MTF
22/10/2014 08:30
GENERAL
REL: 0830 HRS Motor Trade Finances Limited
GENERAL: MTF: Second High Court judgment released
The High Court has released a second judgment in the Sportzone case (the
Quantification Judgment), relating to various fees charged in 39 loan
contracts originated by Sportzone Motorcycles Limited between May 2005 and
July 2008.
This follows the 27 June 2014 High Court hearing, where the Court heard
arguments on the application and quantification of the original 27 September
2013 judgment (the Liability Judgment) in the civil proceeding brought by the
Commerce Commission against a shareholder in MTF, Sportzone Motorcycles
Limited (Sportzone, (now in liquidation)), MTF and MTF Securities Limited.
The original High Court hearing was held in November 2012.
In the Liability Judgment the High Court upheld the Commission's allegations
that certain fees charged were unreasonable in breach of the Credit Contracts
& Consumer Finance Act 2003 (the CCCFA). The Court rejected other
allegations of inadequate disclosure and breach of the Fair Trading Act 1986
(FTA).
The Quantification Judgment is the High Court's application of the 'close
relevance test' introduced in the Liability Judgment. That application is
intended to provide guidance on what costs can reasonably be recovered
through a credit or default fee, rather than through the interest rate
charged to the customer.
While the Quantification Judgment seeks to apply the 'close relevance test'
to types of costs, it does not precisely quantify the amounts by which the
relevant fees have been deemed to be unreasonable. Such precise
quantification would require further calculations to be made by the Commerce
Commission and MTF.
MTF remains disappointed with the original Liability Judgment, where some
fees were considered unreasonable, and considers that the High Court's narrow
basis for that finding does not recognise normal commercial practice,
although the Court did acknowledge that costs not recovered through fees can
be recovered through loan interest rates.
Both the Liability Judgment and the Quantification Judgment are subject to
appeal with a hearing set down for 19-20 November 2014. Consequently, MTF is
not in a position to quantify any ultimate liability in relation to the 39
Sportzone loans, or any other loans originated by MTF shareholders.
MTF considers that the approach taken by the High Court to determine whether
a fee is unreasonable is significant for the consumer lending industry
generally, and may remain significant in the development of the Responsible
Lending Code, currently being developed by the Ministry of Business,
Innovation and Employment, as part of the legislative amendments to the
CCCFA.
As the matter remains before the Courts, MTF will not be making any further
comment at this stage.
End CA:00256665 For:MTF Type:GENERAL Time:2014-10-22 08:30:12
