Harmoney Ltd v Commerce Commission - [2020] NZCA 275

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IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA322/2018
[2020] NZCA 275

BETWEEN	HARMONEY LIMITED Appellant
AND	COMMERCE COMMISSION Respondent

Hearing:	17 and 18 March 2020
Court:	French, Brown and Clifford JJ
Counsel:	A R Galbraith QC, A M Callinan and S A Comber for Appellant J D Every-Palmer QC and A D Luck for Respondent
Judgment:	8 July 2020 at 11.30 am

JUDGMENT OF THE COURT

AThe appeal is allowed in relation to Question 2(b) in the agreed list of issues. In relation to the remaining questions of law the appeal is dismissed.
BThe cross-appeal is allowed.
CThe questions of law in the agreed list of issues are answered at [113] of the judgment.
DThe appellant must pay the respondent costs for a standard appeal on a band A basis together with usual disbursements. We certify for second counsel.

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REASONS OF THE COURT

(Given by Brown J)

Introduction

The appellant, Harmoney Ltd (Harmoney), operates a web-based platform that matches consumers wishing to borrow money with investors wishing to lend money, commonly known as peer-to-peer (P2P) lending.[1] It is common ground that the resultant loan transactions, in which Harmoney Investor Trustee Ltd (HITL)[2] is the named creditor as a trustee for the investors, are consumer credit contracts.[3]
[1]Harmoney is a wholly owned subsidiary of Harmoney Corp Ltd which holds a licence from the Financial Markets Authority under the Financial Markets Conduct Act 2013 (FMCA) to operate a P2P lending platform.
[2]A wholly owned subsidiary of Harmoney Corp Ltd.
[3]The investors and borrowers have no direct contractual relationship.
The primary issue on this appeal is whether, as the respondent (the Commission)[4] contends, the fee Harmoney charges to borrowers for arranging the loans (the Platform Fee), is a credit fee, in particular an establishment fee, subject to the statutory control in s 41 of the Credit Contracts and Consumer Finance Act 2003 (the CCCFA). If the Commission is correct and the Platform Fee is such a fee, it must be set at a level that is reasonable, gauged by reference to the costs incurred in establishing and administering the loan.[5] An important related issue is whether Harmoney is itself a creditor.
[4]It is the role of the Commission to promote compliance with the Credit Contracts and Consumer Finance Act 2003 (the CCCFA): s 111(1).
[5]Section 42. The reasonableness of Harmoney’s Platform Fee is being contested in separate proceedings in the High Court.
Harmoney maintains that the Platform Fee is an unregulated payment akin to a brokerage fee. It contends that the Harmoney structure is not different in substance from a simple model where:
(a)a third party (H) finds an investor (I) willing to lend money to a borrower (B);
(b)the loan is a credit contract and (I), but not (H), is a creditor of (B); and
(c)a charge by (H) to (B) for matching (B) and (I)[6] is not a credit fee but one charged…

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 Harmoney Ltd v Commerce Commission

Details

AGLC: Harmoney Ltd v Commerce Commission [2020] NZCA 275
Case: [2020] NZCA 275
Decision Date: 8 July 2020 at 11.30 am

CaseChat Overview and Summary

Harmoney Ltd (Harmoney) operates a web-based platform matching consumers who wish to borrow money with investors who wish to lend money. The Commission contends that the fee Harmoney charges borrowers for arranging the loans (the Platform Fee) is a credit fee subject to the statutory control in s 41 of the Credit Contracts and Consumer Finance Act 2003 (the CCCFA). The High Court held that the Platform Fee was a credit fee. Harmoney appealed against that finding and the Commission cross-appealed from the High Court's conclusion that the credit contract did not include the Borrower Agreement. The appeal and cross-appeal were heard by the Court of Appeal. The Court of Appeal allowed the appeal in relation to the issue whether the investors were creditors. It held that the investors were not creditors. In relation to the remaining issues the appeal was dismissed and the cross-appeal was allowed. The Court of Appeal held that the credit contract comprised both the Loan Contract and the Loan Disclosure. However, it reached a different conclusion from the High Court on the issue whether the Borrower Agreement was part of the credit contract. The Court of Appeal held that any credit contract which was formed comprising the Loan Contract and the Loan Disclosure will also comprise the related Borrower Agreement. The Court of Appeal held that the High Court did not err in its conclusion that Harmoney was a creditor. However, it concluded that Harmoney was a creditor for different reasons. The Court of Appeal held that the Platform Fee was a credit fee on the basis that it was payable by the debtor under a credit contract. It also held that the Platform Fee was not a credit fee on the basis that it was not payable by the debtor for the benefit of the creditor in connection with the credit contract.

Orders