Powell v K 2 Investment Group Ltd - [2021] NZHC 2253

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2018-409-191

[2021] NZHC 2253

BETWEEN
RICHARD OWEN POWELL

Plaintiff/Counterclaim Defendant

AND

K 2 INVESTMENT GROUP LIMITED

First Defendant/First Counterclaim Plaintiff

AND

K2 INVESTMENT GROUP AUSTRALIA PTY LIMITED

Second Defendant/Second Counterclaim Plaintiff

AND

GABOR KEMENY

Third Defendant/Third Counterclaim Plaintiff

Hearing: 5-7 July 2021

Appearances:

S D Campbell and J J Anson-Holland for Plaintiff P J Woods and T E Hutchinson for Defendants

Judgment:

30 August 2021

JUDGMENT OF OSBORNE J

This judgment was delivered by me on 30 August 2021 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

POWELL v K 2 INVESTMENT GROUP LIMITED [2021] NZHC 2253 [30 August 2021]

TABLE OF CONTENTS

Introduction[1]

The claims outlined[11]

The issues and the outcome[24]

The facts[25]

Ms Durney and Mr Kemeny structure a business together [25]

The trust deeds [27]

The partnership agreements[31]

The acquisition and funding of the property acquisitions and development[39]

The loan agreement — its negotiation, execution and advance[42]

The terms of the loan agreement[56]

K2 New Zealand defaults on loan repayment[62]

What Ms Durney had been doing[69]

Mr Kemeny tries to telephone Mr Powell[71]

The FCA proceedings and interim orders[80]

The final orders of the FCA[94]

Mr Powell’s caveat proceeding[96]

Subsequent dealings in relation to the Napier property[98]

The relevance of the FCA orders and the caveat judgment[101]

Issue 1: authority to represent K2 New Zealand[103]

The issue identified[103]

The Durney email[106]

Mr Kemeny as agent of the partnerships?[114]

The final FCA order[120]

Outcome[124]

Issue 2: validity of the loan agreement[136]

The issue identified[136]

Submissions - defendants[138]

Submissions – plaintiff[144]

Conclusion[146]

Issue 3: did Mr Powell make the agreed advance?[148]

The issue identified[148]

Submissions[150]

Conclusion — payment of the loan[153]

Issue 4: application of the Credit Contracts and Consumer Finance Act 2003 (CCCFA)[159]

The issue identified[159]

The evidence[160]

Submissions – defendants[164]

Submissions — plaintiff[165]

Discussion[176]

Issue 5: the ownership of an equitable interest[195]

The issue identified[195]

Submissions — defendants[199]

Submissions — plaintiff[208]

Discussion[215]

Issue 6: the priority of competing equitable interests[227]

The issue defined[227]

Pleadings and submissions — plaintiff[228]

Pleadings and submissions — defendants[229]

Discussion[233]

Issue 7: the validity of the caveats[248]

Mr Powell’s caveat over the Hastings property[248]

K2 Australia’s caveats over the two properties[251]

Issue 8: entitlement to the escrow funds[260]

The issue identified[260]

Discussion[267]

Costs and disbursements[273]

K2 New Zealand[274]

K2 Australia and Mr Kemeny[276]

Orders[277]

Introduction

[1]Three people are central to this case. Two of them are parties.

[2] First, there is Richard Powell who in 2012 made the loan which gives rise to the proceeding. Mr Powell is the plaintiff.

[3] Second, there is Gabor Kemeny, one of two partners in two property development businesses managed by the first defendant, K 2 Investment Group Ltd (K2 New Zealand), as agent. It was to K2 New Zealand that Mr Powell made his loan. Mr Kemeny is the third defendant, also a counterclaim plaintiff.

[4] Each of these men gave evidence…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2021] NZHC 2253
Decision Date: 30 August 2021

CaseChat Overview and Summary

The High Court of New Zealand considered the case of Powell v K 2 Investment Group Ltd, which involved a loan agreement between Richard Powell and K 2 Investment Group Ltd (K2 New Zealand). Powell alleged that K2 New Zealand defaulted on the loan agreement and failed to provide a mortgage over its 50% equitable share in two properties. The court considered various issues, including the authority of K2 New Zealand's representative to engage in litigation, the validity of the loan agreement, the application of the Credit Contracts and Consumer Finance Act 2003 (CCCFA), and the priority of competing equitable interests. The court ruled that K2 New Zealand's representative lacked the authority to represent the company in litigation, the indoor management rule applied to the loan agreement, and the interest rates charged were oppressive under the CCCFA. The court also found that Powell's equitable mortgage over K2 New Zealand's interest had priority over K2 Australia's interest. The court ordered the loan agreement to be reopened, awarded damages to Powell, and declared that Powell was entitled to specific performance of the mortgage obligation. Additionally, the court ordered the removal of certain caveats and declared that Powell was entitled to 50% of the escrow fund established upon the sale of K2 New Zealand's Napier property.

Orders