Nandani v South Pacific Loans Limited

[2016] NZHC 2751

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-3277 [2016] NZHC 2751

BETWEEN

VINDIYA SHILPA NANDANI

Plaintiff

AND

SOUTH PACIFIC LOANS LIMITED Defendant

Hearing:	On the papers
Counsel	P M Webb for Plaintiff P Craighead for Defendant
Judgment:	18 November 2016

JUDGMENT (NO 2) OF WHATA J

This judgment was delivered by me on 18 November 2016 at 1.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date: ………………………….

Solicitors:           Denham Bramwell, Manukau

Alistaire Hall, Manukau

NANDANI v SOUTH PACIFIC LOANS LIMITED [2016] NZHC 2751 [18 November 2016]

[1]      In my judgment of 26 September 2016, I found that loans six to nine were unconscionable. As the plaintiff had not sought relief specifically in respect of those loans,  I sought  submissions  from  the  parties  as  to  jurisdiction  and  relief.   The plaintiff, in short, submits that equity provides the power to adapt the relief to the circumstances of the particular case.   The defendant highlights that, given the pleadings,  the  factual  evidence  presented  to  the  Court  was  limited  and  did  not

address a range of matters directly pertaining to contracts six through nine.1

[2]      It is not clear from the submissions as to whether the defendant objects, as a matter of jurisdiction, to any relief being granted in relation to the sixth and ninth contracts, but the defendant helpfully quantifies what it considers to be an outcome in the event the remedy of rescission is invoked.  The defendant has quantified that loss based on the contractual terms of loan agreement five.

Assessment

[3]      I accept Mr Craighead’s submission that equity’s broad-brush cannot remedy all pleading deficiencies.  But it is tolerably clear that the pleadings and the evidence engaged on the conscionability of all of the loan transactions, and not simply the first and second loan agreements. The third cause of action pleads:

The  alternative  loan  agreements  cannot  be  sustained  in  the  light  of  the

defendant’s ongoing and persistent breach of duty to the plaintiff.

[4]      I also accept Mr Craighead’s submission that there may have been some matters upon which there could be further elaboration or exploration in the evidence, particularly on the issue of relief (which I address below).   But the core issues relating to conscionability of all of the transactions were thoroughly canvassed.

[5]      While there is no application before me to amend the pleadings to include relief in relation to the sixth to ninth contracts, I consider that it is necessary, on my

1      The defendant referred to the following matters: (a) What were the financial situations of the Plaintiff, her husband and Victory Limited (the building company set up by the Plaintiff)? (b) What was Victory Limited used for, was the Plaintiff using that company to borrow money or obtain credit in circumstances where she then didn’t approach equity with clean hands? (c) At the times of rollovers six to nine what would a lawyer have advised her to do? (d) What attempts were made by the Plaintiff to repay all she owed? (e) What has been the increase in value of the rear property during the period of the defaults?

own initiative pursuant rule 1.9(2) to amend the pleading to include relief in respect of those contracts.   This litigation has already placed a significant burden on the plaintiff  and  defendant  and  I  see  that  little  would  be  served  by  delaying  the resolution of this matter by the requiring the parties to engage additional formalities of an application or the bringing of fresh proceedings.  This is an admittedly unusual course.  But I find support for it in the longstanding authority, Leavey & Co v Hirst

& Co Ltd.2    In that case, the England and Wales Court of Appeal upheld the trial

judge’s decisions to hear a new argument not stated in the defendant’s pleadings where no formal application had been made because “no real injustice would have been done by allowing the amendment”.3

[6]      In terms of relief, I am grateful to Mr Craighead for his reference to the Court of Appeal decision Scales Trading Ltd v Far Eastern Shipping Co Public Ltd.4    As noted by Mr Craighead, the Court in that case stated that in cases of guarantees:5

We find that where contracts of guarantee have been induced by misrepresentation, then if and to the extent the equitable remedy of vitiation is available that remedy may be granted on terms that the guarantor pay to the surety such sum as the guarantor would have bound itself to pay if the misrepresentation had not been made.

[7]      I agree with him that in order to do justice between the parties, I must proceed on the basis that the terms of loan agreement five provides the reference point for the remedy of rescission in terms of achieving what is necessary to return the position of the parties to the position they would have been in had the unconscionable contracts not been concluded. I reject Mr Webb’s submission seeking an interest rate based on the prescribed rate under s 87 of the Judicature Act 1908, or the increase in the consumer price index, or the average banking lending rate. That would not return the parties to the position they would have been in prior to the unconscionable contracts. In short, contractual liability under loan five records the

reasonable expectations of the parties at that time.

2      Leavey & Co Ltd v Hirst & Co Ltd [1943] 2 All ER 581.

3      At 582-583 (per Lord Green MR).

4      Scales Trading Ltd v Far Eastern Shipping Co Public Ltd [1999] 3 NZLR 26 (CA).

5      At 41. I note that this decision was overturned by the Privy Council in Scales Trading Ltd v Far Easter Shipping Co Public Ltd [2001] 1 NZLR 513 (PC), but the Board did not overturn this statement of principle. Rather, it reserved consideration of its correctness for the appropriate case.

[8]      The terms of loan agreement five included (as noted by Mr Craighead):

(a)       The principal is $97,899.35.  Due to the defaults as at 1 April 2010, the amount due was $117,300.25.

(b)      Under the heading “Default Interest Charges and Default Fees”:

(i)Default interest at 39.5 per cent per annum is payable from the time a default is made.

(ii)Default reminder communications incur a minimum fee of $10 for each communication.

(iii)Actual legal costs concerning defaults and enforcement are chargeable.

[9]      Given the foregoing, I find that the plaintiff remains liable to the defendant for the principal sum of $117,300.25 together with the contractual interest rate (29.5%) as specified in loan agreement five. I do not make an award of actual costs and penalty interest as that would belie the facts. The defendant sought to enforce unconscionable contracts, not contract number five.  I also consider that the penalty interest rate is excessive in the circumstances given the delay.

[10]     I also set aside the interim injunction put in place to safeguard the plaintiff’s home pending the result of the trial.  That order shall lie in Court for 10 working days to enable the parties to come to some agreement as to the handling of the property,  which is a family home, and to enable the plaintiff to come to some arrangements for the purposes of alternative accommodation or to reach agreement with the defendant.

Costs

[11]   The plaintiff was not successful on the pleaded action but I did find unconscionability.  In those unusual circumstances, success has been shared and the proper outcome is that costs should lie where they fall.