It was a commercial arrangement between friends, not a consumer credit contract requiring precise statutory loan disclosures the High Court ruled on enforcement of Sachindra Lal’s guarantee of a loan to builder Giri Tata, enabling completion of work on the Lals’ family home in Auckland.
The three-way financing arrangement was intended as a bridging loan, protecting Mr Lal’s credit rating at a time when he was seeking extra finance to complete construction of his home at the beachside suburb of Maraetai.
The High Court was told the Lals are currently living at the property. It does not currently have a building code compliance certificate. There is an ongoing dispute with Mr Tata’s building company about construction issues.
Evidence was given of Mr Lal needing bridging finance necessary to complete construction in early 2024. Negotiations with ANZ Bank for further funding had stalled.
A short agreement signed by all three parties acknowledged that Mr Tata was borrowing $100,000 from Anirudda Jajal, described as a friend of Mr Tata, with interest payable at $1087.50 per month. This agreement anticipated repayment within the month.
In fact, the loan was extended twice and then left unpaid, before Mr Jajal sued Mr Lal on his guarantee nine months after the funds were advanced to Mr Tata.
Mr Lal had signed the tri-partite agreement agreeing ‘the loan is on [him] eventually.’
It was intended repayment would come out of what was then anticipated further ANZ bank financing.
Refusing to pay on his guarantee, Mr Lal argued the Jajal/Tata loan he had guaranteed was a consumer contract, unenforceable because of failures to make mandatory disclosures required by the Credit Contracts and Consumer Finance Act.
Confirming an earlier District Court ruling, Justice Andrew said this was not a consumer credit contract.
Mr Jajal was not in the business of lending money.
Mr Tata was not acting as a ‘broker’ by facilitating arrangements for Mr Lal to finance further construction. He was not paid any fee.
Mr Tata did get an indirect benefit in that work for his building company could progress.
Even if it were a loan which required Credit Contracts and Consumer Finance Act disclosures, it is difficult to envisage what further disclosures might be required, Justice Andrews said.
Mr Lal guaranteed a simple, uncomplicated, loan arrangement.
He was provided with all the relevant information.
The money lent to Mr Tata was spent on construction of Mr Lal’s house.
There was no evidence that Mr Lal misunderstood what he was guaranteeing.
Lal v. Jajal – High Court (27.07.26)
26.207