Mainzeal was one of New Zealand's biggest builders. Photo / Natalie Slade
Mainzeal was one of New Zealand's biggest builders. Photo / Natalie Slade
The liquidators of collapsed builder Mainzeal have chalked up an estimated $10 million bill for legal and financial services since the builder went under six years ago.
Brian Mayo-Smith, one of the BDO liquidators of Mainzeal, has defended the bill, saying they were faced with unravelling an "elaborate" situation betweenNew Zealand and China.
"The collapse of Mainzeal in 2013 left the liquidators to unravel the very elaborate and convoluted corporate dealings between New Zealand and China that the directors had allowed to occur. This required significant expense by the liquidators to work out what had happened," Mayo-Smith said.
BDO had started legal proceedings in 2015, backed by a liquidation committee representing creditors. That was a move to hold the directors to account for their "wrongdoing", he said.
However, directors - former prime minister Dame Jenny Shipley, ex-CEO Peter Gomm and Tauranga man Clive Tilby - are challenging a high court ruling against them.
Mainzeal's former head Richard Yan is challenging an $18m New Zealand bankruptcy proceeding against him over the collapse of the business, saying this country's laws do not apply in China, where he now lives
The directors were collectively held liable for reckless trading and ordered to pay $36m.
A Herald source expressed frustration that the liquidation was costing so much when creditors were unlikely to receive a meaningful return.
"So even if they get back $18m from directors, $10m of this has been wasted on legal and mainly BDO fees. And $111m is owing to creditors, who are likely to get a tiny amount, if anything."
Liquidator reports from BDO show amounts of around $500,000 were being spent each six months on liquidation and consulting, plus legal fees.
But Mayo-Smith indicated it was a long, hard fight to win the first leg of the battle, now under appeal.
Brian Mayo-Smith (left) and Stephen Tubbs in 2013. Photo / Dean Purcell
"The case was defended by three sets of directors [Shipley, Gomm and Tilby] who were each represented by their own QCs and law firms, making the legal process lengthy and expensive," he said.
"Further, offers to settle before and during the trial at less than the judgment sum were refused. The liquidators undertook the litigation with the costs of the legal case funded by LPF. Without this funding, the liquidators were not in a position to take legal action in which case there would be no recovery of losses for creditors," he said.
Nor did he back away from spending more on the case.
"The liquidators intend to continue to pursue the case to maximise the recovery for the creditors, including seeking the securing of the $36 million judgement made by the High Court and pursuing the appeal seeking an increase in damages to $76 million and joint and several liability from the directors for their actions," Mayo-Smith said.
The BDO liquidators were committed to seeking to holding all four directors to account on behalf of the unsecured creditors who without successful litigation have suffered at least $105m of losses, he said.
The liquidators were appointed on February 28, 2013. Many different companies are involved in the action including Mainzeal Property and Construction, Mainzeal Group, Mainzeal Living and Mainzeal Ltd.
The High Court found Yan is liable for $18m alone and the other three directors, $6m each. But the other three too are potentially saved from paying from their own pockets because the insurer will pay out, the latest BDO report on Mainzeal said.
"The insurers for Shipley, Tilby and Gomm have confirmed that $18m has been paid into a trust account to secure the liability of those directors under the judgment pending the outcome of the appeals process. The insurers also paid the costs award," the report from February to August this year said.
