Commerce Commission v Harmoney Ltd

JurisdictionNew Zealand
CourtHigh Court
JudgeCourtney J
Judgment Date18 May 2018
Neutral Citation[2018] NZHC 1107
Docket NumberCIV-2016-404-002125
Date18 May 2018

[2018] NZHC 1107






Commerce Commission
Harmoney Limited

S J Mills QC, A D Luck and J D Cairney for Plaintiff/Respondent

A R Galbraith QC, A M Callinan and S A Comber for Defendant/Applicant

Banking and Lending: Claim that the defendant was breaching the Credit Contracts and Consumer Finance Act 2003 (“CCCFA”) by charging unreasonable credit fees — defendant operated a web-based platform that matched borrowers with investors (peer-to-peer lending) — defendant charged borrowers a fee called a “Platform Fee” — Whether a credit contract under s7 CCCFA (meaning of credit contract) can be comprised of more than one document — whether the Platform Fee was a “credit fee” as defined by s5 CCCFA (interpretation — fees payable by the debtor under a credit contract)

The Loan Contract was a standard form contract under which the borrower agreed to borrow an unspecified amount, for an unspecified term at an unspecified rate. The amount of the loan, and its term and the interest rate were required for certainty of contract. That information was found in the Loan Disclosure which was the vehicle through which the specific terms of an individual loan was recorded. Since those terms could not be found in the Loan Contract document, those two documents formed the credit contract.

A bare trustee's only obligation was to hold an asset and transfer it at the direction of the beneficiary. Many of the tasks associated with the administration of a loan under a Loan Contract would require HITL to perform duties beyond those of a bare trustee. Either HITL was more than a bare trustee or it was the agent of Harmoney, whose business it was actually undertaking. Harmoney's services extended beyond mere matchmaking. It provided a nominal creditor, HITL, to hold the loans as a bare trustee for investors by delegating that task to HITL, with whom investors contracted, unaware of Harmoney's role. The investors, Harmoney and HITL were all creditors under the credit contract.

Since Harmoney was a creditor, the Platform Fee was therefore a credit fee. Although the obligation to pay the Platform Fee arises under the Borrower Agreement, payment was not required until settlement and then it must be by way of deduction from the amount of the loan, therefore the fee was payable under the Loan Contract. Because the Platform Fee must be paid “for arranging each loan” and out of the monies advanced under the Loan Contract, there was a sufficient connection between the fee and the credit contract to say that the fee was payable in connection with the credit contract.


Table of Contents

Para No.



The case stated


Statutory context


Question 1: Is the “credit contract” as defined in s 7 of the CCCFA, comprised of a number of the Documents operating together or just the loan contract?


A contract may be comprised of more than one document


Which document or documents constitute the credit contract


Question 2: On the basis of the Documents and the factual summary, which entity or entities are the “creditor(s)” for the purposes of the CCCFA, as defined in s 5 of the CCCFA?

The issue


Relevant principles


The terms of the Investor Agreement and Loan Contract


The Administration Deed


Question 3: On the basis of the Documents and the factual summary, is the Harmoney Platform Fee a “credit fee” as defined by s 5 of the CCCFA?


First limb: a fee payable “under a credit contract


Second limb: a fee payable by the debtor to the creditor “in connection with a credit contract”


Third limb: a fee payable by the debtor for the benefit of the creditor in connection with a credit contract





Harmoney Ltd (Harmoney) operates a web-based platform that matches people wanting to borrow money with investors who want to lend money, commonly known as peer-to-peer lending. 1 The loan contracts arranged through the platform are credit contracts for the purposes of the Credit Contracts and Consumer Finance Act 2003 (CCCFA). Under the loan contracts Harmoney's sister company, Harmoney Investor Trustee Ltd (HITL) is the named creditor as a bare trustee for the investors.


Harmoney charges borrowers a fee, known as the Platform Fee, to arrange the loans. The Commerce Commission contends that this fee is a credit fee under the CCCFA 2 and therefore subject to the requirement that it not be unreasonable. 3 Harmoney maintains that the Platform Fee is akin to a brokerage fee and is not captured by the CCCFA.


This proceeding is a case stated brought by the Commission to establish whether the Platform Fee is a credit fee.

The case stated

The case stated poses three questions by reference to a specimen loan arranged through the Harmoney website as it operated until December 2015. 4


The loan was documented in five key documents:

  • (a) The “Administration Deed” records the relationship between Harmoney and HITL. The parties are Harmoney and HITL. Slightly different versions were in use before and after October 2015.

  • (b) The “Investor Agreement” sets out the terms on which the investor may access and use the Harmoney website. The parties are the investor, Harmoney and HITL.

  • (c) The “Borrower Agreement” sets out the terms on which the borrower may access and use the Harmoney website. The parties are the borrower, Harmoney and HITL. It is a term of the Borrower Agreement that the borrower pays the Platform Fee. 5

  • (d) The “Loan Disclosure” provides disclosure of the information about the loan before the loan contract comes into existence, as required by the CCCFA. 6 There were slightly different versions in use prior to and after November 2015.

  • (e) The “Loan Contract”, which comes into existence automatically after the Loan Disclosure is sent to the borrower. The parties are the borrower and HITL (with HITL said to be acting through Harmoney as its agent).


The Commission and Harmoney agree on the following summary of the key elements of a transaction effected through the Harmoney website:

  • (a) Prior to any Lending Transaction, a prospective borrower was first required to register with Harmoney. 7 Harmoney would then receive, consider and approve applications for registration in accordance with its eligibility criteria. Harmoney performed various tasks including receiving and assessing loan applications and undertaking credit checks.

  • (b) If the borrower wanted to take out a loan, he or she was required to complete a loan application. 8 The loan application process was designed to assess a borrower's credit grade, which in turn was used to determine the applicable interest rate and the maximum Loan Amount. The borrower then selected an agreed Loan Amount (between the maximum and a minimum of at least $1,000) and chose whether to repay the loan over a 36 or 60 month term (provided that the borrower could afford to make repayments over a 36 month term).

  • (c) Once a loan entered the online marketplace, investors decided whether or not to fund the Loan through placing an order. 9 Investors made orders in $25 increments – referred to as “notes” – for each investment until the loan was fully funded. 10

  • (d) Investors paid the amount they wanted to invest into an ‘investor account’. Harmoney held the investor account in trust for investors whose funds had been deposited into that account. 11

  • (e) Once there were sufficient orders to fully fund the loan listing (or to offer funding of a lesser amount which the borrower nonetheless agreed to accept), Harmoney transferred the investor funds from the investor account to an ‘advance account’, a separate bank account held by the Trustee on trust for investors. 12

  • (f) Harmoney would then transfer the loan principal to the borrower's nominated account. 13 The borrower did not sign a Loan Contract, as the contract was stated to come into existence immediately after Harmoney provided a Loan Disclosure. 14 From that point, the Trustee held the loan on trust for the benefit of investors. 15

  • (g) Settlement of a loan would occur within one business day after Harmoney provided the Loan Disclosure. 16 At Settlement, Harmoney would deduct from the Loan Amount an amount equal to the Platform Fee (outlined below) and transfer it to Harmoney's own account. Harmoney would pay the balance of the Loan Amount to the borrower's nominated account. 17 The Documents state that these fund transfers were to be made by Harmoney “at the direction of the Trustee, as authorised by the Borrower”. 18

  • (h) The Platform Fee is defined in the Borrower Agreement as “the fee payable by the borrower to Harmoney for arranging any Loan which settles, as set out on the Website under the “Interest Rates and Fees Section.” 19 The Borrower Agreement defined the ‘Loan’ as “the total amount lent or to be lent by the Trustee” to the borrower.

  • (i) Following settlement, the borrower had an obligation to make all of the loan repayments specified in the Loan Disclosure 20 to a ‘Collections Account’ held in the name of the Trustee as trustee for investors. 21 Interest accrued on the whole of the Loan Amount, which included the Platform Fee.

  • (j) Harmoney administered the loan accounts, including by receiving payments and undertaking recovery action. The Documents state Harmoney did this as agent for the Trustee. Harmoney charged a fixed service fee to investors for these services. 22 As at December 2015, this...

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1 cases
  • Harmoney Ltd v Commerce Commission
    • New Zealand
    • Court of Appeal
    • 7 August 2019
    ...53, [2016] 1 NZLR 1024 at [113]–[115]. 4 CIV-2016-404-2125. 5 Memorandum of counsel for the Commission dated 29 June 2018. 6 Commerce Commission v Harmoney Ltd [2017] NZHC 1167, (2017) 23 PRNZ 644 [Courtney J strike-out]; and Commerce Commission v Harmoney Ltd [2017] NZHC 2421 [Venning J 7 ......

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