Watherston v PGW Rural Capital Ltd
| Jurisdiction | New Zealand |
| Judge | French J |
| Judgment Date | 05 August 2020 |
| Neutral Citation | [2020] NZCA 329 |
| Court | Court of Appeal |
| Docket Number | CA61/2019 |
| Date | 05 August 2020 |
[2020] NZCA 329
French, Clifford and Collins JJ
CA61/2019
IN THE COURT OF APPEAL OF NEW ZEALAND
I TE KŌTI PĪRA O AOTEAROA
Commercial, Limitation, Statutory Interpretation — appeal against a High Court decision which held that for the purposes of reopening a credit contract the “last obligation” meant the last day for repayment of the loan meaning the appellant's claim was time barred — Credit Contracts and Consumer Finance Act 2003
A R B Barker QC and S T Cottrell for Appellant
J V Ormsby, S D Campbell and J R Halligan for First Respondent
-
A The appeal is dismissed.
-
B The appellant must pay the first respondent costs for a standard appeal on a band A basis with usual disbursements. We certify for second counsel.
(Given by French J)
Section 125(1)(c) of the Credit Contracts and Consumer Finance Act 2003 (CCCFA) states that proceedings seeking the re-opening of a credit contract may be commenced at any time earlier than “1 year after the due date for the performance of the last obligation required to be performed under the contract”.
In the High Court decision under appeal, Dunningham J held that for the purposes of s 125(1)(c) “the last obligation” meant the last day for repayment of the loan. 1 As a result, Mr Watherston's proceeding was time-barred, he having commenced his proceedings more than four years after the final date for repayment.
Mr Watherston now appeals.
In 2005 Mr Watherston purchased a farm property called the Doone. Over a period of several years, he entered into a number of credit contracts with PGG Wrightson Finance Ltd (PGG Finance) in order to obtain funding for the purchase and subsequent development of the Doone.
The credit contracts at issue in the proceeding were three term loan agreements, a current account facility and various securities.
Two of the term loan agreements were dated 6 March 2009. The term of both loans was three years, with the date for repayment being 6 March 2012. The third term loan agreement was dated 12 September 2011, with a due date for repayment being 1 September 2012.
On 29 June 2010, Mr Watherston and PGG Finance entered into a current account facility agreement. The agreement did not contain a specified repayment date but did provide that monies were repayable on demand.
Mr Watherston's indebtedness to PGG Finance was secured by a general security agreement over his personal property, a first mortgage over the Doone and another farm property as well as general and specific securities over chattels, stock and plant.
In 2011 PGG Finance was sold along with all its loans and securities including the Watherston debts to the second respondent Heartland Bank Ltd (then Heartland Building Society). By that time, there had been a series of defaults on the part of Mr Watherston. Under the assignment contract, Heartland had the right to re-assign “impaired” loans. Following further defaults by Mr Watherston, Heartland considered the Watherston loans to be in the impaired category and accordingly re-assigned them back to PGG Finance on 11 July 2012.
On 30 April 2013, PGG Finance assigned its loans and securities including the Watherston loans to another associated entity, the first respondent PGW Rural Capital Ltd (PGW Capital).
On 2 May 2013, PGW Capital notified Mr Watherston of the assignment and made demand for immediate payment of all monies owing including interest. The notice concluded by saying:
Until payment is made in full, all interest, charges, costs and expenses will be calculated and compounded in accordance with the Finance Contracts and added to the amount demanded and all provisions in those documents remain in full force.
For reasons which will become apparent, on appeal Mr Watherston's counsel placed significant weight on the statement that all provisions were said to remain in full force.
Returning to the narrative, Mr Watherston was not able to make immediate payment of the outstanding balance and on 6 May 2013 PGW Capital issued a notice of enforcement. The notice advised that the whole of the secured indebtedness was now due and payable and that the third respondent Mr Hollis, and a Mr Noone had been appointed as receivers. 2
In the months that followed, the receivers sold the two farm properties together with all the stock and plant.
The receivership ended on 6 July 2016 when the loans and securities were assigned to The New Zealand Redwood Co Ltd. Mr Watherston then entered into a deed of settlement with Redwood, under which he settled his indebtedness with that company. His counsel on appeal Mr Barker QC described this in submissions as the final step in the enforcement process by the last holder of the loans and securities.
The following year on 21 February 2017 Mr Watherston performed the last of his obligations under the settlement agreement with Redwood and the remaining securities were released.
On 18 February 2018, Mr Watherston commenced proceedings in the High Court against PGW Capital, Heartland Bank and the receiver. The statement of claim pleads three causes of action. Two are relevant to this appeal because they allege oppression under s 120 of the CCCFA and the remedy sought is an order re-opening all the credit contracts entered into by Mr Watherston.
The allegations of oppression include oppressive terms under the credit contracts and oppressive conduct in the exercise of powers under the credit contracts. In particular, it is alleged that the interest rates payable under the credit contracts were oppressive, that the power to vary those interest rates was exercised in an oppressive manner and that the appointment of a receiver was oppressive. The third cause of action which is not relevant to the appeal is against the receiver for alleged breaches of his duties.
PGW Capital applied for an order to strike out the claims against it on the grounds they were either time-barred under s 125 of the CCCFA or amounted to an abuse of process.
In contending that the claims were time-barred, PGW Capital argued that for the purposes of s 125(1)(c) the date by which the last obligation was due to be performed under the credit contracts was at the very latest 6 May 2013. That date, it will be recalled, was the date the notice of enforcement was issued. According to PGW Capital, the one year time period started to run on that date and therefore in order not to be time-barred, Mr Watherston needed to have commenced his re-opening proceedings by 6 May 2014. As it was, the proceeding was hopelessly out of time by almost four years.
Mr Watherston opposed the strike out application. He contended that time did not start to run until the date he completed the last of his obligations under the settlement deed with Redwood. That was 21 February 2017 and therefore a claim filed on 18 February 2018 was (just) within the one year limitation period.
In the High Court, Dunningham J accepted the interpretation of s 125(1)(c) advanced by PGW Capital and accordingly made an order striking out the claims against it. The Judge accepted that the word “obligation” need not be read as restricted solely to repayment obligations. 3 However, she considered that in the context of a credit contract it was difficult to envisage what other obligation could arise that has a due date in the contract, and that accordingly the last date for repayment will “almost inevitably” be the obligation from which time runs. 4
Having reached that conclusion, it was not strictly speaking necessary for the Judge to go on to address the question of whether, had the claims been in time, they nevertheless constituted an abuse of process. However, the Judge did address that issue. She held there had not been an abuse of process which would have warranted strike out, were the claims not already statute-barred. 5
There has been no cross-appeal against the ruling regarding abuse of process. The sole focus of the appeal was on the interpretation of s 125 and its application to undisputed facts. It was common ground that this was not one of those cases where a strike out application was incapable of being determined before trial.
Before turning to the arguments on appeal and our analysis, it is convenient to first set out the text of s 125 in full.
125 When reopening proceedings may be commenced
(1) Proceedings seeking the reopening of a credit contract, consumer lease, or buy-back transaction may be commenced in the court by the Commission, any party to the contract, lease, or transaction, or any guarantor under a guarantee relating to the credit contract, at any time earlier than,—
(a) in the case of a buy-back transaction, 3 years after the due date for the performance of the last obligation required to be performed under the transaction; or
(b) in the case of a contract or lease that is terminated by either party, 1 year after the date on which the contract or lease is terminated; or
(c) in any other case, 1 year after the due date for the performance of the last obligation required to be performed under the contract or lease.
(2) However, subsection (3) applies if,—
(a) with the knowledge of the creditor under a credit contract,—
(i) the credit provided under the contract is used (in whole or in part) to pay amounts owing under another credit contract or other credit contracts; or
(ii) amounts owing under the contract were paid from credit provided under another credit contract or other credit contracts; and
(b) the creditors under the credit contracts are either the same person or related companies.
(3) Proceedings seeking the...
To continue reading
Request your trial