A small group of wealthy New Zealanders originally invested in Mainzeal owner Richina Pacific alongside a company directed by now-Governor-General Dame Patsy Reddy, court documents reveal.

The investors – including Trevor Farmer and Craig Heatley - formed part of a consortium that acquired Mainzeal and now has an interest in assets in China, including the Shanghai Leather company, which today may be worth more than $1 billion.

The other part of the consortium consisted of a fund raised by Richard Yan which comprised 13 well-known US families, two Canadian investors and a JP Morgan partnership that ended up selling out to another shareholder from Europe.

Former Mainzeal director Sir Paul Collins represented the New Zealand investors through Active Equities, an investment vehicle he directed with former Brierley colleague Reddy.


Active Equities, which was set up to take strategic stakes in small New Zealand companies, was removed from the Companies Office register in July 2013.

The Governor-General declined to comment when asked through a spokeswoman whether she herself was a shareholder in Richina via Active Equities.

"The Governor-General's finances are private," the spokeswoman said.

The Richina consortium was focused on investments in China but in 1995 acquired a majority shareholding in Mainzeal, the Christchurch-based property and construction company that collapsed into receivership in February 2013.

According to court transcripts of the Mainzeal creditors' case, the US investors were placed in REH Capital, which initially held a 51 per cent shareholding in Richina Pacific.

This increased to about 70 per cent and included Yan's personal shareholding of at least 25 per cent.

The US shareholders included:

• The late Richard Rainwater, a Texas billionaire who ran the Bass family investment partnerships that bought Disney in 1984

• His wife, Darla Moore, named one of the top 50 most powerful women in American business

• The Ziff family, who have amassed a US$12b publishing empire

• And the Frist family, which controls a range of assets in the US

"It's ironic in some ways that Richina [was] referred to as a Chinese company … because basically, it's US shareholders," Yan told the High Court.

"And that shareholding has never changed until this day, with the exception of JP Morgan."

The court documents reveal that the acquisition of Mainzeal was not intentional and many of the shareholders, including the New Zealanders, didn't like the idea from the beginning.

Tension in the shareholder group remained a significant factor right through until Mainzeal's demise.

It was the absence of further shareholder support which meant Mainzeal could no longer continue trading.

This was outlined in Justice Francis Cooke's judgment last month which found Mainzeal Property and Construction had been trading while insolvent.

Four directors – former Prime Minister Dame Jenny Shipley, Yan, Peter Gomm and Clive Tilby – were found liable for $36 million in damages.

The judge said Mainzeal was milked by Richina Pacific to buy lucrative assets in China, and told it would be supported, but was given little cash to back that up.

In fact, by 2009 Mainzeal had loaned Richina $42m, meaning the builder was insolvent and had been since 2005, the judge said.

Between 2004 and 2005 Richina purchased the Shanghai Leather Co Ltd (SLC), a former Chinese Government-owned company that had extensive land use rights in Shanghai.

The purchase price was US$20m and Mainzeal provided US$2.37m – approximately 10 per cent of the acquisition price.

The acquisition of SLC was seen as an enormously significant transaction. Richina Pacific's 2004 annual report compared the acquisition of SLC to a famous 1803 Louisiana deal in which the US Government purchased a vast area of land west of the Mississippi River for only US$11.25m from the French Government.

By purchasing SLC, Richina bought substantial land use rights around Shanghai, which became very valuable property as the city expanded.

Justice Cooke's judgement described how Yan was reluctant in cross-examination to place a present-day value on this holding, mainly because he didn't think it was truly tradeable.

"At one point, reference was made to the land being worth 148 times its acquisition price.

"It was suggested to Mr Yan in cross-examination that it would now be worth more than USD700 million. He did not accept that, but did not indicate any alternative figure in response. It is plainly a very valuable holding."

Meanwhile, in 2005, Mainzeal recorded a significant operating loss of $12.1m, and although it was profitable in 2006 due to the sale of Mobil on the Park in Wellington, it lost money in subsequent years.

When Collins joined the board in 2012 he had identified significant underlying issues and indicated Mainzeal would go under unless it received a significant cash injection of $20m as preference share capital or subordinated debt.

PwC had earlier assessed that $20m of capital was required to properly recapitalise Mainzeal.

However, liquidators BDO would later submit that higher amounts would have been appropriate, totalling $60m.

It's clear, though, from the court transcripts that the Richina shareholders were reluctant to support Mainzeal.

"The US shareholder always complain to me … why are you keeping it and why are you wasting your time?" Yan told the court.