With a seven million dollar deposit paid and penalty interest running at $10,000 per day for late settlement on its 2022 purchase of land in south Auckland ripe for redevelopment, Mega Capital was desperately shopping around for finance to cover its thirteen million dollar shortfall.
Mega Capital was held liable to pay initiation fees totalling some $627,700 on proposed borrowing from Pearlfisher Capital after abandoning the Pearlfisher deal in favour of alternative funding.
The High Court was told Mega Capital Group Ltd agreed to buy land at Karaka for $19.8 million with the prospect of creating 180 residential lots to be on-sold for some one hundred million dollars. In the seven month gap between agreeing to buy and having to pay, Mega Capital found it was unable to get bank funding. It turned to Pearlfisher Capital Ltd. A deal was struck for a $10.2 million six month bridging loan at eight per cent. The loan was never taken up. Mega Capital borrowed elsewhere. Pearlfisher sued for fees totalling $627,700 covering establishment fees and brokerage. Mega challenged the amount as being harsh and oppressive; in breach of the Credit Contracts and Consumer Finance Act.
Associate judge Taylor ruled Mega Capital liable to pay. Mega Capital was not a vulnerable consumer, he said. It was an experience property developer. The deal was negotiated with the assistance of professional advisers. During loan negotiations, fees due were specifically discussed and it was made clear these fees were payable after initial documentation was signed even if Mega did not subsequently draw down the loan.
Mega Capital Group Ltd v. Pearlfisher Capital Ltd – High Court (5.04.23)
23.041