Associate judge Roger Bell delivered an oral decision this afternoon, dismissing the Shanghai-based businessman's two applications to thwart the bankruptcy proceeding.
This doesn't mean Yan is bankrupt yet, but the clock now starts ticking for him to prove he is not insolvent. The onus is on him now to pay up, reach a payment agreement with the liquidators or prove he has a counterclaim.
Exercising his discretion, associate judge Bell rejected Yan's suggestion that the proceeding should be held off while he also appeals Justice Cooke's ruling. The appeal is set down for a week next April but a decision may take months due to its complexity.
Associate judge Bell noted that if Yan is adjudicated bankrupt, "there is a real risk that his appeal may be abandoned because as bankrupt he would lose standing to appeal."
"The questions arising on appeal might have wider application than the parties themselves. Proceedings by liquidators against directors for breach of duties are an increasingly common remedy in liquidations today," he said.
"Guidance from the Court of Appeal is likely to be of great interest to the commercial community. Therefore there is a public interest in the appeal."
However, the judge said he was more concerned with the timing of the bankruptcy proceedings because if he did not let them continue the creditors would have to wait until the appeal court gives judgment. This had important implications if there were voidable transactions involved, he said.
Yan had earlier indicated that he might protest bankruptcy on jurisdictional grounds and appeal an earlier decision by associate judge Hannah Sargisson on that issue.
Associate judge Bell acknowledged Yan's lawyers might try other ways to prevent bankruptcy, but suggested his colleague's decision was likely to be upheld.
"On any review, I'm sure that it would be upheld as, in this case, there is a real and substantial connection with New Zealand," he said. If there was to be bankruptcy it would have to be in New Zealand as it appeared China did not recognise personal insolvency, he said.
Delivering arguments for Mainzeal's liquidators, Mark O'Brien QC told the court Yan had to pay up and suggested he had the funds to do so.
"We want to test his solvency - he says he can't pay, he says he can't secure but, with respect, the plaintiffs do not accept that," O'Brien told the court.
While Yan's lawyer, David Chisholm, shook his head, O'Brien told the judge that Yan was "not just a little, but very wealthy."
"He's a man of resource and the liquidators have achieved a handsome judgment and are entitled to the fruits of their labour and to exercise their rights to do so," O'Brien added.
He said the liquidators aren't arguing that the appeal isn't valid, but he said its strength doesn't really matter when deciding bankruptcy.
"We differ in view, but we are not saying it is frivolous or vexatious and I think that is all you need to know," O'Brien said, reminding the bankruptcy judge that he was not there to decide the appeal.
"I do not want to embark on that exercise," Bell said with a wry smile, having noted the case file heading to the appeal court required 13 boxes.
When O'Brien continued to discuss Yan's purported wealth, including property in Shanghai that he said was purchased for $20m but had increased by more than 100 times in value, his opponent interjected.
"There is quite a lot of dispute about quite a lot of this, but my friend can keep giving evidence from the bar," Chisholm said.
Earlier today, Chisholm had labelled the bankruptcy proceedings a "media sideshow" intended to put pressure on his client.
O'Brien said Mainzeal's liquidators were entitled to communicate through the press, noting to the court that his opposition had also engaged with the media.
Earlier, Chisholm had argued the Yan had a legitimate appeal and suggested that trial judge Justice Cooke had gone off track and decided on a case that wasn't put before him.
He says this was a breach of natural justice.
The liquidators are cross-appealing Justice Cooke's judgment, arguing the amount to pay in damages should be $73m.
