Limited liability is not immunity: director and officer accountability in recent New Zealand cases

25 May 2026

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Limited liability remains one of the foundations of company law. A company is a separate legal person, distinct from its shareholders and directors. That principle allows capital to be pooled, risk to be shared, and business risks to be taken. As the long title to the Companies Act 1993 records: one of the Act’s purposes is to “reaffirm the value of the company as a means of achieving economic and social benefits through the aggregation of capital for productive purposes, the spreading of economic risk, and the taking of business risks”.

But limited liability is not immunity. Recent New Zealand decisions in health and safety, environmental enforcement and insolvency show a clear pattern: Courts and regulators are increasingly willing to ask what directors and officers knew, what they controlled, what they were responsible for, and whether they followed through.

These cases do not mean that courts are ignoring the company’s separate legal personality. In most cases, they are not. The more accurate point is that Parliament and the courts have developed specific routes to personal accountability where wider interests are at stake: worker safety, environmental protection, creditor protection and market confidence.

In this Insight, Trevor Wairepo (Partner, Commercial) and Michael Mabbett (Special Counsel, Litigation) review recent decisions which point to a more demanding approach to personal accountability for directors and officers. They also consider what directors and officers can do to manage that risk in practice.

For directors and officers, the lesson is practical: good intentions, board papers and delegated responsibility may not be enough. Where a material risk is known, directors and officers need to ask direct questions, require evidence, and make sure the issue is followed through to completion.

With proper board discipline, clear reporting lines and active follow-up, these decisions are not a cause for panic. But directors and officers do have serious duties, many of which cannot be avoided or delegated away. That is part of the price of separate legal personality and limited liability.

Health & Safety

In the Health & Safety context, the High Court has confirmed that the due diligence duty of directors and officers is active and practical. It is not enough to assume that health and safety systems are working because policies, reporting lines or improvement plans exist.

• On 31 March 2026, the High Court dismissed an appeal by former Ports of Auckland (POAL) CEO, Tony Gibson, against a District Court Judgment finding him guilty of breaches of the Health and Safety at Work Act 2015 (HSWA).[1] The charges arose from a workplace fatality when a container fell on top of, and killed, one of POAL’s employees.
• Under the HSWA, officers of a PCBU[2] “must exercise due diligence to ensure that the PCBU complies with that duty or obligation”. Where the PCBU is a company, all the directors will be officers for the purposes of the HSWA, as will “any other person occupying a position in relation to the business or undertaking that allows the person to exercise significant influence over the management of the business or undertaking (for example, a chief executive)”. Officer liability must be established separately to PCBU liability. In theory, a breach by the company or other PCBU does not automatically mean that its directors or officers have breached their own duties. Their liability depends on whether they exercised reasonable due diligence in their own role and circumstances.
• Most HSWA prosecutions to-date have involved smaller or owner-operated companies. This case was (according to counsel for Mr Gibson) “the first time an officer of a large and complex PCBU has been convicted of failing to exercise due diligence under HSWA”.[3]
• The Court recognised that POAL had made a number of positive changes under Mr Gibson’s leadership. However, it also upheld several key findings of the District Court,[4] including that: (i) Mr Gibson was personally aware of the risks to stevedores working under suspended containers and the need for additional controls to be put in place; (ii) POAL’s training materials and documentation was confusing and often inconsistent; (iii) Mr Gibson was aware that “POAL had demonstrated ongoing difficulties in adequately monitoring “work as done”” (as opposed to work as planned or intended); and (iv) there were material delays in implementing a proposal to restructure teams to improve health and safety on night shift.
• The Court noted that Mr Gibson was only responsible “in part” for some of these failures but that he was ultimately responsible at a “supervisory level”. POAL had other senior managers (as well as a board) with responsibility for health & safety, who were not charged. It seems implicit in the Judgment[5] that they could have been.
• Takeaways:
  • The Judgment confirms that the due diligence duty for directors and officers is demanding, active and practical. It is not always clear how responsibility for health & safety should be divided between management and directors, particularly in large and complex organisations. Some clarity may be provided by the Health and Safety at Work Amendment Bill, currently before Parliament. However, even if the Bill becomes law, directors and officers will need to take reasonable steps to satisfy themselves that health and safety risks are being properly managed in practice.

Environment / Resource Management

The Environment Court has shown that environmental enforcement orders are not limited to companies. In a series of recent decisions, it has made orders against directors under the Resource Management Act 1991 (RMA). This is not ‘piercing the corporate veil’ in the usual corporate law sense.[6] It is the exercise of a statutory enforcement power under the RMA, directed at avoiding, remedying or mitigating adverse environmental effects.

Under s.314 of the RMA, enforcement orders can be made to require a person to (among other things): “avoid, remedy, or mitigate any actual or likely adverse effect on the environment caused by or on behalf of that person”. If a person fails to comply, and another person incurs costs in avoiding, remedying or mitigating that adverse effect, the Court may order the person who failed to comply to pay or reimburse the actual and reasonable costs incurred.

• In Whangarei DC v Sustainable Solvents & Ors[7], enforcement orders were made against the corporate landowner of a site used for solvent recycling, along with the director of the corporate landowner, the corporate operator of the business on the site and its directors. Whangarei District Council’s investigations showed that the site was heavily contaminated. The Court considered it appropriate: “for the directors and shareholders also to be subject to the same orders so that the people who control and own the companies are accountable in the same way.” The parties did not comply. After Council had completed the clean-up exercise, the Court ordered[8] the directors to be jointly and severally liable for the clean-up costs with their respective companies.
• In Gisborne District Council v Woodlett Investments,[9] the Court made enforcement orders against a forest landowner and its director as well as a forestry company and its directors.[10] The judgment records that the director of the landowner was the “alter ego” of the company and the directors of the forestry company “had various roles in the company’s operations, and were all aware or took part in decisions made in respect of the Forest”.
• In Gisborne District Council v China Forestry Group,[11] the Council had, by consent, removed the former director of China Forestry Group from enforcement proceedings. The Court endorsed the decision in Sustainable Solvents and indicated in reasonably clear terms that the director at the time of the relevant activity should have remained a party: “Company directors are the face of a company and must, among others, ensure that a company fulfils its legal obligations. There may, therefore, be circumstances when it is appropriate to require a company and its directors to cease or take action to address adverse effects being caused by the company.”
• Takeaways:
  • If orders could only be made against a corporate landowner, operator or lessee (whichever is responsible for causing the adverse effects) there may be little effective remedy if the company has no assets, fails to comply or later goes into liquidation.[12]
  • The Woodlett case is a reminder that corporate landowners (and, importantly, their directors) need to be particularly mindful of the activities carried out on their land by tenants. That is particularly so where those activities carry environmental risk and the company, its directors, or both have knowledge of, or control over, the relevant decisions. Otherwise, they risk future liability for the costs of cleaning up any adverse environmental effects.

Company law / Insolvency

Much has been written about the Supreme Court’s Mainzeal[13] decision, but some key points are worth reiterating:

• The Courts have a great deal of flexibility when awarding compensation against company directors for breaches of their duties.[14]
• Claims against directors in an insolvency context are usually brought by liquidators for the benefit of the company and its creditors as a whole. In certain circumstances, creditors can bring claims directly against the directors of a company in liquidation.[15]
• Whether a director has breached the duty to exercise skill, care and diligence is assessed objectively, having regard to the nature of the company, the decision, the director’s position and the responsibilities undertaken. Courts will rarely defer to the directors’ “business judgment”[16] where the statutory duties protecting creditors are engaged.

Since Mainzeal, the Courts and the Registrar of Companies have continued to take a more ‘pro-creditor’ stance, and scrutinise director conduct where creditors have been exposed to loss:

• In several decisions, the Courts have upheld claims by creditors against directors in insolvency-related contexts.[17]
• In Vijay Holdings Ltd (in liq) v Kumar [2026] NZHC 904, the High Court declined to prevent liquidators from using in-house counsel. Mr Kumar was sued as director of Vijay Holdings for breach of his directors’ duties. The liquidators were the principals of Waterstone Insolvency, who engaged Waterstone’s in-house counsel for the dispute. Mr Kumar sought to prevent Waterstone’s in-house counsel from acting, among other reasons because the liquidators had a financial interest in the legal fees being charged. The Court found that there was nothing inherently wrong with Waterstone’s model of using in-house counsel. Indeed, this model has been successful at recovering funds from directors, where in other cases the costs of litigation are thought to be prohibitive. The decision is practically significant because funding and legal costs often determine whether claims against directors are pursued at all.
• Section 385 of the Companies Act 1993 permits the Registrar to ban a person from acting as a director, promoter, or from taking part in the management of a company, for up to 10 years. Historically, the Registrar has issued banning orders for periods of usually around 3-5 years, but there are recent examples where banning orders have been much longer. For example, the company which owned Auckland’s SPQR restaurant went into liquidation with its main assets being a shareholder loan account (to its shareholder/director who was bankrupt) and a related-party loan (to a party which had been struck-off the Companies Register for some time). The company had therefore been trading insolvently for some time, and its director was banned for 8.5 years.
• Takeaways:
  • Some shareholders and directors treat limited liability as if it were a complete shield. It is not. Nor should directors assume that a liquidator will be unwilling or unable to pursue claims because of cost. Where creditors are left to bear the loss, directors should expect closer scrutiny.

How should directors respond?

While the recent cases point to closer scrutiny of directors, the risk is manageable:

• Directors do not need to manage every operational detail. Nor should they. But they do need to understand the company’s risks, ask direct questions, require evidence of implementation and follow up unresolved issues.
• Directors should be particularly careful about risks to people’s health and safety, the environment and creditors. These risks may begin as operational or environmental, but once they crystallise they can quickly become legal, financial, insurance and reputation risks.
• Delegation remains necessary, particularly in larger organisations. But delegation is not the same as discharge. Where a director knows about a material risk, receives warning signs, or has responsibility for ensuring that a response is implemented, passive reliance on reporting lines may not be enough.
• Insurance and indemnities should also be reviewed. D&O and statutory liability policies may assist with defence costs, investigation costs and some civil liabilities, depending on the wording. But insurance is a backstop, not a control. Fines under the Health and Safety at Work Act 2015 cannot be insured. Since August 2025, insurance against RMA fines has also been unlawful.

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Commercial Dispute Resolution