Steel & Tube fine for false steel mesh claims raised to $2m

Thursday, 29 August 2019

The High Court in Auckland found Steel & Tube's breach of trust was significant.

Steel & Tube has had its manifestly inadequate' $1.9 million fine for false claims about its earthquake-grade steel mesh increased to just over $2m by the High Court.

The Commerce Commission appealed the previous fine for being too low.

Steel & Tube pleaded guilty last year to 24 representative charges under the Fair Trading Act for making false representations about its steel mesh known as SE62 and passed it off as 500E.

The higher 500E steel mesh standard was brought in by the government after the Canterbury earthquakes. It allowed more movement of buildings so foundations do not crack.

Last year Auckland District Court Judge Warren Cathcart fined the company $1.885m and said its culpability was 'grossly negligent'.

* Steel & Tube: Fletcher offer 'unwelcome'

* Steel & Tube's record $1.9m fine for misleading over steel mesh**

The High Court in Auckland found the District Court's sentence was 'manifestly inadequate' and imposed a fine of $2,009,280.

'Senior management ought to have known of the large scale non-compliance over the four-year charging period,' he said.

'The technical manager was not properly supervised. Steel & Tube cannot be permitted to wash their hands of taking responsibility for that negligent oversight … it was Steel & Tube's responsibility to have proper systems in place to ensure compliance with the standard.'

The charges related to conduct between March 1, 2012 and April 5, 2016. They covered 482 batches and about 480,000 sheets of steel mesh, which Steel & Tube sold for about $24m.

Steel mesh is used to reinforce concrete foundations. (file photo)

Its revenue for the 2016 financial year was about $516m, and its underlying profit for the same period were $19.4m.

In November last year, both the commission and Steel & Tube appealed the fine.

The commission asked for a higher penalty, while Steel & Tube claimed the fine handed down was excessive.

Justice Ailsa Duffy at the High Court in Auckland found the District Court's sentence was 'manifestly inadequate' and increased the fine to just over $2m.

Judge Duffy characterised the state of mind of Steel & Tube's directors and top-level management as one of 'gross carelessness by omission.'

'Essentially, Steel & Tube completely failed to take any steps or put in place any procedures that may have revealed the technical manager's deliberate disregard for the Standard's requirements or his deliberate permitting of SE62 mesh to be sold with false representations about it being independently tested.

'Further those omissions continued even after the technical manager had retired, which was in 2014.'

Even the manager's replacement was trained to follow the 'same misplaced trust and reliance as they had done before', the judge said.

'It is unusual for a company of Steel & Tube's size to fail so completely to have systems and procedures in place that would alert it to deviance, but that is what has happened here,' judge Duffy said.

Once the non-compliant mesh was used in a building it could not be readily be replaced with the correct product very difficult, if not impossible, the judge said.

'The breach of trust was significant.'

A spokeswoman for Steel & Tube said no decision to appeal had been made.

The commission has been approached for comment.