New Zealand’s top court has ruled former Mainzeal directors liable to pay $39.8 million plus interest and costs in compensation to the creditors and subcontractors who were left $111m out of pocket when the company collapsed a decade ago. 

The Supreme Court heard the final appeal over a week in March 2022 for the long-running litigation between the liquidators of the collapsed construction company and its former directors, including former prime minister Dame Jenny Shipley. 

The judgment was delivered at 9am today in Wellington. 

The court had earlier granted leave for an appeal of the Court of Appeal’s decision in 2021 by the liquidators. It also granted leave for the directors of what was NZ’s third largest construction firm to cross-appeal. 

The Supreme Court dismissed the directors’ cross-appeal and found the directors were aware of Mainzeal’s precarious position as the company struggled to make a profit after 2008. 

Former prime minister Dame Jenny Shipley was a director of Mainzeal. Photo / Dean Purcell 

The Supreme Court ordered the multimillion-dollar payment plus interest at 5 per cent from the date of liquidation in February 2013. It means the Mainzeal directors have been ordered to pay more than $50m. 

Compensation was ordered against former chief executive Richard Yan in full, with the liability of Shipley, Clive Tilby and Peter Gomm capped at $6.6m plus an estimated $3m interest each. 

Shipley, who was prime minister from 1997 to 1999, and the other directors are due to issue a statement after the court’s ruling today. 

Mainzeal’s liquidator Andrew McKay, of BDO, said in a statement on behalf of the creditors, of which some 1400 were unsecured creditors, that the Supreme Court’s decision confirms the directors breached their duties while allowing the company to trade while insolvent. 

“This is a landmark judgment which reinforces the obligations directors have to fulfil their duties diligently and responsibly.” 

McKay said the Mainzeal directors “knowingly, and recklessly exposed creditors to illegitimate risk” with their trading while insolvent and used “rob Peter to pay Paul” strategies. 

“The creditors have waited a long time for this decision which brings to a close over eight years of prolonged court proceedings, including trials in the High Court, Court of Appeal and Supreme Court,” he said. 

“At every stage of this long process, the defendants and their insurance company, QBE, have denied wrongdoing which has only delayed justice for the creditors. Given the clear facts of the case, established in each of the trials, it is disappointing that the Mainzeal directors have failed to take any responsibility for their actions which illegitimately used creditors’ money and put them at risk, losing over $111m.” 

Mainzeal's Jenny Shipley and Richard Yan, pictured in 2008. Photo / Greg Bowker 

McKay thanked the legal team and litigation funder, LPF Group, for pursuing such a large case with costs of nearly $10m. 

“We are committed to recovering the damages awarded by the court including in part from the insurers, enforcement action against the directors to ensure creditors receive compensation for their financial losses,” McKay said. “We appreciate that this has been a challenging time for many creditors, and we hope that the Supreme Court’s ruling provides them with a sense of justice being served.” 

The Court of Appeal had ruled the former Mainzeal directors remained liable for reckless trading before the firm folded but they successfully overturned a $36m penalty ruling. 

It also said in its March 2021 judgment the legislation governing insolvent trading in New Zealand is “unsatisfactory in a number of respects” and called for the Companies Act 1993 to be reviewed. 

The Court of Appeal’s decision came after the High Court had ordered the directors to pay $36m for breaching directors’ duties. 

The High Court’s order in 2019 represented just a proportion of the entire deficiency in Mainzeal’s liquidation of about $111m for some 1400 unsecured creditors. 

Sam Hurley is a news director and senior reporter. He joined the Herald in 2017 and has previously worked for 1News and Hawke’s Bay Today.