Ho v Ding
[2015] NZHC 440
•12 March 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-001626 [2015] NZHC 440
BETWEEN EVA YUEN HO
Plaintiff
AND
PAUL DING Defendant
Hearing: 28 October 2014 Appearances:
P F Dalkie for the Plaintiff
S J R Neville for the DefendantJudgment:
12 March 2015
JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 12 March 2015 at 3.00 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors:
Focus Law, Auckland
Ellis Gould, Auckland
P Dalkie, Auckland
EVA YUEN HO v PAUL DING [2015] NZHC 440 [12 March 2015]
Introduction
[1] Ms Ho applies for a summary judgment on her claim against Mr Ding for damages of $400,000 for breach of a loan agreement, plus interest and costs on the basis set out in that agreement.
[2] The basis of Ms Ho’s claim is a written term loan agreement the parties entered into on 16 August 2013. Under the agreement Ms Ho, a barrister and solicitor and principal in a law firm, agreed to advance $400,000 to Mr Ding, an experienced businessman in New Zealand and Korea. Mr Ding agreed to pay monthly instalments of interest at 15% per annum, and to repay the principal sum on or before 16 August 2014. The terms of the agreement stipulate that breach of an obligation to pay interest is a default, whereupon all monies owing under the agreement will become due and payable on demand, and a higher rate of interest,
25% per annum, will be incurred.
[3] It is not in dispute that on the same day the agreement and a related deed were signed, Ms Ho advanced $400,000 on Mr Ding’s direction to TIG Holdings Limited (TIG Korea). That company is registered in Korea. Mr Ding is its sole director.
[4] It is also not disputed that no instalments of interest were paid in respect of the advance or that Ms Ho made no demand for interest until 5 June 2014. At that point, she gave notice that failing payment of $82,465.75 of outstanding interest, she would call up the advance. Mr Ding did not respond. On 23 June she made written demand for repayment of all monies that she claimed were owing. Again, Mr Ding did not respond, and Ms Ho commenced this proceeding on 30 June 2014.
[5] Mr Ding opposes the application for summary judgment. He contends that he has an arguable defence to Ms Ho’s claim, meaning that the claim is unsuitable for summary judgment and ought to be dealt with at trial. He accepts that he would be in default if bound by the term loan agreement as written, but he does not accept he is bound. His position is essentially that the agreement does not reflect the true
arrangement that was entered into on 16 August 2013, and that Ms Ho’s payment of
$400,000 to TIG Korea was really an investment, not a loan.
[6] Mr Ding relies on multiple grounds to negate his prima facie liability under the agreement. He raises non est factum; mistake under s 6 of the Contractual Mistakes Act 1977; and unconscionable bargain. Finally, he argues that it would be inequitable or oppressive to grant summary judgment.
[7] The issue for determination is whether or not Ms Ho has established that the grounds of defence are clearly untenable. If she has then she will be entitled to summary judgment.
The loan agreement
[8] The term loan agreement is an Auckland District Law Society standard term loan agreement. It is signed by Ms Ho and Mr Ding in their personal capacities. Relevantly it provides that:
(a) Ms Ho agrees to lend Mr Ding $400,000;
(b) Mr Ding agrees to pay monthly interest at the higher rate of
25% per annum stipulated by the agreement unless paid on time and without default. In that case, the lower stipulated rate of 15% will apply.
(c) Mr Ding agrees (pursuant to cl 3) to repay the $400,000 with any outstanding interest (including any default interest) on or by
16 August 2014.
[9] The material provisions of the loan agreement governing default are as follows:
3. Covenant to pay and comply with obligations
…
(b) Repay principal sum: Unless alternative provisions are set out in Part 1 of this contract, you must repay the principal sum together with interest and all other moneys then outstanding on the term expiry date.
…
6. When default occurs
Default occurs if:
(a) Breach of obligation to pay money: any of you fail to pay any moneys due in accordance with clause 3;
…
8. Accelerating payment of the moneys owing on default
If default occurs, the moneys owing will become due and payable upon demand, or to the extent any notice is required by law to be given before the secured moneys become payable, immediately on expiry of the relevant notice period, without the need for any further demand.
[10] Additionally, the term loan agreement provides that before any advance can be made, any guarantors named in the agreement must have signed a deed of guarantee in a form acceptable to the lender.
[11] The agreement lists four guarantors on whose behalf Mr Ding signed the agreement. One is TIG Korea. Two are other companies of which Mr Ding is the sole director: TIG Holdings 2012 Ltd (TIG NZ) and TIG One Ltd (TIG HK), a company registered in Hong Kong. The fourth is a Korean-listed company, KD Media Inc. Mr Ding is the CEO of that company.
[12] Under the term loan agreement, security is to be held “in connection with the agreement” over:
(a) All the “present and after-acquired” personal property of
Mr Ding and TIG NZ; and
(b)By way of an option to purchase from TIG Korea, certain warrants TIG Korea owns in conjunction with bonds issued by KD Media Inc. These warrants are stated to be worth 140,000 Korean Won on exercise price, and the option is to purchase the warrants at that price.
[13] On the same day that Ms Ho and Mr Ding signed the term loan agreement a Call Option Deed was signed by Ms Ho, Mr Ding, the three TIG companies and KD Media, to give effect to the option under (b) above.
[14] The deed also records that TIG Korea has agreed under a put option to purchase shares in KD Media, to be completed in three tranches, and that Ms Ho (“lender”) will lend $400,000 to Mr Ding (“borrower”) to enable TIG Korea to complete the purchase of the third tranche.
[15] Materially the introduction to the deed states:
E The Lender [defined as Eva Ho] has agreed to advance to the Borrower [defined as Paul Ding] $NZ 400,000 (“Loan”) under a term loan agreement dated the same date as this deed so that the Borrower can fund TIG Korea to comply with the put option.
…
H TIG Korea will grant a security over the Warrants to the Lenders to ensure the borrower comply with its obligations and agree for the lender to register a charge over the warrant on the Personal Property Security Register.
I TIG Korea shall use the funds to comply with the put option.
[16] These statements are repeated in the operative provisions of the call option deed. They materially provide:
2. In consideration of the Lender advancing the loan to the Borrower, the Borrower shall procure TIG Korea, to grant to the Lender a call option to purchase the Warrants on the following conditions (“Call Option”):
….
5. The Parties confirm the Call Option shall be on the following terms:
5.1 The Lender shall have the option and right to acquire all the Warrants using the Loan, in the event the borrower defaults under: (i) The term loan agreement; or (ii) under any security documents.
…
5.2 The Borrower and the Guarantors acknowledge that the Lender is entitled to take enforcement action under the Term Loan Agreement notwithstanding the Lender’s right set out in this deed. To avoid any ambiguity the Lender shall (in the Lender’s sole discretion) be entitled to either exercise the Call Option to acquire the Warrant for the Loan instead of enforcing its rights for the Borrower and/or the Guarantors to repay the Loan.
5.3 … in the event all monies under the Term Loan Agreement is repaid in full on time in accordance with the Term Loan Agreement the Call Option shall be extinguished.
[Emphasis added].
[17] As the terms of the call option deed make plain, its purpose is to provide for a call option as security for the loan agreement in favour of Ms Ho. The deed provides that Ms Ho has the exclusive right to exercise the call option, but that she may do so only in case of default on the loan agreement by Mr Ding, instead of demanding repayment of the money lent under the loan agreement. The choice of remedy is at her discretion. The agreement is clearly labelled as a loan agreement, and the choice of remedies seems to me to be unremarkable where the value of the warrants may fluctuate unpredictably.
[18] Schedule 4 to the deed contains an Assurance Certificate for Warrants. It provides that if Ms Ho exercises the call option, the warrants are to be released to her free of lien or charge and without further consideration or reference from Mr Ding or TIG Korea. Clause 5.3 of the deed, however, makes it clear that the Call Option is extinguished once the loan is repaid in full. Schedule 4 also repeatedly refers to the warrants as “security”.
[19] Under cl 9 of the deed, the borrower and guarantors “confirm that they have obtained or waived obtaining independent legal advice prior to entering into this deed”.
Ms Ho’s position
[20] Ms Ho’s position is that Mr Ding breached his obligations under the term loan agreement in two ways:
(a) First, Mr Ding failed to pay interest owing once the demand was made
(cl 8).
(b)Second, Mr Ding failed to repay the principal sum together with interest and any other moneys owing when called upon to do so, thereby placing himself in default (cls 3(b) and 6(a)).
[21] The second breach is not pleaded in the statement of claim, but it is common ground that Mr Ding did not make the repayments. Therefore, if Mr Ding is bound by the agreement, then both breaches will be proven.
Summary Judgment – Relevant Law
[22] Counsel for Ms Ho submits that she has established a sufficient factual foundation for an order for summary judgment, and that under High Court Rule
12.2(1) Mr Ding has no defence to her claim. The rule provides:
12.2 Judgment when there is no defence or when no cause of action can succeed
(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
…
[23] The legal principles applying to applications for summary judgment were succinctly expressed by the Court of Appeal in Krukziener v Hanover Finance Ltd:1
The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1
NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is
sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997)
11 PRNZ 66 (CA). The Court will not normally resolve material conflicts
of evidence or assess the credibility of deponents. But it need not accept
uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC
331 at 341 (PC). In the end the Court’s assessment of the evidence is a
matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ
84 (CA).
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162 at [26].
[Emphasis added.]
[24] The onus is on Ms Ho to show that Mr Ding has no defence to her claim that he is liable for damages for breach of the loan agreement.
[25] It is well established that summary judgment is not appropriate in circumstances where there is conflicting affidavit evidence. Where there is a material factual dispute that lays the evidential foundation for a defence in law to a claim against the defendant, then it is inevitable that a defendant will be entitled to trial.2 In the summary judgment context, the court does not need to be satisfied of the truth of the defendant’s allegations, only that those allegations are reasonably arguable.3
Summary judgment should not be entered where there is a possibility of injustice or that the procedure was being used, or would result in, an instrument of oppression.4
[26] However, the court need not refuse summary judgment where the conflict between affidavits is unsupported by evidence and inherently improbable.5
[27] I accept counsel’s submission that Ms Ho has laid the necessary factual foundation for summary judgment. The term loan agreement does provide for a loan, and for repayment as she contends. There is no dispute that the transfer of funds occurred. Therefore the existence of a claim appears, prima facie, to be made out. It is for Mr Ding to respond by raising a potentially arguable defence if Ms Ho’s application is to be defeated. He claims there are genuine disputes as to the true nature and conscionability of the parties’ agreement.
Grounds of defence – is there an arguable defence?
[28] I turn then to consider whether any of the grounds of defence that Mr Ding relies upon are arguable, or whether as counsel for Ms Ho submits, all of them are
untenable.
2 Local Courier Service Ltd v Kesha (1995) 8 PRNZ 690 at 693.
3 At 693.
4 Sayles v Sayles (1986) 1 PRNZ 95 at 98.
5 Krukziener, above n 1, at [26]
[29] For the brief reasons that follow, I am satisfied that all of the claimed defences are untenable. I begin with the claim that there are factual disputes relating to the parties’ intentions when they entered into the term loan agreement and the call option deed.
Factual disputes
[30] Ms Ho claims Mr Ding breached his obligations under the loan agreement and is liable for damages. She alleges that he used the $400,000 advance to purchase shares in KD Media.
[31] Mr Ding disputes that any money is owing at all and denies that he purchased shares in KD Media. He says Ms Ho herself sought to acquire shares in KD Media and advanced $400,000 through him to TIG Korea for this purpose, and that he was to hold the shares on Ms Ho’s behalf. For this reason, Mr Ding says, Ms Ho made no demands that he pay interest.
Ms Ho – an investor in KD Media or a lender?
[32] Mr Ding’s primary argument is that his understanding at the time of the agreement was that it was not a loan, but an investment agreement. Repayment would therefore not be required. As will be seen, I consider that Mr Ding’s own evidence largely undermines that argument.
[33] In his affidavit Mr Ding contends Ms Ho has a history with KD Media. He explains that in early 2013 he entered into an earlier agreement to purchase shares in KD Media from the controlling shareholder, a Mr Shin. That May agreement stipulated that the purchase would be completed in three tranches. Mr Ding learned about the opportunity to purchase shares in KD Media from Mr Sue, a business adviser. Mr Sue also recommended to Mr Ding that Ms Ho could provide the funds necessary to complete the purchase of the second and third tranches. On
13 May 2013 Mr Ding borrowed $500,000 from Ms Ho to complete the second tranche of the purchase. This agreement was not submitted into evidence and neither counsel went into any detail on that agreement at the hearing. Ms Ho in her
submissions states that that loan agreement was signed on the same standard form as the loan agreement currently in dispute. It is apparent from the limited information in evidence that Mr Ding did not meet his obligations under the May agreement and Ms Ho obtained judgment for the debt against him as an unpaid loan.
[34] Mr Ding claims that, unknown to him at the time, Mr Sue and Ms Ho were in correspondence about purchasing shares of their own in KD Media. He produces a number of emails between the two in support of that claim. In one email, sent on
11 April 2013, Mr Sue inquired about setting up a corporate structure to “take
KD Media control back” from Mr Ding.
[35] On 11 August 2013, Ms Ho sent an email to Mr Sue in which she drew his attention to some problems she discovered with the security Mr Ding gave for the May loan agreement. Ms Ho concluded the email thus:
The whole exercise of how and what Paul [Mr Ding] offered me to complete the second tranche is – in your words – “total embezzlement” – Paul has offered KD Media as a guarantor to his own liability to me. His loan of
$500,000 is for his own ends – not for KD Media’s good!
[36] This email was sent five days prior to Ms Ho and Mr Ding entering into the agreement currently disputed on 16 August. Mr Ding says it is unlikely, given the contents and tone of the email above, that Ms Ho would agree to lend further money to him only several days later. He says Ms Ho’s subsequent action can only be explained by her being an investor. I do not accept that logic. It seems to me more unlikely that Ms Ho would agree to invest in a company from which she believed embezzlement to be taking place than that she would agree to a loan with stipulated rates of interest and security arrangements in place, especially in a situation where the investment was to be held on trust by the very person she alleged to be the embezzler.
[37] On 25 August Ms Ho sent the following email to Mr Sue. She wrote on behalf of her client, Mr Damin (Alan) Lun, who was also an investor in KD Media:
Question 1: If we paid $1.9m (500k Alan 400k Eva. 700k Paul. 300k AD) then Mr Shin is obliged to release the third tranche 300,000 shares even though there is still $400k owing to him.
…
Question 2: how r we going to pay the rest of the $400,000 to Mr Shin? [Sic] Question 3: with Alan, Paul, Steve lee, Barry, Eva, Geoff Alan, Alistair all
investing in the management shares we r basically joined at the hips. How r
we going to govern our shareholder rights amongst ourselves? How if we cannot reach agreement? [Sic]
[38] Mr Ding points to Ms Ho’s inclusion of herself (Eva) in the list of shareholders in questions 1 and 3 as proof that Ms Ho intended to invest in KD Media.
[39] The context of the email is unclear, but it was written after the agreement was signed. That means that Ms Ho had the agreement and the call option already in place. It is entirely possible that the email refers to the prospect of exercising the call option, or to a future investment. Even if it does not, it does not prove the main factual point that Mr Ding must show, i.e. that he was actually mistaken as to the effect of the agreement.
[40] Mr Ding refers to an email dated 9 May 2014 to further support this allegation. The email is from Ms Ho’s solicitor to Mr Kim, a director of KD Media. The email records the following:
2. NZ$400,000.00 paid on August 16, 2013
As you know, these funds were to be held in escrow, and not paid out without the instruction of Eva Ho. To refresh your memory on this point I have attached the documents you signed. These set out the basis on which you agreed to hold the NZ$400,000.00.
I am instructed you have paid away the money to someone else without seeking the consent and agreement of Eva Ho.
…
As a result of your breach our client demands that you now return both lots of money to the trust account of Focus Law immediately.
[41] Mr Ding submits that this evidence explains why Ms Ho did not demand any interest until June 2014, a month after the email was sent. The overall effect of the
above correspondence taken as a whole, Mr Ding contends, calls into question the basis upon which $400,000 was paid to TIG Korea.
[42] Ms Ho responds to these allegations in her affidavit in reply. Ms Ho denies that she advanced $400,000 to Mr Ding for him to buy shares on her behalf and argues that this was a loan for Mr Ding to complete his purchase of the shares. She admits that in March and April 2013 she and Mr Sue discussed her potential purchase of shares in KD Media, but says that those discussions never progressed further. In respect of the 25 August email, Ms Ho says that she was discussing the possibility of a future purchase and points to the conditional tense in her language in the email. I accept that statement.
[43] She says that discussions about her potential purchase of shares in KD Media had nothing to do with the August 2013 loan agreement between her and Mr Ding. In respect of the 9 May 2014 email, she says the following:
I wanted the funds held at my direction to ensure they were actually used for the purpose Mr Ding told me about, ie to buy Mr Shin’s shares in KD Media. At the time my interest in doing so was in the event I exercised the call option and also bought shares in KD Media. As it transpired, I never elected to exercise the call option.
[44] In her affidavit in reply, Ms Ho also explains why she did not demand the interest at an earlier date. She says that the $400,000 loan came from her personal cash reserves so she was not under any pressure to make interest payments to another lender.
[45] Despite some misgivings about the wisdom of Ms Ho’s commercial choices,
I have no difficulty accepting her version of events. The emails, and particularly the
9 May 2014 email, are consistent with an appropriate concern as to the value and control of her security. It is notable, too, that in the email of 25 August she refers to Mr Ding’s “liability” to her.
[46] Mr Ding opposes summary judgment on four further grounds: (a) Non est factum;
(b) Mistake;
(c) Unconscionable bargain;
(d) Summary judgment would be inequitable or oppressive. [47] I turn first to the ground of non est factum.
[48] A successful plea of non est factum requires the defendant to show that the terms of the agreement have an effect which greatly differs from the effect expected by the defendant. The defendant also must not have been negligent in signing the agreement. The Court’s focus is on the legal effect rather than character of the document.6
[49] Mr Ding submits that his understanding of the nature of the transaction (being that Ms Ho was investing the money in KD Media and he would be holding the shares on her behalf) is vastly different from the effect of the loan agreement.
[50] Counsel for Ms Ho contends the defence of non est factum must fail as there can be no question that Mr Ding understood that the agreement was a loan.
[51] I agree with counsel’s submission. The loan agreement is clear on its face. It is headed “loan agreement”, and refers to Ms Ho as the lender and Mr Ding as the borrower throughout. It provides for set rates of interest and security for the loan. All these are standard in loan agreements. Furthermore, the agreement is only a few pages long, so there can be no argument that its true meaning was obfuscated. I do not consider that there could be any way that Mr Ding, having read the agreement, could really have been misled as to its true effect.
[52] Even if I am wrong, however, and he signed the agreement without understanding it and without legal advice, or on the basis that reality would reflect
some different set of terms than those set out in the text of the agreement, that would
6 Chiswick Investments v Pevats [1990] 1 NZLR 169 (HC) at 175.
have been a negligent act. Non est factum would therefore fail as a defence to Ms
Ho’s claim in any case.
[53] I turn next to Mr Ding’s submissions as to mistake.
[54] Section 6 of the Contractual Mistakes Act 1977 provides:
6 Relief may be granted where mistake by one party is known to opposing party or is common or mutual
(1) A Court may in the course of any proceedings or on application made for the purpose grant relief under section 7 of this Act to any party to a contract—
(a) If in entering into that contract—
(i) That party was influenced in his decision to enter into the contract by a mistake that was material to him, and the existence of the mistake was known to the other party or one or more of the other parties to the contract (not being a party or parties having substantially the same interest under the contract as the party
seeking relief);
... and
(b) The mistake or mistakes, as the case may be, resulted at the time of the contract—
(i) In a substantially unequal exchange of values; or
(ii) In the conferment of a benefit, or in the imposition or inclusion of an obligation, which was, in all the circumstances, a benefit or obligation substantially disproportionate to the consideration therefor; and
…
(2) For the purposes of an application for relief under section 7 of this Act in respect of any contract,—
(a) A mistake, in relation to that contract, does not include a mistake in its interpretation:
(b) The decision of a party to that contract to enter into it is not made under the influence of a mistake if, before he enters into it and at a time when he can elect not to enter into it, he becomes aware of the
mistake but elects to enter into the contract notwithstanding the
mistake.
[55] Mr Ding’s submission is based on s 6(1)(a)(i). The question is whether Mr Ding was influenced to sign the agreement by a mistake that was material to him, known by Ms Ho, and resulted in a substantially unequal exchange of values or in an imposition of an obligation substantially disproportionate to the consideration given for it.
[56] Mr Ding submits the mistake was his belief that the $400,000 was Ms Ho’s
investment in KD Media. He argues Ms Ho knew Mr Sue was advising Mr Ding
whilst also discussing the nature of the transaction with her, and therefore she knew of his misunderstanding as to the nature of the agreement. In support, Mr Ding says Ms Ho has not produced any documents, other than the loan agreement, to support her contention that the transfer of funds was a loan. He claims he believed the transaction was an investment by Ms Ho in KD Media, and he was to hold shares on her behalf. He argues Ms Ho knew he misunderstood the nature of the transaction, and as a result he was at a serious disadvantage. He submits Ms Ho’s knowledge of his misunderstanding is evident because her firm prepared loan documentation which, as Ms Ho would have known through her commercial legal experience, was unnecessary for an investment. This, Mr Ding argues, shows there was an intentional ploy to mislead him.
[57] Mr Ding relies also on the apparent inequality of consideration for the transaction. If the loan exists, as Ms Ho contends, Mr Ding argues that it was without risk to Ms Ho and with a very high interest rate. Mr Ding contends that this resulted in a substantially unequal exchange of values.
[58] It is not for Ms Ho to prove that Mr Ding understood the agreement as a loan agreement. That is the reason the contract exists. If Mr Ding wishes to contradict it, he must raise some evidence that creates some kind of doubt as to whether he correctly understood what he was agreeing to. He has not done so. The agreement is clear on its face, and even if he were mistaken as to what its terms meant, that error would be a mistake in interpretation excluded under (2)(a). I do not consider that the defence of mistake is tenable.
[59] Ms Ho says Mr Ding’s alleged confusion as to why he signed the agreement
is recent and was not present at the time.
[60] Mr Ding offers no explanation for how he missed the fact that the agreement was for a loan despite his solid business background, nor why he would decline legal advice in these circumstances. The agreement is clear and the words “loan”, “lender” and “borrower” are used throughout. Moreover, it contains a call option; if it were an agreement for the purchase of shares, the call option would be unnecessary. It is difficult to see how Ms Ho could have deceived Mr Ding as to the nature of the
agreement in these circumstances. I note, too, at the risk of stating the obvious, that the fact that the agreement was always meant to be for a loan, not an investment, is a far more logical reason for preparing loan documentation than deception would be. I find it difficult to believe, particularly considering that judgment had earlier been issued against Mr Ding for default on a similar loan, that he would sign an agreement without understanding it fully. I do not consider that he made a mistake within the meaning of s 6.
[61] I turn then to the claim that the loan arrangement was an unconscionable bargain.
[62] An unconscionable bargain exists where the weaker party to the transaction is under some disadvantage that is known to and exploited by the stronger party in circumstances amounting to actual or equitable fraud.7 The disadvantage suffered by the weaker party must be some characteristic or condition which significantly diminishes that party’s ability to assess his or her best interests.8 These characteristics include poverty, mental or physical infirmity, illness, age, stress or anxiety, lack of independent legal advice and other qualifying characteristics depending on the circumstances of the case.9 The stronger party must have sufficient knowledge from the manner in which the transaction was concluded, of the disadvantage and must take advantage of it.10 The question for determination is whether it is unconscionable, in the circumstances, to permit the stronger party to take the benefit of the bargain.11
[63] In the present case, the question is whether Mr Ding’s defence that Ms Ho
acted unconscionably is arguable.
[64] The basis of Mr Ding’s submission is that he was at a disadvantage because he did not obtain any legal advice prior to entering the loan agreement, and because
Ms Ho was aware that he misunderstood the nature of the transaction. The fact that
7 Attorney-General for England and Wales v R [2004] 2 NZLR 577 (PC).
8 Gustav and Co Ltd v Macfield Ltd CA168/05, 24 May 2007 at [29]; ], confirmed in Gustav and
Co Ltd v Macfield Ltd [2008] 2 NZLR 735 (SC).
9 At [29].
10 At [29].
11 At [29].
Mr Ding did not seek independent legal advice is not disputed. It is also not disputed that Ms Ho’s law firm completed the loan agreement. There is a suggestion in Mr Ding's affidavit evidence that Ms Ho acted for KD Media, but the point is not developed or coupled with any submission indicating how this might be a basis for a finding of unconscionability, so it is unnecessary to deal with that point further. There is no issue as to Mr Ding’s ability to understand the agreement itself; it is a simple agreement, and Mr Ding is an experienced businessman whose first language is English.
[65] It will be clear from the discussion of mistake, above, that I do not think Ms Ho took advantage of Mr Ding in the way required to establish unconscionable bargain, because I do not believe he misunderstood what he was doing. Even if he did, in these circumstances, and particularly considering the earlier judgment issued against him, Mr Ding’s lack of legal advice would not constitute a sufficient disadvantage to establish unconscionable bargain. He had enough information to know when advice was necessary, and there is no suggestion that he was prevented from seeking advice. His free choice not to do so does not place him in the position of particular vulnerability required to establish unconscionability.
[66] I turn now to the final ground of defence that Mr Ding relies upon, that summary judgment would be inequitable or oppressive. That ground cannot stand alone without further evidence. In these circumstances, there is nothing to suggest that. This argument also fails.
Conclusion
[67] For the reasons I have discussed, I am satisfied that Ms Ho is entitled to summary judgment.
[68] I make an order for summary judgment against Mr Ding on Ms Ho’s claim as
follows:
(a) Damages of $400,000 for repayment of the principal; and
(b) Interest on $400,000 pursuant to the terms of the deed, at the rate of
25% per annum from 16 August 2013 until the date of payment; and
(c) Solicitor / client costs pursuant to cl 7(f) of the term loan agreement. [69] For the purpose of fixing the quantum of interest and costs, counsel for
Ms Ho is to file and serve a memorandum within 10 working days. If there are any issues as to quantum, counsel for Mr Ding may file and serve a memorandum in response within a further 10 working days, and the matter is then to be placed in the
next available Chambers list.
Associate Judge Sargisson
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