Northland Regional Council has filed legal proceedings to recoup more than $750,000, plus interest, it lent to a timber processing company after the business defaulted on its repayments.
Resource Enterprises Ltd (REL) has failed to pay $860,580, made up of $819,932 in outstanding principal and costs and $40,647 in interest from March to August last year.
NRC sent a formal demand in August for the company to settle its debt and when it failed to pay, a statement of claim was filed in the High Court in Auckland.
Resource Enterprises, its director Maher Mohammad Jammal who lives in Dubai, and shareholder Harkirat Singh Gill were named as defendants.
A hearing took place this week and the court gave the company one week to file further evidence on an issue it raised.
The Marsden Pt-based company opened in 2014 but stopped operating in May 2017, due in large part to a significant increase in the price of local logs, as well as factors pertaining to international wood trading.
REL took industrial grade logs and exported slabs of timber cut from the tree trunk to Saudi Arabia.
Marsden Maritime Holdings cancelled the lease and took possession of the site at the end of July last year.
NRC councillors voted in favour of the loan despite concerns raised in a review of REL's proposal for funding that highlighted an "optimistically low" budgeted log price that would result in low gross margins and high operating costs of the sawmill.
The councillors voted to record the loan in August last year as an "impairment loss".
However, NRC said recording the loan as an impairment loss in no way discharged the financially beleaguered company of its legal liability to repay the loan.
The disastrous loan was the only one made under NRC's Investment and Growth Reserve before the criteria was changed, with more emphasis on supporting agriculture, horticulture, marine, tourism and digital sectors.
Since NRC was the second secured creditor, the market value of the company's assets was estimated to be less than what it owed to the first secured party, which initially was ASB before other investors took over.
According to Northland Inc at the time REL opened, the mill was expected to employ about 20 people under full production and have an estimated economic impact of about $20m.
Information held by NRC indicates 19,600cu m of sawn timber and half-round slabs were exported from the mill up to March 31, 2016.
NRC has no information on the volume of exports for the period from 1 April 2016 until the mill ceased operation in October 2017 as the sawmill wasn't obliged to provide such statistics.