IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-2048
[2025] NZHC 1071
UNDER Section 97 of the Property Law Act 2007 BETWEEN
LJ GROUP NEW ZEALAND LIMITED
Plaintiff
AND
NEW ZEALAND CAPITAL MANAGEMENT LIMITED and
BRIDGING FINANCE GROUP LIMITED
Defendants
Hearing: 12 February 2025
Further submissions filed 14 and 19 February 2025
Appearances:
L Yang for Plaintiff
S R G Judd for Defendants
Judgment:
6 May 2025
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 6 May 2024 at 4 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date:
LJ GROUP NEW ZEALAND LIMITED v NEW ZEALAND CAPITAL MANAGEMENT LIMITED and BRIDGING FINANCE GROUP LIMITED [2025] NZHC 1071 [6 May 2025]
[1] The defendants (NZ Capital) made a series of loans to the plaintiff (LJ Group) which were secured by a registered mortgage over a property at Kinloch (the Kinloch property). LJ Group defaulted in its repayment obligations and NZ Capital exercised its power of sale as mortgagee and has been paid in full. LJ Group pleads that NZ Capital:
(a)breached s 176 of the Property Law Act 2007 (PLA) by failing to obtain the best price reasonably obtainable for the Kinloch property at mortgagee sale; and
(b)exercised its power of sale in an oppressive manner under s 120 of the Credit Contracts and Consumer Finance Act 2003 (CCCFA).
[2]This judgment deals with applications by NZ Capital:
(a)granting it leave to apply for summary judgment;
(b)granting it summary judgment; or alternatively
(c)striking out LJ Group’s claims and dismissing the proceeding; and
(d)awarding it costs.
[3]The primary issues are:
(a)whether NZ Capital breached its duty of reasonable care under s 176 to obtain the best price reasonably obtainable for the Kinloch property;
(b)whether the terms of the loan agreements were oppressive; and
(c)whether NZ Capital exercised its powers under the loan agreements and mortgage in an oppressive manner.
Background
[4] Xian (Jacky) Zeng is the sole shareholder and director of LJ Group. He is an experienced businessman and company director and formerly the principal of a LJ Hooker Real Estate franchise in Auckland. He incorporated LJ Group to be the vehicle to purchase the Kinloch property.
[5] The Kinloch property consists of 280.86 hectares of land in close proximity to Taupo and is partially planted in manuka. There were several structures on the property, including what is referred to as an executive dwelling which in recent times was in a state of disrepair.
[6] In 2018, LJ Group obtained a loan for a term of one year from NZ Capital. In each subsequent year LJ Group entered into a further loan agreement for one year under which NZ Capital made a fresh advance to repay the previous expired loan. All advances were secured by a registered mortgage over the Kinloch property.
[7] For present purposes, the relevant term loan agreements are dated 23 February 2022 and 2 March 2023. The 2022 and 2023 loan agreements were in a standard 2018 ADLS Term Loan Agreement (non-regulated) form with additional clauses.
[8] LJ Group had independent legal advice before entering into the loan agreements.
[9] The terms of the loan agreements dealing with the payment of interest are set out as Schedule A. Under both loan agreements cl 3(c) (interest on the full sum method) applied. This method was described in “Table A – Financial details” of the loan agreements as:
Interest is payable at the higher rate on the full principal sum but will be accepted at the lower interest rate if it is paid within 7 days of the due date for payment.
[10]Under the 2022 loan agreement the lower and higher interest rates were
10.25 per cent per annum and 20.25 per cent per annum respectively. Under the 2023
loan agreement the lower and higher interest rates were 11.95 per cent per annum and
21.95 per cent per annum respectively.
[11] It was a condition of the loans that LJ Group would make all payments by direct debit. The bank account used for this purpose was in the name of Mr Zeng with the ASB Bank (the deduction account). The condition was in the following terms:
Payments
...
The Lender will action all interest, penalty interest and the principal payment by direct debit. The debit will occur on the monthly payment dates for regular payments, and as necessary for penalty payments. Interest is payable every month on the dates as per the payment schedule on this document, for the term of the loan. If the monthly payment date falls on a non business day then;
·It is the Borrower’s responsibility to ensure that there are sufficient funds in their bank account to fund the interest and the final principal payment one business day before the monthly payment date
·If there are insufficient funds available to fund the monthly interest payment one business day before the monthly payment date, it is likely that the direct debit will fail, and the Borrower will then be in default and liable for penalty interest payment
·The Borrower will make arrangements with their trading bank to ensure that all direct debits will not be dishonoured for whatever reason
·The direct debit will occur on the monthly payment date, or the next business day
...
[12] LJ Group did not make the interest payment under the 2022 loan agreement due on 15 February 2023 (the February interest payment). It also did not make the interest payment under the 2023 loan agreement due on 15 March 2023 (the March interest payment). When these defaults were not remedied NZ Capital issued a PLA Notice under s 119 of the PLA (the Notice). LJ Group has said the Notice was not validly served. I am satisfied that is not correct and will return to this later in the judgment.
[13] LJ Group listed the Kinloch property for sale with Bayleys Real Estate. It was sold by tender to OJI Fibre Solutions (NZ) Ltd (OJI) following a four-week marketing
campaign. The sale price of $2.6 million plus GST was sufficient to pay NZ Capital in full.
[14] The sale of the Kinloch property settled on 31 August 2023 but LJ Group obtained a without notice interim injunction to restrain transfer of the title to OJI.1 On 14 September 2023, Muir J directed that the application be heard on notice with interim orders restraining the transfer of title to remain in the meantime.2
[15] The injunction application was set down to be heard on 13 February 2024. On 31 January 2024, LJ Group’s then lawyers sought leave to withdraw. Leave was granted by Downs J on 5 February 2024. On 13 February 2024 the injunction application came before Robinson J who rescinded the interim orders.3 Subsequently Venning J determined costs in relation to LJ Group’s application for an interim injunction and found that both NZ Capital and OJI were entitled to indemnity costs.4
[16] On 14 May 2024 LJ Group filed its amended statement of claim, which is its current pleading. NZ Capital filed its statement of defence on 8 July 2024. The case was set down for a case management conference on 21 August 2024. Counsel filed memoranda for that conference and NZ Capital identified that it would apply for summary judgment and/or strike out of LJ Group’s claim. Associate Judge Taylor made directions in a minute of 21 August 2024 for the filing and hearing of those applications.5
Mr Zeng’s unsworn affidavit
[17] Both parties relied upon affidavits which were filed in support of and in opposition to LJ Group’s application for an interim injunction which included
1 LJ Group New Zealand Ltd v New Zealand Capital Management Ltd HC Auckland CIV-2023- 404-2048, 11 September 2023 (Minute).
2 LJ Group New Zealand Ltd v New Zealand Capital Management Ltd HC Auckland CIV-2023- 404-2048, 14 September 2023 (Minute).
3 LJ Group New Zealand Ltd v New Zealand Capital Management Ltd, HC Auckland CIV-2023- 404-2048, 13 February 2024 (Minute).
4 LJ Group New Zealand Ltd v New Zealand Capital Management Ltd [2024] NZHC 1564.
5 LJ Group New Zealand Ltd v New Zealand Capital Management Ltd HC Auckland CIV-2023- 404-2048, 21 August 2024 (Minute) at [13].
affidavits of Mr Zeng as well as other affidavits filed specifically in relation to NZ Capital’s application.6
[18] LJ Group’s notice of opposition to NZ Capital’s summary judgment/strike out application was filed along with an unsworn affidavit of Mr Zeng and a memorandum of counsel of 31 October 2024 seeking orders pursuant to r 9.73(4) of the High Court Rules 2016 that the unsworn affidavit be accepted for filing and read and used in the proceeding.
[19] Rule 9.73 deals with the swearing of affidavits. It provides that a Judge may direct that an affidavit that is not sworn nor affirmed under subclauses (2) or (3) of the rule (as required by subclause (1)) may nevertheless be accepted for filing and read and used in a proceeding if:
9.73 Swearing of affidavits
...
(5)A Judge may make an order, and a Registrar may make a direction, under subclause (4) in respect of an affidavit only if—
(a)satisfied that, due to the existence of an emergency in any part of New Zealand, requiring the affidavit to comply with either subclause (2) or (3) would—
(i)cause an unacceptable delay in the resolution of the proceeding, having regard to the nature and urgency of that proceeding or any application connected with it; or
(ii)endanger the health and wellbeing of any person; and
(b)the affidavit is presented for filing together with a memorandum of counsel—
(i)confirming that the document contains the same evidentiary matter as the affidavit complying with either subclause (2) or (3) that the intending deponent would have sworn to or affirmed had an emergency not existed; and
(ii)undertaking that an affidavit complying with either subclause (2) or (3) containing the same evidentiary matter as that presented for filing will be filed as soon as circumstances reasonably permit; and
6 High Court Rules 2016, r 7.32.
(c)the affidavit contains, or there is attached to or covering the affidavit a document containing, a statement from the intending deponent to the effect that the matters stated in the affidavit are to the best of his or her knowledge true and correct.
...
[20] I am not able to have regard to Mr Zeng’s unsworn affidavit as the requirements of r 9.73 are not met. There was no emergency in any part of New Zealand that prevented Mr Zeng from swearing his affidavit in the usual way.7 When I raised this with LJ Group’s counsel, I understood him to accept that the affidavit could not be read. I also note that despite the undertaking under r 9.73(5)(b) in counsel’s memorandum of 31 October 2024 that an affidavit complying with r 9.73 would be presented for filing as soon as circumstances permit, no such affidavit was filed by the time of the hearing.
A preliminary issue: service of the s 119 Notice
[21] LJ Group contends the Notice was not validly served. Surprisingly such a fundamental matter does not appear to have been raised earlier in the proceeding. It is associated with another assertion that NZ Capital’s director, Mr Stuart Smith, falsified evidence in opposition to LJ Group’s injunction application.
[22] Under ss 352 and 353 of the PLA, a s 119 notice is to be served on a company in a manner provided for in s 387(1) (other than paragraph (e)) or s 388 of the Companies Act 1993. Relevantly, s 387 allows for service of a document on a company in all the following ways:
(a)delivery to a person named as the director of the company on the New Zealand Register;
(b)delivery to an employee of the company at the company’s head office or principal place of business; or
(c)leaving it at the company’s registered office or address for service.
7 Rule 9.73(5)(a)
[23] Here, LJ Group’s assertion the Notice was not served is untenable. I am satisfied:
(a)it was served in person at the registered office of LJ Group;8
(b)it was sent by email to LJ Group’s lawyer;
(c)it was sent by email to Mr Zeng personally and received by him;
(d)that at no time following service of the Notice did Mr Zeng suggest he had not received it; and
(e)when LJ Group commenced proceedings for an ex parte injunction its lawyers filed an affidavit exhibiting a copy of the Notice.
[24] The allegation that Mr Smith falsified evidence is similarly without merit. In his affidavit of 16 October 2023, Mr Smith set out email correspondence between himself and Mr Zeng. In respect to an email of 26 April 2023 he had added below the body of the email the words “(attached was a copy of [PLA] Notice)”. LJ Group submits these words were misleading, presumably on the basis they suggest the Notice was attached to the email when it was not.
[25] I do not accept LJ Group’s submission. First, I accept Mr Smith’s evidence that the Notice was attached to the email. Second, it is clear the words in question were not part of the original email but were commentary to Mr Smith’s affidavit. They are in brackets and the use of the word “was” makes no sense otherwise. Third, there is nothing to suggest anyone was misled by Mr Smith’s affidavit.
8 There is an affidavit of service of Karl Lewis of 21 November 2024 confirming service of the Notice on 28 April 2023 at the registered office of LJ Group. Mr Smith also addresses the matter and attaches relevant correspondence to his affidavit of 27 November 2024 establishing that both Mr Zeng and his solicitors received the Notice.
Leave to apply for summary judgment
[26] NZ Capital requires leave to make an application for summary judgment because it did not apply for summary judgment at the time it filed its statement of defence.9
[27] The High Court Rules do not provide guideline principles to be applied when determining whether to grant leave to a plaintiff or defendant to apply for summary judgment out of time. In deciding whether or not to grant leave the Court exercises a discretion. The party applying will need to show reasons why leave should be granted. The factors that the Court has identified will be considered include whether the delay in applying is satisfactorily explained, the merits of the applicant’s case and any risk of a miscarriage of justice in determining the summary judgment application at a later time.10 Also, the Court should not grant leave unless doing so will have the effect of avoiding prolonged proceedings,
[28] LJ Group commenced this proceeding with an ex parte application for interim injunction and the focus of the proceeding was then upon that application. Once the application was dismissed and LJ Group filed its amended statement of claim, NZ Capital gave early notice of its intention to apply for summary judgment at the first case management conference. As its counsel submits, the procedural position is effectively the same as it would have been if the application for summary judgment had been filed at the outset. I am satisfied that NZ Capital’s delay in applying for summary judgment is satisfactorily explained.
[29] There is also no evidence of prejudice to LJ Group in proceeding by summary judgment at the present time. NZ Capital’s application is strong. Nothing has been filed since October 2024 to suggest Mr Zeng is unable to deal with this matter and as the application has been opposed he must be providing instructions to LJ Group’s lawyers.
9 High Court Rules, r 12.4(2).
10 Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR 12.4.01A], citing Tip Top Ice Cream Co Ltd v Polarland Ltd (2002) 7 NZBLC 103,564 (HC) at [28].
[30] I am satisfied granting NZ Capital leave to apply for summary judgment will result in the early determination of this proceeding and that there is no risk of a miscarriage of justice if leave is granted.
[31]NZ Capital is therefore granted leave to apply for summary judgment.
Summary judgment principles
[32]Rule 12.2(2) of the High Court Rules reads as follows:
12.2 Judgment when there is no defence or when no cause of action can succeed
…
(2) The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[33] The principles that apply to a defendant’s application for summary judgment were set out in Stephens v Barron as follows:11
(a)The defendant has the onus of proving on the balance of probabilities that the plaintiff cannot succeed. Usually this will arise where the defendant can offer evidence which is a complete defence to the plaintiff’s claim.
(b)An application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination turns on a judgment able to be properly arrived at only after a full hearing of the evidence.
(c)The Court must be satisfied that none of the claims can succeed. It is not enough that they are shown to have weaknesses. The assessment is not to be arrived at on a fine balance of the available evidence as would be appropriate at a trial.
(d)The residual discretion of the Court to refuse summary judgment would be properly invoked to avoid the oppression which would otherwise result if an application by a defendant for summary judgment would pre-empt a plaintiff exercising the right to amend the pleadings.
11 Stephens v Barron [2014] NZCA 82 at [9], citing Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).
(e)Summary judgment should not be applied for unless the substantive merits of the case are clear and capable of summary disposal.
First cause of action: breach of s 176
The pleading
[34] LJ Group’s first cause of action alleges that NZ Capital breached its duty of reasonable care under s 176 to obtain the best price reasonably obtainable as at the time of the sale. The pleaded particulars, insofar as they are relevant, are the following:
…
(b)Failing to consider alternative recovery steps or sales methods;
(c)Failing to obtain a registered valuation for the Property;
(d)Having regard to the substantial and specialised nature of the Property, failing to:
i.Market the [Property] over a reasonably long period of time; and
ii.Undertake an extensive advertising and promotional campaign.
(e)Accepting a tender price that was significantly lower than the market value as assessed by valuers as of the relevant time period;
(f)Adopting an unreasonably short marketing period for Mortgagee Sale;
…
The law
Section 176(1) of the PLA provides:
176 Duty of mortgagee exercising power of sale
(1)A mortgagee who exercises a power to sell mortgaged property, including exercise of the power through the Registrar under section 187, or through a court under section 200, owes a duty of reasonable care to the following persons to obtain the best price reasonably obtainable as at the time of sale:
(a)the current mortgagor:
…
[36] The obligation of a mortgagee under what is now s 176 has been the subject of many decisions of this Court and the Court of Appeal.12 It is not unusual for the Court to resolve allegations that a mortgagee has breached s 176 upon a summary judgment application.13
[37] In Long v ANZ National Bank Ltd the Court of Appeal discussed the relevant principles that apply under s 176, which can be summarised as follows:14
(a)The purpose of s 176 of the PLA is to protect those to whom the duty was owed in the absence of any other incentive for a mortgagee selling the property to obtain the full economic value over and above the sum which will clear the mortgage.
(b)The duty of care owed by the mortgagee is concerned with obtaining the best price reasonably obtainable as at the time of sale. As such, it does not qualify the mortgagee’s right to decide in its own interest if and when to sell.
(c)What constitutes reasonable care will always turn on the facts of the case.
(d)The issue is a commercial one, to be viewed in practical commercial terms.
(e)The statutory obligation is not to obtain the best price reasonably obtainable, but to take reasonable care to obtain the best price reasonably obtainable. That price might not necessarily be obtained.
(f)When the property is sold in a forced sale, such as at a mortgagee sale, it is likely to sell at a substantial discount from the market value that
12 The duty was previously contained in s 103A of the Property Law Act 1952.
13 See for example Mitchell v Trustees Executors Ltd [2011] NZCA 519; and Bank of New Zealand Ltd v Fernando [2021] NZHC 2595
14 Long v ANZ National Bank Ltd [2012] NZCA 132 at [18]–[21]. See also Westpac New Zealand Ltd v Lamb [2012] NZHC 319; and Public Trust v Ottow (2009) 10 NZCPR 879 (HC).
the property would achieve in a sale undertaken by an owner not under financial pressure to sell.
(g)Valuations lose much of their significance if reasonable care is taken, there has been a properly advertised and conducted auction, and the property has been sold at auction or by negotiation after the auction.
(h)What constitutes reasonable care will always turn on the facts of the case. The steps taken by the mortgagee in fulfilling the statutory duty have to be looked at in the round.
(i)In considering the reasonableness of the care taken, the Courts should be slow to second guess the actions of a mortgagee acting on apparently sound professional advice.
[38] The statutory duty in s 176 should not be interpreted in a way that conflicts with a mortgagee’s co-existing equitable duty of good faith. In Downsview Nominees Ltd v First City Corp Ltd Lord Templeton said:15
The general duty of care said to be owed by a mortgagee to subsequent encumbrancers and the mortgagor in negligence is inconsistent with the right of the mortgagee and the duties which the Courts applying equitable principles have imposed on the mortgagee. If a mortgagee exercises his power of sale
in good faith for the purposes of protecting his security, he is not liable to the mortgagor even though he might have obtained a higher price and even though the terms might be regarded as disadvantageous to the mortgagor. ...
[39] Recently, in Small (2005) Ltd v Mahon, Wilkinson-Smith J held that the mortgagee did not have a duty to protect the mortgagor’s position at the expense of its own commercial interests providing it took reasonable care to obtain the best price reasonably obtainable for the property at the time of sale.16
[40] A further helpful authority is Mitchell v Trustees Executors Ltd where the appellant mortgagor argued, amongst other things, that the mortgagee had breached s 176 because it had failed to pursue an offer to purchase the subject property and other
15 Downsview Nominees Ltd v First City Corp Ltd [1993] 1 NZLR 513 (PC) at 524.
16 Small (2005) Ltd v Mahon [2024] NZHC 3251 at [90].
properties together on terms beneficial to the mortgagor. 17 It also alleged there was no explanation for the sale price accepted for the property, or as to the reserve set at auction or who set it. The Court of Appeal agreed with the Associate Judge that the mortgagee had not breached its duty under s 176.
[41]In respect to the failure to pursue the offer, the Court said:
[64] We do not see any merit in this argument. While there was an indication of interest at that price level, the offer was conditional and, according to [the real estate agent’s] evidence, involved a property “trade” and was still subject to due diligence. There were also a number of unconditional offers but these were at very low price levels. There is no evidence to support Mr Richards’ contention that Ms McGoverin had told him [the respondent] had decided not to accept on the basis that it could “do better” at auction. In any case, had the interest been genuine, the offeror could have participated in the auction. Apparently it did not. In those circumstances we do not think there was anything unreasonable about [the respondent’s] decision to proceed with the auction, which did not preclude the $2.4 million offeror participating if it wished to do so.
[42] As to the contention there was no explanation for the sale price achieved, the mortgagor relied upon valuation evidence that the property was valued at $490,000 two months prior to the auction but sold for just $330,000. The Court of Appeal made the following observations:18
(a)A discrepancy between the sale price and the valuer’s opinion may, not must, establish that a breach of duty of care has occurred. We agree. As Asher J stated in Public Trust v Ottow, a sale for a price less than the current market value assessed by valuers does not of itself establish a breach of duty.
(b)Whether there has been a breach of a duty of care must be assessed by considering factors that provide an indication of the reliability and accuracy of the valuer’s report. Associate Judge Doogue made a number of criticisms of Mr Buckley’s report and noted that it was dated two months before the date of the mortgagee auction. It also noted that there had been some low sales in 2008, yet used sales evidence that dated back to 2007. [The valuer] himself accepted that mortgagee sales will lead to a depression of the value by 15 to 20%, which even on his assessed value of $490,000 left a mortgagee sale price of $392,000. We agree with Associate Judge Doogue that there were reasons to be cautious in accepting [the valuer’s] view.
(c)If the mechanism adopted for the mortgagee sale properly tested the market, then the results obtained at auction, rather than the opinion of
17 Mitchell v Trustees Executors Ltd, above n 13.
18 At [68].
the valuer, must be taken as demonstrating what the market value of the property was. Further, if the report of the expert on its face indicates that conclusions reached are questionable, then the Court will have less concern about the divergence between what the valuer said the property was worth and what was actually obtained. We have already mentioned our reservations about [the valuer’s] report. We are satisfied that the mortgagee sale process was adopted according to appropriately qualified expert advice from Barfoot & Thompson and that the sales method met the requirements for a sale process adequately testing the market at the time of sale.
(footnotes omitted)
LJ Group’s position
[43] LJ Group says the price obtained for the Kinloch property of $2.6 million was substantially less than its fair market value of $4.6 million and seeks losses anticipated to be in the vicinity of $2 million.
[44] While LJ Group pleads the Kinloch property was not adequately marketed, this was not the focus of its argument at the hearing. I understood LJ Group’s contention there had been a breach of s 176 came down to the following two matters. First, that NZ Capital had not obtained a registered valuation of the Kinloch property prior to sale. Second, that the sale was at a substantial undervalue based on registered valuer’s reports LJ Group had obtained. LJ Group says upon seeing the valuation reports any reasonable mortgagee would consider that accepting a tender of $2.6 million for the property was neither reasonable nor appropriate.
[45] LJ Group relies upon three valuation reports, all prepared by Russell Grey of Greenland Valuers. The first is dated 5 August 2020, in which Mr Grey assessed the market value of the Kinloch property at $4.4 million plus GST. In March 2022 Mr Grey provided an updated market valuation report for refinancing purposes of
$4.51 million plus GST. Mr Grey provided a third market valuation report in October 2023, shortly after NZ Capital had exercised its power of sale, of $4.6 million plus GST.
[46] Mr Grey has sworn an affidavit in which he responds to criticisms made by Mr Smith of both the 2020 valuation report and of his reputation, experience and ability as a valuer.
[47] Also relevant to the issue of the market value of the Kinloch property is evidence that in November 2020 Mr Zeng engaged Harcourts Taupo to market it for sale by tender. Tenders were received ranging from $500,000 to $2.5 million, which Mr Zeng considered too low and he did not sell the property.
[48] Mr Zeng also says in September 2022 an unconditional offer of $5.1 million plus GST was received from a Mr Shane Le Prou through Mr Greg Kellick of Property Brokers. Mr Zeng says he chose not to accept that offer.
NZ Capital’s position
[49] NZ Capital says it took proper advice in relation to the marketing and sale of the Kinloch property and, in the absence of some evidence that there was a flaw in those processes, Mr Grey’s valuations are irrelevant to the question of whether it breached s 176.
[50] Mr Smith describes the marketing and sale process. He says he personally inspected the property on 31 May 2023 and it presented in a poor and dilapidated state. Access tracks on the property were overgrown and in some instances impassable; there had been no maintenance to manuka trees planted; pine wood lots had been partially harvested without replanting; there were extensive areas of weeds; and buildings on the property, including the main house, had been left open to the weather.
[51] There are also restrictive covenants on the title to the property. Mr Smith undertook research into the level of compliance with those covenants, along with potential land uses within the bounds of them. Specifically, he made enquiries as to the potential use of the property for the production of manuka honey.
[52] Bayleys Real Estate and its salesperson, Mr Stan Sickler, were engaged to market the property. Mr Smith says they were chosen as they are the most active in the Taupo region for the sale of this type of property. Bayleys recommended sale by tender and a four-week marketing campaign. They appraised the market value of the property at $3 million plus GST, and $2.5 million plus GST at mortgagee sale.
[53] Bayleys’ marketing proposal identified several issues affecting the Kinloch property which could have an impact on sale which included challenges to its viability as a functional farm or for potential subdivision. The property’s farming potential was impacted by the total allowable nitrogen discharge allocated to the property, which meant it was only good to grow trees or grass. The presence of forestry encumbrances was also identified as having an adverse impact on value for a specific buyer group interested in forestry. This is important as ultimately the property was sold for forestry purposes.
[54] The Kinloch property was marketed over a four-week period, with advertisements placed not only in The New Zealand Herald and The Waikato Times but also on internet websites. During the marketing period weekly reports were completed detailing the work undertaken that week, statistics of views and enquiries from internet advertising, and a list of potential buyers with whom Bayleys had engaged and their comments on the property. A great deal of interest was generated by the marketing campaign and nine tenders were received.
[55] Once tenders closed, Bayleys was instructed to work with the three best tenderers to improve their tenders (as to prices and conditions). Each of the tenderers increased their tender price. The final tenders were:
(a)Cuvier Trust — $3.1 million plus GST subject to the sale of a property at Whanganui;
(b)OJI Fibre — $2.6 million plus GST subject to obtaining Overseas Investment Office consent and 10 working days due diligence; and
(c)Harris — $2.222 million plus GST subject to 10 working days due diligence.
[56] As noted above, the tender of Cuvier Trust was conditional on the sale of a property at Whanganui. Mr Smith investigated that property, which was a second rotation forest that had been left untended. Given the nature of the property and the state of the market, he concluded the probability of Cuvier Trust satisfying the
condition was low. He felt that if the Cuvier Trust offer failed the Kinloch property would not attract the same level of interest when remarketed and there would be a significant delay during which period penalty interest would continue to accrue. For those reasons, the tender provided by OJI was accepted as the best viable offer available.
Absence of valuation report
[57] There is no statutory or other legal requirement that a mortgagee obtain a registered valuation of the mortgaged property before exercising its power of sale. There are authorities that have held the failure by a mortgagee to obtain such a registered valuation was not a breach of the duty under s 176.19
[58] The authors of Principles of Land Law in New Zealand express the view that a mortgagee should obtain a current market valuation before exercising the power of sale to use as a guide when assessing the reasonableness of the asking price or reserve price at auction.20 The authority cited for that is the Privy Council’s decision in Tse Kwong Lam v Wong Chit Sen.21
[59] The facts of Tse Kwong Lam are very different from this case. It concerned a sale at auction by a mortgagee to a related party where there was just one bidder and the reserve was set without the benefit of professional advice. The Privy Council said:22
A mortgagee who wishes to secure the mortgaged property for a company in which he is interested ought to show that he protected the interests of the borrower by taking expert advice as to the method of sale, as to the steps which ought reasonably to be taken to make the sale a success and as to the amount of the reserve. There was no difficulty in obtaining such advice orally and in writing and no good reason why a mortgagee, concerned to act fairly towards his borrower, should fail or neglect to obtain or act upon such advice in all respects as if the mortgagee were desirous of realising the best price reasonably obtainable at the date of the sale for property belonging to the mortgagee himself.
19 Price v Killarney Capital Ltd [2023] NZHC 2753, (2023) 24 NZCPR 574 at [52]; Liddle v Bank of New Zealand HC Auckland CIV-2009-404-6189, 29 October 2002 at [45]; Southern Cross Building Society v Vuletic HC Auckland CIV-2009-404-8684, 11 August 2009 at [20], [22]–[23].
20 Neil Campbell and others Principles of Land Law in New Zealand (3rd ed, LexisNexis, Wellington, 2020) at 1412.
21 Tse Kwong Lam v Wong Chit Sen [1983] 1 WLR 1349, [1983] 3 All ER 54 (PC).
22 At 1359.
[60] Here, NZ Capital took advice from Bayleys as to the likely market value of the property and sale price at mortgagee sale. Also, the sale was not conducted by auction, NZ Capital was not acquiring the property and there was a competitive tender process with nine formal tenders received. As the sale was by tender, a registered valuation was not required to fix an asking price or a reserve at auction.
[61] LJ Group has not provided evidence that the lack of a registered valuation had any effect on the price achieved for the Kinloch property. Mr Zeng suggests that Bayleys’ appraised mortgagee sale value of $2.5 million plus GST may have set the scene for amounts offered by tenderers but there is no evidence to support that contention There is evidence from the Operations Manager of OJI as to the matters it considered when making its tender, which was based on an indicative valuation it obtained adjusted for features of the property that pointed to a lower value. These included the likely costs of demolishing the residence on the property, that there was some public access over the property, that intensive pastoral farming could not be undertaken (which would reduce the pool of likely purchasers and price), and the sale was by the mortgagee.
[62] LJ Group has also not adduced any evidence that suggests NZ Capital did not take proper care in its selection of real estate agent, in selecting sale by tender or in approving the marketing campaign. There is also no evidence which suggests Bayleys, as NZ Capital’s agent, did not take all reasonable care in the marketing of the property to obtain the best price reasonably obtainable.
[63] There was no submission made that, in the circumstances as described by Mr Smith, NZ Capital was wrong to select the offer of OJI from the three highest tenders received. In addition to the evidence Mr Smith has given as to reasons NZ Capital chose OJI’s tender as the best viable offer, he also gives evidence that the Whanganui property the Cuvier Trust had to sell as a condition of its tender has not sold. NZ Capital’s position is that this shows the decision to accept OJI’s tender has been proven correct. There is no challenge to this evidence.
[64] I therefore find that NZ Capital did not breach its duty under s 176 by failing to obtain a registered valuation prior to exercising its power of sale.
Sale at undervalue
[65] LJ Group’s argument focused principally upon the 2023 valuation of Mr Grey. It also, quite correctly in my view, challenges the admissibility of Mr Smith’s evidence as it relates to Mr Grey’s reputation, expertise and the content of his reports. There are parts of Mr Smith’s evidence which are inadmissible hearsay or opinion evidence to which I have had no regard.23
[66] However, the authorities I have referred to establish that a difference between a registered valuation and the price obtained at mortgagee sale will not of itself establish a breach of s 176. The Court of Appeal in Mitchell v Trustees Executors found that if the report of an expert valuer on its face indicates the conclusions reached as to value are questionable then there will be less concern about any divergence between the valuation and actual sale price.24 Certainly there are factors which raise questions as to the reliability and accuracy of Mr Grey’s 2023 valuation report.
[67] Mr Grey says he has utilised the Market and Land Rate Approaches and Sales Comparison Approach. Both approaches require comparisons to be made between the property being valued and comparable sales. I cannot see evidence of Mr Grey’s use of the Sales Comparison Approach in the valuation reports.
[68]In the case of the Market and Land Rate Approach, Mr Grey describes this as:
... analyses comparable sales evidence to a dollar value per hectare. These rates are then adjusted to reflect the different characteristics between the comparable sales and the subject property. After adjustment, weighted consideration is given to the available evidence to determine an appropriate rate to apply to the subject property.
[69] Mr Grey relies upon very limited comparable sales evidence to arrive at his land rate (dollar rate per hectare). In respect to sales evidence for larger holdings (that is properties larger than 134 hectares) he identifies only two properties he considered were actually comparable on a land rate basis.
23 Evidence Act 2006, s 25.
24 Mitchell v Trustees Executors Ltd, above n 17.
[70] Mr Grey provides a very brief description of comparator properties he has identified, an indicated dollar rate per hectare and a conclusion that the comparator is inferior, comparable or superior to the Kinloch property. He then assesses the range of land rates for all comparator properties and provides an assessment of where he considers the Kinloch property falls within the range. What is absent from that analysis is evidence of the adjustments made to the land rates of comparator properties reflecting the particular characteristics of the Kinloch property to arrive at its assessed value. Those particular characteristics include such things as the restrictive covenants affecting the property, that it is only suitable for forestry and is partially planted, the quality of the planting and the state of access tracks, amongst other things. Rather, Mr Grey has adopted a broad-brush approach which does little to assist the reader to assess the validity of his conclusions.
[71] In the 2020 and 2022 valuation reports Mr Grey assessed the land rates that applied to grazing land and forestry land separately and there was a large difference between them. In the 2020 report he assessed the land rate of grazing land at $22,500 per hectare and the forestry land at just $8,500 per hectare. In the 2022 report the grazing land was again $22,500 per hectare and the forestry land was $9,750 per hectare. In the 2023 report Mr Grey values the whole property as forestry land at a rate of $13,800 per hectare. This represents an almost 40 per cent increase from the 2020 report and a 30 per cent increase from the 2022 report on the land rate applicable to forestry land.
[72] If the land rates Mr Grey adopted for forestry land in the 2020 or 2022 reports were applied to his 2023 valuation, his assessed market value of the Kinloch property would have been lower by between $1.14 million and $1.49 million. Mr Grey does not explain the marked increase in the land rate applied for forestry land and there is no obvious justification for it on the basis of the market conditions or the comparable sales evidence as he describes them in his reports.
[73] There are two other factors I would mention about Mr Grey’s 2023 report. First, he was asked to provide a market valuation, not a forced sale valuation for mortgagee sale purposes. In a forced sale a property is likely to sell at a substantial
discount from market value.25 Second, as the valuation date was 10 October 2023 it could be expected that Mr Grey would have had some regard to the fact the Kinloch property sold in August 2023 for $2.6 million. Mr Grey says in his report he considers that would have been less than the market value of the property, but it appears to play no further part in the valuation exercise. Even allowing for the fact the sale was by the mortgagee, the price obtained following a competitive tender would provide evidence of the market’s perception of the property.
[74] Some support that the price obtained by NZ Capital was the best price reasonably obtainable can be found in the attempts by LJ Group to sell the property itself during 2020. It also adopted a tender process and did not obtain any offer better than the three best tenders received by NZ Capital.
[75] I have not forgotten Mr Zeng’s evidence that he received an unconditional offer to purchase the property for $5.1 million plus GST in September 2022. There is an air of unreality about this evidence. It is difficult to see why Mr Zeng would reject such a generous offer in the difficult circumstances he describes in his evidence. It is also not clear why Mr Le Prou, who Mr Zeng says submitted a tender for the property in 2020, would in 2022 offer twice as much as the previous highest tender. There is no evidence from Mr Le Prou or the agent who is said to have presented the offer to Mr Zeng. Furthermore, Mr Le Prou is associated with the Curvier Trust which made the offer to purchase the Kinloch property for $3.1 million subject to the sale of its Whanganui property. Assuming the offer made in 2022 was genuine, it clearly did not reflect what the market considered the Kinloch property was worth when it was sold in August 2023.
[76] For the reasons given above, I am satisfied that LJ Group does not have an arguable claim against NZ Capital for breach of its duty under s 176 in accepting a tender price significantly lower than the market value.
25 Small (2005) Ltd v Mahon, above n 16, at [91]
Second cause of action: Credit Contracts and Consumer Finance Act
[77] Section 120 of the CCCFA provides the Court with the power to reopen credit contracts as follows:
120Reopening of credit contracts, consumer leases, and buy-back transactions
The court may reopen a credit contract, a consumer lease, or a buy-back transaction if, in any proceedings (whether or not brought under this Act), it considers that—
(a)the contract, lease, or transaction is oppressive; or
(b)a party has exercised, or intends to exercise, a right or power conferred by the contract, lease, or transaction in an oppressive manner; or
(c)a party has induced another party to enter into the contract, lease, or transaction by oppressive means.
[78] The term “oppressive” is defined in s 118 of the CCCFA as “oppressive, harsh, unjustly burdensome, unconscionable, or in breach of reasonable standards of commercial practice”.
[79] Section 119(1) relevantly provides that collateral contracts in linked transactions, such as the taking of a security interest or guarantee, are treated as forming part of the credit contract.
[80] Section 123 provides that a credit contract or an act performed under or in connection with a credit contract is not oppressive if the contract term or act would not have been considered oppressive at the time and in the circumstances that it was made or performed.
[81] Section 124 sets out guidelines the Court must, to the extent they are relevant to the particular circumstances, have regard to when considering whether s 120 applies. These include:
124Guidelines for reopening credit contracts, consumer leases, and buy-back transactions
...
(a) all the circumstances relating to the making of the arrangement, or the exercise of any right or power conferred by the arrangement, or the inducement to enter into the arrangement; and
(c)the relative bargaining power of the parties; and
(d)whether, taking account of the particular characteristics of the debtor, lessee, or occupier (for example, his or her age or physical or mental condition), that person, or the person’s representative, was reasonably able to protect that person’s interests; and
...
(f) whether, before entering into the arrangement, the debtor, lessee, or occupier obtained independent legal or other professional advice in relation to that arrangement; and
...
(h)the terms of other arrangements under which the debtor, lessee, or occupier could have obtained the same or substantially similar credit, hired goods, or finance from a person other than the creditor, lessor, or transferee, including—
(i)the costs of borrowing, costs of the lease, or costs of the buy-back transaction (as the case may be) under those other arrangements; and
(ii)whether the arrangement under consideration imposes significantly more onerous terms on the debtor, lessee, or occupier than would be imposed under those other arrangements; and
(i)the amount payable by the debtor, lessee, or occupier under the arrangement; ...
[82] In Greenbank New Zealand Ltd v Haas the Court of Appeal discussed the meaning of the term oppressive as it is used in the CCCFA.26 The facts of the case are instructive and concerned a borrower who had paid a finance fee equivalent to
32.14 per cent of the principal sum and was charged a base interest rate of
21.7 per cent rising to 25 per cent on default. The combination of the finance fee and the short duration of the loan resulted in a finance rate of 217.3 per cent. In holding that was not oppressive, Tipping J for the Court said:
[24] ... To determine whether a contract or term is oppressive within any of the words or phrases in the definition, it is necessary to have some basis of comparison. In the context the comparator can only be what would be expected or acceptable in terms of reasonable standards of commercial
26 Greenbank New Zealand Ltd v Haas [2000] 3 NZLR 341 (CA).
practice. Something which is in accordance with such reasonable standards could hardly be held to be oppressive. Conversely something which is not in accordance with (ie in contravention of) such standards is, by definition, oppressive. It is therefore important, unless the oppressive aspect is beyond rational dispute, for the Court to be properly informed how the contract or term measures up against reasonable standards of commercial practice.
[25] That will usually, indeed almost always, necessitate the calling of evidence on the point ... While the Act serves a valuable protective purpose, that purpose must be harmonised with the need to allow business people, especially when, as here, they are in receipt of competent legal advice, to be free to decide what contracts they should enter into and upon what terms. It is in such circumstances important for commercial stability not to have credit contracts reopened too readily. That should happen only when there is clear evidence, or the conclusion is otherwise irresistible, that the contract or term is oppressive within the proper meaning of that term.
[83] The Supreme Court in GE Custodians v Bartle approved the approach in Greenbank New Zealand Ltd v Haas.27 The Supreme Court held the words making up the definition of oppressive all contained:28
... the underlying idea that the transaction or some term of it is in contravention of reasonable standards of commercial practice. That sets an objective standard.
(footnote omitted)
[84] The Supreme Court also said that, except in unusual circumstances, where a borrower has independent legal advice a lender is entitled to assume the borrower has entered into an agreement on a fully informed basis:
[48] Even when a lender has knowledge of circumstances which might otherwise cause it to suspect something about the borrower or the borrowing which might make the borrowing highly improvident, it will ordinarily be excused from making inquiry if it is also aware that the borrower is being advised about the transaction by an independent lawyer. The lender is entitled to assume that a lawyer instructed by the borrower will not have accepted that instruction if any conflict of interest exists and so will give dispassionate advice on whether and on what terms the borrower should proceed with the transaction, including the borrowing. The lender is also entitled to assume that the advice given to the borrower by the lawyer is competent advice and that the borrower has chosen to enter into the transaction on a fully informed basis, and so that all risks associated with it have been pointed out.
...
[50] In other than such unusual cases the presence and role of an independent solicitor for the borrower will discharge the lender from the need
27 GE Custodians v Bartle [2010] NZSC 146, [2011] 2 NZLR 31.
28 At [46].
to make inquiry. As a consequence, unless the lender or its agent already has knowledge of circumstances which render the lending in breach of reasonable standards of commercial practice the credit contract on which the borrower had independent legal advice should not be treated as oppressive under Part 5.
LJ Group’s position
[85] LJ Group argues that the 2023 loan agreement was oppressive and NZ Capital exercised its powers under it and the mortgage in an oppressive manner. Some matters relied upon reproduce the alleged breaches by NZ Capital of s 176 which I have already dealt with. Having failed to establish an arguable case that NZ Capital breached its duty under s 176, I do not consider the manner in which it conducted the mortgagee sale could be considered oppressive under the CCCFA.29
[86] The case LJ Group presented at the hearing extended beyond its pleadings, which its counsel said require amendment if the case advances beyond this application. LJ Group says the 2023 loan agreement was oppressive because:
(a)by its terms LJ Group was in default from the first day of the loan;
(b)of the requirement to make interest payments by direct debit;
(c)of the manner of calculating default interest; and
(d)the rate of default interest.
[87] It is then argued that NZ Capital exercised its powers under the 2023 loan agreement and the mortgage in an oppressive manner because:
(a)in respect of the February and March interest payments it repeatedly failed or ignored requests by Mr Zeng to take those from the deduction account and then relied upon non-payment as defaults under the loan agreement and the mortgage; and
29 Duncan Webb and Christopher Birkinshaw Credit Contracts and Consumer Finance in New Zealand (Thomson Brookers, Wellington, 2004) at 148.
(b)it failed provide details of LJ Group’s default thereby hindering its ability to remedy the default, if any.
Were the terms of the loan agreement oppressive?
[88] LJ Group relies upon the evidence of Professor Robert Bowman, an Emeritus Professor of Finance at the University of Auckland Business School with 45 years’ experience in finance and accounting in academic and business roles. While he raises several issues that I shall describe below, the kernel of Professor Bowman’s evidence is that the method of charging interest under the 2023 loan agreement was unlawful and oppressive.
[89] In respect to the 2023 loan agreement, Professor Bowman considers that by its terms LJ Group was in immediate default as it had already failed to pay the February interest payment. He says:
30.I find it interesting and perplexing that when the Agreement was signed, the LJ Group was already in default as it had failed to make the loan payment due on 15 February 2023.
31.Presumably the defendants considered it prudent and profitable to enter into an agreement with the plaintiff that had defaulted on the required payments specified in the loan agreement.
[90] Professor Bowman then says the method of payment by direct debit under the loan was unusual. He describes this as:
34. Payments are made by debits originated by the lender to the borrower’s bank account. The borrower’s only responsibility is to have sufficient funds in its account to dover the debit. The borrower does not even know the bank account of the lender where its debits go.
[91]Professor Bowman then says:
36.It seems to me that the defendants had little incentive to have the default remedied. The “penalty” interest was truly a penalty and a substantial return for the defendant. Ultimate payment of the outstanding loan balance was reasonably assured as a result of the property as security and the personal guarantee of Mr Zeng.
[92] Mr Bowman then speaks to how the interest was calculated in the event of default. In his opinion the base rate of 11.25 per cent is “within reason” for a financing transaction but that:
41. In my opinion, the default interest rate of 10% is high. I regard a rate around 5% as more appropriate. The most common default interest rate stated by non-bank finance companies in their websites is around 5%.
[93] Professor Bowman says the method of calculating interest in cl 3(d) of the loan agreement is the standard treatment in the event of a default, whereby the default interest rate is applied only to the default amount as:
46. In my experience with actual loan documents, textbooks, business and academic articles and articles on the internet, I have never seen a substantively different or alternative method.
[94]In respect to cl 3(c) of the loan agreement, he says:
49. Interest accrues and is payable at the lower interest rate on the full principal. If a payment is not made on its due date or within 7 days then interest at the higher rate is payable on the full principal amount for the period that it is in default. This applies whether the default is payment of interest or principal.
…
55. Until I read this agreement, I had never seen a default interest calculation that applied the default interest rate to the principal loan balance.
[95] Professor Bowman considers the method of calculating interest was “absurdly punitive with no economic logic other than to impose extremely high costs (penalties) on the borrower”. He referenced the New Zealand Commerce Commission instructions for business providers of credit on charging interest in support of his view and says:
59. The Commerce Commission makes it quite clear that default interest should be calculated as per clause 3(d) in the Term Loan Agreement. It is also quite clear that the calculation method in clause 3(c) is not permitted.
[96] Mr Bowman then refers to the power to reopen oppressive credit contracts under the CCCFA and concludes:
81.In my opinion, the method of calculating default interest employed by the defendants (in clause 3(c)) is totally without merit based upon standard practice in the credit granting industry.
82.In my opinion, the method of calculating default interest employed by the defendants (in clause 3(c)) is totally without merit based upon the principles of financial economics.
83.In my opinion, the financial history presented by Mr Smith for the period from 15 February 2023 through (at least) 15 June 2023 is seriously flawed and significantly overstates the loan balances to the detriment of the plaintiff.
84.In my opinion, applying the Commerce Commission’s definition of oppressive ... the entire approach of the defendants to determining appropriate default interest during the period 15 February 2023 through 15 June 2023 was oppressive.
[97] NZ Capital responded with an affidavit of Joanna Pidgeon, a practising lawyer specialising in lending and property transactions.
[98] Ms Pidgeon says that direct debit is commonly used by finance companies and trading banks for commercial lending. She says lenders prefer payment by direct debit “rather than the client missing a payment by chance or choice”.
[99] Ms Pidgeon says the 2023 loan agreement (and the 2022 agreement also) was in a standard ADLS form for unregulated commercial loans commonly used by mezzanine or second tier lenders. She describes the history and development of that loan agreement. Ms Pidgeon says that cl 3(c) is the default option under the ADLS form but parties may agree that cl 3(d) applies if they wish. She says this option was introduced in 2017 as the previous iteration of the loan agreement only had the equivalent of cl 3(c). Ms Pidgeon says it is most common that the default provision in cl 3(c) applies.
[100] Ms Pidgeon is surprised that Professor Bowman has never seen this method of charging interest as it:
33.... has been around for approximately 19 years, since 2005, for commercial non-regulated loans after the implementation of the CCCFA and the separating out of consumer and commercial loans.
[101] Ms Pidgeon also says the Commerce Commission publications to which Professor Bowman refers concern consumer credit contracts under which the option in cl 3(c) would not be permitted, but for commercial credit contracts:
34.… there is no such restriction and, as I have said, the clause 3(c) method is most commonly used to incentivise borrowers to pay on the due date or within 7 days.
[102] In respect to the interest rates that applied in this case, Ms Pidgeon says whilst Professor Bowman opines that the default interest rate of 10 per cent above standard is high, no evidence is provided for this except that he says “this is the most common rate stated on non-bank finance company websites”. She says in her experience default interest rates for commercial second tier loans are usually in the vicinity of 10 to 15 per cent above the base interest rate and that when:
43........... advising a borrower, a lawyer will usually discuss lending terms,
and the client will be asked whether they have tried to get better terms elsewhere, but they are stuck with meeting the market in terms of what lending terms are available.
My analysis of the expert evidence
[103] There is a difference in view between Professor Bowman and Ms Pidgeon on almost every aspect of their evidence. Even though this is a summary judgment application where I have not had the benefit of cross-examination of the experts, I am unable to accept Professor Bowman’s evidence and conclusions in their important respects. I consider his evidence is based on errors of fact and he has arrived at his conclusions without regard to the applicable law.
[104] Professor Bowman appears to assume that the February and March interest payments were payable under the 2023 loan agreement. That is incorrect. The February interest payment was payable under the 2022 loan agreement. This is clearly stated in correspondence between Mr Smith and Mr Zeng and in the Notice which it appears Professor Bowman was not provided with.
[105]The Notice states:
DEFAULT
As at the date of this notice, you are in default under the Mortgage in that you have failed to pay the secured moneys at the times provided by a secured agreement pursuant to clause 3 of the Mortgage. In particular, you have failed to observe and perform the following express or implied covenant(s) in the term loan agreement dated 23 February 2022 (First Agreement) and a further term loan agreement dated 2 March 2023 (Second Agreement) made between the Mortgagee as lender and you as borrower:
1. You have failed to make the following payments:
a. Interest due on 15 February 2023 under the First $16,748.65 Agreement
c. Interest due on 15 March 2023 under the Second $18,100.67 Agreement
d. Administration fee payable for administration $750.00 required in relation to defaults by you
e. Default interest due calculated at an additional $16,340.15 10% p.a. for the period 15 January 2023 to
15 February 2023 under the First Agreement
f. Default interest due calculated at an additional $15,147.01 10% p.a. for the period 15 February 2023 to 15
March 2023 under the Second Agreement
g. Default interest due calculated at an additional $16,769.90 10% p.a. due for the period 15 March 2023 to
15 April 2023 under the Second Agreement
Total owing as at 27 April 2023
$83,856.38
[106] It is not the case that LJ Group was in default under the 2023 loan agreement immediately upon entering into it or that Mr Smith was incorrect in his assumption that default interest resulting from the failure to pay the February interest payment was instantly payable.
[107] In respect to payment by direct debit, I accept it is a common method used by finance companies and trading banks for commercial lending. I also cannot see how this method of payment could ever be considered oppressive.
[108] I am also unable to accept Professor Bowman’s evidence that the method of calculating default interest under cl 3(c) of the loan agreements is not based on standard practice in the credit industry. Professor Bowman does not discuss the history of the ADLS form at all, and indeed appears to have been unaware of it. I agree with Ms Pidgeon that is surprising when it has been in use in several iterations for many years.
[109] Professor Bowman’s reliance upon Commerce Commission publications and advice that relates only to consumer credit contracts further undermines his conclusions.
[110] Professor Bowman makes no reference to the factors set out in s 124 of the CCCFA. A finding that the 2023 loan agreement was oppressive cannot be made without regard to those factors to the extent they are relevant. Here, the relevant factors include that LJ Group had entered into several prior loan agreements on the same or similar terms; Mr Zeng was experienced in commercial matters; LJ Group had independent legal advice; there was no apparent inequality of bargaining power between the parties; and there is evidence that LJ Group was able to obtain finance through another lender. Mr Zeng made a commercial decision based on legal advice to obtain a further loan from NZ Capital and the Court should be reluctant to interfere with such decisions.
[111] Finally, even if Professor Bowman is correct that a default interest rate of 10 per cent above the base rate is high and around five per cent is more appropriate, the difference is not sufficiently noteworthy to render the loan agreement oppressive.30 In this respect, Mr Zeng’s evidence is that LJ Group obtained an offer of alternative finance from Vincent Capital in October 2023 where the base interest rate was 11 per cent per annum and the default rate was 15 per cent above the base rate.
[112] I conclude that LJ Group’s assertion that the terms of the 2023 loan agreement (or the 2022 loan agreement) were oppressive under the CCCFA is not arguable.
Did NZ Capital exercise its powers in an oppressive manner?
[113] LJ Group submits it was oppressive for NZ Capital to have exercised its power of sale in reliance upon the non-payment of the February and March interest payments in circumstances where NZ Capital:
(a)failed or ignored requests by Mr Zeng that it deduct the interest payments from the deduction account; and
30 Greenbank New Zealand Ltd v Haas, above n 26.
(b)failed to “specify or detail the apparent default” by LJ Group thus hindering its ability to remedy its default, if any.
[114] LJ Group’s counsel submits that these allegations raise disputes of fact which are unsuitable for summary judgment and the Court would be assisted in resolving the disputes by expert forensic evidence.
[115] LJ Group relied on similar arguments before Venning J in opposition to the application by NZ Capital for indemnity costs. Venning J made findings as follows:31
[22] Mr Zeng’s explanation for failing to respond to the voluminous email correspondence from NZ Capital regarding LJ Group’s defaults, which commenced in early 2003, is that March 2023 was a particularly “tumultuous month” for him and his family. He says he did not have time to check his email accounts and did not see the emails until about 28 April 2023 and then asked for a bank account number to make the necessary catchup payments.
[23] But as Mr Smith confirmed, the payments under the mortgage had all been made by direct debit. There was no reason why any further payment LJ Group may have wanted to make to clear the arrears could not also have been made by direct debit. ...
[24] Mr Zeng’s explanation for not responding to the numerous emails pointing out the default and the consequences and the suggestion he was unaware of his obligations and how to address them simply does not bear scrutiny.
[116] It is not sufficient for me to rely upon Venning J’s conclusions, I must make my own independent assessment of the evidence. Both Mr Smith and Mr Zeng have sworn affidavits addressing these matters. Importantly, the bank statements for the deduction account are before the Court, as are the email communications between Mr Smith and Mr Zeng which I have examined closely.
[117] The February interest payment was due on 15 February 2023. LJ Group did not have sufficient funds in the deduction account to make the payment and it was dishonoured. Mr Smith advised Mr Zeng of this on 16 February 2023. He asked Mr Zeng to deposit funds into the account and advise him when he could again make the direct debit. Mr Smith followed up on the request on 17 and 20 February 2023.
31 LJ Group New Zealand Ltd v New Zealand Capital Management Ltd, above n 4.
[118] On 23 February 2023 Mr Zeng deposited $23,000 into the deduction account. He emailed Mr Smith during the afternoon of Friday, 24 February to “please charge the interest today”. Mr Smith replied that he was out of the office and would load the payment for the following Monday (27 February 2023 being the next working day). However, that did not occur. Mr Smith emailed Mr Zeng on 3 March 2023:
Jacky
I’ll be back in the office on 14 march. I will load the interest debit again then. Please make sure there is enough in the account to pay for 12 days of penalty interest plus a $250 dishonour fee.
The march interest at the new rate is due the next day (15 march)
The fee is the lowest I can do. We have very high demand for our loans which is the reason I would prefer repayment of this loan
Stu
[119] There was therefore a delay in loading the February interest debit after Mr Zeng’s advice NZ Capital should do so. On 14 March 2023 Mr Smith emailed Mr Zeng:
Jacky,
Back at my desk today so I can re-load the dishonoured February payment plus penalty interest today. Please make sure you have sufficient funds in your bank account to cover the following:
1.Standard interest due 15 February $16,748.645
2.12 days penalty interest $6,635.22
3.Dishonour fee $250
Interest due on 15 March on the new schedule will be $18,100.67 Stu
[120] The bank statements show that after 23 February 2023 Mr Zeng made withdrawals from the deduction account and there was again insufficient to pay the February interest payment which was dishonoured for a second time on 14 March.
[121]On 15 March Mr Smith wrote to Mr Zeng:
Jacky,
Your February interest payment of $16,748.85 has been dishonoured due to insufficient funds in your account
Please deposit sufficient funds into your account today to cover the 4 payment items listed below [in the email of 14 March]
Let me know when you have done this and I will re-load the interest debit again
Stu
There was no reply to the email.
[122] On 15 March 2023 there were insufficient funds in the deduction account to pay the March interest payment and it was dishonoured.
[123] On 22 March 2023 Mr Smith again wrote to Mr Zeng, noting he was waiting for a response and that penalty interest was being charged. He said:
Jacky,
I am still waiting for your response. Whilst you are delaying you are incurring penalty interest.
I am concerned about the level of penalties building. If this is not resolved shortly I will have to issue a property law act notice to start recovery.
Your urgent action on this please Stu
[124] There was attached to the 22 March email a statement of the amounts owing as at 22 March 2023. This included the February and March interest payments, several dishonour fees and penalty interest.
[125]Mr Smith emailed Mr Zeng again on 29 March:
Jacky,
Your response please to this
You need to make progress with payment of the interest arrears as soon as practical to arrest the penalty interest that is accruing
Stu
[126]On 11 April 2023 Mr Smith wrote to Mr Zeng:
Jacky,
Ignoring me is making the situation worse.
Your loan is currently accruing interest at penalty interest rates. Another monthly interest payment is due at the end of this week.
What payment can you make towards interest arrears?
Stu
[127]On 26 April 2023 Mr Smith emailed Mr Zeng:
Jacky,
No answers and no payments from you
You have forced my hand — a property law act notice has been issued. This has been served on your solicitor and the registered address of LJ Group New Zealand Limited
I will appoint a real estate agent this week and start marketing the Kawakawa Road property for sale next week. We will sell the property by tender
Stu
[128] On 28 April 2023 Mr Zeng emailed Mr Smith appearing to ask for an account number to “pay by ourself”. Mr Smith responded the same day “Let me know how much I can debit your account and I will load a payment”.
[129] On 1 May 2023 Mr Zeng wrote “shall we have your account number we could transfer fund to you”. Mr Smith responded the same day:
Jacky,
Please read my email
Every interest payment for this loan since the start 4 years ago has been by
direct debit. Nothing has changed
1.Put the money into your ASB account ...
2.When it is there tell me how much I can debit this bank account
3. I will then run the direct debit Stu
[130] Mr Zeng then emailed that same day, appearing to accept Mr Smith’s position and saying, “please let me know how much you need from the this account”. Mr Smith immediately responded:
Jacky,
Attached is the property law act notice that has been served on the registered office of LJ Group New Zealand Limited.
To stop sale action the amount stated in this notice needs to be paid in full Stu
[131] On 5 May 2023, Mr Smith wrote to Mr Zeng asking him where he was “at with this” and “[t]he more interest you pay now the less penalty interest will accrue”. On 8 May 2023, Mr Zeng responded:
stu,
I want still overseas at moment . please read our email .since Feb . shall we have your account number.please . we could transfer by our self in a min. tell us why you cannot accept the payment
jacky
[132]Mr Smith responded the same day:
Jacky,
Your loan is one of 120 that we manage. The only way our system operates is by payment of interest by direct debit.
Your loan has been running for 4.5 years. You have made about 50 interest payments by direct debit — so you know this process very well despite your attempts at poor English.
All you need to do is;
1.Deposit whatever amount you can pay towards your interest arrears in your ASB bank account
2.Let us know how much to debit
3.We will run the direct debit the next day
The sooner you pay us interest the less penalties you will accrue. Your continued delays and attempts at poor English are costing you. This will be the same outcome as failing to pay body corporate fees or manuka planting costs. Eventually you have to take responsibility for all of this
I have appointed a real estate agent. I am waiting for them to provide a marketing plan before we get the advertising underway
Stu
[133] The interest payments for April and May 2023 were honoured. On 17 May 2023 Mr Smith again wrote to Mr Zeng:
Jacky,
Your monthly interest direct debit for this month has been honoured.
Can I debit your account for the February or March interest that is still outstanding?
Stu
[134] The bank statements show that on 30 May $90,000 was deposited into the deduction account and there was a credit balance at that stage of $94,909.62. However, by 6 June this had reduced to $80,998.95. There was a series of emails between Mr Smith and Mr Zeng on 6 June 2023. Mr Zeng wrote to Mr Smith at
3.30 pm:
stu.
You ask me to deposits the fund to the same account I have ask my family member deposits already .please deduct the overdue balance.
Jacky
[135] Mr Smith responded at 3.35 pm asking for clarification of how much interest Mr Zeng wanted to pay. Mr Zeng responded at 5.32 pm “please deduct all overdue amount”. Mr Smith responded at 8.41 pm advising that as of 15 June the amount outstanding was $162,885.55 and that Mr Zeng should provide a screenprint “showing that you have this amount in your ASB account before I load a debit for this amount”. There was no response to Mr Smith’s email.
[136] On 12 July 2023 Mr Zeng wrote asking why interest had not been charged to the account. Mr Smith responded on 12 July, saying:
Jacky,
I have been direct debiting the standard interest every month.
You have not paid the interest in February and March this year. For this reason your loan is in default and accruing penalty interest
I have asked you if you have sufficient funds in your account to pay the penalty interest. You have not responded. I will not debit your account without your authority
You have left me no option but to sell the property. A property law act notice was served on your company on 1 May and a copy emailed to you. You have ignored this notice.
Now that the property will be sold — are you going to provide me your GST number? If you do not provide this number I will need to pay the GST to the tax department — which will reduce the funds left over to pay you
Stu
[137]The same day Mr Zeng responded:
I am asking the account number many many time for the money transfer why you are refuse to provided . I will ask my lawyer to contact you tomorrow morning
[138]Also on 12 July Mr Smith replied:
Jacky,
I have told you many times that we only receive payments via direct debit
I have offered many times to run whatever debit you want for as much as you want but you refuse to engage. You have chosen repeatedly not to pay what is owed
The offer remains. Tell me what sum you want to pay and I will debit your account tomorrow.
Are you going to provide your GST number or not?
Stu
[139] Mr Zeng sent an email on 31 July referring to the fact that interest payments had been made for April, May, June and July and asking why Mr Smith still wanted to sell the property. Mr Smith replied:
Jacky,
You have completely ignored my repeated requests to you to pay the February and March 2023 interest.
The loan has been in default since the February interest date. This I have advised you many times
You have failed to answer the property law act notice that was served on your solicitor and your company address
You have left me no option but to sell the security property to recover the unpaid interest, principal and costs
Stu
[140] Mr Zeng replied on 2 August asking for the balance of the overdue interest. Mr Smith responded the same day:
Jacky,
Because the loan is in default the outstanding interest plus the principal is due. This was clearly stated in the property law act notice served on your solicitor and the registered address of your company.
I have yet to receive an account of the real estate agents costs
When this account is settled with all costs accounted for the balance due I expect will be about $2.3m
Stu
My analysis
[141] It was LJ Group’s responsibility to ensure there were sufficient funds in the deduction account to make payments under the loan agreements on the due date. The bank statements show that LJ Group did not have sufficient funds in the deduction account to pay either the February or March interest payments on the due date. When NZ Capital loaded direct debits for those payments they were dishonoured. LJ Group was therefore in default of the loan agreements.
[142] It is the case that on 24 February 2023, when Mr Zeng advised Mr Smith to take the February interest payment, there were sufficient funds in the deduction account. However, Mr Zeng was made aware Mr Smith was not able to load the debit until 14 March, by which time Mr Zeng had withdrawn the necessary funds from the account. There was no prejudice to LJ Group from the delay by NZ Capital in taking the February interest payment as Mr Smith had advised default interest would not be charged for the period of the delay.
[143] Ultimately it was LJ Group’s obligation to have sufficient funds in the deduction account to make the interest payments under the loan agreements, but it
applied those funds for other purposes. Mr Zeng repeatedly ignored emails from Mr Smith concerning the defaults and his warning that NZ Capital would exercise its power to sell the Kinloch property.
[144] While Mr Zeng did from time to time make requests for NZ Capital’s bank account details, ostensibly to make payments, that was not the manner in which payments were required to be made. There was no explanation why payments could not be made in the required manner. Mr Smith says in his affidavit of 16 October 2024, and I accept:
As shown by the email correspondence, all Mr Zeng had to do was put the money into the direct debit account and authorise me to deduct it. He chose not to do so. Mr Zeng had been paying interest by direct debit for 4.5 years. He knew exactly what to do and when. ...
[145] I also do not accept LJ Group’s assertion that NZ Capital failed to specify or detail LJ Group’s defaults or hindered its ability to remedy them. As the correspondence makes clear, on several occasions Mr Smith provided statements of the amount owing. Further, both LJ Group and Mr Zeng received the Notice which set out the amount to be paid if a mortgagee sale was to be averted.
[146] What the email correspondence and bank statements show is that LJ Group/Mr Zeng did have funds available at times the payment of which to NZ Capital could have avoided the mortgagee sale of the Kinloch property but they failed to take the necessary steps to do so.
[147] It follows, in my view, there is no arguable case that NZ Capital exercised its powers under the loan agreement (or the mortgage) oppressively.
Other issues
[148] At the conclusion of the hearing, I invited counsel to make further submissions in respect of two issues:
(a)how the principal sum under the 2023 loan agreement was calculated and whether it included the February interest payment; and
(b)whether receipt by NZ Capital of interest payments following expiry of the Notice could amount to a waiver of the Notice.
[149] Counsel for LJ Group took the opportunity to make submissions that went beyond those two issues. Submissions were made that as a matter of interpretation the advance under the 2023 loan agreement should be taken to have included the February interest payment and that there was a contractual misrepresentation or mistake in respect to that matter requiring further evidence to be given. Submissions were also made about what Mr Zeng “reasonably believed” in respect to the February interest payment, which were unsupported by any evidence from Mr Zeng on the point and contrary to the correspondence between Mr Zeng and Mr Smith which shows Mr Zeng was aware the February interest payment was not rolled over into the 2023 loan agreement. The arguments raised have no merit in my view and as they were not pleaded I do not intend to deal with them further.
Calculation of loan advance
[150] Mr Smith has provided an affidavit as to how the advance under the 2023 loan agreement was calculated and that it did not include the February interest payment. I note this was Mr Zeng’s understanding as the email exchanges between Mr Smith and Mr Zeng between 16 February and 24 February 2023 show Mr Zeng was attempting to negotiate the terms of the new loan agreement while at the same time directing Mr Smith to deduct the February interest payment.
Waiver
[151] I raised the issue of waiver as NZ Capital debited the June and July interest payments from the deduction account after expiry of the Notice on 31 May 2023. LJ Group accepts there is no statutory provision to the effect that the acceptance of interest in these circumstances acts as a waiver of the exercise of the mortgagee’s power of sale. However, it says the receipt of such payments will act as a waiver relying by analogy on cases concerned with landlord and tenant where, prior to statutory reforms, the right to forfeit a lease was waived by receipt of rent.32
32 But now see Property Law Act 2007, s 250.
LJ Group’s counsel submitted it was reasonable for Mr Zeng to believe that NZ Capital no longer intended to exercise its power of sale in reliance on the Notice because:
(a)Mr Zeng had deposited $90,000 into the deduction account on 30 May 2023, which was sufficient to remedy the Notice expiring on 31 May;
(b)Mr Zeng disputed the amount alleged to be owing to LJ Group on 6 June 2023;
(c)Mr Zeng deposited $75,000 into the deduction account on 10 July 2023;
(d)of Mr Smith’s non-confirmation of a mortgagee sale until 12 July 2023; and
(e)of Mr Zeng’s objection to the simultaneous sale of the property and the deduction of interest payments on 31 July 2023.
[152] I am satisfied that NZ Capital did not waive reliance on the Notice. There is no provision in the PLA to the effect that receiving interest payments in such circumstances will operate as a waiver of the mortgagee’s rights to exercise its remedies. To find otherwise would also be contrary to the authorities.
[153] The authors of Hinde McMorland and Sim’s Land Law in New Zealand note as follows:33
Once the period of notice given in a s 119 notice expires, the power to sell or to enter into possession, as the case may be, becomes exercisable by the mortgagee. If the mortgagor, after expiry of the notice, remedies the default specified in the notice, the power to sell or to enter into possession remains exercisable, unless there is a waiver of the power by the mortgagee. Where the mortgagor remedies the default by making payment of principal or interest, receipt of that payment by the mortgagee is unlikely, in itself, to constitute waiver, especially if the receipt is expressed to be without prejudice to the power. ...
(footnotes omitted)
33 Hinde McMorland and Sim Land Law in New Zealand (LexisNexis online ed) at [15.103].
[154] Blakely v Teal Investments Ltd concerned an application by a mortgagor for an interim injunction restraining the mortgagee from exercising its power of sale after an accounts clerk at the lawyers for the mortgagee mistakenly accepted a small payment of interest despite the issue of a PLA Notice (which had expired).34 The payment was immediately reversed. The plaintiff applied for an interim injunction on the basis that the acceptance of the interest amounted to waiver. Holland J rejected that argument. The mortgagor in that case, as LJ Group does here, relied by way of analogy on cases concerning the acceptance of rent after service of a notice to quit under a lease. Holland J said:35
The question which must accordingly be asked is whether the issue of a receipt for interest by an accounts clerk in a solicitor’s office of a payment of a sum well short of the arrears of instalments, let alone the principal sum, and made without any evidence of any prior discussions or correspondence and without any conditions attached to the payment or to the receipt, is an unambiguous representation by Teal Investments Ltd that it did not intend to pursue its rights under the mortgage following the notice of 1 February 1980. Although the notice was becoming a little stale, in that six months had expired following the notice for compliance contained in the notice, this factor must be discounted by the threatened mortgagee’s sale by the first mortgagee and the communications between the solicitors for the plaintiff and the solicitors for the defendant.
…
… [W]ith respect to Fry J, I adopt what he said on this matter and do not consider the principles in relation to acceptance of rent after a notice to quit apply to the receipt for interest after a notice under s 92 of the Property Law Act 1952. The prime reason is that once a valid notice to quit is given, rent ceases to become payable and is recoverable as mesne profits. The acceptance of a payment as rent must, I think, acknowledge that the former tenancy has been revived or a new tenancy created. In the case of arrears of interest under a mortgage, those arrears still remain arrears of interest notwithstanding the exercise of the power of sale.
I am satisfied that there is no principle of law requiring me to hold that the unqualified acceptance of interest after a notice under s 92 of the Property Law Act, as a matter of law, amounts to a waiver of such notice.
[155] In TEA Custodians (Bluestone) Ltd v Barnett Associate Judge Gendall referred to Blakely and said:36
[29] In Blakeley [sic] v Teal Investments Ltd, Holland J set out the proper test for determining whether a mortgagee had waived its right to rely on a
34 Blakely v Teal Investments Ltd (1980) 1 NZCPR 257 (HC).
35 At 261.
36 TEA Custodians (Bluestone) Ltd v Barnett HC Wellington CIV-2011-485-17, 6 October 2011.
Property Law Act notice to a defaulting mortgagor. His Honour asked whether the mortgagee’s acts or representations were an “unambiguous representation [by the mortgagee] that it did not intend to pursue its rights under the mortgage following the notice ...”
(footnotes omitted)
[156] I was also referred to Morton v Suncorp Finance Ltd, where the New South Wales Court of Appeal held:37
The purpose of the power of sale is to recover not merely the amounts in default in respect of which gave rise to the power, but all of the amounts due under the mortgage. Under the general law, a power derived from default in respect of the April and May interest payments would include within its purpose the recovery of any other moneys, which by the time of its exercise, were due for payment…Once a power of sale has arisen, it is, I think, available generally and not by reference only to the amount specified in the notice.
[157] The authors of The Law of Waiver, Variation, and Estoppel identify that in many cases judgments of the courts have tended to confuse the concepts of waiver and estoppel,38 but that the elements of all forms of waiver are:39
1an unequivocal representation by X either by words of conduct that it will forgo certain rights;
2X makes that representation when it is aware of the facts that give rise to the rights which are being forgone, of the right to forgo those rights and the connection between the two.
[158] Applying these authorities, neither the receipt of interest payments in June and July 2023 or any of the other matters relied upon by LJ Group (which in some respects were not communicated to NZ Capital) amount to an unequivocal representation by NZ Capital that it was waiving reliance upon the Notice. LJ Group’s obligation to pay interest under the 2023 loan agreement continued after the issue of the Notice until such time as the loan was repaid. The fact the Notice was issued did not affect LJ Group’s continuing obligation to pay interest nor NZ Capital’s right to deduct interest payments from the deduction account. By making payments LJ Group was reducing the amount owing and thus the amount NZ Capital needed to deduct from the sale proceeds following sale in satisfaction of the loan.
37 Morton v Suncorp Finance Ltd (1987) 8 NSWLR 325, 339.
38 Wilken and Ghaly The Law of Waiver, Variation, and Estoppel (3rd ed Oxford University Press) at [4.39].
39 At [4.45], citing Zhang v Shanghai Wool & Jute Textile Co Ltd [2006] VSCA 133.
Result
[159] NZ Capital’s application for summary judgment is granted and judgment is entered for NZ Capital against LJ Group.
[160] It is not necessary to consider NZ Capital’s application to strike out the statement of claim.
[161] NZ Capital is entitled to costs. I understand it will be claiming indemnity costs and also costs for Mr Smith’s time spent in conducting NZ Capital’s defence of LJ Group’s claim. In those circumstances counsel shall confer in an attempt to reach agreement on costs. If they cannot agree they may file memoranda (no longer than 10 pages) within 28 days of the date of this judgment and I will decide costs on the papers.
O G Paulsen Associate Judge
Solicitors:
Ewart & Ewart, Auckland Aspiring Law, Wanaka
SCHEDULE A
3. COVENANT TO PAY AND TO COMPLY WITH OBLIGATIONS
(a)Pay and comply: You must:
(i)repay the principal sum and pay the moneys owing (other than the principal sum) at the times and in the manner set out in Table B or (if applicable) in the manner provided by other agreement and, to the extent that there is no such agreement, then upon demand;
(ii)comply with all of the obligations contained in every agreement between us; and
(iii)comply with the terms of every security or security interest at any time held by the lender for the moneys owing.
(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.
Interest Payment Method
(c)Interest on full sum:
This subclause (c) applies as follows if full sum method is selected in Table A or by default if neither option is selected in Table A.
You must pay interest:
(i)on the last day of the relevant interest period on the amount of the principal sum outstanding on the first day of an interest period at the higher interest rate; and
(ii)on that part of the moneys owing in respect of which there is no agreement between us as to liability for payment of interest (whether or not demand has been made) on the last day of each month at 2% per annum above the taxpayer’s paying rate as prescribed from time to time, calculated with daily rests from the date on which the moneys become owing.
(iii)if, however:
A. you pay the interest on the due date for payment or within seven days of the due date for payment (or such other period as this Annexure Schedule may specify); and
B. during the relevant interest period no default has occurred or no default that occurred in any earlier period has continued during that period;
the lender will accept interest for the relevant interest period at the lower interest rate for that period.
(d) Interest on full sum, default interest only on amount in default:
This subclause (d) applies as follows if full sum method is deleted in Table A but if neither option is deleted, subclause (c) above will apply.
You must pay interest:
(i)on the last day of the relevant interest period on the amount of the principal sum outstanding on the first day of an interest period at the lower interest rate; and
(ii)if you fail to make a payment of interest or of principal on the due date for payment you must pay interests on the amount in default at the higher interest rate for the period from the due date for payment until the date of actual repayment of the amount in default; and
(iii)if not paid within one month of the due date, the default interest amount shall compound at monthly intervals.
- AGLC
- LJ Group New Zealand Limited v New Zealand Capital Management Limited [2025] NZHC 1071
- Case
- [2025] NZHC 1071
- Decision Date
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