What was intended as a $560,000 five month bridging loan in 2015 to ensure completion of an Auckland family home is now well overdue with more than two million dollars outstanding and the High Court ruling Tim Edney’s Waimauri Ltd did not improperly sidestep consumer protection legislation by having Jason and Melinda Harvey form a company as a conduit to take up their loan as borrower.
Consumer protection provisions in the Credit Contracts and Consumer Finance Act do not kick in when the borrower is a corporate.
The High Court was told Mr Edney, Mr Harvey and a Mr Peter Chevin were business associates then involved in a residential subdivision at Te Kauwhata, south of Auckland. Melinda Harvey and Peter Chevin are siblings.
Acting as an intermediary, Mr Chevin approached Mr Edney for assistance in bailing out his sister and her husband.
The Harveys were under pressure from a financier looking to exit its ownership of a property where they were living on Powell Street, in Auckland suburb Avondale. Mainstream financiers were not interested in financing the Harveys exercise of an option to buy Powell Street. Work was required to get building code compliance. Paperwork for new cross-lease title registration was incomplete.
Short term funds were provided by Mr Edney’s Waimauri Ltd; just under $560,000 lent for five months at twelve per cent with a default rate of twenty-two per cent.
A condition of the loan was that the borrower had to be a corporate. The Harveys set up Junior Powell Ltd as borrower.
The loan was not repaid. Repayment date was extended, on the assumption profits from the Te Kauwhata subdivision would soon become available. This subdivision, in fact, ran into financial difficulties.
The Harveys stopped paying interest on their company’s loan.
In the High Court, Justice Anderson made a Property Law Act possession order allowing Waimauri Ltd to take possession of Powell Street for non-payment of the loan.
As at March 2024, outstanding balance exceeded $2.2 million.
Mr Harvey’s claim Waimauri induced his company to take up the loan by oppressive means was dismissed. Email correspondence during negotiations made it clear Mr Harvey was comfortable with the terms and acknowledged it was bridging finance only.
Mr Harvey’s claim the loan was ‘in substance’ a consumer credit contract was dismissed.
Whilst purpose of the loan was a house purchase, Waimauri was not in the business of making consumer loans. The deal just happened to eventuate as part and parcel of their then business relationship in developing the residential subdivision at Te Kauwhata.
There are no ‘anti-avoidance’ rules in the Credit Contracts and Consumer Finance Act, prohibiting insertion of a corporate as titular borrower when making a loan.
It was proper in the circumstances for Mr Edney to require the Harveys have a company interposed as borrower, Justice Anderson ruled. A company is not a natural person; it is not a consumer.
Waimauri Ltd v. Powell Junior Ltd – High Court (28.02.25)
25.075