Court of Appeal confirms liability of Mainzeal directors

This article is reposted here courtesy of MinterEllisonRuddWatts.

The Court of Appeal has delivered its eagerly anticipated judgment in proceedings brought by the liquidators of Mainzeal Property and Construction Ltd against its former directors, including Richard Yan and Dame Jenny Shipley. In those proceedings, the liquidators sought compensation for breach of certain statutory duties of directors engaged on a company’s insolvency: sections 135 (reckless trading) and 136 (incurring obligations) of the Companies Act 1993.

Although differing from the High Court’s judgment in several respects, the Court of Appeal concluded “[t]he liquidators were the successful party in relation to liability, and have established that they are entitled to an award of compensation in respect of the directors’ breaches”.

The Court agreed with the High Court that the directors had traded recklessly (in breach of s 135). It disagreed with the High Court’s approach to compensation arising from their doing so, finding that no loss was attributable to this breach of duty. However, unlike the High Court, the Court of Appeal found that the directors had also caused Mainzeal to commit to obligations without reasonable grounds for thinking that it would be able to fulfil those obligations (in breach of s 136). It considered there was loss attributable to these actions and referred the case back to the High Court to determine the amount of compensation to award to reflect this.

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RITANZ Save the Date

19th Annual Corporate Restructuring, Insolvency, and Turnaround Conference 2021: Looking Ahead: Reset and Response to Change

Venue: 9th of June 2021 AGM and Workshop The Northern Club
10th and 11th of June 2021 Cordis Hotel, Symonds Street, Auckland

Virtual Conference will be held in the event of lockdown

The definitive annual event tailored for restructuring professionals and their advisors

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Life Membership Nominations are now open

To be eligible for Life Membership a person must have shown outstanding service to RITANZ or to the insolvency profession and meet the general criteria for membership to RITANZ.

To assist members in considering nominations for this role, the Board has considered factors which it will take into account when determining whether a nominee has shown outstanding service to RITANZ or to the insolvency profession.

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Insolvency numbers plummet but there are still warning signs, expert cautions

NZ Herald Money editor, Tamsyn Parker, recently interviewed RITANZ Chairperson John Fisk to get his perspective on the outlook for 2021.

Court applications to wind up companies plummeted in 2020, bucking expectations of widespread business failures. But an insolvency expert says there are still warning signs that some companies are in for a tough time this year.

Wind-up applications dropped nearly 32 per cent from 707 to 481 between 2019 and 2020, figures from the Restructuring Insolvency and Turnaround Association New Zealand show.

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