Former directors of the collapsed construction company Mainzeal, including former New Zealand Prime Minister Dame Jenny Shipley, have been ruled liable to pay $39.8 million plus interest and costs to creditors and subcontractors who were left $111 million out of pocket when the company collapsed a decade ago.
LawFuel Power Lawyer Jack Hodder KC (right) represented Shipley and fellow directors Clive Tilby and Peter Gomm, arguing that the company, which went into liquidation in 2013, was being assisted by his clients in a strategy designed to save the company and its creditors, doing so out of rational and selflessness.
The Supreme Court’s decision, described as a “landmark” one by the liquidators, comes after a long-running legal battle between the company’s liquidators and the former directors.
The court found that the directors, including Shipley, were aware of Mainzeal’s precarious financial situation and breached their duties under the Companies Act by continuing to trade.
The court ruled that from January 31, 2011, the directors allowed Mainzeal to trade in a manner that posed a significant risk of substantial loss to creditors. The Supreme Court ordered the payment of compensation, along with interest at 5 percent, dating back to the company’s liquidation in February 2013. The former directors have been ordered to pay over $50 million in total.
Jack Hodder and his team expressed deep disappointment with the ruling and highlighted that the court did not question their honesty or good faith. The decision underscores the legal accountability of company directors in cases of financial mismanagement and breach of duties.
The court found the directors allowed the company to trade in a way that created a serious risk of substantial loss to creditors, which would have been apparent to them if they had acted with reasonable skill and diligence.