Director fights $18m order in Mainzeal case
The last remaining director of collapsed construction giant Mainzeal is fighting bankruptcy and refusing to secure an $18 million liability he has been ordered to pay liquidators.
In November, the High Court allowed bankruptcy proceedings to go ahead against Richard Yan.
Those proceedings, brought by the company’s liquidators, took place before Associate Judge Peter Andrew in the High Court at Auckland yesterday, more than a year after a judgment found Mainzeal directors – former prime minister Dame Jenny Shipley, Peter Gomm and Clive Tilby, along with Yan – liable for reckless trading.
In February 2019, Justice Cooke ordered a total of $36m in damages against Shipley, Gomm, Tilby and Yan, with the first three individually liable for a maximum of $6m each. The insurer of Shipley, Gomm and Tilby has secured $18m but Yan is resisting putting up security for his $18m share. The directors were also ordered to jointly pay costs to Mainzeal in excess of $2.3m.
Associate Judge Andrew reserved his decision on the bankruptcy proceedings.
Mainzeal was put into liquidation in 2013, owing nearly 1400 unsecured creditors more than $110m. Of that sum, $45m was subcontractors’ money, used by Mainzeal as working capital. Following a civil case brought by liquidators Andrew Bethell and Brian Mayo-Smith from BDO in 2018, Justice Cooke found the company traded while insolvent. The ruling is being appealed by the directors.
BDO has also appealed the award of $36m in damages against the directors. The liquidators had argued that directors should pay at least $73m.
Yan, who has resided in Shanghai since 2016, was represented in court yesterday by David Chisholm QC.
Security of $18m could not be provided by Yan because he had no assets or means in New Zealand to pay, Chisholm said. Yan was entitled to a halt of the bankruptcy proceedings until the outcome of the appeal, due to start on July 27, was known. Yan had a right to exercise his right to appeal and being ordered to pay security or being made bankrupt before then would ‘‘stifle’’ that, Chisholm said. If Yan’s appeal was unsuccessful, he would be insolvent in New Zealand.
Yan is a shareholder of trusts that own two central Auckland properties, which liquidators say are valued at about $10m. Those were the only assets in New Zealand he was linked to, Chisholm said. Yan’s China-based company, Richina, bought New Zealand company Mainzeal and borrowed $20m from it to buy companies in China. Liquidators claim some assets may have increased in value by as much as 145 times the acquisition price.
Chisholm said it was ‘‘disingenuous’’ for the liquidators to suggest Yan had control of funds he could access to secure the $18m.
The liquidators had chosen to go down the bankruptcy route as a ‘‘negotiation lever’’ to collect debts from Yan.
A New Zealand bankruptcy could not be enforced in China, he said.
Mark O’Brien QC, representing the liquidators, said if Yan wanted a stay or halt to the bankruptcy he ought to be required to pay or secure the $18m. ‘‘He says he can’t, that is disputed,’’ O’Brien said.
Mainzeal took steps to enforce Justice Cooke’s judgment and a bankruptcy notice for the judgment sum was issued by the court on August 8 last year. On September 12, Yan filed a protest and an application to set aside a bankruptcy. On October 25, he also applied for a stay of enforcement. His applications were opposed and were dismissed by the court on November 27.
High Court rules stipulated that Yan had committed an act of bankruptcy, O’Brien submitted.
Evidence at trial indicated Yan owned directly or beneficially, and controlled, a significant interest in Richina Pacific and it was apparent Yan was able to access money when he needed or wanted it, O’Brien said.
Zoom fatigue is setting in and it is imperative New Zealand figures out how to rejoin the world, says the Trans Tasman Business Circle.
Sir Peter Gluckman, former prime minister Helen Clark and former Air NZ chief Rob Fyfe have co-authored a paper saying New Zealand needs to start working out how it can leave its ‘‘state of near-total isolation’’ to avoid the coronavirus pandemic.
‘‘This is not just affecting tourism and export education but also the many ways in which New Zealand projects and leverages its place in the world,’’ they said.
Opening the trans-Tasman bubble looked increasingly distant with community spread in at least one Australian state, the authors said, and a vaccine could be much further away than expected.
Trans Tasman Business Circle general manager Sharron Lloyd welcomed the discussion paper. ‘‘We absolutely agree that global connectivity is an imperative for New Zealand.’’
The group had worked with the Australia New Zealand Leadership Forum working party investigating how a trans-Tasman bubble would work.
There was no date in sight for opening the borders with Australia, she said.
‘‘There has been a huge amount of work done on how to open them up safely and not just relying on technology, but working with the ecosystem to the airlines, tourism providers etcetera. My understanding is there has been a huge amount done on that and that both prime ministers need to be in agreement that the timing is right from a health perspective.’’
The business community wanted to be connected, and there was work being done on how that could happen if the border did not open. ‘‘In order not to be left behind how do we create that global connectivity – what’s the alternative?’’
It was not a matter people could move freely.
‘‘Internet and video conferencing is great but it is limited and people are getting that Zoom fatigue ... we are so reliant on global connectivity and an international market that I just think the risks are that we will go backwards, that it will be detrimental to our economy if we can’t create global connectivity.’’
Businesses needed to replicate face-toface contact, build relationships, and maintain of waiting until the flow of goods and services.
The aviation industry, which is taking a huge hit from the Covid lockdown, welcomed the discussion.
Justin Tighe-Umbers, the chair of the New Zealand Aviation Coalition, said New Zealanders were ‘‘understandably cautious’’ but it was important to think about what the future might look like if a vaccine for Covid-19 was still years away.
An Air NZ spokeswoman said the airline supported the return of safe flying when borders could re-open.
Asked about the risks to the New Zealand economy of keeping the borders as they were currently, Westpac chief economist Dominick Stephens said the loss of international tourism was the key area.
‘‘For every dollar spent by foreign tourists in New Zealand, New Zealanders