Mainzeal parent appeal dismissed
The Court of Appeal dismissed an application today for a "holding position" to be put on the liquidation of the former parent company of collapsed construction company Mainzeal.
Earlier this month Justice Brendan Brown in the High Court declined Mainzeal Group's sole remaining director, Richard Yan, a stay of execution on the liquidation of Richina Global Real Estate (RGREL).
A fortnight ago Yan applied to the Court of Appeal urgently for a hold on the liquidation, but the judgment released today has dismissed the application, which could potentially see the liquidator able to pursue tens of millions of dollars for creditors.
Yan was also the sole director of RGREL, which was Mainzeal's parent company until six weeks before the construction company's collapse in February last year.
Mainzeal was placed into receivership by Yan, with more than 2000 creditors lodging claims.
The company is now thought to owe unsecured creditors more than $138 million.
RGREL was put into liquidation on February 27 this year, with BDO appointed liquidators last week.
But Yan had appealed RGREL's liquidation separately and earlier this month sought a "holding position" on its liquidation as part of the wider Mainzeal Group.
This would effectively mean it could not be acted on, pending the outcome of the appeal.
Yan appealed the High Court ruling on RGREL less than a week after it was made.
His lawyer, David Chisholm, QC, argued BDO had a conflict of interest in liquidating RGREL at the same time it was liquidating the 12 other Mainzeal Group companies.
He said BDO would gain access to the parent's records which could benefit other companies BDO was dealing with.
"The interests of creditors and contributors of RGREL are quite different to the interests of the creditors and contributors of Mainzeal," Chisholm said.
He asked the Court of Appeal to put RGREL in a "holding position" pending the result of its appeal against its liquidation.
On December 31, 2012, Mainzeal Property's shares were transferred from parent company RGREL to another company, Mainzeal Group.
But prior to that Mainzeal's accounts showed it was owed about $15m by RGREL.
Another $5.78m had also been awarded as part of the "pooling orders", which RGREL owed to its subsidiary King Faade.
BDO liquidator Andrew Bethell said the inter-company transactions suggested BDO needed "full information and transparency around that company" to understand the wider picture.
BDO's lawyer Zane Kennedy said the interests of the creditors required liquidations to proceed.
The investigation was ongoing into the group's collapse and RGREL's books and records were critical to that process.
"The public interest lies clearly in favour of allowing the liquidation with restraint [Justice] Brown put in place", Kennedy said.
Justice Ellen France, giving the Appeal Court's judgment today, said Yan's main concern was the perceived conflict of interest for the liquidators given the application to set aside the "pooling orders".
But to stop the liquidation altogether would be an "unduly blunt response".
"While the appellant disputes the liquidators' claims as to the extent of the interrelationship between the
Mainzeal group of companies, we do not consider we can ignore the broader context, namely, the desirability of the liquidators ascertaining the causes of failure of the wider Mainzeal group which owes its creditors in excess of $100m," she said.
Yan's application was dismissed and he was ordered to pay the respondents' costs.