Dame Jenny Shipley's lawyer says business people could be put off taking up directorships should the bosses of Mainzeal be found to have led the company to its collapse.
Dame Jenny Shipley gives evidence at Mainzeal court case. Photo: RNZ / Tom Furley
The construction giant went into liquidation in 2013 owing creditors some $117 million.
It's alleged this could have been avoided if the directors had pulled the plug on the company long before its ultimate demise.
Giving his closing argument yesterday, Dame Jenny's lawyer Jack Hodder said Mainzeal's board would need to have been clairvoyant to know the business was doomed to fail.
"The plaintiff's case over-reaches. Only hindsight suggests that Mainzeal's insolvent liquidation was unavoidable - nor was it imminent. And I say those words because that is the general focus of legal rules about insolvency," he said.
"Directors clearly have to do something in the face of either imminent or unavoidable liquidation but if they're neither unavoidable nor imminent then the issue simply doesn't arise."
It's alleged the former prime minister, Dame Jenny Shipley, and her co-directors were reckless to keep trading and to enter into high-value contracts given Mainzeal's tenuous financial position.
Mr Hodder, who is also defending six other directors and associated companies, told the court the outcome of the trial, with its high-profile defendants, had far-reaching implications.
He asked why anyone would take up a directorship if even the diligent and conscientious Mainzeal was punished by the court.
"If the plaintiffs are right, why would anybody take on a directorship?"
Prior to its collapse, Mainzeal's board had been counting on receiving cash injections from its Chinese parent company, Richina.
These never came and, coupled with a raft of problems like expensive leaky building claims and projects running millions of dollars over budget, Mainzeal went under.
Justice Cooke disagreed with Mr Hodder's assertion that there was no conflict of interest on Mainzeal's board, pointing out that the director Richard Yan was also the controller shareholder of Richina.
Closing submissions in the hearing are expected to run into next week, which will be the eighth week of the trial.