Former Prime Minister Dame Jenny Shipley and husband Burton were in court for the opening day of the high-profile case against Mainzeal’s former directors.
They include Shipley, career director Sir Paul Collins (knighted in 2014), and Richard Yan, head of Richina Pacific, which owned Mainzeal.
The building company collapsed in early 2013 owing more than $115 million to unsecured creditors. Problems included leaky buildings, cost overruns on the Vector Arena project and a lack of financial support from Richina when times got tough.
In court today, lawyers for the liquidators BDO argued Mainzeal was “dangling by a thread” and directors should have understood the risk.
“If you are profitable, you might be funded, but if you are not profitable, you aren’t going to be funded,” Mark O’Brien QC said.
The liquidators allege reckless trading and breach of director duties when they let the company trade with negative equity – when money owed exceeds the value of assets – from at least 2008. The directors vigorously deny any wrongdoing.
Shipley leaned forward and shook her head as BDO’s lawyer O’Brien asserted that there was no reason to think the funding the company needed to continue trading would be forthcoming.
“When it became obvious that Mainzeal was insolvent, the directors had a duty to put strategies in place to enable the company to avoid substantial risk of serious loss from ongoing trading.”
Dame Jenny was New Zealand’s first woman PM leading the country from 1997-1999. She still chairs Genesis Energy and China Construction Bank (NZ) and is on the board of food export company Oravida and the International Finance Forum in Beijing. She will retire from Genesis at the October annual meeting.
Liquidators Brian Mayo-Smith and Andrew Bethell of BDO hope the directors’ professional liability insurance will allow them to recover up to $75 million for creditors, many of them unpaid subcontractors.
The addition of the insurance companies behind the case adds a certain frisson to the proceedings, as the case can be seen as a battle between litigation funder LPF Group, which is funding BDO, and the insurance companies standing behind the directors.
Bethell says the case is about more than just Mainzeal. It’s about the standards of governance and care owed by company directors in New Zealand towards the company and creditors.
“We say that when it became obvious that Mainzeal was insolvent, the directors had a duty to put strategies in place to enable the company to avoid substantial risk of serious loss from ongoing trading.”