Cayman Islands: Parent Company Contribution Order: Potential Guidance for Irish Practitioners

In Lewis Holdings Limited & Others v. Steel and Tube Holdings Limited,1  the High Court of New Zealand made an order requiring a parent company to contribute to the debts of a subsidiary which was in liquidation.  The decision is of interest to Irish practitioners because there has been an absence of case law concerning a comparable Irish provision (section 140 of the Companies Act, 1990), which was modelled on a previous iteration of the New Zealand provision dealing with the pooling of assets of related companies (section 271 of the New Zealand Companies Act, 1993). 

The Plaintiff was the owner of a particular property which was the subject of a perpetually renewable ground lease.  The lessee at the time the Plaintiff purchased the property was Stube Industries Limited ("SIL"), a wholly owned subsidiary of the Defendant.   

The history of the matter was that from approximately 1990, although the property was leased to SIL, the Defendant parent company occupied the property under an informal sub-lease from SIL, which from that time onwards had no employees.  The property was effectively managed by the Defendant.  In 1996, 1997 and again in 2003 the Defendant paid for decontamination works which had to be carried out on the property on behalf of SIL.  The ground lease was due to expire on 1 December 2009 but was in fact deemed to have been renewed in 2009 due to a failure to serve the necessary notice to the Plaintiff that SIL did not wish to accept a renewal of the lease.  Following the renewal, the Defendant parent company continued to pay the rent on the property as it had done previously until 2013.

In May 2013 the directors of the Defendant recommended that SIL be put into liquidation following a decision to cease providing financial support to SIL and noting that the directors of SIL had made unsuccessful efforts to exit SIL from the lease.  SIL was put into liquidation by a shareholders' resolution.  The liquidators disclaimed the lease as onerous property under section 269 of the New Zealand Companies Act, 1993 leading the Plaintiff to file a proof of debt in SIL's liquidation.  

The Plaintiff and the liquidators claimed that the Defendant company should be ordered to pay to the liquidators the whole of the sum of the Plaintiff's claim in the liquidation.  The Judge, MacKenzie J., noted that Ireland was the only country other than New Zealand in the common law world which had a statutory provision allowing for the making of contribution orders against related companies. 

MacKenzie J. noted that the two competing principles at issue were: 

(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. 

The Judge held that an unyielding application of the principle of separate corporate entity would defy the legislative policy behind the provisions, and the rationale for the principle of separate corporate entity is to enable a business to be carried on by a separate legal entity so as not to expose the shareholders to the liabilities which the business may incur.  It was inherent in this rationale that the company must be not only a separate legal entity but also a "separate commercial entity", and that its business will not be carried on in such a way that this company is not a mere "front" or "façade" for business actually carried on by others. 

The New Zealand Companies Act sets out certain criteria to be considered by the court in considering whether to make a contribution order, which were as follows: 

(a) The extent to which the Defendant took part in the management of the subsidiary

MacKenzie J. held that the Court must consider whether the directors of SIL had acted in that capacity or rather as senior employees of the Defendant.  The two directors of SIL were also the CEO and CFO of the Defendant.  The Judge held that the Defendant carried on the affairs of the business as a single unit "through divisions rather than through subsidiaries".  A number of findings buttressed this opinion: 

(i) The directors did not distinguish between the best interests of SIL and the Defendant.  Their obligation was to oversee the conduct of SIL's business, rather than simply manage it as an integrated part of the business of the Defendant.  The directors were acting in their capacity as CEO and CFO of the Defendant.

(ii) SIL did not have the financial capacity to continue to trade separately.  If it were to be treated as a separate entity, there would have had to have been legal arrangements to ensure its support, but none were put in place. 

(iii) SIL had no employees of its own.  All work on its behalf was done by employees of the Defendant.  Many steps taken on its behalf were done on the Defendant's letterhead and the Defendant oversaw the administration of the lease, the renewal of the lease and the attempts to find a buyer for SIL's leasehold interest.

(iv) The accounting treatments which had been put in place were also relevant.  MacKenzie J. noted that there was a degree of financial intermingling; SIL had no separate bank account; and all payments and receipts for SIL were made through the Defendant.  The rent invoices for the property were addressed to the Defendant at the Defendant's request. 

The Court concluded that there was no evidence of exercise of management functions independent of the Defendant to any material extent. 

(b) The conduct of the Defendant towards the Plaintiff as a creditor of the subsidiary 

The Judge noted that this was not a case where a creditor was confused as to the entity with which it was contracting.  Rather, the Defendant's conduct between 2003 and 2013 indicated that it stood behind SIL.  SIL's directors should have considered whether it was capable of incurring the obligation to pay the rent from its own resources but this was not done.  No special resolution had been passed as would have been necessary under the New Zealand Companies Act. 

(c)  The extent to which the circumstances that gave rise to the liquidation were attributable to the actions of the Defendant

This factor distinguishes the New Zealand legislation from its Irish counterpart.  In New Zealand, the extent to which the circumstances giving rise to the liquidation may be attributed to the defendant is a factor to be taken into account, whereas under the Irish provision, the court is expressly prohibited from making a contribution order unless the court is satisfied that that the circumstances giving rise to the liquidation are attributable to the actions or omission of the related company.   

In this case, the Defendant had ceased funding SIL and then caused the necessary resolution to be passed appointing a liquidator.  SIL could not continue following the withdrawal of funding.  MacKenzie J. held that the liquidation of SIL was entirely attributable to the actions of the Defendant. 

The case is interesting therefore from the Irish perspective, because the circumstances (as determined by MacKenzie J.) met the Irish legislation's criteria for the making of a contribution order. 

(d) Such other matters as the Court thinks fit

Under this heading, MacKenzie J. addressed a number of other factors.  One which is worth noting is that the Judge commented that the Defendant was a publicly listed company which "ought to have known better".  The Judge commented that a failure to observe those requirements cannot readily be ignored or excused where the company concerned is the subsidiary of a publicly listed company.  The implication appears to be that a publicly listed company (or group holding company) may be given less sympathy than a small private corporate group. 

Furthermore, MacKenzie J. held that there should be no "circularity" as regards the making of a contribution order and the receipt of a payment by the same party as a creditor in the liquidation.  Therefore, the Judge ordered that the contribution it was ordering the Defendant to make must be limited solely to the claim being made in the liquidation by the Plaintiff.  This was to prevent any portion of the amount of the contribution being returned to the Defendant in the liquidation. 


This decision is of some interest to Irish insolvency practitioners because New Zealand is the only other jurisdiction in the common law world with a statutory provision which is comparable to section 140 of the Companies Act 1990.  There has been a dearth of Irish case law on this unusual insolvency provision, but the circumstances of the Lewis Holdings Limited case met the key requirement in the Irish legislation that the circumstances giving rise to the liquidation must be found to be attributable to the actions of the party against which a contribution order is sought.

[2014] NZHC 3311

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions