Sale
by receivers of a Marlborough farm was not open to challenge despite a
financiers failure to properly issue default notices to the farm
guarantors. The guarantors were
seriously overextended financially, had no chance of refinancing and in any
event knew informally that default notices had been issued.
The King family has farmed in the Kaituna
Valley near Havelock since 1873. The family farm was lost after a financially
disastrous foray into a dairy conversion at Wakanui near Ashburton. The Court of Appeal was told ASB Bank funding
totalling $21 million was used for the Wakanui project. There was ten million left unpaid when ASB sold
Wakanui after appointing receivers in October 2010. With the Havelock farm at risk, the Kings
refinanced. ASB agreed to write off
seven million of the ten million dollars still due. The three million for ASB was sourced from a
second-tier lender, PFL Finance, offering a one year loan. Terms were step: Havelock Farm was committed
to an interest rate of 11.95 per cent (with a penalty rate of 21.95 per cent),
had to pay the first three months interest in advance and was committed to an
up-front administration fee of $169,250 and a broker’s fee of $37,500. The Kings guaranteed the PFL loan.
Evidence was given that Havelock Farm
defaulted on interest payments due. PFL
Finance served a Property Law Act default notice on Havelock Farm, a statutory
requirement before selling the land. It
failed to send a copy of the default notice to the Kings as guarantors, which
the Act also requires. The Kings claimed
damages from PFL Finance following the sale of Havelock Farms, arguing the sale
process was invalid because they did not receive notice of default. The Court of Appeal said their claim was
without merit. They had informal advice
of the Property Law Act default notice
from a lawyer acting for Havelock Farms and in any event could not have
refinanced the PFL loan given their pressing financial circumstances. The Kings were under pressure from PGG Wrightson
(owed $537,000), Rhodes & Co ($42,600), Waitaki Fuels ($22,400) and payment to their acountant was in
arrears.
King
v. PFL Finance – Court of Appeal (5.11.15)
15.119