McCore Group NZ Limited v Spring Views Development Limited
[2025] NZHC 111
•13 February 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-1069
[2025] NZHC 111
UNDER the Companies Act 1993 IN THE MATTER
of an application to put the defendant company into liquidation
BETWEEN
McCORE GROUP NZ LIMITED
Plaintiff
AND
SPRING VIEWS DEVELOPMENT LIMITED
Defendant
Hearing: 26 November 2024 Appearances:
J D Turner for the Plaintiff G Warren for the Defendant
Judgment:
13 February 2025
JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
[Application for a liquidation order]
This judgment was delivered by me on 13 February 2025 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar
Solicitors:
McVeagh Fleming (J D Turner), Albany, Auckland, for the Plaintiff Octagon Law Ltd (Bharat Bhanabhai), Auckland, for the Defendant
Counsel :
Gary J Warren, Green Lane, Auckland, for the Defendant
McCORE GROUP NZ LIMITED v SPRING VIEWS DEVELOPMENT LIMITED [2025] NZHC 111
[13 February 2025]
TABLE OF CONTENTS
Paragraph
Introduction [1]
Background [2]
Ground for McCore’s liquidation application [6]
Spring Views’ opposition [8]
Legal principles [9]
Analysis [14]
Statutory demand [17]
Conclusion on the statutory demand [26]
McCore loan [27]
Spring Views’ response [29]
Conclusion on the McCore loan [30]
Result [31]
Orders [32]
Introduction
[1] McCore Group NZ Limited (McCore), is seeking an order putting Spring Views Development Ltd (Spring Views) into liquidation. The application for a liquidation order is opposed by Spring Views.
Background
[2] On 21 December 2022, Spring Views and McCore entered into a construction contract (construction contract). The construction contract was for construction work for a project to develop units at 729 Great North Road, Auckland (the Property).
[3] On 28 March and 9 June 2023, McCore issued payment claims to Spring Views under the construction contract, totalling $239,494.46 (the debt). Spring Views failed to pay the owed amount.
[4] On 26 March 2024, Spring Views was served with a statutory demand issued by McCore. Spring Views failed to comply with the statutory demand.
[5]McCore then applied for Spring Views to be put into liquidation.
Grounds for McCore’s liquidation application
[6] The ground stated in McCore’s statement of claim filed on 29 April 2024 for putting Spring Views into liquidation is based on Spring Views’ failure to pay the debt following the statutory demand.
[7] In submissions made on behalf of McCore during the hearing, in addition to failure to pay the statutory demand, a further ground for requesting the liquidation order that was put forward, namely that Spring Views is indebted to McCore in respect of a loan made by McCore to Spring Views. The financial statements for McCore for the year ended 31 March 2023 disclose an alleged loan amount owing by Spring Views to McCore for the sum of $1,564,941.
Spring Views opposition
[8]Spring Views opposition to the order for liquidation is based on two issues:
(a)The construction contract under which McCore issued payment claims upon which the debt claimed by McCore in the statutory demand is based, was a contrivance and not a genuine construction contract.
(b)The loan amount which McCore alleges is owing by Spring Views to it is not an outstanding loan, rather the loan was converted to equity in Spring Views. Accordingly no loan amount is owing by Spring Views to McCore.
Legal principles
[9]Section 241 of the Companies Act 1993 provides:
241 Commencement of liquidation
(1) A company may be put into liquidation by the appointment as liquidator of a named person or of an Official Assignee for a named district.
(2) A liquidator may be appointed by—
(a) special resolution of those shareholders entitled to vote and voting on the question; or
(b) the board of the company on the occurrence of an event specified in the constitution; or
(c) the court, on the application of—
(i)the company; or
(ii)a director; or
(iii)a shareholder or other entitled person; or
(iv)a creditor (including any contingent or prospective creditor); or
(v)if the company is in administration, the administrator; or
(va)if the company is a financial markets participant, the FMA; or
(vi)the Registrar; or
(vii)if the company is a licensed insurer, the Reserve Bank of New Zealand; or
(viii)in the case of a company that has been removed from the New Zealand register, the Registrar or a person who, immediately before the company was removed from the New Zealand register, was a person described in subparagraph (ii), (iii), (iv), or (vii); or
(d) a resolution of the creditors passed at the watershed meeting held under section 239AT.
…
(3) An Official Assignee may be appointed liquidator of a company only—
(a) if the special resolution passed in accordance with paragraph (a) of subsection (2) is passed by reason of the Official Assignee exercising voting rights attaching to shares in the company of—
(i)a person who has been adjudged bankrupt; or
(ii)another company of which the Official Assignee is liquidator; or
(b) by the court.
(4) The court may appoint a liquidator if it is satisfied that—
(a) the company is unable to pay its debts; or
(b) the company or the board has persistently or seriously failed to comply with this Act; or
(ba) the company, or 1 or more of its directors or shareholders, has intentionally provided the Registrar with inaccurate information; or
(bb) the company, or 1 or more of its directors or shareholders, has in a persistent or serious way failed to comply with duties relating to the company—
(i)under this Act; or
(ii)under the Financial Reporting Act 1993 while in force, except that this subparagraph does not apply after 5 years have elapsed after this subparagraph came into force; or
(c) the company does not comply with section 10; or
(d) it is just and equitable that the company be put into liquidation.
(5) The liquidation of a company commences on the date on which, and at the time at which, the liquidator is appointed.
[10]Section 20 of the Construction Contracts Act 2002 (CCA) provides:
20Payment claims
(1)A payee may serve a payment claim on the payer for a payment, —
(a)if the contract provides for the matter, at the end of the relevant period that is specified in, or is determined in accordance with the terms of, the contract; or
(b)if the contract does not provide for the matter in the case of a progress payment, at the end of the relevant period referred to in section 17(2); or
(c)if the contract does not provide for the matter in the case of a single payment expressly agreed under section 14(1)(a), following the completion of all of the construction work to which the contract relates.
(2)A payment claim must—
(a)be in writing; and
(b)contain sufficient details to identify the construction contract to which the payment relates; and
(c)identify the construction work and the relevant period to which the payment relates; and
(d)state a claimed amount and the due date for payment; and
(e)indicate the manner in which the payee calculated the claimed amount; and
(f)state that it is made under this Act.
(3)A payment claim must be accompanied by—
(a)an outline of the process for responding to that claim; and
(b)an explanation of the consequences of—
(i)not responding to a payment claim; and
(ii)not paying the claimed amount, or the scheduled amount, in full (whichever is applicable).
(4)The matters referred to in subsection (3)(a) and (b) must—
(a)be in writing; and
(b)be in the prescribed form (if any).
[11]Section 21 of the CCA provides:
21Payment schedules
(1)A payer may respond to a payment claim by providing a payment schedule to the payee.
(2)A payment schedule must—
(a)be in writing; and
(b)identify the payment claim to which it relates; and
(c)state a scheduled amount.
(3)If the scheduled amount is less than the claimed amount, the payment schedule must indicate—
(a)the manner in which the payer calculated the scheduled amount; and
(b)the payer’s reason or reasons for the difference between the scheduled amount and the claimed amount; and
(c)in a case where the difference is because the payer is withholding payment on any basis, the payer’s reason or reasons for withholding payment.
[12]Section 22 of the CCA provides:
22Liability for paying claimed amount
A payer becomes liable to pay the claimed amount on the due date for the payment to which the payment claim relates if—
(a)a payee serves a payment claim on a payer; and
(b)the payer does not provide a payment schedule to the payee within—
(i)the time required by the relevant construction contract; or
(ii)if the contract does not provide for the matter, 20 working days after the payment claim is served.
[13]Section 23 of the CCA provides:
23Consequences of not paying claimed amount where no payment schedule provided
(1)The consequences specified in subsection (2) apply if the payer—
(a)becomes liable to pay the claimed amount to the payee under section 22 as a consequence of failing to provide a payment schedule to the payee within the time allowed by section 22(b); and
(b)fails to pay the whole, or any part, of the claimed amount on or before the due date for the payment to which the payment claim relates.
(2)The consequences are that the payee—
(a)may recover from the payer, as a debt due to the payee, in any court, —
(i)the unpaid portion of the claimed amount; and
(ii)the actual and reasonable costs of recovery awarded against the payer by that court; and
(b)may serve notice on the payer of the payee’s intention to suspend the carrying out of construction work under the construction contract.
(3)A notice referred to in subsection (2)(b) must state—
(a)the ground or grounds on which the proposed suspension is based; and
(b)that the notice is given under this Act.
(4)In any proceedings for the recovery of a debt under this section, the court must not enter judgment in favour of the payee unless it is satisfied that the circumstances referred to in subsection (1) exist.
Analysis
[14] The issue to be determined in this judgment is whether the defences raised by Spring Views to McCore’s application for an order for liquidation are reasonably arguable such that it is not just and equitable that Spring Views is put into liquidation.
[15]As noted at [8] the two defences put forward by Spring Views are:
(a)The statutory demand issued by McCore is based on payment claims under the construction contract entered into between McCore and Spring Views. The construction contract is a contrivance, and therefore the payment claims made under it were not valid, and consequently the statutory demand issued by McCore is not a valid basis on which the order for liquidation of Spring Views should be made.
(b)The loan allegedly owing by Spring Views to McCore has been converted to equity in Spring Views, and there is no outstanding debt owed by Spring Views to McCore. The alleged outstanding loan is disputed and is not a basis on which an order for liquidation of Spring Views can be justly and equitably made.
[16]I examine each of these grounds in turn.
Statutory demand
[17] Mr Turner, for McCore, submits that construction works were carried out and payment claims were issued by McCore to Spring Views in accordance with s 20 of the CCA and the construction contract. He submits the payment claims comply with the CCA and in accordance with s 22 of the CCA, Spring Views was liable to pay McCore the sums sought in respect of the payment claims unless Spring Views served, within 20 working days of service of the payment claims on Spring Views, a payment schedule on McCore that certified a payment to it and/or any legitimate reasons for withholding payment of any sum. Mr Turner submits that Spring Views failed to serve on McCore the payment schedule in response to the payment claims within the prescribed period (or at all) and accordingly after a 20 working day period expired, Spring Views was liable to pay to McCore the debt owing to McCore under s 23 of the CCA.
[18] Mr Turner submits that as the debt was not paid by Spring Views, McCore was entitled to serve a statutory demand on Spring Views which it did on 26 March 2024, and Spring Views did not make payment of the debt nor seek to set aside the statutory demand. Accordingly, he submits Spring Views is presumptively insolvent and McCore therefore brought the liquidation proceeding.
[19] Mr Turner submits that the CCA imposes a “pay now/argue later” régime and even if there was a genuine dispute as to the amount claimed, it does not release a party from its obligations to either pay the claimed sums or respond with a payment scheduled in accordance with the CCA. Mr Turner refers to the decision of Marsden
Villas Ltd v Wooding Construction Ltd1 as authority for the proposition that the CCA sets up a procedure whereby, if the principal has failed to supply a response within the necessary time frame, the payment claimed must be made, and the principal can be obliged to pay in the interim “whatever the merits”.
[20] Mr Turner submits failure to pay the claimed amount creates a debt owing which is claimed by statutory demand served on Spring Views and under s 79 of the CCA, Spring Views is precluded from raising any counterclaim, set-off or cross- demand to the payment claims as debts.
[21] Mr Turner submits that the construction contract was not a contrivance and the contract was essential to obtain the required finance from China Construction Bank (CCB).
Spring Views’ response
[22] Mr Warren, for Spring Views, notes the project was divided into two distinct phases which he describes as follows:
(a)Firstly, the purchase of the land and initial earthworks (funded by investor finance). These funds were to be paid to each of Spring Views’ investor shareholder accounts and there were also inter-company loans that were recorded.
(b)Secondly, the construction of the residential buildings (funded by external lender financing).
[23] He submits that the initial phases, including the preliminary earthworks, were to be paid out of investor funds. These were commenced in September 2021 and completed in February 2022. He submits there was no construction contract, and the work was conducted by outside contractors who specialised in earthworks. The purchase of the Property was completed in or around July 2022 from additional investor funds.
1 Marsden Villas Ltd v Wooding Construction Ltd [2007] 1 NZLR 807.
[24] Mr Warren submits that it was a condition of financing by the external lender at the time of construction, CCB, that there must be a signed construction contract in place and that at the time the construction contract was entered into, the Spring Views directors were in a commercial dispute and that Mr Yang Chen (Derek) (Mr Chen) was pressured into signing the construction contract by the McCore shareholders, who are also shareholders in Spring Views. He submits:
(a)The McCore shareholders, Mr Wang, Mr Matthew Borg and Mr Michael Gibson, pressured Mr Chen to sign the construction contract drawn up by the McCore parties on behalf of Spring Views. The construction contract contained terms advantageous to the contractor over the principal, Spring Views, for example there was no contractor performance bond.
(b)Mr Chen had no power to enter into or bind Spring Views in any form of contract and all contracts had to be presented to, reviewed, authorised and signed by both Spring Views directors.
(c)Mr Chen initially refused to sign the contract as he understood he did not have any power to do so, however Mr Wang purported to authorise Mr Chen to sign on behalf of Spring Views. Mr Chen accordingly felt pressured into signing the document and he asked why he was signing it and not Mr Zheng, Spring Views’ other incumbent director.
(d)Mr Chen was assured the construction contract was a requirement for CCB and it was only for the purposes of obtaining finance and would have no basis as a real contract between McCore and Spring Views.
(e)The McCore shareholders were in a commercial dispute with Mr Zheng and by refusing to present the construction contract to Mr Zheng, they deprived Spring Views of the opportunity to contest and review the terms of the contract.
[25] Mr Warren submits the CCA does not apply as the construction contract was a contrivance to secure funding only. He submits its purpose has been unfairly enlarged by McCore as an avenue to unjustly deplete Spring Views’ assets to the detriment of the other Spring Views shareholders.
Conclusion on the statutory demand
[26] It is clear that there is conflicting evidence in respect of the circumstances in which Spring Views entered into the construction contract. In particular, the affidavits of Mr Zheng dated 22 October 2024 and Mr Chen dated 19 November 2024 conflict with the reply affidavit of Mr Gibson dated 19 December 2024. There is a direct conflict of evidence between the parties as to the circumstances in which the construction contract was signed. In my view, the circumstances surrounding the entry into the construction contract by Spring Views, the validity of the payment claims issued under the construction contract, and the validity of the statutory demand based on the debt created by the payment claims, needs to be investigated at trial, with evidence and cross-examination. The conflicts of evidence cannot be resolved on affidavit evidence in the context of McCore’s application for a liquidation order against Spring Views.
McCore loan
[27] Mr Turner submits that it is clear that Spring Views is indebted to McCore by way of a loan advance made by McCore to Spring Views. He points to the financial statements for McCore for the year ended 31 March 2023 which show inter-company loan owing by Spring Views to McCore for the sum of $1,564,941. He also points to the accounts of Spring Views for the year including 31 March 2023 which show a loan owing to McCore of the same amount. These accounts were prepared by Nexus Chartered Accountants Limited (Nexus) who have prepared annual financial statements for both McCore and Spring Views.
[28] Mr Turner submits the sum loaned was not recorded as an equity investment, nor was there any exchange of shares or capital which would typically accompany such an investment. He submits that Nexus have never recorded any of the alleged money advancements as equity advancements and they were recorded as loans.
Spring Views’ response
[29] Mr Warren submits that the alleged loans from McCore were converted to an equity shareholding in Spring Views. He points to the following as evidence of this:
(a)Mr Wang issued a statement in July 2022 that once the Property was paid off, all loans would be converted to shareholdings with a direct proportion to the amounts each investor had advanced. He points to Mr Wang’s email of 6 July 2022, which stated:
Once this final payment is done, Jenny will send through the cost to date report and a summary of total cash input by each party. After reconciliation, then the re-allocation of shares to be distributed retrospectively.
(b)On 12 July 2022, once the Property had been made freehold, each shareholder’s financial investments were to be directly represented by the proposed share ratios. Mr Wang emailed Nexus (Yvette Pan), and instructed her to allocate Spring Views’ shares in the percentages requested, which she did.
(c)An exchange of emails between Mr Wang and Nexus on 20 October 2022 confirmed the conversion of the loans to equity as follows:
(i)Mr Wang’s email to Nexus:
The associated loan from ZYJ Group Limited to Spring Views Development Limited was $986,400 as at 31 March 2021 and was $1,036,400 at March 31, 2022. There has been no interest accrued or paid in relation to this loan. The loan was converted to an equity investment based on a 1:1 dollar value in July 2022 to fully pay off the mortgage on the land.
… the current share allocation in Spring Views Development Limited reflects the equity investment from each shareholder.
(ii)Ms Peng of Nexus later that day confirmed the McCore loan had been converted into equity in accordance with the July 2022 resolution:
Yes, I can confirm the statement regarding the loan from ZYJ Group to Spring Views Developments Ltd in the below email is correct.
Conclusion on the McCore loan
[30] It is clear that there is conflicting evidence as to whether the loan which McCore alleges is owing by Spring Views was converted to equity in Spring Views or not. This conflict of evidence cannot be resolved on the basis of affidavits in the context of McCore’s application for liquidation of Spring Views, and requires evidence and cross-examination at trial to determine the position. It is unclear whether or not Spring Views is indebted to McCore for a loan and accordingly Spring Views’ alleged indebtedness under the loan is not a basis upon which a liquidation order can be just and equitably made.
Result
[31] As a result of the conclusions I have reached at [26] and [30], I am of the view that McCore’s application for an order putting Spring Views into liquidation should be dismissed. The reasons for my view, as noted in [26] and [30] are:
(a)There is conflicting affidavit evidence regarding the circumstances in which the construction contract between McCore and Spring Views was entered into. Accordingly, there is a question as to whether the contract is valid and whether payment claims made under it are valid. It follows that there is an issue as to whether the debt resulting from the payment claims under the CCA on which the statutory demand was based, is valid. These conflicts of evidence can only be resolved by evidence and cross-examination at trial and cannot be resolved on affidavit evidence in the context of McCore’s liquidation application.
(b)Similarly, in relation to the loan which McCore alleges is owing to it by Spring Views, there is conflicting evidence as to whether this loan
has been converted into an equity contribution in Spring Views or not. Again, this cannot be resolved on affidavit evidence, and in the context of the liquidation application, needs to be resolved by evidence and cross-examination at trial.
Orders
[32]I make the following orders:
(a)McCore’s application for an order putting Spring Views into liquidation is dismissed.
(b)As Spring Views is the successful party, costs should follow the event. Counsel are directed to endeavour to agree costs and failing agreement being reached within a period of 20 working days from the date of this judgment, counsel for Spring Views will file a memorandum as to costs (not to exceed five pages) within 5 working days after the expiry of the
20 working day period, and counsel for McCore will file a memorandum (not to exceed five pages) in response within 5 working days of receipt of counsel for Spring Views’ memorandum. A decision as to costs will then be made on the papers.
…………………………….. Associate Judge Taylor
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