Mainzeal's Jenny Shipley and Richard Yan, pictured in 2008. Photo / Greg Bowker
A decade of litigation has concluded that will send warning signals across corporate New Zealand.
Directors across the country would have last week kept close tabs on the Supreme Court decision in the long-running Mainzeal case.
The court ultimately ordered the directors, including former Prime Minister Jenny Shipley, to pay out nearly $40 million.
BusinessDesk investigations editor Victoria Young has kept close tabs on this story and points to a mix of reasons behind the collapse of what was once New Zealand’s third-largest construction company.
“We don’t often get a look behind the veil of how these private companies are run, but eight years of financials all came out in the court process,” Young tells The Front Page podcast.
Those financials showed during five of the eight years between 2005 and 2012, the company was running at a loss.
“It was doing it tough,” says Young.
“Construction companies always have these razor-thin margins, working project to project. But [Mainzeal] was basically crap at forecasting. The evidence, which came out in the High Court trial in Auckland and which was accepted by the trial judge, was that Mainzeal failed to meet its budgeted earnings figures every year between 2006 and 2012.”
These shortcomings were further complicated because the parent company at the time, Richina Global Real Estate, wasn’t pouring in enough money to make up that shortfall.
“Obviously, as you start losing money, you need cash injections - and this is when things got really wobbly,” says Young.
These problems were further exacerbated by the leaky buildings claims, which led to huge remedial expenses for the firm.
“These things came together and caused this storm for Mainzeal,” says Young.
The court decision leaves all the directors, including Shipley, in a perilous position, given they’ll have to repay the costs not covered by their insurance.
To hear answers to these questions and more, listen to the full episode of The Front Page podcast.
The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. It is presented by Damien Venuto, an Auckland-based journalist with a background in business reporting who joined the Herald in 2017.
You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify, or wherever you get your podcasts.
New Zealander with colourful history finds himself in third continent's courts.