The Other Side of Business

“The sky is falling”,” run to the hills”, “it must be another case of industrial disease” all sentiments heard while watching the inevitable fall of Mainzeal. This is the time when many will wring their hands and look to for someone to blame. I cant blame them, I am about to do the same. The reason for the use of the word inevitable will become clear. Mr Joyce is passing off the collapse of one of the largest construction companies in New Zealand as nothing more than an anomaly in the stable of ‘sound New Zealand business’ operations. It is of course nothing of the sort. The collapse of Mainzeal was only a matter of time after the Supreme Court announced its decision regarding North Shore City and owners of apartments in Spencer on Byron in October 2012. The Supreme Court found that the Council could be deemed to have owed duty of care over the construction of the building. This, in the words of Duncan Halliwell of Kengsington Swan, means:

“at least in the meantime, the practical effect of this decision is that, for all leaky building cases, councils are at risk of being liable irrespective of whether the particular building is of a commercial or residential nature (or a mixture of both). It is also a reasonable indication that any future attempt by contractors or consultants to argue that they owe no duty of care to the owners of commercial buildings will be similarly unsuccessful”

One of the difficulties in the whole ‘leaky homes’ saga is that the construction company that erected the building often ceased trading. Effectively there was no one to sue. However, commercial buildings until last year were assumed to be exempt from this money go round. No more it would appear. Mainzeal is going into receivership – and this is a surprise?

What we really should be looking at is not the company and the nice scapegoat in the form of – shock horror an Asian!, but rather the Directors. New Zealand directors have a habit of resigning just before the manure hits the turbine. In this case it was a good few days before. The thing is the Directors are the people who actually control the company. It is the Directors that owe a duty of care to the company and who in effect guide the organisation; to Whit – and this is from the Companies Act.

128 Management of company

• (1) The business and affairs of a company must be managed by, or under the direction or supervision of, the board of the company.
• (2) The board of a company has all the powers necessary for managing, and for directing and supervising the management of, the business and affairs of the company

What we are hearing now is that the future of hundreds of families is now in doubt because the Directors did not act early enough or fast enough to solve ‘financial ‘ problems. This is becoming common in New Zealand Business. The Directors see it is too late and within days resign washing their hands of their own incompetence. It is easy for those of a more cynical bent to assume that the collapse of Mainzeal was inevitable and followed typical New Zealand construction behaviour when faced with the possibility of future leaky building claims.

Dr Andrew Cardow

A.Cardow@massey.ac.nz