Carters Building Supplies Limited t/a Carters v Li

[2025] NZHC 1876

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-1005

[2025] NZHC 1876

IN THE MATTER

of the Insolvency Act 2006

AND

IN THE MATTER

of the bankruptcy of Zhiwei Li (also known as Jack Li)

BETWEEN

CARTERS BUILDING SUPPLIES

LIMITED trading as CARTERS Judgment Creditor

AND

ZHIWEI LI

Judgment Debtor

Hearing:	2 July 2025 (by AVL)
Appearances:	P J Morris for Judgment Creditor Self-represented Judgment Debtor
Judgment:	10 July 2025

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 10 July 2025 at 2.30 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

…………………………

CARTERS BUILDING SUPPLIES LIMITED trading as CARTERS v LI [2025] NZHC 1876 [10 July 2025]

[1]                 Carters Building Supplies Limited trading as Carters (Carters), applies to bankrupt the judgment debtor, Mr Li. Mr Li opposes the application.

[2]                 Carters obtained a judgment by default against Mr Li in the District Court in April 2024 for $224,999.72. It issued a bankruptcy notice the following month, followed promptly with an application to adjudicate Mr Li bankrupt.

[3]                 After receiving the adjudication application, Mr Li applied to set aside the District Court judgment. Mr Li also filed a notice of intention to oppose the creditor’s adjudication application on the basis he disputed the amount of the debt. Ultimately, Mr Li’s application to set aside the judgment was struck out as Mr Li failed to file an affidavit in support and failing to appear when the matter was called.

[4]                 Mr Li has abandoned a challenge, originally in his opposition, to the correctness of the underlying judgment.

[5]                 The remaining grounds in Mr Li’s notice of opposition dated 30 July 2024, he representing himself, are that he has tried to settle with Carters but payment plans have been declined, that bankruptcy would not result in Carters’ debt being paid but would only cause both Carters and Mr Li “business damage”, that the debt is the result of the property market in Auckland collapsing, and that Mr Li’s business is recovering and cashflow “will be available to pay back the creditor in several months”.

[6]                 I accept Mr Morris’ submission, counsel for Carters, that the formal requirements for an adjudication order under the Insolvency Act 2006 (the Act) are satisfied and that Carters is prima facie entitled to an order for adjudication subject only to the discretion of the Court.1 Mr Li does not dispute Carters has satisfied the requirements for seeking his adjudication.

[7]                 Carters’ application was heard nearly a year after the date of Mr Li’s opposition and his optimism as to payment “in several months” has proved to be misplaced.

1      Re Epirosa HC Wellington B498/91, 6 March 1992 and Re Tootell, ex  parte  Rabobank Australia Ltd [2013] NZHC 2975 at [6].

[8]                 Under s 37 of the Act, the Court can refuse to adjudicate a debtor if it is just and equitable not to make an order of adjudication or there is  any other reason not  to make an order.

[9]                 The onus is on Mr Li to satisfy me that it is either not just and equitable to bankrupt him or that there is some other sufficient reason not to make an order for adjudication.2

[10]              The Court also has jurisdiction under s 38 of the Act to halt a creditor’s application at any time. The jurisdiction of s 38 is to be exercised flexibly and not by the application of fixed rules.3

[11]              Mr Li did not file written submissions. His opposition was based on his desire to repay Carters in due course.

[12]              Considerations under s 37 of the Act include whether the debtor can meet his debts over time and if so:

(a)does such an arrangement meet the requirements of achieving finality?

(b)the circumstances in which the debt was incurred, and do those circumstances suggest a creditor is acting unreasonably in pursuing adjudication?

(c)will adjudication be pointless?

(d)will the debtor if adjudicated be unable to support himself?

(e)does the debtor have such a standing in the community that there will be significant issues of stigma or embarrassment in adjudication?4

2      Re Tootell, ex parte Rabobank Australia Ltd, above n 1, at [6].

3      Re Kipping, ex parte Sharrock [2018] NZHC 3421 at [14].

4      Re Tootell, ex parte Rabobank Australia Ltd, above n 1 at [8].

[13]              In Re Demario, ex parte Anderson, Associate Judge Johnson said, in relation to s 38 of the Act, the broad thrust of the cases appears to be that in the case of an application based on a judgment debt and the service of a bankruptcy notice, the Court will only halt proceedings under s 38 where:5

(a)The judgment debtor can point to a particular course of action that he or she is taking or is proposing to take which if successful would have the effect of undermining the indebtedness upon which the proceedings are based;

(b)The Court is satisfied that the judgment debtor is bona fide in his or her intention;

(c)The Court is able to discern that there is some merit in the course of action;

(d)The judgment debtor has acted candidly by putting all relevant information before the Court; and

(e)The granting of a halt will not operate unjustly on the judgment creditor.

Discussion

[14]              The debt which was subject to the default judgment in the District Court arises out of a personal guarantee Mr Li gave in respect of the obligations of Kumeu East Realty Limited for building supplies purchased on its trade account  with Carters.  Mr Morris accepts this was a standard trade debt but one to which the guarantee was intended to apply. Mr Li says his company could not pay Carters because of a fall in the Auckland property market. That may well be correct, but Carters took a guarantee from Mr Li to protect itself against such market forces. Mr Li stood to take the profit if the development prospered — he must meet his obligations when it faltered.

[15]              Carters originally made demand under its guarantee on 21 March 2023. District Court proceedings were issued 29 June 2023. Kumeu East Realty Ltd was placed into liquidation by this Court on 21 June 2024 on the application of the Commissioner of Inland Revenue.

[16]              No payments have been made against the debt since a payment of $4,255.47 on 11 May 2023.

5      Re Demario, ex parte Anderson [2021] NZHC 1757 at [16].

[17]              I am satisfied that it is not just and equitable to decline to make an order for adjudication. Nor, in my view, do the circumstances warrant halting bankruptcy. At its most basic, Mr Li’s opposition to bankruptcy is based on the proposition that he will be able to trade his way out of the debt at some unspecified time in the future.

[18]              Mr Li, in his affidavit of 10 March 2025, refers in general terms to the failure of his company Kumeu East Realty Ltd and the failure of the property development it was undertaking. He says:

Following the project’s completion, I personally accumulated millions in debt (Statement of Assets and Liabilities annexed as “B”). My lawyer advised me to declare bankruptcy to eliminate the debt, but considering the interests of multiple creditors and my personal responsibility, I refused to dos.  Instead,  I remained committed to repaying all debts.

[19]              Mr Li says he has transitioned his business model from heavy asset investment into a light asset real estate service industry, focusing on consulting and planning.  Mr Li says this will permit him to leverage his expertise in real estate development and planning to ensure a supply of high-quality affordable housing.

[20]              Mr Li says that business model requires time to establish a client base and successfully develop projects, meaning his cashflow has been extremely tight in the year preceding his 10 March 2025 affidavit.

[21]              Mr Li says that in 2024 he transitioned into investment and consulting and says:

Currently, I have invested nearly NZD 250,000 in a property development project with Goldman Homes Ltd … which is expected to be completed by mid-2025. I anticipate recovering my investment with an estimated 60% return.

[22]              Mr Li also refers to his company, Jack Best (NZ) Limited (Jack Best) providing consultancy services for four real estate development projects.

[23]              Mr Li produces invoices Jack Best has issued for management fees. The first is  dated 31 October 2024 for $50,000  (including  GST) and due for payment on    30 November 2024. Another invoice is annexed for $50,000 (including GST) issued on 20 December 2024 and due for payment 31 December 2024. There is a further

invoice dated 20 January 2025 for  $100,000  (including  GST)  due  for  payment  31 January 2025. Finally, there is a second invoice for $100,000 (including GST) dated 20 February 2025 due for payment 20 March 2025. These invoices are issued by Jack Best of which Mr Li is the sole director and ultimately the sole shareholder.

[24]              The reality is that the above invoices which total $300,000 (including GST) have not resulted in any payment whatsoever to Carters. Mr Li, in his evidence, offers no explanation as to whether these invoices have been paid, if not, why not and if paid, where the money went. I also note that Jack Best has failed to file its annual return and the Registrar of Companies has initiated action to remove the company from the Register.

[25]              At the hearing, Mr Li said the invoices have not been paid and were in fact only due for payment when the respective projects were complete. Mr Li explained that the due dates were added to the invoices automatically by the app/software that he uses to create the invoices. I note, however, that the due dates for payment are not a consistent time from the date of the invoice, for example, the 20th of the month following. That lack of consistency does not support Mr Li’s explanation, nor does Mr Li’s claim in his notice of opposition that he would be able to pay Carters “in several months”. No other source of funds to make such a payment is identified by Mr Li.

[26]              Mr Li, in his affidavit dated 26 May 2025, asserts that by 2026 he anticipates Jack Best will be engaged in over 10 investment and consulting projects. Again, that must be doubted given the Registrar has initiated action to remove the company from the Register. Public notice has been given of the removal and the objection period has lapsed. The Companies office website advises that the Registrar intends to continue with the removal process unless an objection is received. At the hearing, Mr Li offered no explanation as to why he had failed to file the annual return but said he would attend to that omission.

[27]              The short point is, that despite Mr Li’s protests, Carters’ debt goes back to 2023. Nothing has been paid to Carters since 11 May 2023. I asked Mr Li what the timeframe for payment of the Carters debt was. Mr Li was unable to give a timeframe

noting the difficult financial circumstances and that he was still dealing with disputes arising from the failure of the Kumeu East Realty Ltd project.

[28]              None of this gives the Court any confidence that Mr Li can satisfy Carters’ debt over time. Again, Mr Li has already had three years to make some payment towards the debt. Mr Li has no concrete plan to pay Carters, now owed well over $250,000 (allowing for continuing interest and costs awards in the District Court on the struck out application to set aside judgment).

[29]              In my view, there is nothing unreasonable in Carters pursuing adjudication. Mr Li, aware of the Carters debt, on 3 November 2025 invested $250,000 in Golden Homes Limited. The existence of that claimed investment means it cannot be said adjudication would be pointless as there is at least that asset to be investigated by the Official Assignee along with the unpaid invoices. (Mr Li being the ultimate owner of the creditor under those invoices means the Official Assignee could, using Mr Li’s voting rights, take control of Best Jack and pursue those debts).

[30]              At the hearing, I asked Mr Li why he invested $250,000 in Golden Homes Ltd when he knew he owed money to Carters as a result of the March 2023 call on his guarantee. Mr Li said he was expecting the Kumeu East Realty Ltd project to produce money to pay Carters and at that point, Mr Li believed the Carters debt was in the region of $100,000. However, that still means that, knowing Mr Li’s company could not pay Carters, Mr Li chose not to meet his obligation under the guarantee opting to divert cash into another investment. Mr Li, when I asked him why the $250,000 loan to Golden Homes, (as it is described on the bank transfer record produced by Mr Li), was not listed as an asset in the statement of assets and liabilities, Mr Li explained it was because repayment of that amount was disputed by Golden Homes. However, in Mr Li’s affidavit of 26 May 2025, under the heading “The latest updates in the debtor’s business…” Mr Li said: “The investment in Golden Homes is nearing completion, with three units already sold”.6

6      Cash from the Golden Homes loan could not have been what Mr Li intended to fund the payments referred to in his 3 July 2024 notice of opposition as he said he was not expecting the Golden Holmes investment to general a return until mid-2025.

[31]              Mr Li does not assert that he would be unable to support himself if adjudicated bankrupt. Nor is there any evidence that bankruptcy would result in significant stigma or embarrassment to him.

[32]              The lack of any timeframe for the repayment of the Carters debt and Mr Li’s advice that the Golden Homes loan is disputed, means I have real doubts about Mr Li’s ability to repay Carters. The fact is he cannot repay Carters and his opposition amounts to the Court granting him an open-ended extension to pay the debt. In a practical sense, Mr Li is seeking an open-ended stay of enforcement given his claim he has no assets against which Carters could enforce its judgment. Mr Li’s repayment plan is, on his own case, dependent upon the property market recovery which is, of course, unpredictable.

[33] Mr Li’s own Statement of Assets and Liabilities, referred to at [18] above, records debts of $2,357,000 against assets of $22,000.

[34]              Carters acknowledge Mr Li has made payment proposals. The first proposal was  made  in  December 2022  and  would  have  seen  the  debt  paid  in  full  by  15 February 2023. That did not happen. While subsequent proposals were declined, had Mr Li made the payments he said he could make under those payment proposals, the debt would now have been cleared. That a creditor has not accepted a proposal does not prevent a debtor from in fact starting payments. Had the proposed payments been maintained and the debt substantially reduced, Mr Li’s opposition would look very different or, on a best case, the debt would have been cleared.

[35]              As Mr Morris points out, Mr Li is asking the Court to allow him to continue trading, albeit through a company while he is insolvent. With the future of Mr Li’s company uncertain, it appears Mr Li may intend to trade on his own account while insolvent — such being consistent with him not filing the annual return for his company.

[36]There is no basis to decline making the order sought by Carters.

[37]              Accordingly, there is an order adjudicating Mr Zhiwei Li bankrupt. The order is timed as at the date and time of the release of his judgment.

[38]              There is an order that Mr Li is to pay costs to Carters on a 2B basis plus disbursements as fixed by the Registrar.

Associate Judge Lester

Solicitors:
Stace Hammond, Hamilton (for Judgment Creditor)

Copy to:
Mr Zhiwei Li (self-represented Judgment Debtor)