Dame Jenny Shipley and her fellow directors of failed building company Mainzeal have been found liable for $36 million in damages, a ruling from Justice Francis Cooke has found.
The company, which went into liquidation in 2013 had been trading while insolvent despite its high profile – and creditors would have been better off if the company had been put into liquidation earlier, the Court found.
The judgment says the four directors former prime minister Dame Jenny Shipley, Richard Yan, Peter Gomm and Clive Tilby breached their legal duties as company directors.
Yan was found to have a higher level of responsibility by inducing other three other directors to breach their duties, the judgment says.
The liquidators released the following press release –
The decision released today by the High Court found that the former Mainzeal directors, including Rt Hon Jenny Shipley and Richard Yan, breached their directors’ duties and were negligent in allowing the company to continue trading while insolvent, awarding damages of $36m.
Liquidators of the failed Mainzeal group of construction and building companies, Brian Mayo-Smith and Andrew Bethell of BDO, said the creditors have waited a long time for this day.
“We are thrilled with this judgment by the High Court which sets an important precedent for the required standards of corporate governance and care owed by company directors in New Zealand towards the company and creditors,” Mr Bethell said.
“When the company collapsed in 2013, unpaid subcontractors and creditors were owed more than $115m. Many of these creditors themselves were put into serious financial difficulty as a result of the decisions made by the former directors.
“It has been a long, hard road to get to this point and, as a result of the court case and the damages awarded of $36m, creditors of the failed company will now receive some compensation for the losses they suffered.”
“Directors have a responsibility to take into account 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 court case sought to hold the former directors liable for their actions in allowing Mainzeal to trade while insolvent and today’s decision has recognised that negligence,” said Mr Bethell.
In addition, a further $2.1m was awarded to the liquidator in relation to other claims made by the liquidator.