LG Home Trading Limited v Bridgeman Concrete Limited
[2025] NZHC 2982
•9 October 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2025-404-001265
[2025] NZHC 2982
IN THE MATTER OF District Court Act 2016, s 124 IN THE MATTER OF
An appeal of the judgment of the District Court at Manukau
BETWEEN
LG HOME TRADING LIMITED
First Appellant
KANG LIU
Second AppellantWEI ZHANG
Third AppellantAND
BRIDGEMAN CONCRETE LIMITED
Respondent
Hearing: 25 September 2025 Appearances:
H Huang for Appellants
G Holm-Hansen and A Hunt for Respondent
Judgment:
9 October 2025
JUDGMENT OF ANDREW J
This judgment was delivered by me on 9 October 2025 at 2 pm, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
LG HOME TRADING LTD v BRIDGEMAN CONCRETE LTD [2025] NZHC 2982 [9 October 2025]
Introduction
[1] This is an appeal against a decision of the District Court granting summary judgment in favour of the respondent, Bridgeman Concrete Ltd (Bridgeman Concrete).
The judgment debt amounts to $209,140.23 plus costs of $57,370.70.1
[2] At issue is the interpretation of a Deed of Settlement (the Settlement Deed) and whether there was an oral variation to it. The Settlement Deed settled a number of different proceedings in this Court, including applications to set aside statutory demands and the enforcement of a guarantee.
[3] The appellant, LG Home Trading Ltd (LG Home) contends that the District Court Judge was in error in making material factual findings based on credibility; that is an issue for a substantive trial. LG Home further contends that it has arguable defences of oppressive and unconscionable conduct under the Credit Contracts and Consumer Finance Act 2003 (CCCFA) and the Fair Trading Act 1986 (FTA) and that the contractual compensation awarded by the District Court Judge (essentially default interest at the rate of two per cent per month and back dated to when the invoices became payable) amounts to an unenforceable penalty.
Factual background
[4] LG Home began trading in 2018 as “Ocean Concrete”. It is in the business of selling and delivering ready-mix concrete. Mr Liu is its sole director. Ms Zhang is his wife.
[5] LG Home does not manufacture its own concrete; it operates solely as a distributor. Its core business model revolves around receiving concrete orders from its customers, purchasing the same concrete orders on credit from a supplier and then delivering the concrete orders to its customers using LG Home’s fleet of concrete delivery trucks.
1 See Bridgeman Concrete Ltd v LG Home Trading Ltd [2025] NZDC 10970 [Substantive judgment]; and Bridgeman Concrete Ltd v LG Home Trading Ltd [2025] NZDC 14184 [Costs judgment].
[6] The respondent, Bridgeman Concrete, manufactures, supplies and delivers concrete goods. It was LG Home’s former supplier.
[7] Bridgeman Concrete began a trading relationship with LG Home in 2018. At that time, the parties entered into a Plant Share Agreement (PSA) which provided overarching terms for a trading relationship.
[8] As well as setting each party’s rights and obligations, the PSA included the payment of a “bond” and the requirements for any price increases by Bridgeman Concrete. The $200,000 bond was subsequently paid and Bridgeman Concrete started to supply LG Home on credit.
[9] On 8 September 2023, the parties executed a Credit Account Agreement (Credit Account). That account incorporated Bridgeman Concrete’s terms of trade.
[10] Bridgeman Concrete says that LG Home developed a history of defaulting on its obligations and failing to make payments despite promising to do so. LG Home says that Bridgeman Concrete was in breach of the PSA, and as a result it charged an estimated $3.4 million more than its original prices over the years.
[11] On 25 September 2023, Bridgeman Concrete issued a statutory demand against LG Home. That demand was subsequently withdrawn by agreement following part-payment of the debt and a promise to reduce the outstanding balance as part of a continuing relationship.
[12] On 2 November 2023, Bridgeman Concrete stopped supply again and served a second statutory demand on LG Home in the sum of $1,113,861.32. LG Home subsequently applied to this Court to set aside the statutory demand, disputing that part of the debt was due, and raising both set-off and counterclaim.
[13] On 20 December 2023, Bridgeman Concrete filed proceedings in this Court against Mr Liu pursuant to the guarantee(s) Mr Liu provided as part of the Credit Account and/or Terms (the Guarantor Proceeding). Mr Liu filed a notice of opposition to the application for summary judgment of the Guarantor Proceeding.
[14] On 24 April 2024, the application to set aside the statutory demand was heard by this Court. By judgment dated 31 May 2024, Associate Judge Taylor set aside the statutory demand. His Honour held, “By the slimmest of margins, LG Home have established that the price increase counterclaim is reasonably arguable”.2
[15] Prior to that judgment being issued, or the Guarantor Proceeding being heard, the parties entered into a Settlement Deed to settle all issues between them in relation to the PSA, the Credit Account, the statutory demand proceedings and the Guarantor Proceedings (cl 3.1). The Settlement Deed expressly recorded the PSA and Credit Account were terminated (cl 2.2).
[16] All parties were legally represented in the drafting and negotiation of the Settlement Deed.
[17] The Settlement Deed provided that LG Home would pay Bridgeman Concrete the sum of $817,808.14 in instalments:
(a)$400,000 within five working days of the date of the Settlement Deed (cl 1.1(a)); and
(b)the remaining balance of $417,808.14 by 12 monthly instalments (cl 1.1(b)). The first payment was due on 1 June 2024 and the last payment on 1 May 2025.
[18] A further $35,000 was to be paid by 3 June 2024 as contribution towards Bridgeman Concrete’s legal costs, bringing the total amount to be paid by LG Home to $852,808.14.
[19] The Settlement Deed contained an entire agreement clause (cl 8.1), an acknowledgement of legal representation (cl 8.3) and a no amendment unless in writing clause (cl 8.10), together with a no waiver unless in writing clause (cl 8.11).
2 LG Home Trading Ltd v Bridgeman Concrete Ltd [2024] NZHC 1418 at [29].
[20]LG Home paid the $400,000, the first monthly payment of $34,817.35, and the
$35,000 costs contribution to Bridgeman Concrete. However, it did not pay the second monthly payment on its due date.
[21] LG Home did not pay the instalment due on 1 July 2024 and thereby breached the Settlement Deed.
[22] Following LG Home’s default, Bridgeman Concrete issued a statutory demand to LG Home for the remaining principal amount owing under the Settlement Deed (pursuant to cl 6.1(a), being $382,990.79). Bridgeman Concrete also notified LG Home of its said entitlement to interest and costs under cl 6.1(b) of the Settlement Deed.
[23] On 2 July 2024, the appellants’ solicitors advised that the payment was “inadvertently missed by our client due to an oversight”. LG Home then:
(a)paid the second of the monthly payments on 2 July 2024, namely
$34,817.35; and
(b)despite having requested a waiver of the breach, made payment of
$348,173.43 to Bridgeman Concrete on 23 July 2024.
[24] On 15 August 2024, LG Home requested that Bridgeman Concrete waive the breach in consideration for LG Home paying Bridgeman Concrete compensation of one day’s interest plus an additional sum of $30,000 to cover Bridgeman Concrete’s legal costs incurred as a result of the breach. Bridgeman Concrete subsequently refused to grant the waiver.
[25] In response, and by letter dated 30 September 2024, Bridgeman Concrete rejected LG Home’s settlement offer of $30,000. Bridgeman Concrete claimed it was entitled to the following amounts outstanding under the Settlement Deed, totalling at least $254,723.54:
(a)$216,023.54 for interest at the rate of two per cent per month compounding monthly; and
(b)$38,700 in legal costs.
[26]Bridgeman Concrete also made an “in principle” settlement offer in the sum of
$80,000.
[27] In response, and by letter dated 10 October 2024, LG Home offered to settle, on an open basis, with the sum of $35,000.
[28] In response, and by letter dated 11 October 2024, the solicitors for Bridgeman Concrete made a further “in principle” settlement offer in the sum of
$57,500. That offer was not accepted by LG Home.
[29] Bridgeman Concrete says that LG Home has failed to make any payment towards its interest and costs entitlement and is in breach of the default clauses under the Settlement Deed, namely cl 6(1)(b) and (c).
Relevant legal principles
Appeal
[30] An appeal by the District Court is by way of rehearing.3 The appeal court must be persuaded that the decision is wrong, but in reaching that view no “deference” is required beyond the “customary” caution appropriate when seeing and hearing the witnesses provides an advantage because credibility is important.4
[31] The appeal court can consider a new defence on appeal that was not relied on in the lower court5 if, as a matter of law, the decision should not stand and the appeal court has jurisdiction to find accordingly.6
3 District Court Act 2016, s 127.
4 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [13].
5 Kang v Heli A1 Ltd [2025] NZHC 679 at [30]–[33], citing Austin Nichols & Co Inc v Stichting Lodestar, above n 4, at [13].
6 Kang v Heli A1 Ltd, above n 5, at [33].
[32] The principles applicable to summary judgment are likewise not at issue.7 The general rule is that a court will refrain from attempting to resolve genuine conflicts of evidence or to assess the credibility of parties. However, a court need not accept uncritically evidence that is inherently lacking in credibility; for example, where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent or is inherently improbable.8
[33]As the Court of Appeal observed in McKay v Sandman:9
While summary judgment is inappropriate where there are factual disputes or where the court must determine material facts independently of affidavit evidence, the court may disregard factual disputes which are plainly spurious or contrived. When considering a summary judgment application, this court has recognised that the need for judicial caution has to be balanced with the appropriateness of a robust and realistic judicial attitude when that is called for by the particular facts of the case.
The issues
[34]I need to resolve the following issues:
(a)Was the District Court Judge entitled to reject the evidence of Mr Liu about the alleged oral agreement to allow payment to be made late— and was it a matter he could properly determine on a summary judgment application?
(b)What is the effect of the no oral modification (NOM) clause?
(c)Was the Settlement Deed a credit contract?
(d)Was the refusal to grant a waiver oppressive or unconscionable conduct?
(e)Was the consequence of the breach an unenforceable penalty?
7 High Court Rules 2016, r 12.2, states that the onus is on the plaintiff to satisfy the Court that the defendant has no defence to the claim.
8 Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26].
9 McKay v Sandman [2018] NZCA 103 at [30] (footnote omitted).
Issue (a)—Improper determination of conflict of evidence
[35] LG Home says, in reliance on an affidavit from its director, Mr Liu, that it reached an oral agreement with Bridgeman Concrete (via Mr Walters) that the second instalment of $34,817.35 could be paid “a little bit late” (i.e. by the end of the week). LG Home further says that, contrary to that agreement, Bridgeman Concrete immediately issued a statutory demand.
[36] LG Home says that after the breach had been remedied and the principal debt had been paid in full, it requested a waiver of the breach on an open basis on 15 August 2024 and again on 10 October 2024. On both occasions, compensation to pay all Bridgeman Concrete’s losses arising from the breach was offered but both waiver requests were refused. LG Home says that Bridgeman Concrete’s refusals to grant a waiver were oppressive and seeks to have the Court re-open the Settlement Deed under the CCCFA.
[37] The District Court Judge concluded that there was no credibility to Mr Liu’s claim that there was an oral variation to the Settlement Deed allowing for a late payment. LG Home says this was an error; the District Court Judge was not entitled, on a summary judgment application, to resolve a conflict in evidence and this issue, a material one, should be resolved at trial following cross-examination.
[38] I reject those submissions. The District Court Judge was entitled, and correct in my view, to find that Mr Liu’s evidence did not have “any credibility”. The District Court Judge was entitled to take a robust view; it was the only reasonable conclusion available. That is so for five principal reasons:
(a)the argument of an oral variation was raised for the first time in the summary judgment proceedings, despite LG Home having ample opportunity to do so prior. The appellants did not assert such an interpretation for over five months either immediately after the 1 July meeting, or in the substantial correspondence that followed that meeting. As the District Court Judge concluded, it is inconceivable that Mr Liu would not immediately have responded to the letter of demand
of 2 July 2024 with a protestation “but I have been granted until the week to pay”;10
(b)Mr Liu’s history of broken promises to make future payments—and that is apparent from the three statutory demands and the litigation history;
(c)the circumstances of the meeting were to discuss a proposal to pay off the full debt in one go, rather than to make delayed payment of one instalment. The contemporaneous written documentation supports that interpretation;
(d)the evidential hurdle the appellants face to overcome the NOM clause (to the extent that it does not operate as a bar to any variation at all — and I address this issue further below); and
(e)the appellants have repeatedly admitted and maintained throughout the proceedings (including before me), that there was a breach of the Settlement Deed. That is entirely inconsistent, as Bridgeman Concrete submitted, with there being a variation.
Issue (b)—What is the effect of the no oral modification clause?
[39] The District Court Judge concluded that even if he was wrong about making a factual finding rejecting Mr Liu’s account of the oral variation, the Settlement Deed did not, in any event, permit such variation and nor did it permit any waiver except in writing signed by both parties.
[40] LG Home contends that the District Court Judge was in error in reaching that conclusion. It relies upon the following obiter comments of the Supreme Court in Savvy Vineyards 3552 Ltd v Kakara Estate Ltd:11
10 Substantive judgment, above n 1, at [74].
11 Savvy Vineyards 3552 Ltd v Kakara Estate Ltd [2014] NZSC 121, [2015] 1 NZLR 281 at [112]. See also Helen Winkelmann, Susan Glazebrook, and Ellen France “Contractual Interpretation” (2020) 51 VUWLR 463 at 560–510 recording some criticism of the contrary English approach as
Dr Harrison also relied on the “no amendment unless in writing” clauses. There are a number of possible responses to this. A novation is not an amendment but rather a new contract. So, at least if construed literally, these clauses are not engaged. In any event, we do not accept that such a clause deprives the parties to a contract of the ability to vary it otherwise than in writing, albeit that it may be of distinct evidential significance. As well, there are many documents in writing and signed by the representatives of the appellants and respondents which proceed on the basis that the contracts had been novated.
[41] It may be that the District Court Judge was in error in concluding that the NOM clause in the Settlement Deed prohibited absolutely the enforceability of the alleged oral variation. However, I find that that error was not of a material kind.
[42] As the Court of Appeal concluded in Forest Holdings (NZ) Ltd v Sheung,12 the proper approach to such boilerplate commercial clauses (i.e. a NOM clause) is that they raise an evidential presumption against variation being effective unless the required formalities are met—albeit they do not prohibit them absolutely. The reason for that is because the variation may be effective to vary the non-variation clause as well. The Court of Appeal further held that the burden of proof lies on the party alleging the oral variation to show that the parties intended to vary the structure of the settlement arrangements.13 As this Court observed in Heartland Bank Ltd v Mahoney,14 a NOM is clearly relevant as evidence and it makes it “harder” to prove an oral variation.15 In that case, the Court ruled that the NOM clause gave “another reason” for rejecting the defence of the oral variation.16
[43] On the facts here, there is a sound and clear basis for concluding that LG Home falls well short of discharging the evidential burden or presumption against the alleged variation being effective. The five factors that I have identified above as supporting the credibility finding made by the Judge apply equally to this issue. I note, too, that the subsequent conduct of LG Home contradicts the contention for an oral variation. Following the meeting on 2 July 2024, a statutory demand was served to LG Home’s
adopted in the UK Supreme Court decision MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] UKSC 24, [2019] AC 119.
12 Forest Holdings (NZ) Ltd v Sheung [2021] NZCA 608 at [29].
13 At [29].
14 Heartland Bank Ltd v Mahoney [2021] NZHC 1363.
15 At [60], citing Beneficial Finance Ltd v Brown [2017] NZHC 964.
16 At [61].
registered office. A letter of demand followed on 3 July 2024. In response, LG Home’s solicitors confirmed:
(a)the second instalment was “inadvertently missed … due to an oversight”;
(b)the non-payment amounted to a breach of the Settlement Deed; and
(c)requested that Bridgeman Concrete waive the breach.
[44] If the 1 July 2024 meeting had occurred in the manner contended for by Mr Liu, there would have been no breach in the first instance. I reject the explanation put forward by LG Home that its solicitors were acting under urgency in drafting the 3 July response, that the wording reflected shorthand, and that the communications would have been in Chinese and subsequently translated into English. In any event, there is no explanation as to why LG Home failed to raise this issue in any of the detailed correspondence that followed. Indeed, on 15 August 2024, LG Home’s solicitors again acknowledged that a breach had occurred and, despite Bridgeman Concrete having expressed scepticism of any “inadvertence” and late payment, did not raise any suggestion that further time to pay had been afforded.
[45] On 10 October 2024, LG Home’s solicitors again confirmed that “it has never been in dispute” that LG Home breached the Settlement Deed. Again, no mention was made of any alleged oral variation.
[46] As Bridgeman Concrete submitted, the various grounds for challenging the summary judgment and LG Home’s claims have evolved over time. The evidential basis for the claim of an oral variation was insufficient to displace the evidential presumption as it is inherently weak and unreliable—and was properly capable of being addressed and dismissed as part of a summary judgment application.
[47]There is no merit to this second ground of appeal.
Issue (c)—Was the Settlement Deed a credit contract?
[48] The Court may open a credit contract where a party has exercised a right or power in an oppressive manner.17 Oppressive is defined as “oppressive, harsh, unjustly burdensome, unconscionable, or in breach of reasonable standards of commercial practice”.18 LG Home contends that the refusal by Bridgeman Concrete to grant a waiver giving rise to the substantial and “disproportionate” compensation/penalty was oppressive and unconscionable.
[49] In order to sustain the argument of oppression under the CCCFA, LG Home must, of course, establish that the Settlement Deed was a credit contract.
[50] Sections 7 and 6 of the CCCFA provide that a credit contract is “a contract under which credit is or may be provided” and that “credit” means to “defer payment of a debt” or “incur a debt and defer its payment”.
[51] LG Home relies upon a UK case where a dispute arose under the UK Consumer Credit Act 1974 (UKCCA), an equivalent statutory consumer protection statute. The UK Court of Appeal in CFL Finance Ltd v Laser Trust19 held that where there is an underlying credit agreement, the UKCCA applies to a settlement agreement if there is no valid dispute as to the underlying debt.20 However, it held that the UKCCA does not apply where asserted defences are valid, of substance, and the subject of a bona fide compromise.21
[52] This issue is not free of doubt but, in my view, the better view is that the Settlement Deed is not a credit contract. The issue is essentially a legal one where the facts are not in dispute.
[53] The Settlement Deed is exactly what its nomenclature suggests, a settlement of:
17 Credit Contracts and Consumer Finance Act 2003 (CCCFA), s 120.
18 Section 118.
19 CFL Finance Ltd v Laser Trust [2021] EWCA Civ 228.
20 At [45(iv)]
21 At [51].
(a)outstanding invoices;
(b)contractual entitlements to interest and costs;
(c)LG Home’s counterclaim for damages as a result of an alleged failure to give notice of price increases;
(d)the guarantor proceedings; and
(e)the parties’ underlying rights under previous contractual arrangements, including both the PSA and credit account (otherwise terminated by the Settlement Deed).
[54] In my view, rather than being construed as a loan agreement or credit contract, the Settlement Deed is properly to be interpreted as a settlement of various claims with debts to be incurred on an instalment basis. It is relevant to note that:
(a)the Settlement Deed is not a continuation of the terms. It confirms the PSA and credit account are terminated (cl 2.2) and all previous arrangements are superseded (cl 8.1); and
(b)no funds were advanced. The interest and costs claims are only payable on default.
[55]LG Home contends that the Settlement Deed is a credit contract because:
(a)the Settlement Deed preserved the existing debt and allowed for payment in future instalments;
(b)there was no compromise in the principal debt which was equivalent to the settlement sum under the Settlement Deed and therefore the UK CFL Finance Ltd case does not apply.
[56] However, as Bridgeman Concrete submits, both propositions contain false premises:
(a)the Settlement Deed did not preserve existing debt. The existing debt comprised both interest and costs beyond the principal debt underlying the statutory demand. Furthermore, rather than preserving and restructuring any debt, the Settlement Deed terminated the PSA and credit account;
(b)there were several substantive disputes and each were compromised as part of the Settlement Deed. It was disputed whether the credit account and terms applied at all. The entitlement to costs and interest was therefore also substantively disputed. The appellants persisted with those disputes in the District Court. A substantial compromise was reached in relation to:
(i)the amount Bridgeman Concrete would otherwise have been able to claim in relation to the terms against both LG Home and Mr Liu in two separate proceedings (for interest and costs, which the appellants disputed);
(ii)the applicability of the terms (and for which LG Home made no admission of liability);
(iii)LG Home’s counterclaim for price increases; and
(iv)all issues “between them” in relation to the PSA, the credit account, the statutory demand proceeding and the guarantor proceeding.
[57] I conclude that, in substance, the Settlement Deed was not a credit contract. This is because there was a settlement of valid disputes including, but also wider than, the principal debt and there was a bona fide compromise of a wide range of issues under the Settlement Deed.
Issue (d)—Oppressive or unconscionable conduct
[58] While I have concluded that the Settlement Deed is not a credit contract, and therefore not subject to the CCCFA, I address the appellants’ following ground of appeal for completeness.
[59] In contending that the refusal to grant the waiver (giving rise to the severe and disproportionate compensation/penalty consequence) was oppressive or unconscionable, LG Home relies on s 120 of the CCCFA. As noted above, that section provides that the Court may reopen a credit contract if a party has exercised a right or power conferred by the contract in an oppressive manner. It also relies on s 121 which provides that if a party refuses to waive any term of a credit contract, the party is deemed to be exercising a right or power under that contract.
[60] Section 124 of the CCCFA sets out a non-exhaustive list of matters the courts must (to the extent they are applicable), take into account in deciding whether to re-open a credit contract.22
[61] LG Home also relies upon the passage in Gault on Commercial Law which notes that:23
… if the creditor has indicated that it will not insist upon its full legal rights and then does so, that has been held to be oppressive, even when the facts would not allow for an estoppel.
[62] The appellants also referred to Marac Finance Ltd v McKee,24 where it was held that the fact that the lender created an expectation that certain contractual rights would not be enforced, but subsequently enforced them, was found to be sufficient for oppression.
[63] I find that the District Court Judge was not in error in concluding that there was no oppression here. The mandatory factors the Court must have regard to under s 124 provide clear support for his Honour’s findings. This was a contract between
22 See in particular: CCCFA, s 124(f).
23 Ian Gault (ed) Gault on Commercial Law (online looseleaf ed, Thomson Reuters) at [FC7.03(2)(d)].
24 Marac Finance Ltd v McKee (1988) 2 NZBLC 102,687 (HC).
two commercial parties who entered into the Settlement Deed with the benefit of independent legal advice. There is no basis for concluding that there was any serious unequal bargaining power or that LG Home was not reasonably able to protect its interests. Given the lengthy history of default by LG Home, Bridgeman Concrete had good reason, consistent with “good commercial practice”, to insist on a compensation clause for default that provided a real incentive for LG Home to comply with its obligations—and, in the circumstances, it was entitled to reject the request for a waiver.
[64] Furthermore, as the District Court Judge concluded, Bridgeman Concrete had genuine concerns regarding LG Home’s solvency. As his Honour concluded, good commercial practice dictated Bridgeman Concrete utilising the default mechanism set out in the Settlement Deed.25
[65] For similar reasons, I find that the District Court Judge was correct to conclude that Bridgeman Concrete had not acted in an unconscionable manner in breach of the FTA by persisting with its full claim. As the District Court Judge concluded, LG Home had ample opportunity to resolve the matter and it was Mr Liu’s decision not to pay Bridgeman Concrete on the due date but to prefer other creditors that has led to his current predicament. There is no proper basis to re-visit the District Court Judge’s finding that “if there is unreasonable conduct, it was perpetrated by Mr Liu in persisting to resist [Bridgeman Concrete’s] proper claims.”26
[66]I find that there is no merit to this ground of appeal.
[67] I also agree with the submission of Bridgeman Concrete that LG Home’s argument is not for a waiver of breach. It accepts the breach and both the acceleration clause and enforcement clause. In reality, it seeks release from the indemnity clause.
Issue (e)—Unenforceable penalty
[68] The full amount of $817,808.14, being the total sum payable by LG Home under the Settlement Deed has been paid in full. That includes the further $35,000
25 Substantive judgment, above n 1, at [80].
26 At [87].
contribution towards Bridgeman Concrete’s legal costs. The final payment, being a lump sum of $348,173.43, was paid on 23 July 2024.
[69] The judgment debt at issue of $209,140.23 comprises default interest compensation (two per cent per month compounding monthly) that Bridgeman Concrete says it is entitled to under the default clause in the Settlement Deed (cl 6.1(b) of the Settlement Deed). Bridgeman Concrete’s further costs of $57,370.70 awarded by the District Court Judge as part of his subsequent costs judgment, are also at issue (cl 6.1(c) of the Settlement Deed).27
[70] LG Home contends that the default interest compensation is exorbitant, grossly disproportionate to the total principal sum owing under the Settlement Deed and constitutes an unenforceable penalty. This issue was not raised in the District Court. However, as noted above, that does not preclude this Court, on appeal, from addressing it. I note, too, that this issue was essentially a legal one, and not dependent on any contested factual findings. Having said all that, there is merit to the submission of Bridgeman Concrete that raising this issue at this late stage does tend to suggest that LG Home is searching for a defence in adopting somewhat of a “scatter gun” approach.
[71] LG Home does not contend that the acceleration clause or the indemnity clause amounts to a penalty. Instead, it contends that:
(a)multiple consequences are excessive;
(b)the interest compensation clause is penal in nature having regard to:
(i)the length of the breach; and
(ii)its quantum.
27 That clause provides that “LG Home and Mr Liu will meet the actual and reasonable costs (including legal costs on a solicitor and client basis) of and incidental to the enforcement of Bridgeman Concrete’s rights and remedies under the Settlement Deed in the event of a default”.
[72] LG Home further submits that the purposes of the consequences in the default clause provision, namely cl 6.1, are to protect Bridgeman Concrete’s legitimate interests in ensuring that LG Home would pay the settlement payments in accordance with cl 1.1. However, the multiple consequences are out of all proportion and exorbitant.
[73] The leading decision on unenforceable contractual penalties is the Supreme Court case of 127 Hobson Street Ltd v Honey Bees Preschool Ltd.28 The Supreme Court held that a clause that stipulates a consequence for breaching a term of the contract is an unenforceable penalty if the consequence is out of all proportion to the legitimate interests of the innocent party in performance of the primary obligations. The Court further held:
(a)a clause will be an unenforceable penalty if the consequence is out of all proportion to the legitimate interests of the innocent party in performance of the primary obligation.29 “Out of all proportion” means the consequence can fairly be described as exorbitant when compared with the legitimate interests protected;30
(b)determining whether the impugned cause is an unenforceable penalty requires an objective exercise of construction, notionally undertaken at the time of contract formation, and by reference to the terms and circumstances of the contract;31
(c)reference to the circumstance of the contract can include the broader commercial context within which the contract sits;32
28 127 Hobson Street Ltd v Honey Bees Preschool Ltd [2020] NZSC 53, [2020] 1 NZLR 179.
29 At [56]. Also see Wilaci Pty Ltd v Torchlight Fund No 1 LP (in rec) [2017] NZCA 152, [2017] 3 NZLR 293 at [88], incorporating the test applied in Cavendish Square Holding BV v Makdessi [2015] UKSC 67; [2016] AC 1172; and Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28; (2016) 333 ALR 569.
30 127 Hobson Street Ltd v Honey Bees Preschool Ltd, above n 28, at [56].
31 At [91(b)].
32 At [91(b)].
(d)however, it is neither necessary nor desirable to inquire whether the predominant purpose of the impugned clause is to punish the promisor rather than protect the legitimate interests of the promisee;33
(e)the bargaining power of the parties is relevant to the inquiry as to whether the agreed consequences of breach are out of all proportion to the innocent party’s legitimate interests and performance of the primary bargain.34 However, protection against oppression flowing from exploitation of unequal bargaining power is not the primary purpose of a penalties doctrine.35 A court would presume that commercial parties dealing with each other on equal terms are able to assess the appropriate proportion between that legitimate interest and the consequences for breach. The fact that a party has been legally advised as to the nature and effect of the transaction will weigh in favour of upholding the bargain.36
[74] I acknowledge that the interest compensation consequences read together with all of the consequences of default (including the payment of legal costs and the obligation to make immediate payment in full) can together be described as somewhat severe. They are certainly significant. However, in applying the principles of 127 Hobson Street, I find that they do not constitute an unenforceable penalty.
[75] The critical issue to address is whether the multiple consequences are out of all proportion to the legitimate interest of Bridgeman Concrete and the enforcement of the primary obligations. The primary obligations here are, of course, to make payment of the outstanding sum and in a timely, predictable and consistent fashion.
[76] In addressing the legitimate interests and expectations of Bridgeman Concrete, it is also important to have regard to the circumstances that existed at the time the Settlement Deed was negotiated and agreed. This included LG Home’s history of
33 At [58].
34 At [89].
35 At [88] and [91(f)].
36 At [89] and [91(f)].
broken promises and genuine concern by Bridgeman Concrete as to LG Home’s financial position.
[77] The default clause was formed as part of the Settlement Deed that was negotiated between the parties over a period of weeks, and on which each party was legally advised. It is clear that LG Home had the opportunity to and did, in fact, make amendments to the Settlement Deed.
[78] The default provisions were specifically designed to apply, with time being of “the essence”, to protect Bridgeman Concrete’s interests if the Settlement Deed was breached. Given the appellants’ prior conduct, Bridgeman Concrete had every reason to incentivise compliance with the Settlement Deed.
[79] The parties could have elected to adjourn the statutory demand proceedings, underlying substantive rights, or the guarantor proceedings. The mechanism of including the default provisions as drafted provided Bridgeman Concrete with sufficient security that their underlying entitlements would be protected in the event of breach—that being a prospect that it had understandably become increasingly wary of.
[80] I further note that rather than requiring the settlement sum to be paid in one lump sum payment, Bridgeman Concrete clearly assumed risk that any or all of the monthly payments would not be paid. Indeed, LG Home breached its obligations on just the second monthly payment.
[81] Bridgeman Concrete submits that the default provisions do not represent a windfall for it, contrary to the submission of LG Home. Bridgeman Concrete submits that it is entitled to no more than what it would otherwise have been entitled to by way of damages, and through the existing litigation, but for the Settlement Deed. That contention is difficult to accurately assess. However, given that the interest rate at two per cent per month compounding is the same calculation that applied under Bridgeman Concrete’s terms and conditions of trade, there appears to be substantial merit to that contention.
[82] In conclusion, and in evaluating all these factors, I find that the multiple consequences complained of do not constitute an unenforceable penalty. As the Court of Appeal held in Wilaci Pty Ltd v Torchlight Fund No 1 LP (in rec), “It is a perfectly legitimate interest of a contracting party to provide terms to encourage due performance … or discourage default in performance”.37
[83] The case relied upon by LG Home of Vivian Westwood Ltd v Conduit Street Development Ltd38 demonstrates that the issue of an unenforceable penalty is very much a fact-specific inquiry. In my view, that case is of limited assistance to the situation here.
[84]I also dismiss this ground of appeal.
Conclusion
[85] I reject all the grounds of appeal advanced by LG Home. It has failed to establish any error in either fact or law by the District Court Judge. In my view, he was entitled to make the disputed factual findings and to conclude that Bridgeman Concrete had established that LG Home has no defence to the summary judgment application. I also find that the multiple consequences of the default by LG Home under the Settlement Deed (and, in particular, the default interest compensation) does not amount to an unenforceable penalty.
Result
[86]The appeal is dismissed.
[87] As to costs, having succeeded, I am of the preliminary view that Bridgeman Concrete is entitled to costs. I note and assume that Bridgeman Concrete will seek costs based on the default provisions in the Deed of Settlement.
37 Wilaci Pty Ltd v Torchlight Fund No 1 LP (in rec), above n 29, at [97]. Also see Cavendish Square Holding BV v Makdessi, above n 29, at [248].
38 Vivian Westwood Ltd v Conduit Street Development Ltd [2017] EWHC 350 (Ch).
[88] If costs cannot be agreed, then submissions (no more than three pages) are to be filed and served by 5 pm on Friday 14 November 2025. In the event that solicitor/client costs are sought by Bridgeman Concrete, such claims will need to be supported by invoices and advice as to hourly rates.
Andrew J
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