Watherston v PGW Rural Capital Ltd
| Jurisdiction | New Zealand |
| Judge | Dunningham J |
| Judgment Date | 23 January 2019 |
| Neutral Citation | [2019] NZHC 22 |
| Docket Number | CIV-2018-409-000095 |
| Court | High Court |
| Date | 23 January 2019 |
[2019] NZHC 22
CIV-2018-409-000095
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
Banking and finance, Limitation — limitation periods under the Credit Contracts and Consumer Finance Act 2003 — when does time begin to run
J Moss and S T Cottrell for Plaintiff
J V Ormsby and S D Campbell for First Defendant
JUDGMENT OF Dunningham J
In 2005, the plaintiff, Mr Watherston, purchased a farm known as The Doone. He obtained funding for the purchase and development of the farm from PGG Wrightson Finance Limited (PGG Finance). Eventually, he defaulted on the loan agreements and a receiver was appointed to sell The Doone and other assets securing the loan agreements.
Mr Watherston is now suing two finance companies, along with the receiver appointed by one of them. The relief he seeks is to have the credit contracts he entered reopened under s 120 of the Credit Contracts and Consumer Finance Act 2003 (CCCFA) in order to vary the interest rate payable.
PGW Rural Capital Limited (PGW Capital) has filed an interlocutory application seeking the following orders:
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(a) an order striking out Mr Watherston's statement of claim dated 19 February 2018;
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(b) an order for security for costs;
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(c) an order requiring Mr Watherston to file a more explicit statement of claim and further and better particulars; and
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(d) an order seeking Mr Watherston's compliance with initial disclosure obligations.
The last two limbs of the application have been resolved, although PGW Capital seeks costs in respect of that part of the application. The application for security for costs has not been resolved, although some progress has been made on agreeing a mechanism by which appropriate security could be provided. However, as I indicated to counsel at the hearing, it is appropriate to defer consideration of that part of the application until after the strike out application has been determined.
As a consequence, the hearing focused on the application to strike out Mr Watherston's statement of claim against PGW Capital on the grounds of it being statute-barred and being an abuse of process. PGW Capital says:
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(a) the claim cannot succeed because it was filed outside the one-year limitation period in s 125 of the CCCFA. The date on which the last obligation due to be performed under all credit contracts was 6 May 2013 at the latest, and the plaintiff's claim to reopen the contracts was therefore time-barred on 6 May 2014; or
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(b) the filing of the proceeding, in the terms pleaded, three days before the expiry of the plaintiff's claimed limitation period was an abuse of process warranting an order striking it out.
Mr Watherston opposes the application. He submits that:
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(a) section 125(1)(c) of the CCCFA does not run from the last payment obligation, but rather from the due date for the performance of any obligation under the contract and so was not time-barred on 6 May 2014; but in any event
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(b) time runs from 21 February 2017, when the credit contracts in question were finally terminated by performance of a deed of settlement absolving Mr Watherston from paying the shortfall still then owing, and releasing the securities.
The issues for determination are:
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(a) Which subsection of s 125 governs the commencement of the limitation period in this case?
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(b) When did the relevant subsection trigger the commencement of the limitation period in this case?
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(c) If the limitation period has not expired at the time of filing these proceedings, should it be struck out as an abuse of process?
In September 2005, Mr Watherston purchased a large north Canterbury farm, The Doone, with finance from PGG Finance. At the time, The Doone was leased to a third party. However, in anticipation of the lease expiring on 31 March 2009, Mr Watherston approached PGG Finance for further funding to develop the farm and to purchase stock and plant for that farming operation. In February 2009, further finance was provided by PGG Finance for that purpose.
The credit contracts Mr Watherston entered into with PGG Finance comprised a successor of term loans as well as a current account facility, the terms of which were varied over time.
As at May 2013, when Mr Watherston went into default, his indebtedness arose under the following agreements:
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(a) a current account facility agreement dated 29 June 2010 under which he owed $4,331,474.11;
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(b) a term loan agreement dated 6 March 2009 under which he owed $1,206,378.08;
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(c) a term loan agreement dated 6 March 2009 under which he owed $1,005,315.06; and
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(d) a term loan agreement dated 12 September 2011 under which he owed $2,713,633.15.
The loan agreements were secured by:
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(a) first mortgages over The Doone and another farm owned by Mr Watherston called Rocky Peaks; and
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(b) general and specific securities over chattels, stock and plant
(referred to collectively as “the securities”).
In 2011, PGG Wrightson Limited (PGW), the owner of PGG Finance, decided to divest itself of PGG Finance and it was sold to Heartland Bank Limited (the second defendant), along with its “non-impaired” loans. However, Heartland Bank and PGW also agreed that Heartland Bank could assign back certain loans, if they became impaired. PGW established PGW Capital, (the first defendant, and the applicant in this application) to deal with the impaired loans.
In 2013, Heartland Bank elected to assign back the Watherston loans as impaired loans, and PGW Capital purchased them at full value, including all penalty interest.
PGW Capital then promptly took enforcement action. On 2 May 2013, it notified Mr Watherston that the contractual and security agreements between him and PGG Finance had been assigned to it. It also made demand for immediate payment of all monies owing under the finance contracts, including all interest payable in accordance with the finance contracts.
This was followed with the issue of a notice of enforcement by PGW and PGW Capital on 6 May 2013, which advised Mr Watherston that he was in default under both the specific and general security deeds securing the indebtedness. The notice formally notified him that “the whole of the secured indebtedness … is now due and payable”, and stated that Malcolm Grant Hollis and Maurice George Noone had been appointed as receivers under the provisions of the security agreements.
On 6 July 2016, the New Zealand Redwood Company (New Zealand Redwood) acquired the loans and the securities by way of assignment from PGW Capital.
The receivership concluded on 20 July 2016, with the receivers' final report on that date showing that PGW Capital suffered a loss of approximately $1,820,000.
In the latter half of 2016, Mr Watherston reached a settlement with New Zealand Redwood of the outstanding obligations under the loans and the security agreements. Mr Watherston then performed his obligations under the settlement agreement on or about 21 February 2017, and the remaining securities were released.
Mr Watherston filed these proceedings on 19 February 2018 suing Heartland Bank and PGW Capital, along with Mr Hollis, one of the receivers appointed by PGW Capital on 6 May 2013. The key elements of the claim are that:
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(a) the terms of the credit contracts were oppressive because, contrary to representations made, the interest rates were above market rates; and
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(b) the receiver appointed by PGW Capital acted oppressively in conducting the sale of the secured assets.
The relief sought includes reopening the credit contracts to reduce the interest rates, and a claim for damages calculated on the basis that the development of The Doone would have proceeded successfully had the interest rates not been oppressive, allowing the plaintiff to sell one farm and retain either The Doone or Rocky Peaks. There are also claims for general and exemplary damages.
On receipt of the proceedings, PGW Capital filed a statement of defence raising limitation defences. It also wrote to Mr Watherston claiming:
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(a) further and better particulars were required;
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(b) initial disclosure was inadequate;
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(c) security for costs was required; and
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(d) there were limitation issues.
These issues were not promptly resolved to the defendants' satisfaction and lead to the present application. 1
The Court may strike out a proceeding if it:
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(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
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(b) is likely to cause prejudice or delay; or
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(c) is frivolous or vexatious; or
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(d) is otherwise an abuse of the process of the Court. 2
The Court will strike out a cause of action that is time-barred. 3 It does so on the basis that the proceeding is frivolous or vexatious or is otherwise an abuse of process of the Court. The onus is on the defendant to satisfy the Court that the plaintiff's cause of action is clearly statute-barred. 4 In approaching that issue the Court will assume that the pleaded facts are true, whether or not they are admitted. It will also not shy away from determining the point even if it involves deciding difficult questions of law involving extensive argument. 5
In this case, there is no material dispute about the factual matrix in which the limitation issue is raised. The question turns on the interpretation of s 125 of the CCCFA, and how it triggers the limitation period in the circumstances of this case.
The plaintiff seeks to have the relevant credit contracts reopened under pt 5 of the CCCFA on the grounds that the contracts are...
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Watherston v PGW Rural Capital Ltd
...for a standard appeal on a band A basis with usual disbursements. We certify for second counsel. 1 Watherston v PGW Rural Capital Ltd [2019] NZHC 22 at [47]. 2 Proceedings have not been issued against Mr Noone. 3 At [46]. 4 At [46]. 5 At [76]. 6 Patrick v Bank of New Zealand [2018] NZCA 1......