McConnell to pay $1.1M: used Hawkins' insolvency as a weapon - judge

Wednesday 26th June 2019

The parent company of the former Hawkins businesses tipped into receivership has been ordered to pay $1.1 million of court costs for exploiting the looming failure and delaying a leaky school claim brought by the Ministry of Education.

The High Court has ruled McConnell Ltd, the ultimate shareholding company of H Construction North Island, should have to pay increased costs after it rejected a settlement offer and attempted to seek an adjournment that wasn't just unsuccessful, but unnecessary.

Last year, the ministry won its case against H Construction North Island, with the court ordering a $13.4 million payment to help repair nine leaky buildings at Botany Downs Secondary School in Auckland.

The ministry then sought almost $1.5 million in costs and disbursements, and wanted McConnell Ltd and two of its directors, David McConnell and John McConnell, to pick up the tab.

Justice Mathew Downs accepted the ministry's submission that the ex-Hawkins unit was exploiting its inability to realistically settle, while exploiting its possible insolvency. The ministry had offered to settle for $7.1 million, when H Construction's highest counter offer was $2.1 million, the judgment shows. The former Hawkins unit's own advisors recommended settling several times.

"In summary, McConnell authorised Hawkins to vigorously defend a claim that should have been settled; knew HGL (Hawkins Group Ltd) was paying Hawkins’ legal fees and disbursements because Hawkins could not; was complicit in wielding Hawkins’ likely insolvency as a weapon; and guaranteed representation for its subsidiary when Hawkins would otherwise have been unrepresented," Justice Downs said.

That met the threshold justifying non-party costs. However, the Justice Downs said that didn't establish that the directors were personally liable, given they didn't inject their own money and there was no evidence the directors personally benefitted by eschewing a settlement in favour of a trial.

The McConnell family sold the Hawkins construction business to Downer in March 2017 for A$55.4 million. The Orange H group of companies was set up to complete legacy projects Downer didn't want. It was placed in receivership in May 2018, 10 days after the Ministry of Education's win on the Botany Downs claim.

(BusinessDesk)

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