CSG Finance (NZ) Limited v Sharma

[2016] NZHC 2269

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-942 [2016] NZHC 2269

BETWEEN

CSG FINANCE (NZ) LIMITED

Plaintiff

AND

NATHAN N K SHARMA Defendant

Hearing:	15 September 2016
Appearances:	JE Standage and EJ Couper for Plaintiff R Chaudhry for Defendant
Judgment:	26 September 2016

JUDGMENT OF TOOGOOD J

This judgment was delivered by me on 26 September 2016 at 3:00 pm

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

CSG Finance (NZ) Limited v Sharma [2016] NZHC 2269 [26 September 2016]

[1]      The  defendant,  Mr  Sharma,  guaranteed  a  loan  agreement  between  CSG Finance (NZ) Limited (“CSGF”) and Payless Printing Ltd (“Payless”) for the financing of a printer.  Payless defaulted in its payments under the loan agreement and is in liquidation.   CSGF now claims against Mr Sharma under the guarantee.  It has applied for summary judgment in order to recover the outstanding principal, interest, and solicitor-client costs relating to the default.

Background

[2]      Payless ran a printing business.  Mr Sharma was sole director and shareholder of the company.  In October 2013, Payless entered a “lease to own” agreement (“the initial agreement”) with Leasing Solutions Ltd (“LSL”, which was later renamed CSG Finance (NZ) Ltd) and Konica Minolta Business Solutions New Zealand Ltd (“Konica Minolta”).  Under the initial agreement, LSL provided Payless with finance for the purchase of a commercial printer, and Konica Minolta provided Payless with printer maintenance services.

[3]      Before signing the initial agreement, Mr Sharma dealt with a representative from Konica Minolta, who helped him select a printer.  LSL was not involved with these discussions, and only became involved at a later stage when Mr Sharma sought finance.

[4]      Payless failed to make some of the payments due under the initial agreement, allegedly on the basis that the printer was faulty.  On or around 10 June 2015, CSGF offered to restructure the agreement by bundling the arrears and principal owing together into a new loan agreement so that Payless could start afresh with payments.

[5]      Under the proposed new agreement, Payless would purchase the printer and would pay monthly instalments of $5869.96 to CSGF in repayment of the 2013 loan. CSGF would take a security over the printer.  In addition, it would also acquire the right to request and obtain an “all moneys” mortgage over Mr Sharma’s family home in Papatoetoe, along with a right to caveat that property.

[6]      The proposed agreement also provided that as guarantor, Mr Sharma would be jointly and severally liable for the payment of the loan, fees and interest; that CSGF could make demand from him without demanding performance from Payless; that any outstanding money owing would become immediately payable to CSGF in the event of default; and that Mr Sharma would indemnify CSGF for any costs and legal expenses resulting from a default.

[7]      Mr Sharma discussed this offer with a CSGF representative, and a copy of the proposed agreement was emailed to Payless on 10 June 2015.  More than a fortnight later, on 26 June 2015, Mr Sharma travelled to CSGF’s offices and signed the new loan agreement on behalf of Payless and himself as guarantor.1

[8]      Payless paid two monthly instalments under the new loan agreement, but then defaulted by failing to make any further payments to CSGF after 30 August 2015. On 12 April 2016, CSGF served a statutory demand on Payless for payment of

$35,219.76, being the instalments due at that time.   That same day, CSGF also served notice on Payless and Mr Sharma under s 128(1) of the Property Law Act

2007, meaning that all amounts under the new loan agreement accelerated and become payable to CSGF immediately.  Payless did not make repayment within 15 days.

[9]      On 28 April 2016, CSGF served a final demand on Mr Sharma for payment of $255,703.71, being the total accelerated amount to that date.  It requested payment by 4 May 2016.  No payment was received, and on 3 June 2016, Payless was placed into liquidation.

Application for summary judgment

[10]     CSGF now seeks summary judgment against Mr Sharma, as guarantor to the new loan agreement, for the outstanding the principal sum; default interest at the rate of 18 per cent from the date of default until the date of judgment; post-judgment

interest under the Judicature Act 1908 and solicitor-client costs.

1      On the same date, Payless also entered into a “service level agreement” with Konica Minolta,

relating to printer maintenance. CSGF was not a party to this agreement.

[11]     Under r 12.2 of the High Court Rules, the Court may give summary judgment against a defendant if the plaintiff satisfies the Court that the defendant has  no defence to a cause of action, and there is no real question to be tried.  The Court’s assessment of the evidence in such cases is a matter of judgment, and a robust and realistic approach may be taken where the facts warrant it.2

[12]     Mr Chaudhry for Mr Sharma opposes CSGF’s application principally on the grounds related to oppression under s 118 of the Credit Contracts and Consumer Finance Act 2004 (CCCFA).  He also argues that CSGF engaged in misleading and deceptive conduct in its dealings with Mr Sharma; that CSFG breached its obligation under s 16(b) of the Sale of Goods Act 1908, namely, that the printer would be of merchantable quality; and that CSFG failed to mitigate its losses under the loan

agreement.3

Discussion

Oppression under the CCCFA

[13]     Mr Chaudhry submitted that there is a defence to CSGF’s cause of action because new loan agreement was “oppressive” in terms of s 118 of the CCCFA. This is said to be because CSGF did not ask or give Mr Sharma an opportunity to seek legal advice before entering the agreement, which affected his family home.  He also says that a representative from CSGF told Mr Sharma that the new loan agreement was the same as the agreement he had previously signed with Leasing Solutions Ltd, which would have influenced his decision not to seek legal advice in the circumstances.

[14]     Because Mr Chaudhry’s submission is not directed at any of the terms of the new loan agreement, I understand his submission to be that Mr Sharma was induced into the new loan agreement because CSGF acted oppressively.  Although it was not

specifically argued, I also proceed on the basis that Mr Chuadhry would seek to have

2      Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162 at [26].

3      Arguments relying on alleged breaches of CSGF’s lender responsibilities under ss 9C(3) and (4)

and s 17 of the Credit Contracts and Consumer Finance Act 2003 were not pursued.

the new loan agreement reopened under s 120 of the CCCFA on the grounds that

CSGF induced Mr Sharma to enter it by oppressive means.

[15]    Mr Sharma has deposed that he did not receive the email and attached documents  from  CSGF  on  10 June  2015  and  that  he  first  saw  the  new  loan agreement on the date that he signed it, 26 June 2015.   In contrast, CSFG’s representative,  a Mr Cardmaster,  says  that  he  spoke to  a Payless  representative sometime in June 2015 and was told that Payless was delaying execution of the new loan agreement because it was waiting to hear back from its lawyer.  Mr Chaudhry also submitted that, in any case, this conflict in evidence demonstrates a serious question to be tried which should preclude summary judgment.

[16]     When determining the existence of oppression under s 118 of the CCCFA, the Court must focus on the acts of the creditor.4   A credit contract cannot be impugned as oppressive by reference to matters that affected the borrower, but which were unknown to the creditor.5    The fact that a borrower has taken, or been given the opportunity to take, legal advice may be a safeguard against a finding that a creditor has acted oppressively.6   But the fact that a borrower did not take, or was not given the opportunity to take, legal advice before entering a credit agreement does not necessarily mean there was oppressive conduct – that will depend on the circumstances of the case.

[17]     Mr Sharma comes from a business background.   The new loan agreement was a commercial contract which he entered into in his business capacity.  People engaged in business can be regarded as capable of looking after themselves and understanding the risks involved in giving guarantees.7    In these circumstances, it cannot be said that CSGF was under any duty to ensure that Mr Sharma had obtained legal advice.   Having emailed the documents to addresses he knew were used by

used by Mr Sharma, Mr Cardmaster was entitled to assume on behalf of CSGF that

4      Colley v Westpac New Zealand Ltd [2013] NZCA 57, (2013) 13 TCLR 639 at [37].

5      GE Custodians v Bartle [2010] NZSC 146, [2011] 2 NZLR 31at [47].

6      GE Custodians v Bartle, above n 5; KBL Investments Ltd v KBL Courtenay Ltd [2016] NZCA

227, (2016) 10 NZBLC 99-721 at [79].

7      Royal Bank of Scotland Plc v Etridge (No 2) [2001] UKHL 44, [2002] 2 AC 773 at [88], affirmed in UDC Finance Ltd v Down [2009] NZCA 192 at [37].

Mr Sharma had been in possession of the proposed agreement for more than a fortnight.

[18]     In  the  circumstances,  I  do  not  need  to  decide  whether  it  is  proved  that Mr Sharma did not receive CSGF’s email of 10 June 2015; there is nothing in the evidence to indicate that CSGF knew or took advantage of the fact that Mr Sharma had not consulted a lawyer.  And there is no evidence CSGF actively dissuaded him from obtaining such advice.

[19]     Mr  Sharma  initialled  handwritten  amendments  to  the  agreement  directly above the provisions granting the security, indicating that he read that part of the document.  Beside the security provisions is a heading – clear and obvious – reading “Securities”. The wording of the provisions is also unmistakably clear:

Konica Minolta C800 (Serial Number C800000142).

The  Guarantor  as  owner  of  the  property  located  at  28 Beaufort  Place, Papatoetoe, Auckland with the legal description Lot 408 DP 105570 (the "Property") unconditionally and irrevocably undertakes and agrees to grant, execute  and  deliver  to  CSG  Finance  an  all  moneys  memorandum  of mortgage in a form as requested by CSG Finance and which is registrable at the Land Transfer Office over the Property, promptly upon CSG Finance's request.

The Guarantor hereby irrevocably consents and agrees to CSG Finance registering a caveat against the Property in respect of the interests of CSG Finance under this Agreement.

[20]     I do not accept as plausible Mr Sharma’s claim that he did not realise the new loan  agreement  could  lead  to  CSGF  placing  a  security  over  his  home,  and Mr Chaudhry did not point to any evidence which could be adduced at a trial which might lead the Court to conclude otherwise.   Moreover,  I do not accept that a businessman such as Mr Sharma needed to obtain legal advice in order to understand the meaning and legal effect of security provisions expressed in conventional terms.

[21]     In the absence of any other particular circumstances indicative of oppression being raised,8  I find that there is no reasonably arguable issue about whether CSGF

acted oppressively in this case.

8      See CCCFA, s 124.

[22]     Mr  Chaudhry  alleges  that  CSGF  engaged  in  misleading  and  deceptive conduct in relation to the new loan agreement.   He says CSGF did not inform Mr Sharma of its own managerial and legal structure, particularly that it was the same as LSL, with which Mr Sharma had engaged previously.  He also says CSGF was aware of Mr Sharma’s issues with the printer and his poor credit history but chose nevertheless to execute the new loan agreement with Mr Sharma’s residential home as security.  Mr Chaudhry argues that CSGF’s conduct engages s 9 of the Fair Trading Act 1986 as misleading and deceptive.

[23]     The  short  answer  to  these  submissions  is  that  cl  5.8  of  the  new  loan agreement expressly precludes the consideration of counterclaims and rights of set- off.9   If Mr Sharma wishes to pursue a claim under the Fair Trading Act he may do so, but not in this proceeding.  Moreover, none of the matters raised is indicative of misleading or deceptive conduct.  CSGF was under no obligation to disclose its legal and managerial structure to Mr Sharma; Mr Sharma made no enquiry about the

matter and it was irrelevant.  And Mr Sharma was well aware of the nature of the printer and any defects when he executed the new agreement.  CSGF’s knowledge of the earlier defaults by Payless did not require it to take any different approach to addressing the new loan arrangements.

[24]     The exclusion of counterclaims and  rights of  set-off under cl 5.8 of the agreement also provides a complete answer to Mr Chaudhry’s further submission that CSGF breached an implied term under s 16(b) of the Sale of Goods Act 1908, namely that the printer would be of merchantable quality.  Payless was required to repay the loan while any claim under an implied warranty was litigated.  But, in any event, LSL/CSGF was not the supplier of the printer and cl 3.2 of the initial agreement  provided  expressly  that  LSL  did  not  give  any  warranty  about  the

condition or suitability of the printer.

9      A right of set-off may be contractually excluded, whether expressly or by clear implication:  see

Grant v NZMC Ltd [1989] 1 NZLR 8 (CA); Zheng Li Trustee Ltd v Henderson [2015] NZHC
1723 at [55].

[25]     Mr Chaudhry submitted that CSGF failed to mitigate its losses in that it should have taken action against Mr Sharma under the new loan agreement at an earlier stage.  The evidence, however, shows that CSGF acted promptly, and engaged Mr Sharma in discussions about the matter as early as October 2015.   Clauses

12.2(a) and (b) of the new loan agreement provide, in any event, that CSGF is not obliged to enforce payment of the loan or bring proceedings in the event of default, and that CSGF will not be liable for not exercising its rights under the agreement.

Conclusion

[26]     None of the proposed defences or issues raised by Mr Chaudhry are capable of being made out, and I am satisfied that there are no serious questions to be tried. The plaintiff is entitled to summary judgment.

Orders

[27]     I give judgment for the plaintiff.  Mr Sharma shall pay to CSG Finance (NZ) Limited the following sums:

(a)       The sum of $252,408.71.

(b)      Interest at the rate of 18 per cent per annum, from the first default to

30 March 2016, totalling $3,295.36.

(c)       Interest at the rate of 18 per cent on the sum of $252,408.71 from

1 April 2016 until 26 September 2016, being the date of judgment.

(d)Post-judgment interest pursuant to r 11.27 of the High Court Rules and at the rate specified by s 87 of the Judicature Act 1908.

(e)       Costs and disbursements (excluding GST) on a solicitor-client basis in accordance with the new loan agreement.

...........................................

Toogood J