Creditors
successfully challenged a part-payment scheme put up by Shane McKillen,
claiming to be broke after the failure of drinks company VnC Cocktails. Creditors will require a better offer, or he
faces bankruptcy.
The High Court refused approval to a
scheme offering creditors three cents in the dollar saying that related party
family debts totalling more then $23 million should not have been counted in
votes approving the scheme and that Mr McKillen should not be able to hide
behind family trusts while offering up a minimal return to unpaid creditors.
Personal creditors of Mr McKillen
challenged an Insolvency Act part-payment scheme voted by creditors in February
2015. Mr McKillen claims to have debts
of $33.8 million and assets of only $107,500.
His company, VnC Cocktails Ltd, perished following a high profile push
into the US market.
Two creditors challenged the 2015
part-payment scheme: Bank of New Zealand claiming $3.6 million and investor
Audrey Investments Ltd claiming $2.4 million.
They said the proposal was pushed through with votes from related party
debts; family trusts in which Mr McKillen was a discretionary beneficiary or
from investment vehicles where he exercised indirect control. These votes alone gave a voting majority of
73 per cent. A 75 per cent majority is
necessary to approve a part-payment scheme.
Evidence was given that Mr McKillen was
offering creditors three cents in the dollar to be paid at the rate of one cent
in the dollar each year over three years.
Only external creditors were to share in the payout; related party debts
were to be written off.
Associate judge Doogue ruled the bulk of
the related party debt should have been excluded from voting. This debt arose from personal guarantees
given by Mr McKillen and there was no evidence the guarantees had been called
up. Judge Doogue further said he would
have refused approval for the part-payment scheme in any event. As a matter of commercial morality, creditors
should not be forced into a part-payment scheme where a debtor creates a
complex structure of family trusts providing no clarity as to financial
resources available, he ruled.
Horton
v. McKillen – High Court (11.12.15)
16.022