Deborah Coddington: MPs add new timebomb to list of issues to ignore

The booze lobby likes our parliamentarians. Photo / Mark Mitchell

When parliamentarians ignore the majority of people of this country, who overwhelmingly want the blood alcohol limit cut for driving, it's tempting to organise an inspection of their office fridges.

When I was an MP, the booze lobby kept my fridge stocked with free booze, which I gave to the press secretaries.

If MPs took time out from gin slurping, they might correct some of this country's ills - by reducing car crashes, for a start. Restoring property rights could follow - for example, allowing Maori to charge for access if they gain customary title to coastal areas.

And there's another ticking time bomb of breached property rights which only Parliament can correct. It was set by four Supreme Court judges when they ruled on their colleague Justice Bill Wilson, who resigns from office on November 5.

They dreamed up a new concept called "indirect indebtedness", in a judgment known as Saxmere Two.

It's not as sexy as front-page drunken car wrecks but bear with me because one day this will explode in the face of some poor shareholder, who'll wonder whence it came.

You might think, from the stories you've read, that Justice Wilson should not have heard a case involving Saxmere because the opponent was represented by Alan Galbraith, QC.

Galbraith and Wilson were friends and shareholders in Rich Hill, a private company involved in thoroughbred horses.

There was no written contract between them as to how much money each contributed in shareholders' funds but their understanding was based on mutual trust and they thought they kept it pretty much equal.

At the time of the Saxmere case, Wilson's shareholder account was $74,249 less than Galbraith's, although neither knew this until later.

But Wilson personally paid all the power, phone and vehicle expenses at the farmhouse and stables for his family and staff accommodation. So things were roughly even and both shareholders were happy.

Moreover, the company's assets far and away exceeded the liabilities, so if it all turned pear shaped all creditors could be paid.

So Wilson owed Galbraith no money. I'll repeat that slowly because that's not what you've been told by so-called business journalists: Justice. Wilson. Did. Not. Owe. Galbraith. Any. Money. Nor did he owe Rich Hill money.

Sir David Gascoigne, the judicial conduct commissioner investigating the complaints against Wilson, who found he should face a judicial conduct panel, examined all the accounts and confirmed this.

However, there remains this case law, Saxmere Two. Four judges decided Wilson was indirectly indebted to Galbraith. This is an impossibility. It's like saying a woman who's had a hysterectomy is indirectly pregnant. A guillotined Marie Antoinette is indirectly alive and well, contemplating cakes.

Because sooner rather than later, one of two scenarios will occur. Two shareholders fall out (it happens often). The one with the greater shareholder account - say he's contributed $2 million - can then sue the other (the indirect debtor) who's contributed only $500,000 - for the $1.5 million.

Second scenario: company goes into liquidation and the liquidator sues the lesser shareholder - the indirect debtor - for the difference. These are people who had no idea they were in debt to other shareholders, and neither should they have been, until the Supreme Court, in its misguided wisdom, decided otherwise.

Which brings me to the final riddle.

If there is a concept of indirect indebtedness, where does the direct indebtedness lie? The Supreme Court judges neither asked nor answered that question.

Did it even occur to them?

There is only one place left for direct indebtedness and that is the company, so the shareholder who has loaned the least amount must be sued by the company.

This is judicial activism gone mad, especially considering the majority of private companies in New Zealand are small to medium-sized, or husband-and-wife affairs.

They are drawn up legally but function well enough day-to-day on mutual agreement, which doesn't necessitate the expense of extra contracts between shareholders binding them to equal contributions at all times.

They also operate on mutual trust, a concept these Supreme Court judges didn't seem to understand, particularly when it came to one of their own colleagues who had, remember, sworn loyalty to the judicial oath.

(And since disclosure is the subject du jour - yes, my husband Colin Carruthers QC led Wilson's legal team but he has as much influence on my columns as I have on his cases - ie, none.)