Two months after a February 2013 discharge from his second bankruptcy, Feroz Khan embarked on a scheme to buy and subdivide land at Parakai near Helensville resulting in a $339,700 loss to creditors and Khan misappropriating $100,000 cash properly belonging to his development company.
Bankrupted in 1998 and again in 2010, Mr Khan’s second bankruptcy followed failed attempts to subdivide land at Parakai. Undeterred by this earlier setback, his new 2013 Parakai proposal envisaged a 65 lot residential development. His special purpose company Fordyce Road Development Ltd obtained resource consent for the subdivision after an Environment Court appeal. Mr Khan provided no working capital for his company. Resource consent costs were funded with Fordyce Road borrowing at rates of up to 27 per cent.
The High Court was told Parakai vendors cancelled their contract of sale in 2015 after Fordyce Road failed to pay a required deposit or to settle what was an amended purchase price at $3.25 million. The sale price was renegotiated over the two year period it took to get resource consent. Mr Khan disputed the vendors’ right to cancel. Fordyce Road received $100,000 in settlement of all claims it may have had over the disputed cancellation. Evidence was given that this payment did not go through Fordyce Road’s books; Mr Khan diverted payment to his own bank account.
With Fordyce Road in liquidation, the liquidator sued Mr Khan and his spouse. Justice Lang ordered Mr Khan to pay $339,700 to Fordyce Road, for debts incurred by the company when it was insolvent and now left unpaid. The company was insolvent from the off. It had no capital, no present source of income and was totally reliant on borrowed money. Mr Khan was personally liable for his company trading whilst insolvent.
In addition, both Mr and Mrs Khan were ordered to repay a portion of the $100,000 misappropriated from the company: Mr Khan $62,200 (of the $100,000 taken, he passed on some $35,000 to Peters Property Holdings Ltd left unpaid by Fordyce Road); Mrs Khan $29,000 received from her husband which she knew properly belonged to Fordyce Road, said Justice Lang. Mrs Khan is only liable to repay $29,000 if her husband fails to pay the ordered $62,200. They did not appear in court to defend the liquidator’s claims.
Prior to the High Court hearing, Fordyce Road liquidator froze a Kiwibank account in the Khans’ names holding $125,300.
Fordyce Road Development Ltd v. Khan – High Court (12.09.19)
19.166