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McCore Group NZ Ltd (McCore) sought an order to place KC Seaview Ltd (Seaview) into liquidation on the grounds that Seaview was unable to pay its debts. The dispute arose from a statutory demand served by McCore on Seaview for repayment of an advance of $840,000. Seaview opposed the liquidation, with Mr Chuxi (Jason) Zheng’s interests arguing that the advance was an equity investment rather than a loan repayable on demand. The High Court of New Zealand, Auckland Registry, was tasked with determining whether a genuine and substantial dispute existed regarding the nature and repayment terms of the McCore advance.

The central legal issue before the court was whether Seaview was unable to pay its debts, which hinged on whether the $840,000 advance from McCore to Seaview constituted a loan repayable on demand or an equity investment. McCore contended that the advance was a loan, and as Seaview had not complied with the statutory demand, liquidation was appropriate. Conversely, Mr Zheng’s interests argued that the advance was intended as an equity investment, to be repaid pro-rata with other shareholder advances and subject to the venture's profitability, meaning it was not presently payable in full.

Associate Judge Brittain noted that a liquidation proceeding founded on a debt subject to a genuine and substantial dispute could be stayed or dismissed, as enforcing such a debt through liquidation might constitute an abuse of process. The court found that there were differing accounts of what was discussed at the time of the investments, and these could not be resolved on affidavit evidence alone, with limited documentary evidence to support the assertions made. While a deed of settlement between Mr Zheng and Mr Wang confirmed the existence of loans, it was silent on the intention of the parties regarding repayment if sale proceeds were insufficient to meet all advances. The court concluded that a genuine and substantial dispute existed regarding the terms of Seaview’s obligation to repay the McCore advance, and therefore, the application for liquidation was dismissed.