Mainzeal director opposes RGREL liquidation
A company linked to collapsed construction firm Mainzeal Property should not have been put into liquidation, the Court of Appeal has heard in Wellington.
Richard Yan, Mainzeal's sole director, is opposing the liquidation of Richina Global Real Estate (RGREL) on the grounds that the company did not meet the criteria for liquidation.
Yan is also sole director of RGREL, which the court heard had been a funnel for overseas funds into the Mainzeal companies.
His lawyer, David Chisholm, QC, told the court that RGREL had been able to pay its immediate debts.
However, it had been tipped into liquidation by a relatively small amount - a $136,000 statutory demand from Mainzeal Property.
Another sum, $289,000 in foreign exchange losses, was undisputed and would have been covered by a related company, Isola Estate, except that Yan had agreed to freeze Isola and RGREL's property.
"That was our downfall," Chisholm said.
He argued that it would be "an abuse of process" to wind up a company when it relied on disputed debts.
He challenged $23 million in pooling orders that the Mainzeal and RGREL liquidator, BDO, had sought from RGREL and Isola as contributions towards the Mainzeal liquidation process.
He said the "cart had been put before the horse" and the "meatier issues" raised by the pooling orders should have been dealt with before the liquidation hearing.
The orders should not to be used as a "some sort of back-door debt-collection process", he said.
Chisholm said the liquidator should not be allowed to "pick the eyes out of" company restructuring moves in 2011 and 2012 and not recognise others.
Zane Kennedy, the lawyer for BDO, argued that the receivers had been "drip-fed" information throughout.
There had been "nowhere near enough evidence" at the time they sought RGREL's liquidation to prove there "was a bona fide disputed debt".
Mainzeal had been a "massive corporate collapse", with creditors owed more than $100 million, and an investigation was in the public's interest.
He noted a high number of inter-company transactions, some of which made no commercial sense, with loans on terms such as "no interest payable" or "payable only on profitability".
The liquidators were working "with one hand behind their backs" to understand the nature of the transactions of New Zealand-based companies when it appeared the ultimate owners were in China.
Kennedy said he believed the liquidation judge had taken the view that even if RGREL could have borrowed from Isola to pay its foreign exchange losses, this did not demonstrate RGREL could meet its debts.
The parties debated whether BDO should be allowed to seek the liquidation of Isola, owned by Yan and his wife.
Kennedy said Isola had failed to meet its obligation to provide any substantial evidence that it was solvent and clearly owed King Facade at least $2.4m.
Chisholm said that Isola had no creditors besides the disputed amount and a $7m loan from RGREL on a 10-year term.
The decision was reserved.