RNZ, Auckland, September 20, 2018
RNZ published Photo 123rf
When Mainzeal collapsed, it owed creditors millions more than has been claimed, the liquidator for failed construction firm has said.
The former construction giant went into liquidation in 2013 amid claims of governance failures and reckless trading.
Larger than declared
About $117 million in claims were filed against Mainzeal following its collapse, but liquidator Andrew Bethell told the Auckland High Court it in fact owed creditors far more.
“The liquidators have admitted $117 million of creditor claims out of $157 million received. In reality creditors have lost many millions more than that due to claims not being filed.”
(Dame Jenny Shipley Photo: Dan Childs Photography)
This included a $46 million claim from AMP Capital in relation to its Botany Town Centre development, which was never followed through.
It is claimed that Mainzeal gave millions of dollars in loans to affiliated companies and did not take appropriate steps to recoup debts when it was not paid.
The Court was told yesterday that it should have been apparent as early as 2008 that it would not get the money it was owed.
The directors, who include former prime minister Dame Jenny Shipley, had been counting on Mainzeal’s parent company, Richina, to provide the finance it needed, but this never happened.
The directors had also continued to take on large construction contracts, while leaky building claims against it continued to stack up.
Mr Bethell was highly critical of the directors for not insisting on repayment of loans it was owed.
“In the circumstances, I believe this showed a reckless disregard for the interests of creditors.”
He said Mainzeal should have ceased trading years before it did and not doing so put creditors’ money at risk.
Radio New Zealand Reporter Matthew Theunissen filed the following story on September 19, 2018
It is impossible to speculate whether Mainzeal’s collapse would have been less disastrous if it had occurred earlier, the lawyer for Dame Jenny Shipley and three other directors of the failed construction firm has said.
Mainzeal Property and Construction was a giant in the construction world and its collapse led to hundreds of job losses and caused unsecured creditors to lose tens of millions of dollars.
Justice Francis Cook has been trying to unpick the hugely complex circumstances that led to Mainzeal going into liquidation.
The lawyer for the out-of-pocket creditors, who are suing Mainzeal for $75 million, has laid much of the blame at the feet of the company’s high-profile board of directors.
After two days of hearing about “systematic governance failures” and reckless trading by the board, Justice Cook today (September 19) heard a very different story from the directors’ lawyers.
Collapse not unusual
Jack Hodder, who is acting for Dame Jenny and three other former directors, said the collapse was disastrous, but it was not unusual for companies to go into liquidation.
He also pointed out that a degree of risk-taking was an inherent part of doing business.
“Of course no-one disputes that the termination of Mainzeal’s operations with receivership and then liquidation in early 2013, was a disastrous for a number of people, including unsecured creditors, for whom always has the first thoughts of sympathy.”
Mr Hodder said the plaintiff’s assertion that the directors knew – or should have known – that Mainzeal’s future was untenable long before it went into liquidation was speculative.
“Hindsight is one of those things that everybody can reasonably quickly say, ‘Of course we can’t use hindsight’, and then moves on and applies hindsight. So our proposition is that it’s an easy and dangerous mistake to think that what makes sense with hindsight made sense as events unfolded.”
Mr Hodder called Dame Jenny and the other directors intelligent, thoughtful and conscientious people who took their responsibilities seriously.
He said the company’s collapse was unlike most such cases.
“This is an unusual case. Most cases something goes serious wrong, you can identify what it is and ignoring it is reckless. Here we have something quite different: we have a very long period of trading, right up to the end in 2013. And even in 2013 good there were attempts by individuals to keep on going, because there was good reason to do so.”
It has been claimed that Mainzeal gave millions of dollars in loans to an affiliated company and did not take appropriate steps to recoup debts when it was not paid.
The court was told yesterday that it should have been apparent as early as 2008 that it would not get the $33 million it was owed.
Lawyer David Chisholm, who is acting for former director Richard Yan, said the directors had acted appropriately in trying to generate cashflow for Mainzeal to try to get it out of insolvency.
The hearing is expected to take at least another six weeks.