Mainzeal directors lose bid to reduce financial penalties

Former Prime Minister Dame Jenny Shipley and other directors of failed national builder Mainzeal Construction have lost an attempt to reduce financial penalties.

The High Court at Auckland rejected the case brought by Jennifer Mary Shipley, Richard Ciliang Yan, Peter Gomm, Clive William Charles Tilby and others against a $36 million penalty imposed on them.

In late February, Justice Francis Cooke ruled four directors of the failed construction company should pay $36m to unsecured creditors. The Mainzeal directors had traded recklessly, Justice Cooke said, particularly by allowing the mostly loss-making company to trade for several years while technically insolvent.

The judge said Shipley, Tilby and Gomm were liable for up to $6m each of the $36m total. A fourth director, Richard Yan, also founder and main

The application by the plaintiffs to alter the amount awarded in the original judgment were dismissed. The loss they caused was the starting point for their liability.

shareholder of Mainzeal's parent company, Shanghai-based Richina Pacific, should be liable for the full $36m, Justice Cooke said.

The four directors have already filed appeals.

In the latest case, heard in May, the application by the plaintiffs to alter the amount awarded in the original judgment was dismissed. The loss they caused was the starting point for their liability, the judge said.

Liquidators Andrew Bethell and Brian Mayo-Smith applied to seek higher penalties.

The directors argued the court's assessment of the losses for creditors caused by their breach of duties were “exaggerated because the court used the gross amount owing to the creditors without taking into account expected recoveries from the assets of the companies in liquidation”.