The partner says that the ruling "sets a precedent for corporate accountability"
A partner from Hamilton Locke NZ has helped represent the liquidators of Mainzeal Property and Construction Ltd in an eight-year-long litigation that saw the liquidators win in the Supreme Court.
Litigation partner Mihai Pascariu worked together with Mark O’Brien KC and Zane Kennedy on the matter, which was lodged against Mainzeal’s former directors. In its ruling, which was released on 25 August, the Supreme Court issued to the ex-directors an order to contribute compensation in excess of $50m to Mainzeal’s assets.
According to Pascariu, the decision “sets a precedent for corporate accountability.”
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“Today's court decision is a resounding victory for the creditors and subcontractors who were affected by the collapse of Mainzeal. The judgment reinforces the crucial role that directors play in upholding and maintaining the financial integrity of a company and it underscores that negligence will not be tolerated,” he explained.
Pascariu added that the judgment “clarifies the scope and application of directors’ duties when a company is insolvent or on the brink of insolvency” and “highlights the obligations and responsibilities of directors to carry out their duties with unwavering diligence and accountability.”
The decision, he said, also spotlights the importance of litigation funding, which supported the pursuit of the case.
The litigation involved Mainzeal, which was placed in receivership and liquidation in February 2013. By the end of the receivership, the receivers had settled their payment to Bank of New Zealand as the secured creditor and to preferential creditors in full; however, there was a shortfall of approximately $110m still owed to unsecured creditors.
The Supreme Court ruled that the former directors had breached their duties as defined under sections 135 and 136 of the Companies Act 1993.