For Whanganui honey producer Henry Mathews, it was intended as a short-term three million dollar loan to ease liquidity. Against expectations, honey prices fell, leaving his company Settlers Honey exposed and Mr Mathews unsuccessfully arguing an 87 per cent financing rate was oppressive.
The High Court was told of a 2022 repo agreement with Cliff Cook’s PHC Treasury Ltd purchasing honey stocks from Settlers for three million dollars. Settlers kept possession of the honey. Initial agreement was that Settlers would repurchase the honey thirteen months later for five million dollars; an effective interest rate of some 66 per cent.
With a fall in market value for honey, this arrangement went through four subsequent variations, resulting in Settlers eventually committed to an eighteen month deal having an effective interest rate of 87 per cent together with addition of second mortgage security over land owned by a related company.
When push came to shove, Settlers could not pay. Mr Mathews stands as guarantor.
Mr Mathews and Settlers claimed the repurchase deal was an ‘oppressive credit contract,’ in breach of the Credit Contracts and Consumer Finance Act.
PHC Treasury claimed the contract was not a loan, but an investment purchase of honey.
In economic terms, repo agreements are not ‘investments,’ they are collaterised loan contracts, with assets provided as security against repayment of a loan on due date.
The fact PHC Treasury registered its security interest over the honey on the Personal Property Securities Register underscored this point; in substance, a repo agreement is a loan, not an agreement for purchase and resale.
Treating the repo agreement as a loan, Associate Judge Skelton ruled there was no evidence that loan terms were ‘oppressive’ in breach of the Credit Contracts Act. Oppression requires proof terms ‘contravene reasonable standards of commercial practice.’
It was Mr Mathews who offered from the outset to pay 66 per cent interest. Later increases in the effective interest rate amounted to penalty interest for late payment.
Mr Mathews had independent legal advice both during initial negotiations and during subsequent re-negotiations, the court was told.
He provided no evidence of what amounts to common commercial practice in repo agreements. It is not for the court to assume what is, or is not, reasonable, Judge Skelton said. Evidence of current commercial practice is required.
Both Settlers Honey as borrower and Mr Mathews as guarantor were held liable to repay the full amount. Further evidence is required to calculate the amount due.
PHC Treasury Ltd v. Settlers Honey Ltd & Mathews – High Court (30.10.25)
25.228