Mainzeal’s Richard Yan wins reprieve on liquidation of related companies

Richard Yan, the principal of the failed Mainzeal group of companies, has won the latest round with the liquidators of his empire after the Court of Appeal ruled in his favour that disputed debts must be settled before two related companies could be wound up.

Justices Tony Randerson, Rhys Harrison and Ellen French upheld Yan's appeal to set aside the liquidation of Richina Global Real Estate (RGREL) and turned down the liquidator's bid to add Isola Vineyards, in a judgment released today.

During the course of the hearing, the debts owed by RGREL relied on by the liquidators to support their appointment were found not to be due or were held in a trust account, with the remaining debts "substantially and genuinely disputed" and that it was "premature to make a liquidation order before the disputes were determined," the judgment said.

"The short point is that, at this stage, there are no undisputed debts due by RGREL upon which a liquidation order could be properly made," the judges said. "To do so would be unfair in terms of the well-established principles we have outlined above and would amount to an abuse of process."

The Appeal Court turned down a bid by BDO's Andrew Bethell, Brian Mayo-Smith and Stephen Tubbs, who were appointed liquidators for most of the Mainzeal group, to join Isola Vineyards to the administration, as the outstanding debts of the firm were also disputed.

"While we accept that there were inadequacies in Isola's evidence to support its assertion that it had the capacity to meet the disputed liabilities should it ultimately be found liable to pay them, we agree with the Judge that a liquidation order was not appropriate in the circumstances," the judgment said.

The liquidators are pursuing the related party debts that stemmed from two restructures in 2012.

"Although the BDO liquidators have not yet formulated their defence to the application to set aside the pooling orders, it is evident that the validity of the transactions and the impact on intercompany indebtedness will be central to the dispute to be determined," the judgment said.

"The liquidators contend that if the various liabilities between Mainzeal/KFL (King Facade) and Isola/RGREL had not been 'netted off', significant funds could flow to Mainzeal and KFL and to their unsecured creditors who, we are advised, are owed over $100 million," the judgment said.

Mainzeal Property & Construction and Mainzeal Living were tipped into receivership on Feb. 6 last year, the Waitangi Day public holiday, and 200 Vic joined them on Feb. 13. Liquidators were appointed to the Mainzeal group later that month on Feb. 28.

The receivership of Mainzeal Property & Construction left a surplus of $1.1 million for the liquidators of the wider group, who represent unsecured creditors who have lodged claims worth at least $139.3 million. The receivers were appointed by Bank of New Zealand, which was owed $11.3 million, the bulk of which was over the Mainzeal headquarters building on Auckland's Victoria St.

If the liquidators aren't successful in achieving a significant recovery from the related party loans, any distribution to unsecured creditors "is not likely to be substantial," they said in their latest report on the wider administration.

Former Prime Minister Jenny Shipley and former Brierley Investments chief executive Paul Collins resigned as directors of Mainzeal Property & Construction in December 2012, at the request of Mainzeal and Richina group principal Yan. They remained directors of Mainzeal Group until just before the MPC receivership.

(BusinessDesk)