He has blamed the collapsing Auckland property market for his financial woes, but hoped to trade himself out of the quagmire once the real estate market rebounded.
Li was made bankrupt in July by order of the High Court after an application by Carters building supplies company.
The application related to a $225,000 debt.
A decision by Justice Lester says the debt was subject to a default judgment last year in the District Court.
It arose out of a personal guarantee Li gave in respect of his company Kumeu East Realty Ltd (KERL) for building supplies purchased on its Carters trade account.
Li argued the company could not pay Carters because of a fall in the Auckland property market.
Carters demanded repayment in March 2023 and launched legal proceedings later that year.
KERL, described as a residential property development company, was placed in liquidation by the High Court in June last year after an application by Inland Revenue.
IRD refused to provide details about its application or say how much it was owed.
A liquidator’s report says auditors are reviewing potential claims after identifying “inter-company transactions” across related entities.
“The liquidators have been advised of potential legal action commenced against the director in his personal capacity by one of the company’s creditors.
“The liquidators will continue to monitor subsequent legal proceedings in this regard.”
‘Must meet his obligations’
Justice Lester’s decision says Li opposed Carters’ bankruptcy application and tried to settle with the company but his payment plans were rejected.
Representing himself, he argued bankruptcy would cause “business damage” to both him and Carters.
Li claimed the debt was “the result of the property market in Auckland collapsing”, but said his business was recovering and cashflow would be available to repay creditors “in several months”.
However, the judge said Li’s optimism was “misplaced”, pointing out he’d made no repayments to Carters since May 2023.
“Mr Li stood to take the profit if the development prospered — he must meet his obligations when it faltered,” the judge wrote.
The judge said Li’s opposition to bankruptcy was based on him being able to trade his way out of debt “at some unspecified time in the future”.
In an affidavit in March this year, Li discussed the failure of KERL and the property development it was undertaking.
He said he personally accumulated “millions in debt” after the project’s completion. A financial statement recorded personal debts of $2.357m against assets of $22,000.
“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 do [so]. Instead, I remained committed to repaying all debts.”
The developer blamed the collapsing Auckland housing market for his financial problems.
He had transitioned his business model to a “light asset real estate service” focused on consulting and planning, which he claimed would let him leverage his expertise in property development to ensure a supply of high-quality affordable housing.
However, this required time to establish a client base and develop projects, meaning his cashflow had been “extremely tight”, the decision says.
Li told the court he had invested nearly $250,000 in a property development with another housing company and anticipated recovering his investment with a 60% return.
He also produced invoices totalling $300,000 for management fees linked to another of his companies, Jack Best (NZ) Ltd.
The judge said none of the invoices had resulted in payment to Carters and there was no evidence as to whether the invoices had been paid or where the money went.
Jack Best had failed to file returns and was now being removed from the companies register.
The judge questioned why Li had invested $250,000 in a housing project when he knew he owed money to Carters.
“Mr Li chose not to meet his obligation under the guarantee, opting to divert cash into another investment.”
The judge said he had “real doubts” about Li’s ability to satisfy the Carters debt. Li’s repayment plan was dependent upon the property market recovering, “which is, of course, unpredictable”.
There was no evidence that bankruptcy would result in “significant stigma or embarrassment”, or that Li would be unable to support himself.
The application was therefore granted, with Li ordered to pay Carter’s costs.
The Official Assignee is now responsible for administering Li’s bankruptcy estate under the Insolvency Act.
Li could not be reached for comment.
Lane Nichols Auckland desk editor for the New Zealand Herald with more than 20 years’ experience in the industry.
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