DENTONS
Harassment of Siouxsie Wiles triggered health and safety obligations
The Employment Court has made an important finding in relation to officers’ duties under the Health and Safety at Work Act.
Following the release of the Supreme Court’s decision about Mainzeal last week, some IoD members have asked about former Mainzeal director Sir Paul Collins, and what he did to mitigate his risk.
Sir Paul joined the Mainzeal board in April 2012, 10 months before the collapse of the company. At the time he joined the board, Sir Paul believed that Mainzeal was solvent. However, he immediately identified the significant underlying issues confronting Mainzeal, and suggested that $20m should be injected into the company as preference share capital or subordinated debt.
By mid-2012, Sir Paul recognised that Mainzeal was in a “precarious position to say the least” and that unsecured creditors were “seriously exposed”. As the year went on, the issues surrounding the Siemens contract created difficulties for the company and, as the High Court pointed out, Sir Paul’s emails in 2012 demonstrated a growing concern about Mainzeal’s reliance on Richard Yan’s expressions of support (and the absence of the required support).
It was Sir Paul who, in December 2012, told the other directors that specialist advice on solvency was urgently required. Sir Paul said that, if Mainzeal did not have BNZ support, the company was insolvent and a receiver should be appointed. He also thought that Mainzeal needed additional equity of not less than $10m, and emphasised the need for a binding commitment of support from stakeholders.
The liquidators’ original claim against the Mainzeal directors included various causes of action against Sir Paul, including reckless trading (section 135 of the Companies Act) and breaching a duty in relation to the company’s obligations (section 136).
In December 2017, the liquidators dropped the section 135 and 136 claims against Sir Paul. None of the other causes of action pleaded by the liquidators against Sir Paul succeeded at trial, and he was awarded costs in relation to the claims he faced. Sir Paul did not take any further part in the Court of Appeal or Supreme Court hearings.
While we cannot say for sure why the liquidators dropped the section 135 and 136 claims against Sir Paul, it is likely that they recognised that the actions he took during his short tenure as a director of Mainzeal placed him in a better position than the other directors, as he identified the issues that the company was facing:
In addition, he recognised that the directors needed professional advice about Mainzeal’s solvency and their duties.
Prudent directors of a distressed company should take similar steps, including: