Creditors mull legal action against Qantas NZ bosses

Friday 27th April 2001

KEVIN DODDRELL: Photocopier salesman turned failed airline chief

By Nicholas Bryant

Pressure was mounting late yesterday for the board of Tasman Pacific Airlines to front up over its failure to take action as the company nose-dived into receivership.

Tasman Pacific's shareholders were scheduled to meet at the offices of Auckland merchant bank Clavell Capital yesterday afternoon at 1pm with a statement expected to be released following it.

As the story of the airline's failure unfolded this week, the heat went on the shareholders - 10 prominent businessmen led by chairman Ken Cowley and dealmaker David Belcher - who have remained silent during the collapse.

The questions to which creditors are demanding answers:

If Tasman Pacific's directors were aware main trunk routes were profitable, why did they not make moves to cut the unprofitable provincial routes in a bid to keep the airline flying?
Why was the old Ansett New Zealand management team, headed by former photocopier salesman Kevin Doddrell, kept on after its sale to Tasman Pacific, given that regime had been responsible for huge losses?
What caused Qantas Australia to walk away last week from negotiations to buy the airline?

Industry sources suggest the power of the pilots' union might have been the reason the shareholders did not rationalise routes.

Mr Doddrell's defenders said he was well thought of for carrying out a $26 million cost-cutting campaign.

And the reason Qantas walked away was thought to be because it discovered the inescapable "black hole" of a 10-year leasing deal with Air New Zealand worth $62 million.

Meanwhile, creditors and former employees were searching yesterday for avenues to exact retribution from the shareholders they hold responsible - sparking a row between small and big business over whether the directors should exceed their legal liability and personally pay some of the airline's debts.

Under the Companies Act directors can be held liable if they allow their company to knowingly trade while insolvent.

Under s135 a director of a company must not agree to the business of the company being carried on in a manner likely to create a substantial risk of serious loss to the company's creditors.

One creditor, Pacific Flight Catering chief executive Terry Hay, said he would support any action taken against Tasman Pacific shareholders.

"Limited liability companies are invented as paper people - behind them stand the flesh and blood. As long as you obey the rules of the paper world you're fine, you're entitled to lose all your money. What you're not entitled to do is lose other people's money - that's what trading while insolvent means; you're digging into other people's pockets," Mr Hay said.

Mr Hay said he was forced to close two offices and lay off 70 people.

Creditors, who had been paid in cash in the months leading up until last Saturday's liquidation - suggesting lines of credit had been exhausted - said Tasman Pacific had been in dire straits for months.

Debts mount, crash fallout, marketing strategy

Editorial - page 21

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