Seller must obtain judgment before pursuing $189,863 interest claim, ruling finds
The High Court has set aside a solar farm developer's statutory demand for default interest, finding that the claim was genuinely disputed and, in any event, not yet a debt.
In Ake Mana Ltd v Far North Solar Farm Ltd [2026] NZHC 2837, released 16 September 2026, the court found that Ake Mana Ltd (Ake Mana) had raised a genuine and substantial dispute about whether it owed the $189,863.01 that Far North Solar Farm Ltd (Far North) demanded.
In a 25 September 2025 agreement, Far North agreed to sell the assets of its Waitara solar farm project to Ake Mana for $5.5 million plus GST. Completion depended on Ake Mana obtaining Overseas Investment Office (OIO) consent by 23 December 2025. Ake Mana never lodged an application. Far North terminated the agreement on 24 March 2026 and, on 10 April 2026, served a statutory demand for interest at 14 percent a year under the agreement's default interest clause.
The court said that a party ordinarily cannot rely on a failed condition if it did not take reasonable steps to satisfy it. That principle may not apply, however, where satisfying the condition was impossible even with reasonable steps. A barrister specialising in overseas investment law gave evidence for Ake Mana that, given farm land advertising requirements, obtaining consent within the agreement's timeframes "would have been clearly impossible."
Far North argued that Ake Mana took no meaningful steps towards consent. The court acknowledged that Far North had "reasonable grounds for being sceptical" but found that Ake Mana had done enough to show a genuine and substantial dispute. Whether its efforts were sufficient turned partly on credibility and needed ordinary civil proceedings to resolve.
Although that conclusion disposed of the application, the court also considered whether the interest was a debt. A statutory demand can cover only "a debt owing by a company" under s. 289 of the Companies Act 1993.
Even if Ake Mana had breached its obligations, the court held that the breach did not make the purchase price payable or turn the interest into a debt. It applied the UK Supreme Court's 2025 decision in King Crude Carriers SA v Ridgebury November LLC, which distinguished an accrued obligation to pay from a claim for loss caused by breach. The court saw "no reason to believe" that the English approach would not apply in New Zealand.
On that hypothesis, the court said Ake Mana would be liable in damages instead, and the possibility that an award might exactly match the interest figure did not make Far North's claim a debt. "Far North must obtain judgment first," it said.
The court set aside the demand and held that Ake Mana was entitled to costs, indicating a preliminary view that costs on a 2B basis would be appropriate.
