The Supreme Court has brought the Mainzeal saga to an end by holding the directors liable and awarding compensation of $39.8 million (plus 10 years of interest). The outcome effectively endorses the lower courts' criticisms of the directors' conduct and awards a similar amount of compensation to that of the High Court in February 2019.

Background

Last Friday in California, Silicon Valley Bank (SVB) was shut down by its local regulator and the Federal Deposit Insurance Corporation (FDIC) was appointed as receiver. Urgent regulatory action to prevent systemic risk in the USA and UK has followed.

Restructuring and Insolvency 2022/23: The year that was and what's to come

We take a look back at all the major developments in Restructuring and Insolvency law for 2022 and get a taste of what's yet to come in 2023 and beyond.

You can access the summary version of this update HERE (PDF).

Court exercises discretion to grant examination order

18 February 2022

Key takeaways for directors

A significant decision of the Supreme Court of the United Kingdom was released last week, BTI 2014 LLC v Sequana SA and others, confirming the existence of a duty owed to the company by its directors to consider the interests of the company's creditors when the company becomes insolvent or approaches insolvency.

As expressed by the Supreme Court, the so-called "creditor duty" reflects a sliding scale:

The latest chapter in the Mainzeal saga played out last week with the Supreme Court hearing the directors' appeal (and the liquidators' cross-appeal) against the Court of Appeal's decision in Yan v Mainzeal Property and Construction Ltd (in liq) [2021] NZCA 99.

The Court of Appeal has delivered the highly anticipated Mainzeal judgment after hearings in July 2020. The Court held that the directors breached both of the two core duties which protect creditors from the risks of insolvent trading, but overturned the controversial measure of damages for reckless trading adopted by the High Court. The High Court is now required to reconsider the quantum of loss but on a "new debt" measure.