Mainzeal creditors denied payback while directors appeal ruling

Creditors of failed construction firm Mainzeal face months of uncertainty as the former directors of the company appeal a High Court judgment against them.

In February, Dame Jenny Shipley, Clive Tilby, Peter Gomm and Richard Yan were ordered to pay $36 million for breaching their directors' duties and reckless trading of Mainzeal, which collapsed in 2013 owing $110m.

They now intend to challenge the judgment of Justice Francis Cooke who found them liable for Mainzeal's losses.

"The directors do not agree with the High Court judgment and believe they have strong grounds to challenge the decision," Shipley, Tilby and Gomm said in a statement from their lawyers, Chapman Tripp.

Yan, who is represented separately, had already filed an appeal.

Jack Hodder, QC, representing Shipley, Tilby and Gomm, said it was unlikely they would get a hearing until later this year at the earliest.

"There are complex issues here and the premise of the appeal is that the High Court judge took a relatively novel approach to the issues before him. We say that novel approach was not open to him. That's the essence of it."

Among the issues the former directors claim the High Court's findings were procedurally unfair and in breach of the principles of natural justice.

"They were not raised in the pleadings, not supported by evidence, not pursued by the liquidators at trial, not put to relevant witnesses and made without adequate notice to the Directors, such that it was not possible to respond to them at trial."

The directors have taken issue with the breach of duty finding, claiming the court "inappropriately applied hindsight" to conclude that their reliance on the support from Richina Pacific was not reasonable.

They also claim the court miscalculated the quantum of the loss by including debts owed by companies other than Mainzeal and by "failing to account for Mainzeal's available assets."

None of the directors were available for interviews and Hodder said they wouldn't be making further comment.

Liquidators Brian Mayo Smith and Andrew Bethell of BDO expressed disappointment at the appeal.

"The unpaid subcontractors and creditors, who were owed more than $115m after Mainzeal collapsed in 2013, will have to wait longer to receive any of the $36m awarded to them," they said in a statement.

"The court judgment, which clearly recognised the former directors including Richard Yan and Dame Jenny Shipley, breached their director duties and were negligent in allowing the company to continue trading while insolvent, was emphatic," Bethell said.

"It is disappointing that the former directors have failed to accept this decision and acknowledge the pivotal role they played in the company's collapse.

"Many creditors, who through no fault of their own, lost millions when Mainzeal was put into liquidation and were put into serious financial difficulty as a result. The $36m damages awarded by the High Court meant they would have received some compensation for the considerable losses they suffered.

"We remain committed to ensuring the former directors are held accountable for the significant losses caused. We will be working with our legal team over the coming days to determine our role in the Court of Appeal," Bethell said.

The liquidators, on behalf of the creditors, have 10 working days to file a cross-appeal.