Mega Capital Group Limited v Pearlfisher Capital Limited
[2023] NZHC 749
•5 April 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-1537
[2023] NZHC 749
UNDER section 290 of the Companies Act 1993 and Part 19 of the High Court Rules 2016 IN THE MATTER OF
an application for an order setting aside a statutory demand
BETWEEN
MEGA CAPITAL GROUP LIMITED
Applicant
AND
PEARLFISHER CAPITAL LIMITED
Respondent
Hearing: 2 February 2023 Counsel:
T Nelson for applicant
T B Fitzgerald and J F Hall for respondent
Judgment:
5 April 2023
JUDGMENT OF ASSOCIATE JUDGE TAYLOR
[Application for statutory demand]
This judgment was delivered by me on 5 April 2023 at 3:00pm
pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors:
Patel Nand Legal, Auckland for applicant Bell Gully, Auckland for respondent
MEGA CAPITAL GROUP LIMITED v PEARLFISHER CAPITAL LIMITED [2023] NZHC 749 [5 April 2023]
TABLE OF CONTENTS
Introduction [1]
Background [2]
Mega Capital’s application to set aside statutory demand [15]
Affidavit of Ajaypal Singh dated 1 September 2022 [17]
Pearlfisher’s notice of opposition to Mega Capital’s application [33] Affidavit of Tony Abraham dated 15 September 2022 [34] Reply affidavit of Ajaypal Singh dated 29 September 2022 [55] Reply affidavit of Sidhartha Bhalla dated 29 September 2022 [58]
Mega Capital’s Submissions [66]
Pearlfisher’s Submissions [78]
Legal Principles [88]
Setting aside statutory demand [88]
Credit Contract and Consumer Finance Act 2003 [92]
Analysis [99]
Result [112]
Orders [114]
Introduction
[1] Application by Mega Capital Group Limited (Mega Capital) to set aside statutory demand issued against it by Pearlfisher Capital Limited (Pearlfisher).
Background
[2] On 5 November 2021, Mega Capital entered a contract to buy the property at 221 Jesmond Road, Karaka, Auckland (the property) for the purpose of developing it. The agreed purchase price was $19.8 million, and settlement was scheduled for 15 June 2022.
[3] Mega Capital failed to settle on this date because it had insufficient funds. The shortfall was approximately $13 million. Mega Capital had paid approximately
$7 million in deposits to the vendor of the property, and penalty interest had begun to accrue at approximately $10,000 per day.
[4] Mega Capital was unable obtain bank lending to complete this purchase, so it sought finance from the second tier/private finance market. Subsequently, it was introduced to Pearlfisher by its mortgage broker. Pearlfisher funds lending by seeking investments from funds and high net worth individuals, arranging finance on an ad hoc basis for each new lending opportunity. It also contributes its own funds.
[5] Pearlfisher first became involved with Mega Capital on 1 June 2022 when they were approached by Mega Capital’s mortgage broker, Mr Falgun Patel. He explained that Mega Capital was seeking finance of approximately $13 million. Pearlfisher denied this request.
[6] A month later, Mr Patel approached Pearlfisher on behalf of Mega Capital again. Mr Patel outlined that Mega Capital had obtained an additional $2 million in funding from Mr Sarwan Singh and was now seeking finance of only $8 million. This lower quantum, combined with the additional source of funding, gave Mr Abraham
comfort as to the support for the transaction, its viability, and that there would be sufficient equity for Pearlfisher based on the lower facility.
[7] Through an indicative offer on 12 July 2022, a revised indicative offer 19 July 2022 and related facility agreements, Pearlfisher agreed to provide finance to Mega Capital. The initial loan amount was for $8.18 million plus all establishment fees and interest. It was subsequently increased to $10.27 million plus all establishment fees and interest.
[8]The terms of the credit contract, as far as relevant, were as follows:
(a)all obligations joint and several unlimited guarantees from Mega Capital’s directors;
(b)the proposed drawdown to occur in full on around 27 July 2022;
(c)repayment on or before six months following the initial drawdown;
(d)interest at eight per cent per annum and penalty interest at 10 per cent above that, making for a total of 18 per cent in the event of default or late payment;
(e)fees including financial arrangement fees of $100,000, establishment fees of $530,000 and a broker fee of one and a half per cent of the facility;
(f)further security in addition to the above guarantees, including:
(i)a first and only ranking general security agreement over the assets and undertakings of Mega Capital including specific security over Mega Capital’s right, title and interest in all material contracts relating to the property and proposed development;
(ii)a registered first and only mortgage over the property; and
(iii)a security trust deed; and
(g)as a pre-condition to drawdown, among others, was a statement confirming equity input from Mega Capital of not less than $9,800,000.
[9] During the negotiations, and after the final agreement was signed, the parties had discussed whether certain fees were payable if the lending was not drawn down. Pearlfisher had twice confirmed that their fees would remain payable.
[10] On 26 July 2022, Mr Abraham spoke to Mr Ajaypal Singh, the director of Mega Capital. Mr Abraham indicated that if Mr Singh wanted settlement to occur the next day (as he had indicated), Pearlfisher would need to take action that day to collect the funds from its investors. Pearlfisher duly collected the funds and deposited $8 million with its solicitors in preparation for settlement. The additional $2 million was due to be transferred to its solicitors on the day of settlement.
[11] On 27 July 2022, Mr Singh texted Mr Abraham to tell him that settlement would be postponed until 29 July 2022, due to a delay in funds arriving and a shortfall of $145,000.
[12] On 28 July 2022, Mr Singh informed Pearlfisher that Mega Capital would not be proceeding with the loan. Mega Capital had obtained alternative finance from a different lender.
[13]Pearlfisher wrote to Mega Capital demanding payment of the sum of
$627,699.26 by 4 pm on 11 August 2022. No payment was made.
[14] On 19 August 2022, Pearlfisher served Mega Capital with a statutory demand for $627,699.26.1 The demand stated that the sum comprised arrangement fees of
$80,000, establishment fees of $530,000 and costs of $17,699.26.
1 I note that the demand itself was dated 18 August 2022.
Mega Capital’s application to set aside statutory demand
[15]Mega Capital seeks orders:2
(a)to set aside the statutory demand served on them by Pearlfisher on 19 August 2022; and
(b)awarding Mega Capital costs on this application.
[16]The grounds on which Mega Capital seeks the orders are:
(a)The underlying credit contract ought to be reopened under ss 117-124 of the Credit Contracts and Consumer Finance Act 2003 (CCCFA) as the contract and Pearlfisher’s demand thereunder were oppressive. This is because:
(i)The contract was negotiated on a truncated timeline in circumstances where, as Pearlfisher knew, Mega Capital was already incurring substantial penalty interest each day on the property purchase for which it sought funding.
(ii)Through (knowingly) only offering Mega Capital part of the funding it needed to complete the purchase, Pearlfisher created a situation in which it could demand payment of substantial fees without advancing any lending. The end point was reasonably foreseeable. It was unlikely that Mega Capital could obtain the balance of the funding, as Pearlfisher’s terms did not leave any room for meaningful security for another lender.
(iii)The end position, on Pearlfisher’s demand, is unjustly burdensome. Pearlfisher claims payment of more than
$600,000 in fees even though Mega Capital did not draw down any of the lending. All the terms in s 118 of the CCCFA are apt
2 Originating application by Applicant to set aside statutory demand dated 1 September 2022.
(“oppressive, harsh, unjustly burdensome, unconscionable, or in breach of reasonable standards of commercial practice”).
(b)Therefore, there is a substantial dispute as to whether the debt claimed by Pearlfisher is owing and due. This dispute is not suitable for determination in the statutory demand process. The reasonableness of Pearlfisher’s terms and conduct, and the related market practice, are key considerations in determining whether Pearlfisher’s terms and conduct were oppressive. Those questions can only be determined at trial, with expert evidence and cross-examination.
Affidavit of Ajaypal Singh dated 1 September 2022
[17] Mr Ajaypal Singh, a director and shareholder of Mega Capital, has made an affidavit in support of Mega Capital’s application to set aside the statutory demand. 3 He deposes that Mega Capital was incorporated in 2021 to invest in property development.
[18] He says that on 5 November 2021, Mega Capital entered into a sale and purchase agreement to buy the property at 221 Jesmond Road, Karaka, Auckland. The purchase price was $19.8 million, and the settlement date was 15 June 2022. Mr Singh says that Mega Capital could not settle on this date because they had been unable to obtain finance.
[19] On 1 July 2022, the vendor’s solicitor issued a settlement statement requiring payment of $17.82 million.4 Mega Capital negotiated an additional month in exchange for paying a further deposit of $5 million. Penalty interest would continue to accrue at almost $10,000 each day.
[20] Mr Singh deposes that Mega Capital then engaged a broker to help secure finance to complete this transaction. This broker introduced Mega Capital to Pearlfisher.
3 Affidavit of Ajaypal Singh dated 1 September 2022.
4 This letter is attached to the affidavit at AS-001.
[21] He says that Pearlfisher was told that Mega Capital urgently needed finance. Following this initial introduction, Mr Singh says that Mr Tony Abraham contacted Mega Capital directly.
[22] Mr Singh states that Mega Capital received the first indicative offer from Pearlfisher on 9 July 2022. In this offer, Pearlfisher agreed to lend Mega Capital approximately $8 million. Mega Capital would be required to pay fees of $20,000 to progress the lending process.
[23] He then details a Zoom conversation that occurred on 10 July 2022. Mr Singh claims that on this call with Mr Abraham, Mega Capital asked Pearlfisher to lend the full amount needed to complete the purchase. Mr Singh deposes that Mr Abraham indicated Pearlfisher could lend the full amount of $10 million at higher fees, if Mega Capital would then use Mr Abraham’s contractors for earthwork and other civil work in the property development.
[24] On this call, Mr Singh also recalls that Mr Abraham was asked what Mega Capital’s risk was if they did not go ahead with the deal. Mr Singh deposes that Mr Abraham said that only the $20,000 fee would be lost.
[25] Mega Capital signed the first indicative offer on 12 July 2022. Mr Singh claims that Mega Capital was desperate at this point to secure funding and it took comfort in Mr Abraham’s assurance that should they not proceed, the risk was limited to the
$20,000.
[26] Next, Mr Singh deposes that on 19 July 2022, Pearlfisher sent a revised indicative offer. This offer listed that the loan amount was $10.27 million plus all establishment fees and interest.5 Mega Capital signed this offer.
[27] Under the terms of the agreement with Pearlfisher, Mega Capital could not provide meaningful security to another lender. Pearlfisher’s terms required a “first
5 This revised offer is foreshadowed in the text conversation between Mr Singh and Mr Abraham at AS-007. Mr Abraham writes “Ajay I think we can get approval to $10.0m additional $2m will be priced at 8% IR, and an additional fee of $150k. We will amend docs on that basis and seek formal revised approval by the end of the week with settlement targeted next week”.
and only” General Security Agreement, as well as a “first and only” mortgage. In those circumstances, Mega Capital was unable to obtain lending for the balance.
[28] Mr Singh says that after signing Pearlfisher’s offer, Mega Capital continued to search for alternative finance with the assistance of its broker. Mega Capital did secure alternative finance for the entire amount required to settle the property (around $13 million).
[29] Mr Singh deposes that Mega Capital signed the documents for this alternative finance on 27 July 2022. It decided to proceed with this alternative finance because it was the only way Mega Capital could settle the property. With the assistance of the alternative lender, Mega Capital settled the property.
[30] Mr Singh deposes that he spoke with Mr Abraham on the telephone to inform Pearlfisher that Mega Capital would not be going ahead with their funding. Mr Singh states that Mr Abraham told him that “[Mega Capital] had no idea what he was going to do to [them].” And that he had already taken two people to court and won on both occasions. Mr Singh claims that Mr Abraham told him that if he wanted to avoid court, he needed to agree to pay an amount on the telephone. Mr Singh deposes that he then ended the conversation with Mr Abraham.
[31] Mr Singh confirms that Mega Capital was served with the statutory demand on 19 August 2022.6
[32] Mega Capital has not paid the amount demanded as it believes the fees and Pearlfisher’s behaviour were not reasonable. Instead, Mr Singh details that Mega Capital wants to defend any claim against it and have the contract reopened under the CCCFA.
Pearlfisher’s notice of opposition to Mega Capital’s application
[33]Pearlfisher oppose Mega Capital’s application on the following grounds:7
6 Although he notes the demand is dated 18 August 2022.
7 Notice of opposition to originating application to set aside statutory demand dated 15 September 2022.
(a)there is no substantial dispute as to the amount due and owing; and
(b)there is no substantial argument that the contracts between the parties should be reopened under ss 117-124 of the CCCFA, in circumstances where:
(i)all fees were fully and fairly disclosed in all four of the contracts signed by Mega Capital;
(ii)the circumstances under which the fees would be payable were highlighted in correspondence;
(iii)the fees were specifically negotiated;
(iv)Mega Capital was represented by a professional mortgage adviser, legal counsel, and a financial adviser;
(v)Mega Capital was a sophisticated commercial party;
(vi)Mega Capital entered the contract with a view to profit, as part of a major commercial and real estate development project, in which it expected to receive revenue of nearly $100 million from the sale of 180 residential lots; and
(vii)the allegedly oppressive aspect of the parties' agreements arose from the fact that Mega Capital did not draw down on the loan facility, which was a decision that Mega Capital made of its own volition, for perceived commercial benefit, after Pearlfisher confirmed the fees that would become payable if Mega Capital did not proceed with the loan facility.
Affidavit of Tony Abraham dated 15 September 2022
[34] Mr Tony Abraham is a director of Pearlfisher. He deposes that Pearlfisher is an established and experienced non-bank lender that specialises in property development funding.
[35] In his affidavit, Mr Abraham details that Pearlfisher’s fees are set out in their indicative offer, the formal offer, and eventually in the detailed loan terms. He deposes that these fees typically include:
(a)an up-front fee (called a “Work Fee”) to compensate Pearlfisher for its time in assessing and providing indicative terms which may include engaging professional advisers such as lawyers. This is typically payable immediately when the indicative offer is countersigned;
(b)an “Arrangement Fee”, which is payable at some intermediate stage (for example, when the indicative offer is countersigned); and
(c)an “Establishment Fee”, which is payable when Pearlfisher confirms its commitment to the loan (for example, when the formal offer is made or countersigned, depending on the transaction). This is usually the largest of the three fees.
[36] Mr Abraham explains that in his experience, it is common practice in the industry for arrangement and establishment fees to be payable regardless of whether the loan is drawn down.
[37]From Pearlfisher’s perspective, the reasons for this are as follows:
(a)Pearlfisher is unwilling to undertake the work involved in organising a binding formal offer unless it is ensured the right to charge its arrangement fee.
(b)Pearlfisher is also unwilling to risk being economically committed to the loan (which is the effect of making a formal offer) unless it is assured of its establishment fee.
(c)If the fees were only payable on draw down, then borrowers would be at liberty to deal with many different financers, even to the point of countersigning multiple formal offers, to then decide which facilities to draw down and which to abandon.
(d)Pearlfisher moves quickly to offer finance when it is required. To counter the risk involved in that, Pearlfisher requires the assurance that the arrangement and establishment fees will be payable even if the borrower decides not to proceed.
[38] Mr Abraham deposes that his first contact with Mega Capital occurred on 1 June 2022, when Mr Falgun Patel of Mortgage Supply Co Limited contacted him on behalf of Mega Capital. He says that Mr Patel told him that Mega Capital was seeking finance of around $13 million. Mr Abraham explains that he declined this request because of the loan-to-value ratio and the fact that Pearlfisher already had loans secured against properties in this part of Auckland.
[39] Mr Patel contacted Mr Abraham again on 8 July 2022. Mr Abraham recalls that Mr Patel told him that Mega Capital now wanted to borrow $8 million. Mr Abraham was more interested in this proposal because of the reduced facility, the increased equity being contributed, and the additional information provided about the borrower. Mr Abraham deposes that these conversations left him under the impression that Mega Capital was a serious, substantial, and capable property developer.
[40] On 9 July 2022, Mr Abraham sent Mr Patel a draft indicative offer. Mr Patel replied on 11 July 2022 to ask what Mega Capital’s liability would be if they did not proceed with the settlement. Mr Abraham deposes that he replied, “the obligations are the arrangement fee and the establishment fee (subject to us issuing a formal offer in the latter case).”
[41] On 12 July 2022, Mr Patel forwarded Mr Abraham an email from Mr Singh. Mr Singh had countersigned the indicative offer but had “updated the fee structure.” He had deleted the arrangement fee, deleted the establishment fee, and agreed to increase the work fee to $20,000. Mr Abraham deposes that this was not acceptable for Pearlfisher. The arrangement and establishment fees were critical components of their offer.
[42] Mr Abraham met with both of Mega Capital’s directors that day at 2 pm on a Zoom call to discuss the offer. Mr Abraham deposes that he explained the arrangement fee and establishment fee needed to remain as they were drafted in the draft indicative offer. He claims that on the call, Mega Capital indicated that it would accept this.
[43] At 4:33 pm that afternoon, Mr Abraham received a countersigned indicative offer from Mr Bhalla (Mega Capital’s financial adviser). Mega Capital paid the
$20,000 work fee required by the first indicative offer on 13 July 2022. Mr Abraham deposes that in the following days, Pearlfisher instructed its lawyers to prepare the relevant document and it sought commitment from various investors.
[44] On 15 July 2022, Mr Abraham received an email from Mr Patel who was forwarding Mr Singh’s email requesting that Pearlfisher increase its commitment to
$10 million. Mr Abraham explains that he was reluctant to do so. He had already completed most of the work required to present a formal offer to Mega Capital based on the lower commitment and Pearlfisher’s risk calculations and risk assessment were premised on that figure.
[45] Later that evening, Pearlfisher issued a formal letter of offer based on the terms provided in the first indicative offer. This meant that Mega Capital was liable for the establishment fee under the signed first indicative offer. Mr Abraham claims that Pearlfisher has completed the work it had agreed to do to trigger that fee.
[46] Mr Abraham deposes that over the next few days, Pearlfisher internally discussed the possibility of increasing the offer to $10 million. Pearlfisher decided it would. Mr Abraham exchanged text messages with Mr Singh about the proposed terms.
[47] On 18 July 2022, he texted Mr Singh to confirm that the original establishment fees and arrangement fee would still be payable if Pearlfisher began again with an amended offer.
[48] On 19 July 2022, Pearlfisher issued a revised indicative offer. This offer included the same fee structure as the first indicative offer, along with additional fees to recognise the increased quantum of the loan and resulting increased risk. Mega Capital returned a countersigned offer that same day.
[49] Over the following week, Mr Abraham exchanged a series of emails with Mega Capital about the loan. This included some discussion about the fees. On 21 July 2022, Mr Patel emailed to say the facility agreement did not match the contractual terms outlined in the revised indicative offer because the arrangement fees did not account for the $20,000 that had already been paid, and the “non-refundable establishment fee” was recorded as $150,000, rather than $130,000. Mr Abraham admits that Mr Patel was correct in these two instances. Mr Abraham had Pearlfisher’s lawyers correct these details.
[50] On 22 July 2022, Mega Capital returned signed copies of the loan and the security documents, including the facility agreement (which recorded all the fees).
[51] Mr Abraham deposes that over the next week further emails were exchanged in preparation for settlement. On 26 July 2022, Mr Abraham spoke to Mr Singh. He deposes that he told him if Mega Capital wanted to proceed with settlement the next day, Pearlfisher would need to take action that day to collect the funds. Following their conversation, Mr Abraham deposes that Pearlfisher duly collected the funds and deposited the $8 million with their solicitor. The additional $2 million was due to be transferred to their solicitors on the day of settlement.
[52] On 27 July 2022, Mr Singh informed Mr Abraham that settlement would be postponed until 29 July 2022 due to a shortfall of $145,000. Mr Abraham suggested that to solve this shortfall, Mega Capital might consider asking their mortgage or financial advisers to defer payment of their fees until the funds arrived.
[53] Mr Abraham deposes that on 28 July 2022, Mr Singh contacted him to say that Mega Capital would not be proceeding with the loan. Mr Abraham says that he felt shocked by this announcement given how closely he had worked with Mega Capital over the preceding week and how close the loan was to settlement.
[54] Mr Abraham confirmed that Pearlfisher subsequently issued the statutory demand.
Reply affidavit of Ajaypal Singh dated 29 September 2022
[55] Mr Singh filed a second affidavit in reply to one point in the affidavit of Mr Tony Abraham.
[56] At [15] in his affidavit, Mr Abraham stated that he did not know why Mr Singh had not attached a certain email to his evidence.
[57] Mr Singh responds that he did not have the time to look for and attach all relevant emails, texts, and other documents. Mr Singh says that he only had 10 working days to reply to the statutory demand. And at the time he was in India, which made this difficult.
Reply affidavit of Sidhartha Bhalla dated 29 September 2022
[58] Mr Sidhartha Bhalla is a registered financial adviser who currently trades as Finance Experts Limited. He made his affidavit in reply to the affidavit of Mr Abraham.
[59] Mr Fitzgerald and Mr Hall objected to the admissibility of Mr Bhalla’s evidence. Counsel say that this affidavit was filed in reply, however, it is not being used as reply evidence. Reply briefs are intended to address matters in the defendant’s evidence that could not reasonably be anticipated in the plaintiff’s original evidence.8 Mr Fitzgerald and Mr Hall claim that if Mega Capital intended to rely on market considerations supported by expert evidence, then it ought to have led the evidence in chief, to allow Pearlfisher to respond to it.
8 Houghton v Saunders [2014] NZHC 423, (2014) 21 PRNZ 721 at [3].
[60] Notwithstanding Mr Fitzgerald and Mr Hall’s objection, I will allow Mr Bhalla’s affidavit to be read by the Court. It does contain relevant information to Mega Capital’s claims that the contract was oppressive, particularly in respect of what might be considered as market practice in the circumstances of the transaction.
[61] Mr Bhalla deposes that he has 10 years of experience in the finance industry – this has included working as a banking adviser, mobile mortgage manager, and more recently as a financial adviser.
[62] He discloses that he was involved with this transaction as Mega Capital’s financial adviser. However, the purpose of his affidavit is to offer expert evidence on whether Pearlfisher’s fees were consistent with reasonable commercial practice.
[63] He deposes that Pearlfisher’s fees totalled $630,000 on the lending of $10.27 million. This equated to 6.13 per cent. Mr Bhalla deposes that, in his experience, fees of more than 6 per cent of the lending is highly unusual and outside reasonable commercial practice. Fees for a transaction of this kind, on the private lending market, would normally range between one and two per cent.
[64]For the alternative finance that Mega Capital obtained, the fees totalled around
2.2 per cent. This was at the higher end of the range because of the short timeframe. Mega Capital agreed to pay around $300,000 for the lending of more than $13 million.
[65] Mr Bhalla also deposes that in his experience, it is unusual and outside of reasonable commercial practice for an establishment fee and/or arrangement fee to be payable if the client does not proceed with the lending. If anything, he claims that there would only be a work fee payable. That fee would depend on the loan size and amount of work involved, but he states that it would often be in the range of $5,000 to
$20,000.
Mega Capital’s Submissions
[66] Mr Nelson, for Mega Capital, submits that the underlying credit contract between the parties ought to be reopened as oppressive under ss 117-124 of the CCCFA. Accordingly, he submits that there is a substantial dispute about whether the
debt claimed by Pearlfisher is owed to them. Therefore, he says, the statutory demand should be set aside.
[67] He submits that the credit contracts in this case were oppressive for the following five reasons.
[68] First, the contract had two features which, operating in conjunction, were self- evidently harsh and oppressive. Specifically:
(a)the establishment fees (of $530,000) were payable regardless of whether the lending was drawn down and in addition to the arrangement fees (of $100,000); and
(b)the establishment fees were grossly excessive in amount.
[69] In support of this submission, Mr Nelson refers to Raptorial Holdings Ltd (in rec) v Elders Pastoral Holdings Ltd.9 In that case, the Court of Appeal noted “the magnitude of the exit fee […] is a striking feature, and is of course the very cornerstone of the oppression argument,” and “it must be borne in mind that the fee was payable regardless whether the credit contract ran its full term of 18 months”. The Court considered that “a finance rate of 80 per cent or higher … may ultimately justify the conclusion that this is one of those plain cases … where a particular term of a credit contract simply speaks for itself.”10
[70] Second, Mr Nelson submits that the terms of the contracts were not reasonably necessary to protect the interests of the creditor.11 Pearlfisher’s investors committed
$8.18 million from 15 July 2022 to 31 July 2022. It requires an establishment fee of
$400,000 in return, which equates to a return of 4.9 per cent, or 111.6 per cent per annum. The investors then committed an additional $2.09 million from 19 July 2022 to 31 July 2022. It required a further establishment fee of $130,000, which equates to a return of 6.22 per cent, or 189.2 per cent per annum.
9 Raptorial Holdings Ltd (in rec) v Elders Pastoral Holdings Ltd [2001] 1 NZLR 178 (CA) at [53]
10 At [53].
11 At [29].
[71] Mr Nelson submits that these kinds of returns bear no rational connection to the opportunity cost Mr Abraham claims his investors lost and:
(a)The contract required payment of $530,000 in establishment fees even though Mega Capital did not draw down any of the lending.
(b)The establishment fee structure was disproportionate to any interest Pearlfisher had in compensating its investors for committing capital. These fees would provide an annualised return in the realm of 111.6 to
189.2 per cent.
[72] Third, Mr Nelson submits that the establishment fees’ amount and structure contravened reasonable commercial practice. In support of this claim he points to the expert evidence provided by Mr Bhalla. Mr Nelson sought to distinguish the present facts from those in GE Custodians v Bartle, where the Supreme Court held the terms of the credit contract “reflected market conditions” and the rate was “unexceptional”.12
[73] Additionally, Mr Nelson argues that Mr Abraham’s comment that, in his experience, “it is common practice in the industry for fees such as the arrangement fee and establishment fee to be payable regardless of whether the loan is drawn down,” amounts to opinion evidence. And, would therefore be inadmissible under s 23 of the Evidence Act 2006 and r 9.43 of the High Court Rules 2016.
[74] Mr Nelson also points to the disagreement between Mr Bhalla and Mr Abraham on this issue as evidence of a substantial underlying dispute. One that cannot be resolved in the statutory demand context.
[75] Fourth, Mr Nelson points to a range of additional circumstances that point towards a finding of oppression:
(a)Mega Capital had significantly less bargaining power because they were desperate and in financial difficulty;13 and
12 GE Custodians v Bartle [2010] NZSC 146, [2011] 2 NZLR 31 at [45] and [52].
13 Credit Contracts and Consumer Finance Act (CCCFA) 2003, s 124(1)(c).
(b)the terms of the lending prevented Mega Capital from providing meaningful security to another lender, even though it could not complete the purchase without further funding.14
[76] Fifth, Mr Nelson submits that the matters relied on by Pearlfisher are not fatal to the claim of oppression.15 Instead Mr Nelson claims that they are merely factors that must be assessed in the round with all other circumstances under s 124 of the CCCFA. In support of this argument Mr Nelson points to a range of authorities.16
[77] Mr Nelson says that the oppression claim turns on disputed evidence and all the circumstances of the case. It is unsuitable for determination in the statutory demand process.
Pearlfisher’s Submissions
[78] Mr Fitzgerald and Mr Hall, for Pearlfisher, submit that the fees claimed by Pearlfisher cannot meet the test for oppression that is required to reopen a commercial contract.
[79] In support of that position Mr Fitzgerald and Mr Hall point to the following factors:
(a)Mega Capital is an experienced and sophisticated commercial party.
(b)The project for which it sought finance was substantial. It had agreed to pay $19.8 million for the land.
(c)The applicable fees were fully and fairly disclosed in the contracts that Mega Capital signed.
14 Sections 124(1)(l) and (p).
15 Here he refers to Pearlfisher’s claims that these were commercial parties, who had received legal advice.
16 Raptorial Holdings Ltd (in rec) v Elders Pastoral Holdings Ltd, above n 9; Greenbank New Zealand Ltd v Haas [2000] 3 NZLR 341 (CA); Robinson v Budget Loans Ltd [2012] NZHC 1206; Wake Up Commercial Ltd v Extension Capital Ltd [2022] NZHC 1824.
(d)The fees were specifically negotiated between the parties. There is evidence of specific communication about the fees.
(e)Mega Capital was represented by lawyers, professional financial advisers, and mortgage advisers. All of whom were aware of the fees.
[80] Mr Fitzgerald and Mr Hall say that Mega Capital agreed to pay these fees as part of a calculated risk that it hoped would lead to a substantial profit from its property development. Mega Capital hoped to generate $95 million in revenue from this project.
[81] Mr Fitzgerald and Mr Hall also drew attention to the context in which Mega Capital makes its argument that Pearlfisher’s fees were too high. Unbeknownst to Pearlfisher, Mega Capital was negotiating with an alternative lender after signing the agreements with Pearlfisher. And Mega Capital signed with the alternative lender after Pearlfisher’s fees had fallen due.
[82] Therefore, Mr Fitzgerald and Mr Hall submit that Mega Capital’s argument that Pearlfisher’s fees are oppressive focuses nearly exclusively on the quantum of the fees, without engaging with the context in which those fees arose.
[83] Mr Fitzgerald and Mr Hall say that Mega Capital’s argument also relies too heavily on purported expert evidence (referring to Mr Bhalla’s affidavit). They say that even this evidence only goes so far as to call the fees unusual.
[84] Mr Fitzgerald and Mr Hall also say that Mega capital cannot rely on its own conduct as a factor pointing in favour of oppression. Here counsel are referring to Mega Capital’s submission that the fees are high given Mega Capital did not draw down the loan. Mr Fitzgerald and Mr Hall submit that when the fees are assessed at the time of the contract, by reference to the nature and the circumstances of the loan, the fees are clearly not oppressive. Counsel say that Mega Capital cannot make these terms oppressive by choosing not to proceed with the deal.
[85] Turning to the Court’s power to reopen credit contracts, Mr Fitzgerald and Mr Hall say that this power should be exercised very sparingly between sophisticated, well-advised, commercial parties. Counsel argue that this power is reserved for cases where there has been some abuse of the commercial relationship that is so extreme as to justify curial intervention.
[86] Additionally, Mr Fitzgerald and Mr Hall submit that it is open to the Court to set aside part of the statutory demand but uphold the remainder. Counsel say that Mega Capital’s submissions in this case are almost exclusively directed towards the establishment fees, rather than the arrangement fees or legal costs. Therefore, Mr Fitzgerald and Mr Hall submit that if the Court determines there is a substantial dispute about the establishment fees, it may set aside only this portion of the statutory demand.17
[87] In support of its case, Pearlfisher draws the Court’s attention to the High Court decision in Powell v K 2 Investment Group Ltd.18 It says that this is the most relevant authority for the present case. In that case, the applicant argued that a default interest rate was too high. The Court held that the credit contract was not oppressive, despite the “extremely high” interest rate.” In reaching that decision, the Court took into account a list of factors – almost all of which, Mr Fitzgerald and Mr Hall argue, are applicable in the present case. They include that it was not a consumer credit contract, there was no obvious disparity of business acumen,19 the borrower was legally represented, a lawyer conducted the negotiations, the interest rate was the subject of negotiation, and the default interest rate had a logical purpose.
Legal Principles
Setting aside statutory demand
[88]Section 290 of the Companies Act 1993 provides, relevantly:
17 Counsel point to Eagle Flight Training v Aerospace Invest Pte Ltd [2018] NZHC 966 as an example of this.
18 Powell v K 2 Investment Group Ltd [2021] NZHC 2253.
19 At [178].
290 Court may set aside statutory demand
(1)The court may, on the application of the company, set aside a statutory demand.
…
(4)The court may grant an application to set aside a statutory demand if it is satisfied that—
(a)there is a substantial dispute whether or not the debt is owing or is due; or
(b)the company appears to have a counterclaim, set-off, or cross- demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or
(c)the demand ought to be set aside on other grounds.
…
[89]There are some principles relevant to the application of s 290(4):20
What the applicant must show is that the dispute it raises has substance; the applicant must explain to the court what the dispute is; and the dispute so shown must be a real and not a fanciful or insubstantial dispute. The Court must bear in mind that it is operating in the summary jurisdiction, with the accompanying disadvantages that brings for any applicant. The Court must also keep in mind the requirement that what is intended to be a summary hearing should not be converted into a full-blown trial.
[90] As to s 290(4)(a), the Court is to look at whether a genuine substantial dispute exists.21 Mere assertion of a dispute does not suffice, and Mega Capital must show a fairly arguable basis for it.22 In practice, it is required that there be some material short of proof that backs up the claim that the amount is in dispute.23
[91] The Court must bear in mind that in dealing with this claim it is operating in the summary jurisdiction, and this brings accompanying disadvantages for any applicant.24 It will not usually be possible to resolve disputed questions of fact on affidavit evidence alone, especially where issues of credibility arise, unless such
20 AAI Ltd v 92 Lichfield Street Ltd (in rec & liq) [2015] NZCA 559, [2016] NZAR at [22] (footnotes omitted).
21 Taxi Trucks Ltd v Nicholson [1989] 2 NZLR 297 (CA) at 301.
22 N F Global Ltd v Sky Capital Management Ltd [2020] NZHC 2196 at [39]. See also United Homes (1998) Ltd v Workman [2001] 3 NZLR 447 (CA) at [27].
23 Arzan Investments Ltd v Beresford Apartments Ltd (2003) 16 PRNZ 825 (HC) at [17].
24 AAI Ltd v 92 Lichfield Street Ltd (in rec and in liq), above n 20, at [22].
evidence is contrary to the available documents or earlier statements made by the parties.25
Credit Contract and Consumer Finance Act 2003
[92] Section 120 of the CCCFA provides that’’ the Court may reopen a credit contract if it considers the contract is oppressive, or a party has exercised a right or power conferred by the contract in an oppressive manner.
[93] Section 118 defines oppressive to mean “oppressive, harsh, unjustly burdensome, unconscionable, or in breach of reasonable standards of commercial practice.”
[94] The Supreme Court, in GE Custodians v Bartle, affirmed the Court of Appeal’s interpretation of s 118:26
… The Court of Appeal has correctly said in Greenbank New Zealand Ltd v Haas that the various words which together form the definition of the term “oppressive” all contain different shades of meaning but they all contain 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. A contract or course of conduct may therefore, as Arnold J also said, be treated as oppressive even though the party whose conduct is said to be oppressive may be (subjectively) blameless because the party is simply following industry practice. Where that practice is in breach of reasonable standards, compliance with it will not immunise a lender. It is for the courts rather than the industry to set the standard. But that assumes a situation in which the lender knows of the matter found to give rise to oppression or knows something which should have put it on inquiry.
[95] Oppression requires “something more than an inquiry into whether a particular contract is advantageous or disadvantageous from the point of view of the party applying”.27 It “clearly connotates that some real detriment or hardship is involved”.28
25 Link Electrosystems Ltd v GPC Electronics (New Zealand) Ltd [2007] NZCA 501, (2007) 18 PRNZ 946 at [17]; and Confident Trustee Ltd v Garden and Trees Ltd [2017] NZCA 578 at [16].
26 GE Custodians v Bartle, above n 12, at [46], applying Greenbank New Zealand Ltd v Haas [2000] 3 NZLR 341 (CA) at [24].
27 Italia Holdings (Properties) Ltd v Lonsdale Holdings (Auckland) Ltd [1984] 2 NZLR 1 (HC) at 16; cited in O’Keefe v Mairangi Properties Ltd [2013] NZHC 411 at [44] and Mayes v Southern Cross Finance Ltd [2014] NZHC 1164 at [94].
28 Italia Holdings (Properties) Ltd v Lonsdale Holdings (Auckland) Ltd, above n 27, at 16.
[96] Section 124 provides the Court with guidelines for deciding whether s 120 applies and whether to reopen a credit contract. To the extent that they are relevant in the circumstances, the Court must have regard to a range of factors, including:
(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;29
(b)the relative bargaining power of the parties;30
(c)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;31
(d)whether, before entering into the arrangement, the debtor, lessee, or occupier obtained independent legal or other professional advice in relation to that arrangement;32
(e)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— 33
(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;
(ii)whether the arrangement under consideration imposes significantly more onerous terms on the debtor, lessee, or
29 CCCFA, s 124(1)(a).
30 Section 124(1)(c).
31 Section 124(1)(d).
32 Section 124(1)(f).
33 Section 124(1)(h).
occupier than would be imposed under those other arrangements; and
(f)the amount payable by the debtor, lessee, or occupier under the arrangement.34
[97] Section 123 provides that whether the fee provisions are oppressive must be assessed at the time the contract was entered into.
123Time and circumstances relevant to reopening credit contracts, consumer leases, or buy-back transactions
A credit contract, a consumer lease, a buy-back transaction, a term of a credit contract, a consumer lease, or a buy-back transaction, or an act performed under, or in connection with, a credit contract, a consumer lease, or a buy-back transaction is not oppressive if the contract, lease, transaction, term, or act would not have been considered oppressive at the time, and in the circumstances, that it was made or performed.
[98] In Bartle v GE Custodians Ltd, the Court of Appeal also identified that the power to reopen contracts for oppression is reserved for cases of serious abuse.35
The oppression remedy is not a contract-remaking remedy. It floats, like oil across water, across the top of credit contracts. It is ever-present. It polices serious abuse of credit contracting, where curial intervention may properly be invoked. So conceived, the CCCF Act performs a valuable prudential function in the law and indeed society in general. The statutory imperative is to see that those who borrow money understand what is going on in the transaction and what they are getting into. If they do understand and adopt the risk, then such borrowers can hardly be heard to complain. The legislation is thus a valuable corrective. If this is paternalistic - and undoubtedly it is - it is because Parliament has seen that to be necessary in the interests of the citizens of this country.
Analysis
[99] The key issue for determination in this judgment is whether it is reasonably arguable that the financing arrangements entered into between Pearlfisher and Mega Capital should be reopened under ss 117 to 124 of the CCCFA as being oppressive to Mega Capital. If so, then it is reasonably arguable that there is a
34 Section 124(1)(i).
35 Bartle v GE Custodians Ltd [2010] NZCA 174, [2010] 3 NZLR 601 at [49].
substantial dispute concerning the amount claimed by Pearlfisher under the statutory demand and it should be set aside.
[100] Mr Nelson submits that the credit contracts entered between Mega Capital and Pearlfisher were oppressive for five reasons which can be summarised as follows:
(a)The contracts had two features which, operating in conjunction, were self-evidently harsh and oppressive:
(i)the establishment fees (of $530,000) were payable regardless of whether the lending was drawn down and in addition to the arrangement fees (of $100,000); and
(ii)the establishment fees were grossly excessive in amount.
(b)The terms of the contracts were not reasonably necessary to protect the interests of the creditor. Mr Nelson presented figures showing the return rates to Pearlfisher of approximately 111 per cent to approximately 189 per cent over the short periods of time during July 2022, in respect of which Pearlfisher’s investors committed funds. Mr Nelson contends that these kinds of returns bear no rational connection to the opportunity costs of Pearlfisher’s investors.
(c)The establishment fees’ amount and structure contravened reasonable commercial practice, and, in this respect, Mr Nelson relies on the expert evidence provided by Mr Bhalla. Mr Nelson points to a disagreement between Mr Bhalla and Mr Abraham on the issue of what is normal commercial practice, and that disagreement cannot be resolved in the statutory demand context.
(d)Other circumstances which point towards oppression:
(i)Mega Capital had significantly less bargaining power because it was desperate and in financial difficulty; and
(ii)the terms of the lending prevented Mega Capital from providing meaningful security to another lender, even though it could not complete the purchase without further funding.
(e)The matters relied on by Pearlfisher as not being favourable to a claim of oppression are not fatal and are merely factors to be assessed in the round with all the other circumstances under s 124 of the CCCFA.
[101] Mr Nelson relies on Raptorial Holdings Ltd (in rec) v Elders Pastoral Holdings Ltd and submits that it is possible for the terms of the contract to be so extreme as to, by their very nature, indicate oppression. In the Raptorial Holdings decision, there was an exit fee payable of $1.5 million in respect of a loan of
$4.25 million and the Court of Appeal noted:36
… the magnitude of the exit fee in this case is a striking feature and is of course the very cornerstone of the oppression argument. It must be borne in mind that the fee was payable regardless whether the credit contract ran its full term of 18 months …
[102]Mr Nelson submits the Court considered that:37
… a finance rate of 80 per cent or higher … may ultimately justify the conclusion that this is one of those plain cases … where a particular term of a credit contract simply speaks for itself.
[103] Mr Nelson submits that Pearlfisher’s fees in the present case effectively amounted to a return in the region of 111 per cent to 189 per cent per annum for the short periods in July 2022 when Pearlfisher’s investors were committed to providing funding, and the key issue is accordingly whether Pearlfisher’s terms breached reasonable commercial practice. He submits this is ultimately a question that can only be determined at trial, after discovery with expert evidence and cross-examination. Consequently, there is a ground of substantial dispute in relation to the amount claimed in the statutory demand.
[104] Mr Nelson further submits that the present case should be distinguished from the decisions in GE Custodians v Bartle, Greenbank New Zealand Ltd v Haas and
36 Raptorial Holdings Ltd (in rec) v Elders Pastoral Holdings Ltd, above n 9, at [53].
37 At [53].
Trustees Executors Ltd v Carey,38 as in this instance Mega Capital has produced evidence as to whether the terms of Pearlfisher’s loan reflected market conditions. He points to Mr Bhalla’s expert evidence and the evidence regarding the alternative finance terms obtained by Mega Capital. He submits that there is a conflict between Mr Bhalla’s evidence and the statement by Mr Abraham that:39
… in his experience it is common practice in the industry for fees such as the arrangement fee and establishment fee to be payable regardless of whether the loan is drawn down.
[105] Mr Nelson submits this conflict cannot be resolved in the statutory demand context and requires a contest of expert evidence at trial.
[106] Mr Nelson submits that factors relied on by Pearlfisher as being unfavourable to the Court making a finding that oppression had occurred, such as that the parties were commercial parties with legal representation, are not fatal to a claim of oppression and are only factors which must be assessed with all other circumstances under s 124 of the CCCFA. He points to the decision in Raptorial Holdings Ltd where the lender was a commercial party that required the lending to purchase and develop a hotel complex, had the assistance of a finance broker, was legally represented and the guarantors (or at least one of them) were experienced developers.40 Mr Nelson points to that decision as the Court held it was not possible to properly assess matters of this kind from affidavit evidence in the summary judgment context.41 He also refers to the decision of Greenbank New Zealand Ltd where the lender was a commercial party that required lending for a property development, had legal advice and required lending with a view to a profit. In Mr Nelson’s submission, those factors were relevant and pointed against oppression, but emphasises that in the Court’s conclusion that the oppression defence was not arguable, the Court nevertheless considered it significant there was no evidence that the fee was oppressively high.42
[107] Mr Nelson also referred to the decision in Wake Up Commercial Ltd v Extension Capital Ltd where the Court held there was a serious question to be tried on
38 Trustees Executors Ltd v Carey HC Auckland CIV-2010-404-4645, 18 February 2011 at [29].
39 Affidavit of Tony Abraham dated 15 September 2022 at [7].
40 Raptorial Holdings Ltd (in rec) v Elders Pastoral Holdings Ltd, above n 9, at [5], [22] and [37].
41 At [48].
42 Greenbank New Zealand Ltd v Haas, above n 16, at [27]–[29].
oppression even though the lender had legal and other professional advice on the contracts.43
[108] Mr Fitzgerald and Mr Hall on the other hand submit that the claim that the contracts should be reopened under the CCCFA is untenable. Mr Fitzgerald submits that “oppressive” means more than unfair and refers to the decision in Italia Holdings (Properties) Ltd v Lonsdale Holdings (Auckland) Ltd where the Court held unfairness did not establish oppression. Oppression requires “something more than an inquiry into whether a particular contract is advantageous or disadvantageous from the point of view of the party applying”.44
[109] Mr Fitzgerald refers to the following passage from the decision in Greenbank New Zealand Ltd v Haas:45
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 where there is clear evidence, or the conclusion is otherwise irresistible, that the contract or term is oppressive within the proper meaning of that term.
[110] Mr Fitzgerald then analysed the factors under s 124 of the CCCFA in relation to Mega Capital and submits as follows:
Particular characteristics of the debtor
(a)This is not a case of a vulnerable consumer borrower and Mega Capital is a sophisticated commercial party in the business of property development. The purpose of the loan requested from Pearlfisher was to fund the purchase of a block of land for $21 million and Mega Capital intended to complete a significant development project on this land, aiming to subdivide the land into 190 sections with an estimated total value of around $95 million. Mega Capital clearly held
43 Wake Up Commercial Ltd v Extension Capital Ltd, above n 16, at [11]–[17].
44 Italia Holdings (Properties) Ltd v Lonsdale Holdings (Auckland) Ltd, above n 27, at 16.
45 Greenbank New Zealand Ltd v Haas, above n 16, at [25] (emphasis added).
itself out as an experienced property developer and demonstrated its credibility and level of experience in the fact that it had already commenced the process to obtain resource consent and had the approval of Council for the necessary earthworks. The development had all the hallmarks of a large-scale development undertaken by an experienced property developer.
Professional advice
(b)Mega Capital had professional advice from its legal team, a mortgage adviser and a financial adviser throughout the process. Mr Bhalla was Mega Capital’s financial adviser who was involved in the process from an early stage, and Mega Capital was represented by the law firm, Patel Nand. It is clear that Mega Capital was well advised throughout the negotiation process.
Form of the arrangement
(c)The fees set out in the various letters of offer and the facility agreement could not be more plain and they are expressed in clear and concise language. The details of the fees were expressly discussed and explained to Mega Capital and its advisers numerous times throughout the financing process. This is not a case where Mega Capital could say it did not understand the fees or when they were payable.
[111] Mr Fitzgerald then responds to various points made by Mega Capital in its submissions as follows:
(a)He submits that Mega Capital’s complaint boils down to an argument that the fees Mega Capital agreed to pay are simply too high, notwithstanding all the contextual facts which are taken into account under s 124 of the CCCFA. He points to:
(i)Raptorial Holdings where the fee concerned was $1.5 million on a loan of $4.25 million (as compared to fees of around
$600,000 on a loan of more than $10 million) and he submits the fees in the present case are not even comparable when the broader context is taken into account.
(ii)The Wake Up Commercial decision which was relied upon by Mega Capital, in which the principal amount was $2.35 million and the application fee and arrangement fee were together
$115,000 for a two month term. He submits this is broadly comparable to the range of fees at issue in the present case and in that decision the applicant did not even attempt to include the fees in its oppression claim.
(iii)Powell v K2 Investment Group Ltd in which case the applicant argued that the default interest rate was too high.46 Mr Fitzgerald submits that in that case, the Court held the credit contract was not oppressive despite the extremely high penalty interest rate and the Court took account of a list of factors, which in the present case, mostly apply: not a consumer credit contract and there was no obvious disparity in business acumen, the borrower was legally represented, a lawyer conducted the negotiations, there were negotiations about the default interest rate, the default interest rate had a logical purpose, and there was proposed security.
(b)Mr Fitzgerald deals with Mr Bhalla’s evidence and makes the following points:
(i)Mr Bhalla in his affidavit expresses the view that fees of more than six per cent of lending is highly unusual and outside reasonable commercial practice. In the present case the fees at issue amount to 6.13 per cent of the principal lending and are only marginally outside Mr Bhalla’s six per cent benchmark.
46 Powell v K2 Investment Group Ltd, above n 18, at [159].
(ii)Mr Bhalla’s evidence does no more than say that Pearlfisher’s fees are higher than usual in the market. Although Mr Bhalla gives evidence that the fees are “outside reasonable commercial practice”, it is clear he means “outside market pricing” as he considers the fee in isolation from the rest of the circumstances relating to the loan.
(c)It was Mega Capital’s own decision not to draw down the loan and it cannot render the fee “oppressive” by reason of its own conduct.
Result
[112] I am of the view that the statutory demand should not be set aside. In my view, Mega Capital has not established that it is reasonably arguable that the contracts between Pearlfisher and Mega Capital were oppressive and should be reopened under ss 117 to 124 of the CCCFA. The reasons for this are those set out by Mr Fitzgerald at [108] and [111] of this judgment, but briefly re-summarised:
(a)Mega Capital is a sophisticated commercial party in business of property development and not a vulnerable consumer. It held itself out to be an experienced property developer undertaking a major property development.
(b)Mega Capital received professional advice from a financial adviser, mortgage broker and legal team in relation to negotiating the contracts.
(c)Pearlfisher has provided a reasonable explanation for the structure of its fees and its lending process, and calculations by Mega Capital of return rates which the fees represent are not determinative.
(d)The fees are not so excessive when considered in context so that on their face the contracts are oppressive.
(e)The fees were discussed and negotiated specifically and there is no doubt Mega Capital was entirely clear on its obligation to pay the fees if it did not proceed to draw down the loan.
[113] Accordingly, Mega Capital has not established that it is reasonably arguable that there is a substantial dispute regarding the amount claimed in the statutory demand.
Orders
[114]I make the following orders:
(a)Mega Capital’s application to set aside the statutory demand issued by Pearlfisher is dismissed.
(b)Mega Capital shall have a period of 20 working days from the date of this judgment to undertake any of the actions set out in s 289(2)(d) of the Companies Act 1993 in respect of the statutory demand;
(c)As the successful party, Pearlfisher is entitled to costs on a 2B basis and disbursements in respect of the application.
…………………………….. Associate Judge Taylor
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