Justice David Goddard asked many questions at yesterday's Mainzeal Court of Appeal hearing, but appeared unsatisfied with the answers.
"So…you can do it a whole bunch of ways, which produce wildly different outcomes, and there's no expert evidence," he said to Jenny Shipley's lawyer Michael Arthur.
The answer, in short, was yes, although Arthur said trial judge Justice Francis Cooke had used what evidence he had available to him to come with up the $36 million figure that Shipley and the other three directors were held liable for.
"It all seems very crude," Justice Goddard said and, nodding towards Mark O'Brien QC, the lawyer for Mainzeal's liquidator, added: "I'm sure Mr O'Brien will attempt to persuade me that if it is not surgically precise, it is credible." Justice Goddard is hearing an appeal from Mainzeal directors former Prime Minister Shipley, Richard Yan, Peter Gomm and Clive Tilby, against an order to pay $36m in damages, plus $2.3m in costs to Mainzeal. The construction company collapsed in 2013, owing more than $110m.
Why and how
Lawyers spent the morning arguing why Justice Cooke was wrong to have found directors liable for breaching their duties, but by the afternoon they were arguing whether he had come to the correct liability figure.
The directors make this argument because, in its cross-appeal, Mainzeal's liquidator BDO said the $36 million awarded isn't enough. The amount awarded is discretionary.
At trial, the liquidator argued for much more compensation, applying what is dubbed the "the new debt approach". Under that methodology, the liquidator argued, the directors should be liable for $75 million.
Justice Cooke rejected this approach, and made up his own one, deciding that the starting point should be $110 million, as that was the amount owing at liquidation, and then discounting it by about 60 per cent. He called it the net deficiency approach.
The liquidator is running two arguments: if Justice Cooke's approach is upheld, then interest and its own costs should be added to this figure when calculating the starting point, and it shouldn't be discounted so heavily.
It is also still advocating for "the new debt" approach, although it has increased its claim by another $12 million.
At yesterday's hearing several alternatives were traversed, because the parties don't agree on the formula to be used or even what figures should be put into it.
The court heard how the sums could be calculated including or excluding the value of construction bonds, or with or without specific projects counted.
Arthur said the Mainzeal liquidator's approach was a "hybrid cherry-picking approach where a formula is applied but then single items are put out for special treatment favouring the liquidator's case".
He said even if the "new debt" approach is preferred, the figure should be $44.5 million.
The "new debt" approach has found favour in the UK, but was rejected by New Zealand's Peter Watts QC. Under the methodology, the court should take into account any new debts incurred by the company from when it is found to have traded illegitimately.
As the case continues, Jack Hodder QC, who also acts for Shipley, Peter Tilby and Clive Gomm, will set out arguments about procedural unfairness at the trial.
Richard Yan's lawyer is yet to give arguments about whether the directors really caused the losses claimed by the liquidators.
Mainzeal's liquidator's lawyer, O'Brien has not yet addressed the court in response to the main appeal or on quantum.
The hearing before Justices Stephen Kos, Forrie Miller and Goddard is scheduled to last all week.