Mainzeal collapsed in 2013. Creditors lost a staggering $110 million dollars. It has taken the liquidators six years to get a win in court, with the High Court finding the directors collectively liable for thirty six million, a third of the total losses of the company.
Ebert was a smaller construction firm but their losses were of a similar size. What does the Mainzeal decision mean for Ebert creditors; will they have to wait as long for a result?
Yes, is the short answer, but there are some positives. In the majority of cases of liquidations, the liquidators take no action against directors. There are a number of reasons for this but the temperament of the appointed liquidators are definitely a factor. In this case BDO were the liquidators of Mainzeal and are also the liquidators of Ebert.
We also know, from the first liquidators report from BDO, that there has been an attempt to recover some funds, possibly from a related party to the directors. However, the larger claim and recovery will be against the directors, and this will likely involve protracted litigation and could take many years.
A faster commercial resolution could be obtained by an early settlement, but there remain three unknowns. First; simply because Ebert failed does not mean that there was reckless trading, so the liability of the direcotrs remains to be tested. Second, do they directors have insurance, or assets to pay any claim, and finally what is their appetite to fight or settle?
Much of the coverage of the Mainzeal decision overlooked how close the liquidators came to losing the case. They brought twelve claims, and only got home on one, and even that was a close run thing. At Waterstone we feel that the liquidators should have achieved greater success, but then of course we are not neutral observers.
This matter is off to the Court of Appeal, so we are hopeful that BDO gets a more favorable hearing there than they did in the High Court. In the meantime, the only lesson we can be confident of, for the Ebert creditors, is that the wait is likely to be a long one.
For further information detailing the recent Mainzeal judgment from the high court and what this means for creditors & directors moving forward click here
