The company that built the leaky Hawke's Bay Regional Council building has gone into liquidation owing more than $3.6 million, meaning ratepayers may be further out of pocket on the $10m offices.
Herbert Construction Co Ltd was put into liquidation by Associate Judge Rob Osborne in the High Court at Napier yesterday.
Regional council interim chief executive Liz Lambert said the liquidation might reduce the amount the council could recover through litigation.
However, it had expected the liquidation, and last month added five parties as defendants to the claims, she said.
It is expected to cost $2.2m to repair the building, which was touted as being "state of the art" when completed in 2005.
The council has spent $99,000 on legal fees to date.
Yesterday's ruling follows years of litigation by companies pursuing Herbert debts. Last month, the company was given a month to make satisfactory progress towards reaching a compromise with creditors.
Strata Group and Carter Holt Harvey had applied to liquidate the company over respective debts of $33,935 and $65,600 for separate jobs.
Lawyer Daniel Kerr, representing Herbert, said a compromise manager had been appointed since then, and genuine progress was being made.
Of the 34 creditors, 24 were in favour of adjourning the matter for another month, he said. Those 24 accounted for $2.9m of the debt.
There was a prospect of success in a claim by the company against Ravensdown for $747,000 it said was owed, and the company directors had developments under way in Fiji that could see a "top-up" of funds available to creditors.
The company was no longer trading, but if it was liquidated, the funds from Fiji would not be available for creditors, Mr Kerr said.
Carter Holt's lawyer, Bruce Gilmour, opposed the adjournment and said there was no evidence the Fiji operations would contribute anything, "let alone debts in the region of $3.6m".
The company itself had declared its only assets were a $7600 crawler crane, a $16,000 scissor lift and "some tools".
"We are simply dealing with smoke and mirrors." Carter Holt's debts were nearly two years old, and Herbert "only continues to oppose the application to use up time so a liquidator cannot get in and look at what's going on", Mr Gilmour said. "There's no magic in this."
Associate Judge Osborne said every month that went by put creditors at risk, and led to fewer voidable transactions being available to recovery.
It was clear the company had "gone backwards hugely", he said.
"One would assume, given the gasping insolvency, that it's got tax losses and there may be benefit for those involved here in keeping going forward."
He said no weight could be given to the prospect of money from the Fiji projects. He was not prepared to grant a further adjournment, and would issue a detailed judgment to the parties.
"The essential reasons relate to the rights of the creditors in relation to a non-trading, clearly insolvent company."
Company director Malcolm Herbert told The Dominion Post he was "disappointed with this outcome both for us and for the creditors, because we had a genuine desire to make the creditors' compromise work".
"We still hope that we will be able to repay these debts, particularly if the liquidator embraces the prospect of the creditors' compromise.
"We don't therefore believe that the Herbert Construction era has come to an end. We still want to try to fix this if we can."
- The Dominion Post