The High Court allowed payment of beneficiary living expenses out of a frozen family trust bank account over top of allegations by unpaid creditor FMI Building that the Li family’s Oka Tree Family Trust was part of a scheme designed to cheat creditors.
Lin Li is bankrupt after his company failed. Auckland-based building supplier FMI Building Innovation Ltd is chasing him for over $1.2 million, a company debt Mr Li personally guaranteed.
To protect its position, FMI Building got a High Court order freezing all assets of Mr Li, his spouse Xi Shen, and their family trust Oka Tree.
FMI Building alleges Mr Li is shifting all his assets out of creditors’ reach.
The High Court was told Mr Li transferred a South Auckland property to Oka Tree in September 2024, just days after he received a demand from FMI Building calling for payment on its guarantee.
Some two weeks later, Mr Li sold a second South Auckland property with net proceeds of some $200,000 transferred to his mother-in-law in China. Repayment of her loan, he said.
In addition, Mr Li and Ms Shen signed a Property (Relationships) Act agreement around the same time stating the two South Auckland properties were Ms Shen’s separate property.
The validity of all these transactions is disputed.
Meanwhile, Mr Li asked the High Court to release funds from Oka Tree’s frozen bank account to meet household expenses and legal fees.
Evidence was given that funds frozen in New Zealand then totalled about $151,000.
FMI Building objected to any release.
The bank account is a Trust asset. The Trust does not have any living expenses, it said.
Mr Li has provided no evidence of insufficient funds within the family to pay current living expenses, FMI Building said, particularly in light of the $200,000 remitted offshore to family in China.
Justice Venning said High Court Rules allow release of frozen funds to meet ordinary living expenses. A broad interpretation of these Rules allows release of family trust assets to meet beneficiary living costs, he ruled.
Reimbursement of $60,100 was allowed for living costs and legal fees incurred.
FMI Building Innovation Ltd v. Li – High Court (2.04.25)
25.101