Commerce Commission v Harmoney Limited

[2021] NZHC 4211

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV2017-404-1970

[2021] NZHC 4211

UNDER

Parts 1, 2 and 4 of the Credit Contracts and Consumer Finance Act 2003

BETWEEN

COMMERCE COMMISSION

Plaintiff

AND

HARMONEY LIMITED

First Defendant

HARMONEY INVESTOR TRUSTEE LIMITED

Second Defendant

Hearing:	On the papers
Counsel:	J D Every-Palmer QC, J D Cairney and A D Luck for the Plaintiff I J Thain, M Bell and I E Scorgie for the Defendants
Judgment:	14 September 2021

JUDGMENT OF GAULT J

This judgment was delivered by me on 14 September 2021 at 5:00 pm pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

……………………………………

Solicitors / Counsel:

Mr J D Every-Palmer QC, Barrister, Auckland Mr J D Cairney, Barrister, Auckland

Mr A D Luck and Ms J Nedeljkov (plaintiff’s instructing solicitor), Meredith Connell, Auckland Mr A R Galbraith QC (counsel for the defendants), Barrister, Auckland

Mr I J Thain, Mr M Bell and Mrs I E Scorgie (defendants’ instructing solicitors), DLA Piper, Auckland

COMMERCE COMMISSION v HARMONEY LTD [2021] NZHC 4211 [14 September 2021]

[1]                 Following an investigation, the Commerce Commission (the Commission) commenced proceedings against the defendants (together, Harmoney) in August 2017 alleging that an establishment fee charged by Harmoney breached s 41 of the Credit Contracts and Consumer Finance Act 2003 (the CCCFA).

[2]                 Following discussions, the parties have reached a settlement, and the Commission has filed an interlocutory application for a declaratory order on admission of facts under r 15.15 of the High Court Rules 2016. Harmoney consents to the declaratory order sought without a hearing.

Background

[3]                 The first defendant operated a website ( through which consumer borrowers could apply for loans.

[4]                 Credit was provided to a borrower under a contract between the borrower and Harmoney with the terms set out in separate agreements.

[5]                 The funds used to provide a loan consisted of the amount the borrower wished to borrow and an additional amount referred to over different time periods as an Origination Fee, Platform Fee or Establishment Fee (Platform Fee).

[6]                 Harmoney was a creditor in respect of each contract, each contract was a credit contract and, in the case of borrowers who used or intended to use the credit wholly or predominantly for personal, domestic or household purposes, a consumer credit contract in terms of the CCCFA.

[7]Each Platform Fee was a credit fee as defined in the CCCFA.

[8]Section 41 of the CCCFA provides:

41       Unreasonable credit fee or default fee

A consumer credit contract must not provide for a credit fee or a default fee that is unreasonable.

[9]                 The Commission alleged that each Platform Fee was an unreasonable credit fee under the CCCFA (whether it was an establishment fee as defined, a credit fee other than an establishment fee or a combination).

Settlement

[10]              Mr McIvor’s affidavit in support of the Commission’s application states that under the settlement, Harmoney and their parent company have provided enforceable undertakings to the Commission under ss 74A to 74C of the Commerce Act 1986, via s 113(aa) of the CCCFA, to:

(a)pay $7,000,000 in compensation to borrowers charged unreasonable establishment fees; and

(b)not charge establishment fees of more than $165 for a five year period.

[11]The parties further agreed that:

(a)Harmoney would file a notice of admissions in respect of the Commission’s second amended statement of claim; and

(b)the Commission would file an application for a declaratory order that Harmoney breached s 41 of the CCCFA in relation to their Platform Fees, and that Harmoney would consent to the making of such an order.

[12]              Harmoney has filed a notice of admissions admitting facts pleaded in the second amended statement of claim, including the breaches of s 41 of the CCCFA.

Discussion

[13]              Declaratory relief is available in this Court for breaches of the CCCFA.1 While a declaration will not be granted where the matter is moot or the relief will be of no practical utility, declaratory relief following a settlement in this regulatory context may be of real practical utility where there is public interest in a Court

1      Commerce Commission v Ferratum New Zealand Ltd [2020] NZHC 1607 at [16]-[18].

declaring conduct to be in breach rather than that breach being acknowledged and admitted in a private settlement agreement between the parties.2 It will also act to deter others from engaging in similar conduct.

[14]              Those considerations apply in this case. Indeed, the parties agreed that the Commission would seek a declaratory order and that Harmoney would consent.    For these reasons, and on the basis of Harmoney’s admissions, I consider it is in the interests of justice to grant the declaratory order sought. There is a strong public interest in making the declaratory order.

[15]              The Commission does not seek any orders as to any further costs and, in the event the Court makes the declaration sought, will file a notice of discontinuance in respect of the balance of the relief sought in the second amended statement of claim.

Result

[16]I make the following orders:

(a)A declaration that Harmoney Ltd and Harmoney Investor Trustee Ltd breached s 41 of the Credit Contracts and Consumer Finance Act 2003 by charging unreasonable establishment fees on consumer credit contracts  entered  into  by  them  between  26  August  2014  and     12 February 2020.

[17]Costs are to lie where they fall.

Gault J

2      Commerce Commission v ANZ Bank New Zealand Ltd [2015] NZHC 1168 at [18]; and Commerce Commission v Ferratum New Zealand Ltd [2020] NZHC 1607 at [19]-[21].