12 Aug 2020

Steel and Tube back in court as Commerce Commission argues for more fines against it

7:47 pm on 12 August 2020

The Commerce Commission wants a steel company to pay hundreds of thousands of dollars more in fines for misleading customers.

Steel and Tube

Steel and Tube after it admitted selling masses of steel mesh it did not properly test between 2012 and 2016. The Commerce Commission wants it to pay more fines. Photo: Supplied

The Court of Appeal is hearing two appeals against a record-breaking $2 million fine imposed on Steel and Tube after it admitted selling masses of steel mesh it did not properly test between 2012 and 2016.

The court had said it was an important case for determining the degree companies could be held to account for breaches - not just of Fair Trading law, but other comparable legislation.

Steel and Tube was originally fined $1.88m, which was raised on appeal to the High Court last year.

The company's lawyers argued in court in Wellington today that while Steel and Tube was "grossly careless" in letting its technical manager run mesh testing in a substandard way, the law did not allow for his failings to be sheeted home to the company as a deliberate breach - and that he was too far down the management chain for that.

It had not been proven the company "acted deliberately and knowingly", lawyer Erin McGill said.

But the commission's lawyer, Alysha McClintock, said if the High Court's earlier decision backing that argument stood, it would let other companies off the hook.

"What it does is essentially what happened in this case, it divorces the culpability of the company from the basis for its liability," McClintock said.

"The commission says this curtails the ability to hold corporates properly accountable for the offending.

"It would by implication have a similar [significant] impact on the Commerce Act, and there are ... substantially similar provisions in the Fisheries Act, and Health and Safety at Work Act."

The company's lawyers also pushed back on a key commission argument: That the fine should have been bigger because Steel and Tube was a large company that had profited from misrepresenting the mesh to buyers.

"When you examine this case, gain was not a motivation at all," Mike Heron QC told the court.

A fine of between $500,000 and $1m would have been more appropriate, he said.

"It would be quite unfair for Steel and Tube to be treated as the exemplar or the outlier, when everyone else - including recidivists and those who deliberately sought to gain - were treated more leniently," Heron said.

Another lawyer for the commission, John Dixon, argued that the technical manager's failings were the company's failings.

The fine's starting point should have been up to $4.5m, ending at $2.5m-$2.8m once discounts were applied, he said.

The High Court appeared to have treated Steel and Tube as the victim of the conduct and of the state of mind of the technical manager, Dixon said.

"And the court treated that as mitigating, whereas we say the court should have treated it as aggravating."

The mesh in question

Steel and Tube had sold the mesh with certificates that appeared to show it had been certified by an independent testing lab.

It wrongly carried a lab logo for four years, which the company said was "inadvertent" at the time RNZ exposed this in 2016, when it had only been tested by its own technical manager.

Later testing showed many sheets - Steel and Tube's, and other companies', too - were not up to the higher standard imposed after the Canterbury earthquakes, in response to mass damage to house slab floors.

Heron told the Court of Appeal today: "None of this conduct was done with a view to making money or even to saving cost".

Dixon countered that, saying: "This was a really serious departure from acceptable commercial practice by a very large company ... over a long period of time."

Get the RNZ app

for ad-free news and current affairs