Commerce Commission v Harmoney Ltd - [2017] NZHC 2421

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2016-404-002125 [2017] NZHC 2421

BETWEEN
COMMERCE COMMISSION

Plaintiff/Respondent

AND

HARMONEY LIMITED Defendant/Applicant

Hearing: 27 September 2017

Appearances:

J Every-Palmer QC, J D Cairney and A D Luck for
Plaintiff/Respondent
A R Galbraith QC and A M Callinan for Defendant/Applicant

Judgment:

3 October 2017

JUDGMENT OF VENNING J

This judgment was delivered by me on 3 October 2017 at 4.30 pm, pursuant to Rule 11.5 of the High
Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors: Meredith Connell, Auckland
Simpson Grierson, Auckland

Copy to: J Every-Palmer QC, Wellington
A R Galbraith QC, Auckland

COMMERCE COMMISSION v HARMONEY LIMITED [2017] NZHC 2421 [3 October 2017]

The application

[1] The Commerce Commission (the Commission) has brought a case stated against Harmoney Limited (Harmoney). It is before the Court for determination on
25 and 26 October 2017. Harmoney seeks to strike out the case stated as an abuse of process. It is the second time Harmoney has sought to strike the proceeding out.

General background

[2] As Courtney J explained in her decision on the first strike out application, peer-to-peer lending is a form of lending under which an intermediary operating through a web-based platform matches lenders and borrowers.1 The intermediary contracts separately with each; the lenders and borrowers do not enter into a direct contract with one another.

[3] In New Zealand peer-to-peer lending is regulated by the Financial Markets Conduct Act 2013 (FMCA). The FMCA is directed towards the protection of the investors/lenders and does not provide specific protection for borrowers. The Credit Contracts and Consumer Finance Act 2003 (CCCFA), which was enacted to protect the interests of borrowers under credit contracts, does not refer to peer-to-peer lending. Harmoney is licensed under the FMCA to operate a web-based peer-to-peer lending platform.

Procedural background

[4] The Commission brought a case stated to clarify the application of the CCCFA to peer-to-peer lending in general and in relation to Harmoney’s structure in particular. Harmoney is the largest operator in the market.

[5] One of the fees that Harmoney charges borrowers is a platform fee. The Commerce Commission considers that the platform fee falls within the definition of a “credit fee” under the CCCFA. If so, the CCCFA would require that the fee not be
unreasonable. The Commission’s case stated poses questions about this fee and

1 Commerce Commission v Harmoney [2017] NZHC 1167 at [1].

other aspects of peer-to-peer lending transactions effected through Harmoney’s

platform.

[6] Harmoney first applied to strike out the case stated on the ground that it required the determination of mixed questions of fact and law and so fell outside the scope of the case stated procedure.

[7] Courtney J concluded that:

[65] The Commission’s case stated essentially seeks to establish the threshold for the application of the CCCFA to peer-to-peer lending arrangements before it considers the position of individual contracts. I am satisfied that doing so is within the intended purpose of the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Commerce Commission v Harmoney Ltd

Details

AGLC: Commerce Commission v Harmoney Ltd [2017] NZHC 2421
Case: [2017] NZHC 2421
Decision Date: 3 October 2017

CaseChat Overview and Summary

The case involves a dispute between the Commerce Commission (the Commission) and Harmoney Limited (Harmoney), a peer-to-peer lending platform operator. The Commission has brought a case stated against Harmoney to clarify the application of the Credit Contracts and Consumer Finance Act 2003 (CCCFA) to peer-to-peer lending, particularly regarding Harmoney's platform fee. Harmoney has applied to strike out the case stated, arguing it constitutes an abuse of process due to the duplication of issues in separate enforcement proceedings.

The court had to decide whether the case stated proceedings should be struck out as an abuse of process. Harmoney argued that the case stated proceedings were duplicative of the enforcement proceedings and thus constituted an abuse of process. The Commission countered that the case stated proceedings were intended to clarify legal issues before enforcement actions, and there was no abuse of process as the two sets of proceedings were fundamentally different in nature and sought different relief.

The court reasoned that the case stated and enforcement proceedings were distinct in their objectives and procedures. The case stated proceedings were intended to clarify legal issues under the CCCFA before any enforcement actions, while the enforcement proceedings aimed to enforce compliance with the Act. The court held that the Commission was not misusing or abusing the process by pursuing the case stated proceedings first, as the two sets of proceedings were different in nature and character. The court also noted that the case stated proceedings served a public interest by clarifying the scope of permissible activities in the peer-to-peer lending market.

The application to strike out the case stated was dismissed. The court awarded costs to the Commission.

The court's final orders were that the application to strike out the case stated proceedings was dismissed, and the Commerce Commission was to receive costs together with disbursements as fixed by the Registrar. The court declined to certify for second counsel due to the confined nature of the hearing.

Orders