The loan agreement did not breach reasonable commercial standards: court
The High Court granted an order for possession of a residential property after the borrower defaulted on a mortgage loan, rejecting claims that the loan was oppressive or that the lender was estopped from enforcing its rights.
Waimauri Ltd., a property finance company, provided a bridging loan to Powell Junior Ltd. in 2015 to facilitate the purchase and renovation of a residential property at 2/35 Powell Street, Avondale. Powell Junior, owned and directed by Jason Harvey, borrowed $557,907.50 under a loan agreement based on a standard legal template. The loan was secured by a mortgage over the property and was intended to be short-term financing while Powell Junior Ltd completed the necessary works to obtain a code compliance certificate and refinanced with a mainstream bank.
The loan was originally due for repayment in November 2015, but Powell Junior defaulted. Waimauri granted an extension until February 2016, but the default remained unremedied. Over the following years, multiple refinancing attempts failed, and Powell Junior made only intermittent payments. By March 2024, the outstanding loan balance had grown to $2,233,353.80. In November 2019, Waimauri issued a notice under the Property Law Act 2007, demanding payment. Powell Junior did not comply, prompting Waimauri to seek possession of the property.
Powell Junior opposed the application on three main grounds. It argued that the Property Law Act notice was invalid because the loan balance was misstated. It also claimed that the loan agreement was oppressive under the Credit Contracts and Consumer Finance Act 2003 and should be reopened. Additionally, it asserted that Waimauri was estopped from enforcing the mortgage because of an alleged agreement that capped Powell Junior’s liability at $649,000.
The High Court rejected all of Powell Junior’s arguments. It ruled that the minor discrepancy in the loan balance did not invalidate the Property Law Act notice. It found that Powell Junior had failed to prove that Waimauri had agreed to limit its liability under the mortgage and determined that any expectations to that effect were based on the actions of a third party, not Waimauri. On the issue of oppression, the court concluded that the loan agreement did not breach reasonable commercial standards. It found no evidence that Waimauri applied unfair pressure or acted in a way that made the loan unduly burdensome. The requirement that Powell Junior be the borrower did not, in itself, turn the agreement into a consumer credit contract under the Credit Contracts and Consumer Finance Act.
Finding that Waimauri was entitled to enforce its mortgage rights, the court ultimately granted an order for possession, requiring Powell Junior to vacate the property.
