Mainzeal liquidators seek twice as much compensation in cross-appeal

Tuesday 9th April 2019

Mainzeal Property and Construction's liquidators want to double the amount of compensation the failed firm's directors, in particular chair Jenny Shipley, were ordered to pay, in cross-appealing a High Court ruling.

In late February, Justice Francis Cooke ruled that four directors of the failed construction company should pay $36 million to unsecured creditors. The Mainzeal directors had traded recklessly, Justice Cooke said, particularly by allowing the mostly loss-making company to trade for several years while technically insolvent.

The judge ordered Shipley, Tilby and Gomm were liable for up to $6 million each of the $36 million total. In the case of a fourth director, Richard Yan, who was also the founder and main shareholder of Mainzeal’s parent company, Shanghai-based Richina Pacific, Justice Cooke said he should be liable for the full $36 million. The four directors have already filed appeals.

In their cross-appeal, Mainzeal liquidators Andrew James Bethell and Brian Mayo-Smith said the court erred in applying a discount of two-thirds to the starting point for compensation of $110 million and limiting the directors' liability to $6 million each, or 5.45 percent of the total claims filed in liquidation.

They also said the court was wrong to order compensation from ex-Prime Minister Shipley at the same rate as Tilby and Gomm, "given her role as chairperson of Mainzeal, a director of other companies within the group... and her position as a director of, and her interest in, Richina Pacific Limited, Mainzeal’s holding company until 2009."

According to the cross-appeal, "her culpability was significantly greater than the culpability of Messrs Gomm and Tilby."

They want an order for the directors to be liable to the respondents for a percentage of the sum of $73.3 million, being two-thirds, as opposed to one-third of the total creditors' claims of $110 million.

Within that, they call for Shipley, Gomm and Tilby to be jointly and severally liable with Yan for no less than 20 percent of $73.3 million together with interest. It also seeks Shipley to be jointly and severally liable with Yan for an additional 30 percent of the sum of $73.3 million together with interest.

If other elements of their appeal are accepted they have suggested different calculations, all of which involved a higher amount in total and for Shipley in particular.

(BusinessDesk)

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