Long Mainzeal case ends with director’s bankruptcy
More than a decade of litigation following the collapse of construction firm Mainzeal ended yesterday with the bankruptcy of Richard Yan.
The former Mainzeal boss had been found liable for trading while insolvent and ordered to pay almost $40 million alongside other directors Jenny Shipley, Clive Tilby and Peter Gomm.
That came to more than $60m once interest was applied, according to the most recent report from BDO liquidators, posted on March 22. While insurance had covered Shipley, Tilby and Gomm, the liquidators had not received anything from Yan and moved to bankrupt him.
Yesterday, Associate Judge Grant Brittain heard that while Yan had been made aware of the bankruptcy proceedings against him, he hadn’t made moves to oppose them. The businessman is understood to be in China.
The lawyer for the liquidators, Zane Kennedy, told the High Court at Auckland the last communication with Yan — via email — was on March 6, but since then “he’s gone quiet”.
The liquidators had evidence that Yan had seen the bankruptcy documents, however. “The documents have undoubtedly been drawn to the attention of the judgment debtor [Yan] . . . that’s in the affidavit . . . he wasn’t engaging but there is no question that this happened, there’s no prejudice. It’s been raised,” Kennedy said.
Kennedy asked the judge to truncate some of the timeframes for bankruptcy using his discretion because of that evidence. The judge allowed bankruptcy notices to be treated as formally served and declared Yan bankrupt.
The Supreme Court in 2023 had held Yan responsible for most of the award, saying he acted in “stark contradiction” to the spirit of his assurances and that Mainzeal’s trading while insolvent and the way it caused losses to its creditors was “fundamentally his fault”.
Most of Yan’s interests are in China, although at the time of the ruling property records showed Yan still directly owns two properties in Auckland and has a stake in Richina, which owns property in North Otago and elsewhere.
Documents from Yan’s evidence in a 2019 High Court hearing claimed Yan’s stake in Richina was possibly worth as much as US$1 billion ($1.69b) at the time, whereas Shipley’s US$50,000 Richina investment could have been worth US$14.5m at the time, albeit this was based on Shanghai property prices.
According to the latest liquidators’ report, creditors of Mainzeal have already been paid 6 cents in the dollar. At the High Court trial of the directors, liquidators claimed creditors were owed $111.44m but this has risen to $159.02m.
The latest report says $5.14m has been paid to admitted creditors with another $1.55m held on trust. Liquidators Brian Mayo-Smith and Andrew Bethell say not all creditors have provided updated contact details.
The directors’ duties case against Yan, Shipley, Tilby and Gomm took several years and resulted in the Supreme Court noting problems with the law in that area. “The problems just highlighted are not the only ones that have emerged from our consideration of the present case, and we endorse the view expressed by the Court of Appeal that a review of the relevant provisions would be appropriate,” it said.