Shipley defends reckless trading accusation

Jenny Shipley.

Former Prime Minister Dame Jenny Shipley and four other Mainzeal board members are accused of failing to appropriately assess the company's financial position, according to the liquidators suing them.

Shipley and fellow Mainzeal directors Richard Yan, Peter Gomm, Clive Tilby and Sir Paul Collins and Siew Kwan are defending a lawsuit from the construction group's liquidators accusing them of reckless trading and alleging they breached their duties.

More details of the lawsuit emerged this week after Chief High Court Judge Geoffrey Venning allowed access to court documents in the case.

The liquidators say Shipley, Yan, Gomm, Tilby and Collins failed to make an appropriate assessment of Mainzeal Property and Construction's financial position and the implications of it continuing to trade after July 2011, when it allegedly failed a limb of an insolvency test.

By allowing Mainzeal Property and Construction to continue to trade after July 2011 until its collapse in 2013, the liquidators say the five board members caused a $47.4 million increase in the company's liability to its creditors.

The liquidators are seeking payment of that amount from those directors.

Mainzeal's collapse into receivership on Waitangi Day 2013 sent shockwaves through the building industry. Liquidators said last year that the creditors were owed $151 million.

On the claims alleging reckless trading, Shipley, Gomm, Tilby and Collins deny them and say they "carefully and frequently" monitored the financial position of Mainzeal Property and Construction and sought external advice from Ernst & Young.

Shipley, Gomm, Tilby and Collins also say they were entitled to and reasonably did take comfort from forward work orders relating to the Christchurch rebuild.

Shipley, Yan, Gomm, Tilby and Collins are also accused of breaching their director's duties by entering into a debt restructure in December 2012.

Shipley, Gomm, Tilby and Collins deny breaching director duties and say Mainzeal Property and Construction had a limited role in the transaction.

Yan, who has separate legal representation, has denied the allegations against him. Kwan has not yet filed a statement of defence.