Having deceived multiple financiers by having each believe they had first ranking security in an Auckland property development, Liyun Chen then unsuccessfully sought court intervention claiming loan contracts were ‘oppressive,’ with consumer credit legislation applying because loans in part were used to refinance her prior private borrowing.
The Court of Appeal ruled Credit Contracts and Consumer Finance Act rules did not apply. The loans were business transactions for business purposes. Mandatory consumer protection disclosures were not required.
As guarantor of the loans, Ms Chen was ordered to pay shortfalls owed second-tier property financiers: $766,000 owed Goodmore Investments; $1.1 million owed Tawa Trade Finance. In addition, there is default interest at between twenty-five per cent and twenty-eight per cent running on unpaid balances.
Goodmore’s loan was the first, in early 2021: a short-term loan of $4.54 million to refinance then current borrowings and to complete a property development on Umbria Lane in Manukau.
Multiple properties across Auckland owned by Ms Chen or her family trust were provided as collateral security, plus Ms Chen’s guarantee.
The court was told interest payments were often late. The loan was not repaid on due date.
Sale of mortgaged properties enabled partial repayment. The eventual $766,000 shortfall followed a forced sale of the incomplete Umbria Road project.
The Court of Appeal ruled the Goodmore loan was not a personal loan. Its predominate purpose was business; property development.
It was artificial for Ms Chen to subdivide this loan into two purposes: business and personal.
Using some of Goodmore’s money to repay a personal loan was in effect the refinancing of prior personal business borrowing, given Ms Chen’s extensive programme of property developments in both New Zealand and China.
A second loan, for $1.7 million from Tawa Trade Finance, was made mid-2022.
Tawa was unaware that security offered for the loan were properties already pledged earlier to another financier: General Finance Ltd. Ms Chen did not disclose that General had been given priority, with an agreement to mortgage signed several months previously.
On default, Tawa was left with $1.1 million unpaid.
The Court of Appeal dismissed claims by Ms Chen that the Tawa loan was also a consumer credit loan and could be challenged under consumer finance legislation.
The fact one of the borrowers was a Chen family trust did not make a business loan a personal loan.
Similarly, a term of the Tawa loan prohibiting GST registration by Ms Chen did not affect the status of the loan as a business loan. Some of the properties supposedly offered to Tawa as collateral security were owned by Ms Chen personally, or her family trust. Tawa was concerned about ‘loan to value’ ratios in its lending. It did not want to see Ms Chen or her family trust registering for GST as property developers. This would result in fifteen per cent of any later sale payable as GST, reducing Tawa’s recovery on sale.
Chen v. Goodmore Investments (NZ) Ltd & Chen v. Tawa Trade Finance Ltd – Court of Appeal (26.11.25)
26.025