A company director who bought an $883,000 aeroplane as part of a sponsorship deal with Gisborne City Football Club has had judgment entered against him for just under $480,000.
With court costs and interest, the figure that accountant Kevin John Whitley has to pay UDC Finance balloons out to more than $500,000.
In a judgment from the High Court at Auckland, Associate Judge David Abbott said that Mr Whitley did not have any arguable defence against UDC's claim.
The court was told that Mr Whitley was the chief executive of a group of companies known as the Emerald Group when the club sought support, particularly with travel.
He was also chief executive of Gisborne City, who played as far away as Wellington in the Central League, and had been chartering an Air National Corporate Ltd aircraft for away travel.
Air National proposed that Emerald invest in an aircraft that it would supply.
Under the arrangement, the club would have free use of the plane throughout the season but otherwise Air National would continue using it as part of its fleet.
A company called Kevair Ltd, with Mr Whitley as sole director and shareholder, was incorporated to buy the plane, with the deal settled in February 2006.
Kevair signed two agreements with Air National - one to purchase the aircraft for $883,000 and the second a management agreement estimated at around $284,000 a year.
The purchase of the plane was funded through a five-year loan of $540,000 from UDC, with the rest coming from Emerald Group or its investors.
Mr Whitley and Kevair were recorded as the borrowers and Mr Whitley was recorded as guarantor of the UDC loan.
Kevair had expected that revenue from hire or charter of the aircraft when not being used by the club would meet all costs under the management agreement with Air National, as well as its commitments to UDC.
"Unfortunately, apart from the first month of operation, the aircraft failed to produce the projected cash surplus," Associate Judge Abbott said.
While Emerald supported payments for a time, that ended when Mr Whitley and the other investors parted company and the group split up.
Associate Judge Abbott said that as part of the break-up, Mr Whitley agreed to reimburse the other investors $US204,000 ($NZ282,824) they had advanced towards the purchase of the plane.
Kevair defaulted on the UDC loan instalments in June and September 2007.
Mr Whitley asked UDC to repossess and sell the aircraft, an invitation that was not taken up by the finance company.
Instead in December that year UDC made demands on Kevair and Mr Whitley for the amount owing at that time, $479,541.
Meanwhile Air National says Kevair owes it $663,791 under the management agreement, including $326,000 for repairs.
It has claimed a lien on the plane which it is continuing to use to pay down the outstanding debt.
Mr Whitley's lawyers argued that the guarantee had been discharged because UDC failed to take possession of the aircraft or to register its interest, thereby allowing Air National to claim its lien on the plane.
NZPA