Plans by Mainzeal’s Richard Yan for a hotel and vineyard on Waiheke Island hosting Chinese Communist Party officials are at standstill. Isola Vineyards Ltd is in liquidation with assets of 33,000 bottles of wine, land on Onetangi Road valued at $1.9 million and some $727,500 frozen in a law firm’s trust account. The High Court ordered $2.16 million damages be paid by Isola to Mainzeal liquidators following 2012 debt restructuring trying to prevent Isola going down with the Mainzeal ship.
Isola is controlled by Mr Yan and his spouse. The High Court was told purchase of Isola was funded with Mainzeal money, channelled through a related company: King Façade Ltd. With Mainzeal’s imminent collapse, Isola was at risk. Mainzeal would want its money back.
In early 2012, Mr Yan arranged a restructuring of King Façade’s debt. This was to rationalise King Façade’s tax position, Mr Yan told the High Court. It had the effect of eliminating debt owed to King Façade’s only external creditor, Bank of New Zealand, and increasing the debt owed a related company: Richina Global Real Estate Ltd. Curiously, this increased debt was structured as a contingent debt; repayable in ten years and then only if Richina Global was profitable. King Façade’s contractual right to a specific sum of money from Isola had been replaced by a King Façade loan to Richina Global of little economic value.
In the High Court, Justice Cooke ruled the debt restructuring prejudiced Mainzeal group. Its ability to recover $2.16 million from Isola (through King Façade) had been replaced by nothing. This amounted to a transaction for inadequate consideration, in breach of the Companies Act. Both Richina Global and Isola Vineyards were ordered to pay King Façade damages of $2.16 million.
Mainzeal Property and Construction Ltd v. King Façade Ltd – High Court (26.02.19)
19.050