity of the company in liquidation is to be respected, I must bear in mind the rationale for the provision in our law that a company is a legal entity separate from its shareholders. That rationale is to enable a business to be carried on by a separate legal entity, so as not to expose the shareholders (be they one or many) to the liabilities which the business may incur. It is inherent in that rationale that the company will be not only a separate legal entity, but also a separate commercial entity. Its business will be conducted in such a way that the company is not a mere"front" for a business actually carried on by others. The "corporate veil" shields thesubstance of the company and its business from the shareholders who own the company. It does not, if the company is a mere facade, shield that facade from the operators of the business which is carried on in its name.[21] A particular aspect of the separate corporate identity of a company which must be taken into account in the balancing exercise is the common business practice of using the principle of separate corporate identity in the creation of group structures. The evidence shows, if indeed evidence was necessary, that it is common practice in company groups that a range of services are undertaken centrally, group staff are used to manage subsidiaries, and senior officers of the parent act as directors of the subsidiary. STH places considerable reliance on such matters. Those propositions are largely uncontroversial as statements of general practice. What is required is a factual assessment of the practices adopted in this case, to determine whether there is some conduct or other circumstance falling within the s 272 guidelines that disentitles STH from relying on the separate legal existence of Stube.[22] Because the policy considerations which I must bear in mind require application to the circumstances of this case, I do not consider it helpful to elaborate on those policy considerations in a general way at this stage. It is preferable that I address relevant points as they arise in my discussion of the matters I must take into account under s 272. To those matters I now turn.The matters in s 272(1)(a) The extent to which STH took part in the management of Stube[23] The positions of the parties on this issue are diametrically opposed, as the following summary of their submissions shows. Mr Crossland says:[Stube] was always managed by its parent STHL. The facts referred to shortly of themselves alone may not be determinative. However, it is their cumulative effect and in some instances their duration that lead to the inescapable conclusion in that a contribution order is just[.][24] Mr Barker submits:Although employees of STHL took part in the management of [Stube], [Stube] was at all times managed as a separate company.[25] I must examine the point in some detail. That requires a consideration of the evidence about the management of the company which goes beneath the formal legal structure and looks at what actually happened.[26] I begin with the directors. As STH submits, the appointment of senior employees of a holding company as directors of a subsidiary is common practice and does not of itself amount to participation by the holding company in the management of the subsidiary. But that does not mean that actions of such directors cannot amount to such participation. What is required is an examination of the acts of the employee directors, to determine whether they were, in the way they operated, acting as directors of the subsidiary, or as senior managers of the parent.[27] STH called evidence from Mr Dent as to usual practice on the use of subsidiary companies in the structuring of business enterprises. I need not describe and discuss that evidence. It is for the most part uncontroversial. But it is of littleassistance to me in deciding the issues I must address. Mr Dent's evidence wasexpressed only in broad general terms. He had not been instructed to look at what had been done in this case. I am concerned with the application in this case of the business practices which Mr Dent describes.[28] At all material times up to 2009, the directors were Messrs Calavrias and Candy. Mr Calavrias was the CEO of STH, and Mr Candy the CFO. They were both called as witnesses by the plaintiffs. Mr Candy, in his affidavit evidence in chief, said that at all times he and others in STH management considered that theproperty (albeit in Stube's name) was a leasehold asset of STH. He said that during his tenure they treated the property both as to its benefits and liabilities as something that lay with STH. His recollection is that any expense and revenue related to the property was treated for taxation purposes at the STH parent level. He was asked in cross-examination about his understanding of the basic concepts that underpin the operation of companies in New Zealand, and the concept of separate corporate personality of different companies. He was questioned about the provision inStube's constitution which, in accordance with s 131(2) of the Act, permitted its directors to act in the best interests of the parent. He was asked whether he was aware that when he was a director of Stube he was entitled to take into account or to act in the best interests of STH in making decisions as a director. He said:I can't say it was top of my thought processes, however, having said that, the superannuation fund which was attached to Stube at the time was being used by Steel & Tube Holdings Limited in the interests of Steel & Tube Holdings Limited so I think I, I would have had some cognisance without actually being totally aware of it.[29] Mr Calavrias was asked in cross-examination about his position and agreed that he would have been careful throughout his time as a director of Stube to comply with his duties as a director of that company including the duty to manage by the board. He agreed that the only decisions that arose related to the lease. It was then put to him:Q. And in practice, you and Mr Candy and the board made those decisions, didn't you?A. We made those decisions, um, but when you've got a 100%owned subsidiary, the financing, the decision making as suchwould sort of be mixed within, um, within the total company 'cos it didn't have its own funding lines. So we had to, we'd provideeverything in a seamless fashion.Q. But again coming back to this point about the constitution of Stube permitting you to act, you as the board to act in the interests of Steel & Tube Holdings. You know, that was something that was –you had in mind, wasn't it, when you were acting?A. Well all I've got to say is up to the period that I was there in 2009, Imean it acted as if it was all one company, all the subsidiaries wereacted like that, and yeah, that's what we did.Q. But again I come back to your answer, that you were aware that Stube was a separate company?A. Oh yes, yes, perfectly aware, yes.Q. And the way in which you describe that you managed that and other subsidiaries was presumably because you were aware as a director of Stube you were entitled to act in the best interests of Steel & Tube Holdings in managing Stube, wouldn't you?A. Yes.[30] Those answers, from both Mr Candy and Mr Calavrias, confirm a clear impression I have formed from the contemporary documents in evidence. The STH group acted as a single unit. For the most part, the different trading activities of STH were carried on through divisions, rather than through subsidiaries. Messrs Calavrias and Candy adopted the same approach in respect of their duties as directors of Stube. I do not find, in their evidence, any indication that they managed Stube any differently from the way they managed the divisions of STH.[31] Mr Barker submits that a practice of dealing with governance on a group basis, ignoring the statutory and judiciary duties that the boards of each entity encounter at an individual level, can only be a concern when s 131(2) of the Act does not apply. He submits that there is no potential for conflict between the interests of the holding company and the subsidiary when there is a provision permitting the directors to act in the best interests of the holding company.[32] I consider that submission overstates the effect of such a provision in a constitution. Under s 15, the subsidiary is a separate legal entity. Its affairs must beconducted in a way which reflects that separate legal existence. Its business must be conducted so that the company has a separate commercial existence, to match its separate legal existence. The directors must act accordingly. Section 131(2) is a limited exception to the duty of directors under s 131(1). It is not an exception to any other duty under the Act.[33] A provision in a constitution that a director of a subsidiary may prefer the interests of the holding company to those of the subsidiary does not mean that the interests of both companies can be conflated, or that the interests of the subsidiary can be ignored. The proper application of such a provision requires the directors to recognise that there are different interests involved, and to decide which are to be preferred in the issue under consideration. Mr Candy and Mr Calavrias' answers incross-examination about the ability of a director of a subsidiary to act in the best interests of the holding company indicate that they did not make a distinction between the best interests of the company and the best interests of the subsidiary. They saw only one set of interests involved, the overall interests of the group.[34] The directors did not structure their decision-making to that end. They did not hold formal board meetings for Stube. Nor did they sit down together to discuss matters with a conscious appreciation that they were doing so with their Stube directors' hats on. Their interactions appear, from their oral evidence and the contemporary documents, to be dealings between the CEO and CFO of the STH group, not dealings between Stube board members.[35] STH places reliance on Dairy Containers Ltd v NZI Bank Ltd, which counsel describes as an important case for considering the relationship between a holding company and a subsidiary.9 Counsel draws attention to the comments of Thomas J at page 89 lines 32-50, and submits that the fact that a holding company has "total control" of a subsidiary, through the appointment of employees of the holdingcompany as directors, is not a factor that could disentitle the subsidiary and holding company from relying on the separate corporate personality of the companies.9 Dairy Containers Ltd v NZI Bank Ltd [1995] 2 NZLR 30 (HC).[36] That passage, and that case, are directed to a quite different issue from that involved here. The issue there was whether the employer of the directors was vicariously liable for the directors' negligence in their governance of the subsidiary. More relevant for this case are Thomas J's comments at pages 79 and 80 about the fundamental function of directors to monitor the company's business. Hisdescription of the task of the directors makes it clear that the task is to run a business which is separate from that of the employer who has appointed them. The obligationis to oversee the conduct of the company's business, not to manage it as if it was part of an integrated business carried on by the parent.[37] Under s 136 of the Act, a director of a company must not agree to the company incurring an obligation unless the director believes at the time on reasonable grounds that the company will be able to perform the obligation when it is required to do so. The way the group operated meant that this issue was not separately addressed for Stube. Any obligation was, for Messrs Calavrias and Candy, an obligation of the group, not a separate obligation of Stube. That point emerged clearly in cross-examination of Mr Candy about the following statement in his reply affidavit in evidence in chief:2.4 4.14/6.3: I do not remember the costs being accredited to [Stube]. Nick Calvarias [sic], my fellow [Stube] director and STHL CEO, took the view that STHL, to be a good corporate citizen, would need to clean up the site. I also recall that Ceramco had walked away from a lease it had through a subsidiary. We had discussed how that did not seem to be appropriate for a publicly listed company to be seen to do. This came up between Nick and I because for a period of time a Ceramco executive (Charles Bidwill) sat on the STHL board.[38] That passage in his evidence was put to him in cross-examination in these terms:Q. "I also recall that Ceramco had walked away from the lease ithad through a subsidiary. We had discussed how that did not seem tobe appropriate for a publicly listed company to be seen to do." Nowdo I take you to mean from that sentence that certainly Mr Cavalrias [sic] and yourself discussed the fact that one possibility was that Steel & Tube Holdings Ltd could've placed Stube Industries Limited into liquidation and avoided the liability for the cleanup costs thatway? That's correct isn't it? That's what that means?A. Well, no, I don't, I don't think we'd ever discussed walking awayfrom the site and not paying for the cleanup. What that was aroundwas the rental that, um, at the time I remember Charles Bidwell being on the board and Ceramco had, um, I can't even recall thedetail of it but I knew that Ceramco had essentially walked away from some obligations, um, on some leases that it had. So that was the discussion point.Q. So, well, we'll just put it in a broader basis then, I mean thepossibility of walking away from Stube Industries' obligations is that that's what Ceramco had done, now not necessarily as a strategy, but that that was what was happening and that wasn't appropriate forSteel & Tube Holdings Ltd, I mean that's the point isn't it?A. Yes.Q. But the point is, is it not, from what you've said there that that was an action that was open to you, it's just one that you andMr Calavrias would not consider, is that fair?A. Well I guess I don't know what happened after Ceramco movedaway from those leases, whether there's any Court cases or anythingelse, but the fact was the name was in the paper, so whether theywere entitled to do it or whether they weren't I don't know and wenever explored that possibility at the time.[39] From the perspective of the extent to which STH took part in the management of Stube, I find that Messrs Calavrias and Candy, in their involvement in the management of Stube, did so in their capacity as the CEO and CFO of STH, and that their status as directors of Stube did not isolate STH from the management of Stube. In making those findings, I intend no criticism of Mr Calavrias or Mr Candy. The formal distinction between Stube and STH was not a distinction which they needed to make, in the way the group operated under their stewardship. But, while it was not necessary for Mr Calavrias and Mr Candy to consider Stube'sseparate position, in the light of the way the Steel and Tube group then operated, the matter must now be viewed through a different lens. The liabilities of Stube and STH must be considered separately. When that is done, it is clear that Stube did not have the financial capacity to continue to trade without the support of STH. If they were treated as separate legal entities, legal arrangements were required to ensure support. There were none.[40] In reaching that conclusion, I have taken into account and given full weight to the well established practice of appointing senior managers of a holding company as directors of subsidiaries, to which I have referred at [26]. Nothing which I havesaid is intended to suggest that practice is inappropriate. But, as I have observed, when that practice is adopted, the directors must approach their duties as directors in a way which recognises the separate legal personality of the two entities. They must conduct the affairs of the subsidiary as a separate board. They must ensure that there are appropriate legal and commercial arrangements in place to recognise and give effect to the separate legal status of the subsidiary. The ability of the directors to act in the best interests of the parent does not obviate the need to have regard to the separate legal status of the subsidiary.[41] STH also took part in the management of Stube in other ways. Stube had no employees of its own, and all matters which needed to be attended to for Stube were carried out by employees of STH. This too is common practice within groups and does not of itself mean that when employees of the parent carry out actions on behalf of the subsidiary, the parent is taking part in the management of the subsidiary. But again, what is necessary is a close examination of the employees' actions, to determine whether those are in reality actions taken on behalf of the subsidiary, or on behalf of the parent or the wider group.[42] Many of the steps undertaken by group employees were effected on STH letterhead, without the employee concerned stating that he or she was acting for Stube rather than STH. Also, there were no recorded arrangements for STH to provide management services to Stube, and no inter-company charge for the provision of services. Again, neither of those factors is of itself of particular significance in indicating the extent to which STH was involved in the management of Stube. Of more importance is the extent to which, when the issues are examined in detail, the steps taken fell within the purview of STH, not Stube. I examine some examples.[43] The first is the action which was taken with regard to the administration of the lease, and attempts to find an alternative use for the property, or a buyer for the leasehold interest. Mr Anastasiadis, who was the company solicitor for STH until July 2003, managed the lease and issues to do with the property. In evidence, he said he did so on behalf of Stube. That needs to be tested against the contemporary record. Once the metallisation plant closed, and the sublease terminated, there wasno income from the land. Considerable efforts were made to find an alternative use for the site within the STH group, or to sell the leasehold interest. In April 2003, Mr Anastasiadis arranged a sole agency agreement for the sale of the property with C B Richard Ellis (Agency) Ltd. The formal agency agreement was between STH and the agent. On 14 April 2003 the agent submitted an offer which it had obtained for a transfer of the leasehold interest in the property. The vendor was described in the offer document as Stube. Mr Anastasiadis wrote to the solicitors for the offeror on 1 May 2003. He said that the form of agreement was inappropriate for the transaction being contemplated by STH, and proposed instead a sale of the shares in Stube to the proposed purchaser, rather than a transfer of the leasehold interest. On 13 June 2003, Mr Calavrias sent a memorandum to the directors of STH in which he said that management at STH had been in negotiation for some time to formulate an exit strategy from the lease. He said STH had negotiated a sale and purchase agreement for the sale of the shares. One of the conditions of the agreement was a unanimous resolution from the board of STH accepting the appointment of the purchaser as a director of Stube. He submitted a draft resolution for consideration by the board.[44] That proposed transaction did not eventuate. But it demonstrates very clearly that Mr Anastasiadis was acting for STH, not Stube. The proposal he put forward could only have been implemented by STH, not Stube. Stube's separate legalexistence was relevant to the form of transfer proposed, but Stube had no control over it.[45] From Mr Anastasiadis' departure in October 2003 until March 2007, the company solicitor for STH, and accordingly also for Stube, was Mr Joubert. He took over responsibility for some of the management of the affairs of Stube, principally the leasehold interest. He says that in his recollection, decisions for Stube never went to the board of directors of STH. It is pertinent to note that decisions for Stube never went to the board of directors of Stube, for no meetings were held. He further says that all relevant decisions were made by the directors or authorised persons on behalf of Stube. It is necessary to test that assertion against the contemporary record.[46] Mr Joubert dealt with the remediation work which followed the cessation of the metallisation business. That work was carried out by or on behalf of STH, not Stube. Also, in June 2004 he instructed a firm of architects and engineers to review the site for suitability of redevelopment. They reported to STH, for the attention of Mr Joubert, in a letter dated 14 June 2004. The correspondence indicates that proposal was not taken further. In obtaining that report, Mr Joubert must have been acting on behalf of STH, not Stube. Stube had no financial capacity to carry out any redevelopment on the site.[47] In May 2004, Mr Calavrias was involved in entering into an agency agreement for the sale of the property with Colliers International (Colliers). The proposed agreement prepared by Colliers was expressed as being between Colliersand STH. It was described as an agency "to effect the sale of the business known as Stube Industries Limited and carried on at 15 Fisher Crescent". An offer from a proposed purchaser was submitted. That was initially expressed as an offer to Stube to purchase the leasehold interest. The documents indicate that an amended offer was subsequently submitted, in the form of a proposed agreement between Stube and the intended purchaser to effect the transfer by a sale of all the shares in Stube. That sale did not eventuate. Once again, its relevance is that any transfer effected by means of the sale of the shares in Stube was within the control of STH, not Stube.[48] In July 2004, Mr Joubert wrote an exploratory letter to STH's insurancebrokers. It raised the question whether there might be cover for the remediation costs incurred by STH. In that letter Mr Joubert said:On 19 September 1989 a ground lease for the site was concluded between the Ports of Auckland and Healing Industries Limited.Healing Industries Limited changed its name to Stube Industries Limited and became wholly owned by Robert Stone Limited, which in turn became wholly owned by Steel and Tube Holdings Limited. The leasehold rights to 15 Fisher Crescent were vested in Steel and Tube Holdings Limited as early as 1992.[49] Mr Crossland places some emphasis on Mr Joubert's description of the leasehold rights as being vested in STH. The letter was carefully worded. It is clear that Mr Joubert was aware of, and had in mind, the separate existence of Stube. Inmy assessment, when he described the rights as vested in STH, he accurately described the commercial reality as it was understood and administered within STH.[50] In 2008, an arrangement was reached for Carr & Haslam Ltd to take a licence of the site, for $1,000 per month. The documentation of that arrangement was in the hands of Mr Joubert's successor as company solicitor, Mr Jenkins. He prepared a licence agreement in the name of STH as licensor. The agreement was signed on behalf of STH by Mr Calavrias and Mr Candy. Mr Jenkins was cross-examined as to why he had prepared that licence in the name of STH rather than Stube. His answer was that he thought he originally drafted it for Stube, but changed the name of the licensor to STH after a discussion with Mr Candy or possibly someone in the finance section. The deliberate change in the identity of the licensor in the licence agreement indicates clearly that the company with the real financial interest in the transaction was STH, not Stube.[51] The evidence about STH's accounting arrangements supports the proposition that Stube was treated as a division of STH, for financial purposes. Stube had no separate bank account. All receipts and payments on its behalf had to be madethrough STH's bank account. The use of the parent's bank account would not ofitself indicate involvement by the parent in the management of the subsidiary, at least so long as a clear record of the transactions was kept within the internal records of the group. However, the evidence shows that the financial intermingling of the affairs of Stube and STH went well beyond the use of a common bank account.Receipts and payment were not only transacted through STH's bank account, theywere accounted for as STH's transactions.[52] This is illustrated by the arrangements for payment of the rent and rates, payable by Stube under the lease. Lewis sent quarterly invoices for the ground rent. Those invoices were, at the request of STH, addressed to STH, not Stube. They were paid by STH. The rates on the property, payable by the lessee, were also invoiced to STH by Auckland City Council. It was important to STH that the rent and rates be invoiced in this way. That is demonstrated by an exchange of emails involving the STH accounts department, following registration of the renewal of the lease in late 2009. That exchange indicates that the property had been recorded bythe Auckland City Council as being in the name of STH, and rate demands had been addressed to STH. When the renewal of the lease was registered in late 2009, in the name of Stube, Auckland City Council altered the name. Ms Wong from STH sent an email to Mr Beecroft on 24 August 2010 which said:We have contacted the Auckland City Council and found out that it is them that changed the address details. No-one at Steel & Tube contacted them at all. Auckland City Council saw the notice of sale in December 2009 and they think that Stube Industries own the property now, which is incorrect. The new owners have to contact the Council to get it changed to the correct name and address. Steel & Tube cannot pay the rates directly because it is not addressed to the right party, that is, Steel & Tube Holdings Limited.Steel & Tube Holdings Limited would like to keep the previous arrangement where we get an invoice from whoever owns 15 Fisher Crescent. The invoice is to be addressed to Steel & Tube Holdings Limited, Finance Department, Private Box 30-543, Lower Hutt 5040[53] In a further email following Mr Beecroft's reply, Ms Wong said:For tax purposes we need ALL invoices to be addressed to Steel & Tube Holdings Limited and not Stube Industries. If Steel & Tube are to pay the rates directly, they (Auckland City Council & ARC) will have to reissue the 2 invoices changing the name to Steel & Tube Holdings Limited and NOT Stube Industries.Sorry to be particular on this. Because IRD is particular about this, we will have to be as well.[54] That exchange indicates a deliberate intention to treat STH as the owner, not a mistaken view on the part of an STH employee about the ownership of the lease.[55] A particularly important stage, in considering the extent of participation of STH in the management of Stube, is the renewal of the lease in 2009. Until late 2008, STH had been investigating options for the redevelopment of the property or the sale of the leasehold interest. I have described some of those initiatives. It is not necessary to describe them all. By late 2008, STH had been unable to come up with a plan which would extract value from the lease. Mr Jenkins reported regularly to Messrs Calavrias and Candy, as CEO and CFO of STH, on all STH's propertyholdings, including 15 Fisher Crescent. In his monthly report of October 2008 Mr Jenkins recorded the position in this way: Ground lease review date is 30 November 2009. Barry Wither wrote to us on 5.09.08 advising that Quadrant are willing to continue discussion with an open mind but with the lease terms certain only 15 months to run the options are limited. Tse advise that despite the uncertainty in the market they do not entirely discount the possibility of there being a highly motivated owner/occupier developer in the market. Recommend marketing the Lessee's interest in the land for sale by calling for expressions of interest on the basis that any offer will be seriously considered.[56] In the next monthly report which is in evidence, for January 2009, the position is recorded:Ground lease review date is 30 November 2009.Will not renew.[57] In answer to questions from me as to what had happened in that intervening three month period to change the situation, Mr Jenkins answered that he could not recall exactly what occurred. He said they would have investigated as many options as possible to do something with the lease and explored any and every viable option, but probably came to a blind end. He must have gone to Mr Calavrias and said that we do not see any viable options. He said that he then got a firm instruction from Mr Calavrias in late November or early December that the lease would not be renewed. He could not recall anything in writing but did remember Mr Calavriastelling him verbally "no we are not going to renew".[58] Later events do not support the proposition that a firm decision not to renew had been made by then. STH continued to investigate whether it could obtain valuefor the lessee's interest by a sale. Mr Jenkins had been taking advice from an external valuer. The valuer suggested that Mr Jenkins respond to Mr Beecroft'sletter of 12 March 2009 advising the proposed new rent by asking him for the detail of the assessed land value and the market yield which had been used in fixing theproposed rental. The valuer said: "By requesting this information it willdemonstrate to the lessor you are seriously researching and considering taking up thenew term." Asked why they should give an indication that they might renew, Mr Jenkins said that STH wanted to keep its options open as long as it could, in the hope that Lewis or Quadrant might offer some sort of deal, or a sweetener, to STH tonot renew the lease. Quadrant had made a proposal to a client of Colliers for aredevelopment proposal on the land, conditional on Stube's lease not being renewed.[59] Also, when the new ground rent valuation of $195,000 was received, it was less than the approximately $250,000 estimated earlier. Mr Calavrias said to Mr Jenkins:As you know it was our view that we should exit (abandon) the lease at the appropriate time before the renewal date. Does the lower ground lease rental increase the value of this site now and should we be pursuing a buyer for the lease?[60] Mr Barker submits that a firm decision had been made by the directors of Stube not to renew the lease, and its renewal was the result entirely of a mistake by Mr Jenkins in failing to give the required notice. I do not accept that submission. The evidence which I have described indicates that STH was endeavouring to keep its options open as long as possible in the hope that it could extract some value from the lease. In adopting that stance, those involved, particularly Mr Jenkins and Mr Calavrias, were not acting in their capacity as employees and/or directors of Stube. Mr Jenkins, in answer to a question from me, accepted my description of his efforts to show Lewis and Quadrant that it might be renewing the lease as brinkmanship. That form of brinkmanship was not, and could not properly have been, undertaken on behalf of Stube. Rental under the lease was a significant liability to Stube. It had no income to meet that liability. It had no realistic means of extracting, from its own resources, any value from the right to renew the lease.[61] Mr Jenkins made a mistake in not appreciating that notice not to renew was required. But he made that mistake in the context of the background of STH'sactions in keeping its options open as long as possible, and so not advising Lewis that it did not intend to renew. The mistake was not one which an employee actingon Stube's behalf was likely to have made.[62] The steps taken after the mistake was discovered give an insight into the extent to which the lease had become ingrained in the corporate culture as belonging to STH. As I have recorded at [8], STH claimed legal professional privilege for the external legal advice obtained following the deemed renewal of the lease. Thatadvice must therefore have been obtained by STH, not Stube. If it had been obtained by Stube the privilege would be that of Stube, claimable by the liquidators. That indicates that even when an issue serious enough to require external legal advice arose, STH did not have any regard to the separate legal existence of Stube. If it had, it would have ensured that it was Stube that obtained advice.[63] STH submits that Lewis was aware that the failure to give notice not to renew was a mistake, and that this weighs against a s 271 order. I do not accept that submission. As Mr Jenkins' evidence makes clear, STH was involved in "brinkmanship", and took steps to suggest to Lewis that it might renew. The letter proposing the new rent had drawn Mr Jenkins' attention to sch 1 of the Public Bodies Leases Act. There was no reason for Lewis to think that Mr Jenkins might have overlooked or misread the relevant clause. The evidence does not support the proposition that Lewis was aware that STH intended not to renew, and that the failure to give notice was a mistake.[64] In the statement of claim, the plaintiffs allege that:At all material times the defendant treated the affairs of [Stube] as its affairs and treated [Stube] as an economic division of [STH].[65] Counsel for STH submits that there is nothing of substance in this allegation and that Stube was a shell company that was managed, as per common practice, as part of the group, and maintained as a separate entity. I reject that submission. Stube was not a shell company. It owned a significant property interest, which was both an asset and a liability. I find no evidence of any exercise of management functions concerning that property interest which was independent of STH, to any material extent. The evidence, including but not limited to the examples I have given, satisfies me that, in the relevant period, extending from about 2003 to the date of liquidation, STH took part in the management of Stube to an extent which was total in all essential respects. Mr Crossland describes Stube as a "slave" of STH. Another metaphor might be "puppet". The separate legal entity which was Stube was devoid of any capacity to conduct its own affairs.(b) The conduct of STH towards Lewis as a creditor of Stube[66] It is not in dispute that Lewis, and its agent Quadrant, knew that the legal entity Stube was the lessee. The plaintiffs do not put their case on the basis that the actions of STH caused any confusion for Lewis as to the legal entity with which it contracted. Rather, the case is that STH conducted itself towards Lewis as if theproperty was STH's and that STH stood behind its subsidiary. The plaintiffs assertthat STH's conduct demonstrated its commitment by continuing to fund Stube. Itsays that all negotiations were conducted on this basis and that in none of the many negotiations over many issues was there any suggestion that STH would not continue to support Stube.[67] Mr Crossland submits that STH's conduct once it had decided to abandonStube was in sharp contrast to how the company had behaved until then. He submits that its conduct was contrived and specifically designed to create a post facto veneer of separate legal personality between Stube and STH. Mr Crossland submits that the pains taken by STH at that stage to draw a distinction between Stube and STH are in stark contrast to its earlier behaviour, and throw into sharp relief the conduct over the previous two decades where Stube was treated as part and parcel of one economic unit, namely STH.[68] Mr Barker submits that the factor in s 271(1)(b) is largely concerned with the impression given by the related company to the creditors of the legal relationship between the two companies. If the related company treated the two companies as one entity for the purposes of its dealings with creditors it is more likely that it will be just and equitable to treat the companies as one entity for the purposes of the liquidation. He further submits that it is relevant whether the related company acted in good faith in a way that benefited the creditor. He submits that STH has always been clear in its conduct towards Lewis about the legal relationship between Stube and STH and has acted in a way that would mean it would be unjust and inequitable to make an order under s 271. He submits that there could have been no confusion on the part of Lewis as to which entity was the lessee of the property and that it would be an absurd proposition that after 20 years of dealing with Stube as the lesseeof the property and STH as its parent, the lessor could be confused about which company was the lessee and what role STH played in relation to the lease.[69] Mr Barker submits that STH's conduct towards the only creditor of Stube has been exemplary. Up until the date of liquidation it had been paid in full. He submitsthat Lewis' claim is for losses arising from the disclaimer of the lease, which wasonly renewed due to an unfortunate mistake. He further submits it is relevant to theCourt's consideration of this factor that Lewis benefited from STH's involvement,from the payment of the rent and rates after 2003, the remediation of the property at a cost of about $2 million and continuing to pay the rent and rates for three years after the mistaken renewal of the lease in 2009.[70] He submits that s 271 is directed at circumstances where the related company deprives the company in liquidation of assets to the detriment of creditors in disentitling circumstances such as the sweep of cash when the related company is insolvent, or causes the company in liquidation to enter into a liability to the detriment of creditors in disentitling circumstances, for example causing the company in liquidation to do so when insolvent. He submits that STH has notdeprived Stube of any assets but was a substantial net contributor to Stube's assetsfrom 2003 to 2013 by meeting all of its liabilities. He submits that there can be no suggestion that STH caused Stube to incur any fresh liabilities and that the lease renewal in 2009 was a simple error with serious consequences. He submits that STH acted in an exemplary manner in relation to its subsidiary and Lewis was the main beneficiary of this. He submits to make an order under s 271 in the light of STH'sgood faith contributions and transparent conduct about the identity of the lessee would be unjust and inequitable.[71] This is not a case where the conduct of the related company has caused confusion as to the legal entity with whom Lewis was contracting. Lewis alwaysknew that the lessee was Stube. However, STH's conduct toward Lewis, over adecade between 2003 and 2013, was such as to indicate to Lewis that STH stood behind Stube. The evidence which I have already discussed is sufficient to demonstrate that. There are other examples which I do not need to enumerate. It issufficient to say that the entirety of STH's actions, in paying the rent and rates, inmeeting the remediation costs, and in seeking to find uses for the property withinSTH's own divisions would have all demonstrated to Lewis that STH was taking responsibility for the property.[72] What is in issue here is whether, given Lewis' clear knowledge of the identityof its lessee, that conduct of STH should support the making of a s 271 order, toconvert STH's longstanding assumption of responsibility for the property into a legalobligation.[73] One relevant consideration is the extent to which Lewis has relied upon that conduct, and altered its position in reliance on it, or has had its position altered bySTH's conduct. The principal matter for examination on this aspect is the renewal of the lease.[74] The lease which was disclaimed and from which Lewis' status as a creditor ofStube originates was entered into in May 2009 by the deemed renewal under cl 6 of sch 1 of the Public Bodies Leases Act. I have not accepted the submission that the failure to give notice that the lease would not be renewed is a simple mistake for which Stube is solely responsible. I have described the circumstances in addressing the extent to which STH took part in the management of Stube. Those circumstances are also relevant under this heading.[75] The contractual position between Lewis and Stube which arose from the deemed renewal is clear. STH does not assert that Stube has any legal grounds for relief from the consequences of that mistake. The contract between Stube and Lewis was operative.[76] STH asserts that Lewis is no worse off than it would have been if Stube had been treated as a separate legal entity, and STH had declined to provide support at the time of the renewal. In those circumstances, Stube would not have entered into the renewal. It submits that Lewis is better off as a result of the later disclaimer of the lease than it would have been if the renewal had never been entered into.[77] It must be a matter of speculation whether or not Lewis would have been worse off if the lease had ended in 2009 rather than 2012. But the fact is that the lease was renewed. Lewis acquired the contractual rights arising from that renewal and it retains, following the disclaimer, the right to claim damages, the measure of which is intended to put Lewis in the position that it would be in if the contract had been performed. The fact that if events had occurred differently the contract would not have been entered into and Lewis would never have acquired the rights under the contract is irrelevant, so far as its rights against Stube are concerned.[78] STH's conduct towards Lewis in relation to the renewal of the lease is relevant, under s 272(1)(b), in deciding whether it is just and equitable to make an order under s 271. I have discussed that conduct in considering s 272(1)(a). The issue under s 272(1)(b) is whether that conduct makes it just and equitable that STHshould pay part or all of Lewis' claim against Stube. I consider that the fact that, if events had transpired differently, there would have been no claim against Stube is also not relevant to this question. The conduct of STH towards Lewis in relation to the lease is a factor weighing in favour of an order, under s 272(1)(b).[79] Mr Baker submits that s 271 is directed at circumstances where the related company deprives the company in liquidation of assets to the detriment of creditors in disentitling circumstances, such as the sweep of cash when the related company is insolvent, or causes the company in liquidation to enter into a liability to the detriment of creditors in disentitling circumstances, for example causing the company in liquidation to do so when insolvent. As to the first example of disentitling circumstances, a sweep of cash, Mr Barker submits that STH has not deprived Stube of assets to the detriment of creditors in disentitling circumstances. Instead, it has made significant contributions to Stube by paying the rent and meeting the remediation costs.[80] I do not intend to examine whether STH's meeting the remediation costs canbe regarded as a contribution to Stube. That would require an examination of the legal responsibility for the remediation of the site, which it is not appropriate to undertake here. It is sufficient to observe that the evidence does not establish thatSTH had no legal liability to meet the cost of remediation necessary to meet regulatory requirements.[81] STH has been a substantial contributor to Stube by payment of rent over the period which I have considered it appropriate to examine, namely from about 2003. Over a longer time period, STH has not necessarily been a net contributor to Stube. When Stube, as Healing, was acquired by STH, it had a business which was presumably a viable one. The income from the business was presumably sufficient to pay the rent. STH restructured that business. The financial details of the restructuring are not in evidence. The outcome of the restructuring was that Stube was left with no business. It was left with the lease, and no source of income to pay the rent. There is no evidence from which I can assess whether the value taken by STH from Stube was more or less than its later payment of rent.[82] To the extent that s 271 is directed at circumstances where the related company deprives the company in liquidation of assets to the detriment of creditors in disentitling circumstances, the consideration of the Court should not be confined to actions in the period just prior to the liquidation. Over the long run, the evidence does not establish that STH has been a net contributor to Stube.[83] In any event, s 271 is not limited to situations where there has been a deprivation of assets from the company in liquidation. There may be otherdisentitling circumstances. I consider that STH's actions in relation to the lease fallwithin that description.[84] Stube had for many years been unable to pay the rent without STH's support.It had no legally enforceable arrangements for support. If the directors of Stube had consciously entered into a contract to renew the lease, they would have been incurring an obligation, which the directors could not have had reasonable grounds to believe Stube would be able to perform from its own resources or by recourse to legally enforceable financial arrangements, as required by s 136 of the Act. Furthermore, the renewal of the lease was a major transaction which should not have been entered into unless approved by a special resolution, under s 129 of the Act. STH, as shareholder, did not pass a resolution authorising the transaction. Nor did ittake any steps to put in place legally enforceable funding arrangements to enable Stube to meet its obligations. Sections 129 and 136 apply to a transaction deliberately entered into. They do not cease to apply, even if I was to accept the proposition that the renewal was the result of a mistake by Stube.[85] STH and the directors of Stube did not comply with those provisions, and STH continued to pay the rent. Its conduct towards Lewis in relation to the renewal was such as would reasonably lead Lewis to believe that Stube was not treated as a legal entity distinct from STH. That conduct is directly relevant to s 271(1)(b). It weighs in favour of an order.(c) The extent to which the circumstances that gave rise to the liquidation of Stube are attributable to the actions of STH[86] Mr Crossland submits that Stube was not a real company actually trading that had faced a fiscal calamity caused by some extraneous event. He submits that STH made a decision sometime in 2012 or 2013 through its new CEO, and its CFO who was then the sole director of Stube, to withdraw funding from Stube, knowing that the renewal creating a 21 year obligation had been signed in 2009. STH deliberately ceased funding and then passed a shareholders' resolution to appoint a liquidator. He accordingly submits that Stube's liquidation is directly and solely attributable to the actions of STH.[87] Mr Barker submits that the circumstances that gave rise to the liquidation are not attributable to STH, and are largely attributable to the actions of Lewis andQuadrant. He submits that the main cause of Stube's liquidation was the onerous lease and that had it not been for the unreasonableness of the lessor in not allowing Stube to assign the lease, and imposing unreasonable demands on Stube, Stube would not have had this burden. Mr Barker relies upon this asserted unreasonableness both under this heading, as the extent to which the actions of STH have contributed to the liquidation, as well as under the next heading, "such other matters as the Court thinks fit". He submits that the Court should consider Lewis' "contribution to the loss, including breaches of the lease and unreasonableness". I deal with his submissions on this aspect under s 272(1)(d).[88] So far as s 272(1)(c) is concerned, I find that the circumstances that gave rise to the liquidation of Stube are attributable entirely to the actions of STH, in deciding to withdraw the support which it had previously provided to Stube.(d) Such other matters as the Court thinks fit[89] Under this heading, counsel for the plaintiffs submit that there are a number of matters which are relevant and support an order under s 271:(a) Section 136 of the Act requires directors of a company not to agree to the company incurring an obligation unless the directors believed at the time on reasonable grounds that the company would be able to perform the obligation when it was required to do so.(b) The treatment of the lease liability in the group accounts demonstrates that STH regarded it as its own liability.(c) There is an absence of documents that one would expect to find, such as a resolution approving entry into a major transaction for the 21 year lease by Stube. Mr Crossland submits that this was a major transaction for Stube, but was treated as being within the delegated authority of the CEO of STH to enter into renewals of leases. He submits that this indicates that the renewal, while signed by the Stube directors, was comprehended by them as an act carried out by them on behalf of STH.(d) There is no evidence that STH's own creditors or its employees wouldbe prejudiced if the s 271 order were made.(e) STH, as a publicly listed company with a company solicitor to attend to the legal requirements of itself and its subsidiaries, cannot properly complain to the Court that an order is not just and equitable, by relying on separate legal personality, when for years it has treated itself as a single economic enterprise.(f) The constitution of Stube, which enabled the directors to take account of the interests of the holding company STH, does not operate as what Mr Crossland describes as "a prophylactic against a pooling order".(g) STH is seeking sympathy from the Court on a number of grounds. This is not a factor weighing against the making of an order.[90] Mr Barker submits that the Court should consider, under s 272(1)(d):(a) Lewis' contribution to the loss, including breach of the lease and unreasonableness;(b) Lewis' failure to mitigate loss; and(c) whether in fact Lewis suffered loss.[91] I have addressed Mr Crossland's first three points in discussing the earlierparagraphs of s 272(1). His fourth point is that there is no evidence of prejudice to the creditors or employees of STH. That is so. However, I must address Mr Barker's submission that under s 272(2), the extent to which the businesses of the relevant companies have been combined is an express matter to be taken into account, whereas under s 272(1) it is not.[92] Sections 272(1) and (2) address different situations under s 271. Section 272(1) applies to a s 271(1)(a) case; s 272(2) applies to a s 271(1)(b) case. Section 271(1)(a), which is relied upon here, applies where the related company is not itself in liquidation. Subsection (b) applies where both or all of the related companies are in liquidation. The reference in s 272(2) to the extent to which the businesses of the companies have been combined is explicable by the need, in cases under s 271(1)(b), to have regard to the position of the creditors of all the companies in liquidation. The extent to which the businesses have been combined is a relevant consideration in determining what is just and equitable as between the separate creditors of each of those insolvent companies.[93] Similar considerations do not arise under s 271(1)(a). So, the absence of a similar provision in s 272(1) does not mean that the extent to which the business of Stube and STH have been combined is not relevant. It may be relevant under any of paragraphs (a) to (d). I have taken into account, in considering paragraph (a), the extent to which the business of Stube has been subsumed into that of STH, and have upheld Mr Crossland's submission that it has been treated as a division of STH.[94] I attach some weight to Mr Crossland's fifth point that STH as a publicly listed company ought to have known better. The separate legal existence of Stube, on which STH relies, carries with it a responsibility to ensure that the legal requirements which apply to that separate legal entity are observed. A failure to observe those requirements cannot readily be ignored or excused where the company concerned is the subsidiary of a publicly listed company.[95] Mr Crossland's sixth point is that s 131(2) does not operate as "a prophylactic against a pooling order". I have addressed s 131(2) in considering s 271(1)(a). For the reasons given there, I find that the existence of the provision in the constitution of Stube enabling it to act in the best interests of STH does not preclude an order under s 271, because the directors of Stube did not act as s 131(2) requires.[96] I address together Mr Crossland's seventh point, and Mr Barker's first point.Both in its evidence, and in its counsel's submissions, STH has sought to paint itselfas having had to deal, for Stube, with an unreasonable landlord. The evidence and submissions cover an extensive catalogue of complaints. These include allegedly unreasonably refusing consent to a sublease in 1998, and other actions which STH asserts were intended to force out the then tenant Mt Wellington Metalisation (1998) Ltd so that Quadrant could develop the property for a third party. STH also asserts that from 2000 Lewis and Quadrant sought on regular occasions to acquire the property for development and continued to claim there were breaches of the lease, such as contamination, without providing evidence. STH also asserts that possible assignments of the lease were made contingent on STH carrying out extensive remediation work and that, after it was carried out, the nature of the lease meant that few purchasers were interested in acquiring a lease before the rent review in 2009.[97] I do not intend to traverse those allegations in detail. They are largelyirrelevant to the issues I must consider. Lewis' claim is for damages for disclaimer of the lease renewed in 2009. Lewis' conduct prior to that point is not relevant.Mr Barker was critical of the plaintiffs for not calling the previous general manager of Quadrant, Mr Wither. He invites me to draw an adverse inference. Because I find the prior conduct irrelevant, I decline to draw such an inference.[98] In case I am wrong in treating the matters relied upon by STH as irrelevant, I find that those matters do not establish that Lewis or Quadrant was actingunreasonably in enforcing Lewis' rights under the earlier lease. The parties on bothsides of this contract are commercial parties, well able to enforce their rights under the contract. If Lewis was acting outside its legal rights, then Stube had legalremedies. It chose not to challenge any of Lewis' actions in this way. It is notappropriate to trawl through the past history of grievances in the way STH urges.[99] Mr Barker submits that Lewis obtained the benefit of STH remediating theproperty at STH's cost and that the building on the site, which belonged to Stube,was demolished to assist the remediation, leaving a more useable site. The evidence does not establish a benefit to Lewis over a wider timeframe. Lewis was the owner of land which had been contaminated by the activities of the lessee. An outcome of the remediation is that the land is now essentially bare land, with no lessee'simprovements on it. I deal with the consequences of that in more detail when considering the quantum of Lewis' claim for damages against Stube. It is sufficientat this stage to note that the evidence indicates that the current state of the landmakes the lessor's interests in this property less attractive than it was when Lewis acquired that interest in 1996.[100] The evidence does not establish that Lewis has unreasonably exercised rights available to it under the lease, for example as to the need for its consent for an assignment, to seek to gain compliance by the lessee with its obligations under the lease to deal with the contamination which its activities had caused. Lewis' conductis not a factor weighing against a s 271 order.[101] Mr Barker's second and third points relate to the quantum of Lewis' claim fordamages against Stube arising from the disclaimer of the lease. I consider those points when dealing with the application under s 307.[102] Mr Barker also submits that Lewis is seeking to obtain, by means of an order under s 271, the benefit of what is in effect a parent company guarantee. He submits that such a guarantee could not be expected to be available for a perpetually renewable lease, and that an order under s 271 would place Lewis in a better position than it would be in if it did have a parent company guarantee, because it would obtain both full rent and the unencumbered freehold title to the land itself.[103] I do not accept the proposition that the absence of a parent company guarantee is a factor which weighs against the making of an order under s 271. An order under s 271 is not analogous to a guarantee by the related company. It requires consideration of whether it is just and equitable, on the basis of the matters prescribed, that the related company should contribute to the losses of the company in liquidation. In this case, there is a single creditor whose claim is for damages on the disclaimer of the lease. Those circumstances are relevant to the consideration of the factors in s 272, in the way I have described. Whether or not they lead to the same financial outcome as would have applied if there had been a guarantee by the related company of the lease is not relevant. The only potential relevance is that a guarantee would obviate the need for an application under s 271. The absence of a guarantee is not a factor which weighs against an order under s 271.[104] As to Mr Barker's submission that Lewis would be better off with an orderunder s 271 than with a parent guarantee, an order under s 271 will not lead to the result that Lewis will obtain full rent and the unencumbered freehold title to the land itself as he submits. The most that Lewis could obtain under an order under s 271 isan order that STH pay the whole of Lewis' claim in the liquidation. As I later discuss, that claim is, in essence, a claim for damages for disclaimer of the lease.[105] The matters which I have considered under s 272(1)(d) weigh in favour of a s 271 order.[106] In what he describes as a "cross check" for the proposition that Stube has been the "slave" of STH, Mr Crossland submits that the circumstances are such as to make STH a shadow director of Stube, in terms of s 126 of the Act. That includes within the meaning of director, for the purpose of those sections dealing withdirector's duties, any person in accordance with whose directions or instructions the actual directors or the board are required or accustomed to act.[107] In Re Hydrodam (Corby) Ltd 180 Millet J described the nature of a shadow director under the equivalent English provision in these terms:10A de facto director, I repeat, is one who claims to act and purports to act as a director, although not validly appointed as such. A shadow director, by contrast, does not claim or purport to act as a director. On the contrary, he claims not to be a director. He lurks in the shadows, sheltering behind others who, he claims, are the only directors of the company to the exclusion of himself. He is not held out as a director by the company. To establish that a defendant is a shadow director of a company it is necessary to allege and prove: (1) who are the directors of the company, whether de facto or de jure; (2), that the defendant directed those directors how to act in relation to the company or that he was one of the persons who did so; (3) that those directors acted in accordance with such directions; and (4) that they were accustomed so to act. What is needed is first, a board of directors claiming and purporting to act as such; and secondly, a pattern of behaviour in which the board did not exercise any discretion or judgment of its own, but acted in accordance with the directions of others.[108] As I have held, it is perfectly proper and usual commercial practice to appoint employees of the holding company as directors of a subsidiary. It is also permissible for those employee directors to act in accordance with the best interests of the holding company, even although that may not be in the best interests of the subsidiary, provided the constitution so provides, as it does here. What is not permitted is that those employee directors have regard only to the interests of the holding company, without giving separate consideration to the separate legal existence of the subsidiary, or the separate best interests of the subsidiary. A director who acts in that way, having regard only to the interests of the holding company or the wider group, without separate consideration of the position of the subsidiary, may potentially bring the holding company within the scope of that description by Millet J. However, as I have reached the conclusions which I have as to the roles10 Re Hydrodam (Corby) Ltd [1994] 2 BCLC 180 (Ch) at 183.which the directors played by considering the matters in s 272(1), it is unnecessary to say more about this aspect.The outcome of the s 271 application[109] The matters which I have considered under s 272 have led me to the conclusion that it is just and equitable to make an order under s 271(1)(a). The order which can be made is that STH pays to the liquidators "the whole or part of any or all of the claims made in the liquidation".[110] There is only one claim in the liquidation, that of Lewis. I have had regard only to that claim in considering whether it is just and equitable to make an order. Mr Barker suggested that STH may itself be able to make a claim in the liquidation. It would be inappropriate that any amount which STH was ordered to pay should be returned in part to STH as a creditor. For this reason, the order should not be in respect of all of the claims, but should be limited to the claim by Lewis.[111] I do not consider that it is necessary, in making an order under s 271(1)(a), that the relevant claims have been quantified. I addressed that point in an interlocutory judgment.11 I do not repeat what I said there. I make some additional comments. The section may have to be applied in a liquidation in which there are many creditor claims. It would be potentially inconvenient if all claims had to be quantified before an order could be made. The wording of s 271 does not suggestthat this is required. The words "the whole or part of any or all of the claims"indicate that the order may be expressed in general terms, and that quantification of the amount to be paid is not a prerequisite of the order.[112] That conclusion is supported by the purpose of the section. That is to require a contribution by a related company to a liquidator when the actions of the related company make it just and equitable to lift the corporate veil to some extent. The extent to which the veil is to be lifted is determined principally by a consideration of the actions of the related company, rather than by a consideration of the nature and quantum of the claims made in the liquidation.11 Lewis Holdings Ltd v Steel & Tube Holdings Ltd [2014] NZHC 2650.[113] For these reasons, I conclude that quantification of Lewis' claim under thes 307 application is not necessary before an order can be made.[114] I consider that it is appropriate to make the order now. For the reasons I later give, the s 307 application cannot be finally determined now, but this judgment should give the parties the greatest level of finality that is possible. The essential issue is whether the matters which I have considered should result in an order that STH pay all, or only part, of the claim, whatever the amount of that claim may ultimately be. I do not consider that the quantum must be fixed before that issue can be decided. The section does not provide any guidance on the circumstances in which it may be just and equitable to make an order, having regard to the s 272 factors, but to limit that to part of the claims only. That lack of specific guidance is, I infer, deliberate. The circumstances must be considered, and the order which is made must be one which achieves justice and equity for both the related company and the creditors of the company in liquidation.[115] When the extent of involvement of the related company has been limited, the extent of the contribution may also be limited to only part of the claims. STH took part in the management of Stube to an extent which was, in essence, total. That justifies a total contribution under s 271. There is nothing in the other circumstances, which I have held also support an order, which justifies any proportionate reduction. I have determined that it is just and equitable that STHmake a contribution to Lewis' claim. The circumstances as I have described themlead me to the conclusion that the contribution should be total, not partial.[116] For these reasons I find it just and equitable that STH should pay the wholeof Lewis' claim.Determination of the amount of Lewis' claim under s 307[117] To quantify the extent to which STH is required to contribute, it is necessaryto determine the amount of Lewis' claim against Stube in the liquidation.Section 307 of the Act provides:(1) If a claim is subject to a contingency, or is for damages, or, if for some other reason, the amount of the claim is not certain, the liquidator may—(a) make an estimate of the amount of the claim; or(b) refer the matter to the court for a decision on the amount of the claim.(2) On the application of the liquidator, or of a claimant who is aggrieved by an estimate made by the liquidator, the court shall determine the amount of the claim as it sees fit.[118] Stube's leasehold interest under the lease was disclaimed by the liquidators under s 269. The effect of a disclaimer is prescribed in s 269(3) and (5) which provide:(3) A disclaimer under this section—(a) brings to an end on and from the date of the disclaimer the rights, interests, and liabilities of the company in relation to the property disclaimed:(b) does not, except so far as necessary to release the company from a liability, affect the rights or liabilities of any other person.(5) A person suffering loss or damage as a result of a disclaimer under this section may—(a) claim as a creditor of the company for the amount of the loss or damage, taking account of the effect of an order made by the court under paragraph (b):(b) apply to the Court for an order that the disclaimed property be delivered to or vested in that person.[119] In its amended statement of claim, Lewis seeks a declaration that it be admitted as a creditor pursuant to s 307, in the amount to be assessed by the Court. In its proof of debt, and in the original statement of claim, Lewis claimed $2,618,528, a sum calculated as the discounted present value of the loss of its right to future rent under the lease. In the original statement of defence, STH pleaded that Lewis now holds the land unencumbered following the disclaimer of the lease and that it had not had regard to the rents and other sums that the disclaimer enables Lewis to receive from releasing or otherwise realising the value of itsfreehold interest in the property. It also pleaded, as an affirmative defence, that Lewis has failed to take reasonable steps to mitigate any loss following the lease being disclaimed.[120] At trial, Lewis' evidence on quantum was principally that of Mr Sheppard, a chartered accountant, who is also an investor and a company director. He adopted the approach of assessing the present value of the income for the remainder of the 21 year term, to 30 November 2030, and the present value of the freehold interest in the land which would revert to the lessor in 2030 if there were no renewal. He then assessed the value of the unencumbered freehold interest in the land at the date of renewal. His opinion is that the difference between those two figures represents theamount of Lewis' loss. He calculated those two figures according to a range of assumptions, which led to a range of differences between $1.3 million and $1.9 million, with the most likely scenario a figure of $1.6 million.[121] STH relied, for quantum, particularly on the evidence of Mr Colcord. Mr Colcord is a registered valuer. He valued the lessor's interest in the propertyimmediately prior to disclaimer of the lease, by calculating the present value of the perpetual income stream from the rental. He assessed that at $2.95 million. As an alternative, he calculated the present value of the rental stream until the expiry of the current term in 2030, plus the present value of the unencumbered freehold interest in 2030. He assessed that at $2.87 million. Adopting the approximate midpoint, heassessed the value of the lessor's interest immediately prior to the disclaimer of thelease at $2.91 million. From that, he deducted the unencumbered freehold interest after disclaimer. He valued the freehold land as at the date of the disclaimer at $3.2 million. He therefore concluded that, even with an allowance for selling costs and a delay in realisation of the proceeds of sale, the value of the freehold interest which reverted to Lewis on the disclaimer exceeded the value of the leasehold interest immediately prior to disclaimer, so that Lewis had suffered no loss from the disclaimer.[122] The plaintiffs responded to Mr Colcord's evidence with an affidavit fromMr Smithies, a registered valuer. He generally agreed with Mr Colcord's freeholdland value assessment and land discounted cash flow analysis. He did not agree withMr Colcord's opinion that Lewis is in a more favourable position without the lease inplace. His opinion is that a ground lease with long term secure occupancy is a very attractive investment, in this case more valuable to Lewis than the freehold tenure, with no income and requiring significant investment to earn a return.[123] With that description of the contest between the parties on the quantum of the loss, I consider the law relating to the measure of damages. The terms of s 269, asset out above, suggest that the measure of Lewis' loss should be the same measure of damages as on the repudiation of a lease by a lessee. That proposition is supported by high authority. In re Park Air Services involved a disclaimer of a lease by the liquidators of a lessee under the equivalent English provision to s 269.12Lord Hobhouse said:13The act of disclaimer brings into existence the right of the lessor to claim for the loss or damage which he has sustained in consequence of the operation of the disclaimer. This right is given by section 178(6) of the Act. A lessor is deemed to be a creditor of the company to the extent of the loss or damage and he is accordingly given the right to prove for the loss or damage in the winding up.This is a statutory right to compensation directly analogous to a right to claim damages for a statutory fault. Its character is compensatory. It is a right which comes into existence without more at the moment of the disclaimer. It is not a right to the performance of the contract disclaimed; it is not a right to the payment of future debts.Two things follow from this. The first is that the assessment of the compensation involves, as the statute says, an ascertainment of the loss or damage sustained by the lessor as a result of the disclaimer. It is necessary to quantify the relevant sum in money terms. This is precisely the same exercise as has to be undertaken when assessing the damages for a breach of contract, as, for example, where one party has repudiated a contract and the other party has accepted that repudiation as terminating the contract and he then exercises his secondary right to claim damages: see Lord Diplock inPhoto Production Ltd. v. Securicor Transport Ltd. [1980] A.C. 827, 849.[124] In discussing the normal measure of damages arising from a disclaimer of the lease, Lord Hobhouse said:14After the disclaimer the right to rent is lost. There is only a right to compensation. That involves a comparison between the pre-disclaimer and12 In re Park Air Services [2000] 2 AC 172 (HL(E)).13 At 180.14 At 181.post-disclaimer positions. For material purposes this difference is the aggregate of the differences between the contractual rent and the market rent over the period of the remainder of the lease discounted to allow for advancement. [125] To similar effect, Lord Millett said:15This gives the landlord an immediate right to prove for the loss or damage which he has sustained in consequence of the operation of the disclaimer, that is to say in consequence of the determination of the lease and the acceleration of the reversion. This is normally measured by reference to the difference between the rents and other payments which the landlord would have received in future but for the disclaimer and the rents and other sums which the disclaimer will enable him to receive by reletting. But the subject matter of the landlord's proof is compensation for loss of his right, inter alia, to future rent, not the rent itself, to which he no longer has any claim. The amount of this loss has to be assessed. This involves giving credit for thereceipts which the disclaimer will enable him to obtain by reletting. [126] In calculating damages, allowance must be made for the fact that the damages will be payable earlier than the rental would have been payable under the lease. As Lord Hobhouse said:16Any award of damages involves arriving at a single monetary figure which in present terms quantifies that loss. Where the loss will be suffered over a period in the future, the computation will have to make allowance for any advancement that has occurred (e.g. Overstone Ltd. v. Shipway[1962] 1 W.L.R. 117). To fail to take into account the element of advancement leads to an over-compensation of the claimant. Making an adjustment for the element of advancement is an essential ingredient in the quantification of the compensation.[127] On this point Lord Millett said:17There is no justification for employing a different approach in the assessment of compensation for such damage than would be employed if the claimant were claiming damages for breach of a contract which had been wrongfully terminated. In assessing damages in such a case, however, allowance would have to be made for accelerated receipt of any sums which had not fallen due at the date of breach (and which the contract did not make immediately due and payable in the event of breach). An award of compensation which failed to take this into account would over-compensate the claimant.15 At 183-184.16 At 180 and 181.17 At 184.[128] The starting point is therefore that the prima facie measure of Lewis' loss isthe difference between the present value of the rent until 2030, less the amount which Lewis could have obtained, in June 2013, if it had let the property on similar terms, that is, a perpetually renewable ground lease.[129] There is no evidence from which the market rental could be assessed for such a lease. Mr Colcord's evidence was that it would be difficult to let the property on a basis replicating the previous lease, namely a perpetually renewable ground lease. He considered that the 21 year frequency of rent reviews would possibly be a difficulty because more modern ground leases have more frequent rent reviews, such as five years. I asked Mr Colcord whether he had undertaken any work to consider whether a permanently renewable ground lease with either 21 year or five year renewals and reviews would be a marketable proposition and if so, what level of rental might be achieved, or what level of incentive would be necessary to achieve a similar level of rental to that in the disclaimed lease. He had done no work along those lines, but thought that a lessee entering into such a long term lease would very likely require an incentive. A lessee would want to undertake a development on the land, either as an owner/occupier or for subleasing. It might seek a 12 month rental holiday, to give time for that development. He also said, in response to a question from me, that a party looking to undertake a development appropriate for this land would prefer to own the freehold, not the lessee's interest under a perpetually renewable ground lease with either 21 or five year reviews. Such a party would be looking for a higher return on the amount invested in the development if the property were held under a ground lease than if it were held under a freehold title. He saidthat lessee's interests generally sell, on a yield basis, at approximately 1.5 per cent to two per cent above the yield on an equivalent freehold interest, because of the risk of ground rent rises.[130] I then asked Mr Colcord about the attractiveness of the site for a lessee on a lease with a three to five year term with one or two rights of renewal. Mr Colcord said that a lessee of the property on those terms would use it for a purpose that did not require a large investment of capital, such as a storage yard. His off the cuff estimate, given in response to my question, was that the hurdle rate, to make the use of the property for such a purpose viable, would be likely to be somewhere in theregion of $15 or $20 per square metre. The rent order of the disclaimed lease was $26 per square metre.[131] The evidence leads me to the preliminary view that there would not be a market for a perpetually renewable lease which replicated, in broad terms, the disclaimed lease. I am also of the preliminary view that a lease for a finite term is unlikely to be an appropriate equivalent to a perpetually renewable ground lease, for the purposes of calculating damages. To be put to a use which provides a sufficient return on its value, the land requires development. The level of investment is such that it could be realistically undertaken only by the freehold owner, or a lessee with secure long term tenure under a perpetually renewable ground lease.[132] I am therefore not able on the evidence before me to calculate damages by reference to the measure of damages described in In re Park Air Services.18[133] Mr Barker submits that, if I were to conclude that this measure of damages could not be applied, Lewis would have failed to prove its case and no damages should be awarded. I do not accept that submission, for two reasons.[134] First, the gross amount of Lewis' loss can be calculated from the evidence. It is the present value of the rent payable until 2030. The rent payable is a known figure, and the evidence would enable me to fix a discount rate to calculate the present value of the rent for the remainder of the term. What is not proven is the quantum of the market rental which must be deducted. That raises the question whether the deduction of the market rental is a necessary component of provingLewis' loss, for which the onus of proof in an ordinary action is on the plaintiff, or whether it is an aspect of the duty to mitigate, where the onus is on the defendant. I do not address that question here, because this is not an ordinary action between Lewis as plaintiff and Stube as defendant. The task of the Court, under s 307, is to determine the amount of the claim as between the creditor and the liquidator. The burden of proof which would apply in an action between Lewis as plaintiff and Stube as defendant is not necessarily applicable.18 In re Park Air Services, above n 12.[135] Second, the inability to determine the market rent arises not from a lack of evidence of the market rent, but from the lack of a market. The outcome of that should not be that Lewis would fail in its claim. Instead, some other measure of the loss must be found. Unless some other measure can be used, there seem to be two possibilities. The first is to award the amount of the discounted future rental, without a deduction for the value of the ability to use the land which arose on disclaimer of the lease. The second is to award no, or nominal, damages. Neither option is attractive.[136] It is not immediately obvious to me what an alternative measure might be. What is needed is a means of quantifying the value of the acceleration of the reversion. The lessor has, on disclaimer, obtained the unencumbered freehold title, which it would not otherwise have obtained until 2030, at the earliest. The value of that acceleration should be deducted from the discounted value of the rent payable until 2030.[137] I see difficulty in valuing the acceleration. Assessing the value of the land in 2030 is inherently problematic. It requires an assumption about the growth in the value of the land over a 17 year period. That is inherently speculative, and not an attractive option for assessing loss. Even if a sufficiently reliable figure could be obtained for the value of the land in 2030, that would have to be discounted to give a net present value. That requires the use of a discount rate. The choice of that rate also involves an assumption. Depending on the assumptions used on those two aspects, the figures for the value of the reversion might vary widely.[138] Even if the value of the accelerated reversion could be calculated in that way, it may not be appropriate to adopt that in fixing the measure of damages. The approach of both Mr Sheppard and Mr Colcord, although differing in detail, essentially involves deducting the market value of the freehold interest in 2013, from the discounted present value of the rental stream to 2030 plus the reversion in 2030. I doubt whether those two components in the calculation can be directly related in that way. They are conceptually different in nature. The present value of the rental stream to 2030 and the reversion in 2030 is essentially the value of a future cash flow. The current market value of the land is the value of an asset which is notincome producing. To obtain a proper comparison, from which to calculate the measure of damages, it seems to me that it may be more appropriate to compare the present value of the future cash flow from the lease, on the one hand, with the present value of the future cash flow which could be derived from the land, on the other.[139] A future cash flow might be derived from the land in one or other of three broad ways:(a) by leasing the land;(b) by developing the land and earning a return on the development; or(c) by selling the land and investing the proceeds in some other income earning asset.[140] I have already discussed the first possibility. The lack of a market means this does not provide a means of assessing a future cash flow.[141] The second possibility, development of the land, was the subject of considerable evidence and much focus at the hearing. Lewis may or may not decide to pursue this course. Even if it does, I do not consider that it is an appropriate way of measuring the future cash flow. Development of the land will require an investment of several million dollars and carries significant business risk. Applying general principles as to mitigation of damages, an investment of that size and nature falls well outside the realms of any duty on the part of Lewis to mitigate its loss. Also, only the return on the bare land is relevant. It may be difficult to separate the return on the bare land from the return on the total development.[142] The third possibility is to sell the land and invest it in some form of income producing asset. Lewis owns a portfolio of ground leases. The most appropriate form of asset to be used for the comparison, if it were available, would appear to be the purchase of another property subject to a ground lease. The relevant incomestream to take into account would be the rent under a ground lease of land which has a market value equal to the market value of Lewis' land.[143] It would not be possible to use that measure of damages unless there is evidence of an available market in which Lewis could purchase a ground lease property for a sum equivalent to the proceeds of sale of this property. If there is no such available market then some other form of investment would need to be considered. A ground lease has features which mean that in economic substance it is in the nature of a bond.19 The rate of return on a risk free bond would, as I presently see it, seem to provide the closest equivalent measure to the rental payable under a perpetually renewable lease.[144] These difficulties in fixing the measure of Lewis' claim in the liquidation leadme to the conclusion that I should give the parties an opportunity to adduce further evidence, and to make further submissions. To allow that, this judgment is delivered as an interim judgment under r 11.2(a) of the High Court Rules. I direct that the application under s 307 is to be set down for further hearing, to consider the issues discussed in [128] to [143]. I will arrange a telephone conference to discuss the scope and nature of that hearing.[145] My comments about the appropriate means of calculating the quantum ofLewis' claim in the liquidation, under s 307 of the Act, are intended as guidance to the parties on the issues which require further consideration. They are not firm views, and are not intended to limit or define the scope of the further inquiry which is needed.Result[146] I order under s 271, that STH pay to the liquidator the whole of Lewis' claimin the liquidation of Stube. The quantum of that claim is to be determined following a further hearing.19 Mandic v Cornwall Park Trust Board [2012] 2 NZLR 194 (SC) at [25].[147] Costs on both applications are reserved for determination after the further hearing."A D MacKenzie J"