One of the directors of a defunct timber company has been bankrupted over their failure to repay the Northland Regional Council a substantial loan despite a court order.
The High Court adjudicated Harkirat Singh Gill bankrupt on April 13 and moves are afoot to make another director of Resource Enterprises Ltd (REL) Maher Jammal, based in Dubai, to be bankrupted in New Zealand.
REL borrowed $750,000 from NRC in 2014 to set up a sawmill in Marsden Pt but the company went belly up three years later, forcing NRC's previous councillors to record the amount, plus the outstanding interest of $69,933, as an "impairment loss".
The loan was approved despite red flags being raised for the council in a review of REL's proposal for funding. In October, the High Court ordered REL to pay NRC $860,580 together with interest from August 20, 2019.
A letter of demand was sent to REL directors Jammal, and New Zealand-based Harkirat Singh Gill, but no payment has been received.
Towards the end of last year, NRC filed an application with the High Court to endorse a bankruptcy notice against Gill. Following court approval, the notice was served on him.
As Gill failed to repay the money owed, council filed an application for the court to adjudicate Gill bankrupt.
NRC has commenced a similar process against Maher Jammal.
According to the Companies' Office, Gill was appointed a director of REL on February 10, 2014 and ceased the role on March 12, 2018.
The current directors are Maher Jammal of Dubai, Kuwait-based Salman Jamal, and Colin Theyers who lives in Auckland.
Maher Jammal is also a director of New Zealand-based companies Resources Trading Ltd and Resources Forestry Ltd.
REL opened in 2014 but stopped operating in May 2017, in large part because of a significant increase in the price of local logs, as well as factors pertaining to international wood trading.
In seeking capital, REL put its proposal to the NRC's economic development arm, Northland Inc. Of the $4m REL needed to set up a mill, NRC provided $750,000, with the rest secured through the ASB.
NRC loaned the money despite red flags being raised by Forme Consulting Group, engaged by Northland Inc, to review REL's proposal.
In August 2019, NRC councillors voted to record the loan as an "impairment loss" but that in no way discharged the financially struggling company of its legal liability to repay the loan.
Northland Inc general manager investment and infrastructure Vaughan Cooper said since the case was before the court, it was inappropriate to comment.