Shipley combative under cross-examination
Former prime minister Dame Jenny Shipley has conceded that failed construction company Mainzeal had no legally binding guarantee of financial support from its parent company.
Shipley put in an assertive, sometimes combative, performance under cross-examination at High Court in Auckland on Monday in her third day giving evidence in the Mainzeal civil damages trial.
Construction firm Mainzeal was put into receivership in 2013.
Liquidators Andrew Bethell and Brian MayoSmith of BDO allege the company traded while insolvent. They are suing some former directors, including Shipley, for up to $75 million in damages.
Shipley was a director of Mainzeal between 2004 and early 2013, a period in which it was dependent for its solvency on assurances of financial support from other companies within the wider Richina Pacific investment group after it suffered big losses on major construction projects and leaky building claims.
Mark O’Brien, QC, representing the liquidators, cross-examined Shipley about whether the assurances should have been in the form of legally binding contracts, rather than verbal assurances. ‘‘You were relying on assurances without security,’’ he said.
Shipley defended the directors’ reliance on the financial assurances, which she said were accepted by Mainzeal’s auditors.
She said operating companies within the Richina Pacific investment group relied on each other for financial support.
But she acknowledged there was no formal written contractual documentation.
She said Richina Pacific’s financial support was demonstrated on a number of occasions, including in the wake of losses on Auckland’s Vector Arena.
There was ‘‘no doubt in the minds of directors that we would have the support as and when required’’, she said.
O’Brien said there was intercompany support within the group, but ‘‘mainly it went out’’ from Mainzeal to others. By the end of 2008, Mainzeal was owed nearly $40m by other Richina companies, he said, and a plan to recapitalise Mainzeal with about $20m from the parent group did not happen after Mainzeal was delisted from the NZX.
Defendants include Shipley, Mainzeal chief executive Richard Yan, Peter Gomm, Clive Tilby, Sir Paul Collins, Siew Kwan, Richina Global Real Estate and Isola Vineyards. They deny the allegations.
The court also heard that Shipley’s family trust remained a shareholder in Richina, and that she and her fellow directors had director’s liability insurance. Such insurance is taken out, in part, to pay for the cost of any damages awarded.