Mainzeal Directors Face $75m Bill to Unpaid Creditors for Breach of Duties And Reckless Trading

Breach of director duties and reckless trading associated with the collapse of Mainzeal in 2013 leaving creditors more than $115million out of pocket, will be examined in the Auckland High Court case starting today against the company’s former directors, including Rt Hon Dame Jenny Shipley, Sir Paul Collins and managing director and China-based shareholder Richard Yan.

Liquidators of the failed Mainzeal group of construction and building companies, Brian Mayo-Smith and Andrew Bethell of BDO, are seeking to recover over $75m from the defendants for losses suffered by Mainzeal’s creditors.

The court case alleges breach of director duties, reckless trading and claims against related organisations.

“It has been a long, hard road to get to this point. The collapse of Mainzeal was one of the largest in New Zealand’s history and left behind a trail of unpaid sub-contractors and other creditors, many of whom were put into serious financial difficulty as a result of decisions made by the directors” said Mr Bethell.

“This case is 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. Directors have a responsibility to take account of the interests of creditors, existing and future, and not to allow a company to trade recklessly or incur obligations it cannot reasonably expect to be able to perform. This case seeks to hold the former directors liable for their actions in allowing Mainzeal to continue to trade while it was in a precarious financial position.

“The case will also look at whether the directors breached their duties when they failed to assess properly whether Mainzeal’s related companies, controlled by Richard Yan, would fulfil promises to provide Mainzeal with the financial support it needed,” said Mr Bethell.

The case against current and former Mainzeal directors and related parties is expected to take six to eight weeks and is being heard in the Auckland High Court.

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