BMW Financial Services New Zealand Limited v Cotton

[2021] NZHC 854

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-002343

[2021] NZHC 854

BETWEEN

BMW FINANCIAL SERVICES NEW ZEALAND LIMITED
Plaintiff

AND

MARTIN NEWELL RAINE COTTON

Defendant

Hearing:

21 April 2021

Appearances:

R Langdana for Plaintiff

No appearance for Defendant

Judgment:

21 April 2021

ORAL JUDGMENT OF VENNING J

Solicitors:           Paul Davies Law Limited, Auckland Counsel: J Long/R Langdana, Auckland Copy to:           Defendant

BMW FINANCIAL SERVICES NZ LTD v COTTON [2021] NZHC 854 [21 April 2021]

[1]        The plaintiff, BMW Financial Services New Zealand Limited, seeks judgment for the recovery of a debt owed to it by the defendant, Martin Newell Raine Cotton.

[2]        The plaintiff commenced these proceedings and applied for summary judgment against Mr Cotton in December 2020. The claim is based on a guarantee provided by Mr Cotton.

[3]        Mr Cotton initially filed a notice of opposition to the plaintiff’s application on the day the matter was first called in the summary judgment list. The proceedings have been subsequently called on two further occasions. At the last of those calls on 23 March Gault J noted the file that while the plaintiff had sought judgment because Mr Cotton had failed to file any affidavit to support his opposition the Judge considered it appropriate to allocate a formal proof hearing. That formal proof hearing has been convened and heard this morning.

[4]        At the outset of the hearing Mr Cotton was called. There is no appearance of or for Mr Cotton.

[5]        The background can be stated shortly. It is a relatively straightforward commercial arrangement. The plaintiff carries on business throughout New Zealand as a financial services provider and lends money to, amongst other things, enable customers to purchase motor vehicles. At relevant times the defendant was a company director of a company MSLN Limited.

[6]        By a written agreement dated 27 May 2016 the plaintiff entered a loan agreement with Mr Cotton’s company MSLN Limited. The loan agreement was part of a sale and purchase agreement where MSLN Limited had purchased a new Audi R8 Coupe car. Relevantly for present purposes, Mr Cotton the defendant, guaranteed the payment of all amounts MSLN Limited owed to the plaintiff under the loan agreement. Under the loan agreement the plaintiff advanced $354,645 to MSLN Limited for the purposes of purchasing the vehicle. MSLN Limited granted a security, agreed to pay monthly instalments, and as noted, Mr Cotton the defendant guaranteed the due and

punctual payment of all the amounts owing by the company MSLN Limited. The advance was made on 27 May 2016.

[7]        MSLN Limited fell into default as at 27 July 2017 and remained in arrears. The defendant acknowledged the arrears and informed the plaintiff that he would sell the vehicle and apply the proceeds to his debt.

[8]        On 27 February 2018 Mr Cotton sold the car to Continental Cars and applied the proceeds of $191,161.34 to reduce the loan balance. The plaintiff proposed a restructured repayment plan with payments to commence on 27 March 2018. Between 27 March 2018 and 27 June 2018 Mr Cotton made the agreed monthly payments. On 27 July 2018 however, he again defaulted and has remained in default ever since. The plaintiff then brought this application for summary judgment.

[9]        As noted, the basis for the application is the loan agreement. A copy of the loan agreement has been annexed to the affidavit of Wayne Andrew Buchanan, Chief Financial Officer of the plaintiff. That loan agreement confirms MSLN Limited’s agreement to pay the moneys advanced under the loan agreement, acknowledged that the company had received a full and complete copy of the loan agreement and a schedule of its terms. Importantly for present purposes, the loan agreement also included a guarantee acknowledgement pursuant to which Mr Cotton as guarantor acknowledged receiving a full and complete copy of the loan agreement, the schedule of terms, and confirming his agreement to be bound by the terms of the guarantee.

[10]      The loan agreement was executed by Mr Cotton as a director of MSLN Limited and was also executed by Mr Cotton as a guarantor. His signature as guarantor was witnessed by a business manager.

[11]      On the face of the documentation Mr Cotton is bound by the guarantee and is obliged to pay the shortfall owing to the plaintiff under the loan agreement.

[12]In his notice of opposition Mr Cotton stated his grounds of opposition to be:

Responsible Lender Issues,

The responsible lending obligations involve: making reasonable inquiries about a consumer’s financial situation, and their requirements and objectives, taking reasonable steps to verify a consumer’s financial situation and Responsible lending is to act in a customer’s best interests, ensuring affordability, transparency of terms and conditions and supporting a borrower if they experience repayment difficulties, I had difficulties including [losing] everything (Family, 23 years of Marriage, Home and Business) yet they still seemed unwilling to help me. I have nothing left, I live in rented accommodation, of which I am under notice to vacate, I have 3 months to find alternate accommodation and I am on furlough with my employer.

The respondent relies on Responsible Lender Guidelines as I never completed an application form for any of my loans they were arranged by Scott Wendleburn at Continental Cars, how he was able to process the loan application was always as if by magic, I wish the loan applications [were] treated with more care and attention and I should have had to fill out and sign the application myself.

I have still not been able to secure a legal defence of which I should be entitled as I cannot afford to pay for legal services, I am not sure what else I can do to be able to defend the claims.

[13]      In relation to the matters raised by Mr Cotton in the notice of opposition a number of points can be made. First, there is no evidence before the Court to support the matters he sets out by way of proposed defence. It was for that reason the matter was adjourned on more than one occasion but Mr Cotton has failed to take the opportunity to provide any evidence.

[14]      Next, it appears that a number of the matters he refers to are matters which have occurred subsequent to MSLN Limited and him entering the loan agreement in the first place. Further, to the extent he suggests he never completed an application form for any loans, as noted, the loan agreement was completed by him, both on behalf of MSLN Limited as a director and in his personal capacity.

[15]      The only issue of any potential legal interest is whether or not in fact there were any responsible lender obligations under the Credit Contracts and Consumer Finance Act 2003 (CCCFA) in any event, given the nature of the transaction as a business to business loan. Mr Langdana submitted the answer to that lies in the definition sections in the CCCFA itself. First, relevant guarantee:1 a relevant guarantee for the purposes of the CCCFA is:

1      Credit Contracts and Consumer Finance Act 2003, s 9B.

a guarantee given, …by a natural person in respect of a consumer credit contract, … .

[16]      Consumer credit contract is itself defined in s 11 as a contract where the debtor is a natural person, so that a relevant guarantee is a guarantee given by a natural person in respect of borrowing by another natural person. It does not apply to the circumstances of a business to business loan or credit contract guaranteed by another person, even if that other person is a natural person. The Act has no application to the borrowing in this case.

[17]      Finally, as a general observation it is stretching credibility somewhat for Mr Cotton to suggest that as a director of a company he would enter a loan agreement to borrow a substantial sum of money to purchase a high value motor vehicle without knowing what was involved, and as noted, the obligations under that borrowing were met for a significant period of time before default.

Result

[18]      For the above reasons I am satisfied that there is no arguable defence to the plaintiff’s claim. The plaintiff is entitled to the judgment it seeks. There will be judgment for the plaintiff in the sum of $145,543.58, which includes the principal sum, enforcement costs, and costs on a 2B basis.

Venning J