BMW FINANCIAL SERVICES NZ LTD v COTTON [2021] NZHC 854

BMW FINANCIAL SERVICES NZ LTD v COTTON [2021] NZHC 854 [21 April 2021]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2020-404-002343[2021] NZHC 854BETWEEN BMW FINANCIAL SERVICES NEWZEALAND LIMITEDPlaintiffAND MARTIN NEWELL RAINE COTTONDefendantHearing: 21 April 2021Appearances: R Langdana for PlaintiffNo appearance for DefendantJudgment: 21 April 2021ORAL JUDGMENT OF VENNING JSolicitors: Paul Davies Law Limited, AucklandCounsel: J Long/R Langdana, AucklandCopy to: Defendant[1] The plaintiff, BMW Financial Services New Zealand Limited, seeks judgmentfor the recovery of a debt owed to it by the defendant, Martin Newell Raine Cotton.[2] The plaintiff commenced these proceedings and applied for summaryjudgment against Mr Cotton in December 2020. The claim is based on a guaranteeprovided by Mr Cotton.[3] Mr Cotton initially filed a notice of opposition to the plaintiff's application onthe day the matter was first called in the summary judgment list. The proceedingshave been subsequently called on two further occasions. At the last of those calls on23 March Gault J noted the file that while the plaintiff had sought judgment becauseMr Cotton had failed to file any affidavit to support his opposition the Judgeconsidered it appropriate to allocate a formal proof hearing. That formal proof hearinghas been convened and heard this morning.[4] At the outset of the hearing Mr Cotton was called. There is no appearance ofor for Mr Cotton.[5] The background can be stated shortly. It is a relatively straightforwardcommercial arrangement. The plaintiff carries on business throughout New Zealandas a financial services provider and lends money to, amongst other things, enablecustomers to purchase motor vehicles. At relevant times the defendant was a companydirector of a company MSLN Limited.[6] By a written agreement dated 27 May 2016 the plaintiff entered a loanagreement with Mr Cotton's company MSLN Limited. The loan agreement was partof a sale and purchase agreement where MSLN Limited had purchased a new Audi R8Coupe car. Relevantly for present purposes, Mr Cotton the defendant, guaranteed thepayment of all amounts MSLN Limited owed to the plaintiff under the loan agreement.Under the loan agreement the plaintiff advanced $354,645 to MSLN Limited for thepurposes of purchasing the vehicle. MSLN Limited granted a security, agreed to paymonthly instalments, and as noted, Mr Cotton the defendant guaranteed the due andpunctual payment of all the amounts owing by the company MSLN Limited. Theadvance was made on 27 May 2016.[7] MSLN Limited fell into default as at 27 July 2017 and remained in arrears.The defendant acknowledged the arrears and informed the plaintiff that he would sellthe vehicle and apply the proceeds to his debt.[8] On 27 February 2018 Mr Cotton sold the car to Continental Cars and appliedthe proceeds of $191,161.34 to reduce the loan balance. The plaintiff proposed arestructured repayment plan with payments to commence on 27 March 2018. Between27 March 2018 and 27 June 2018 Mr Cotton made the agreed monthly payments. On27 July 2018 however, he again defaulted and has remained in default ever since. Theplaintiff then brought this application for summary judgment.[9] As noted, the basis for the application is the loan agreement. A copy of theloan agreement has been annexed to the affidavit of Wayne Andrew Buchanan, ChiefFinancial Officer of the plaintiff. That loan agreement confirms MSLN Limited'sagreement to pay the moneys advanced under the loan agreement, acknowledged thatthe company had received a full and complete copy of the loan agreement and aschedule of its terms. Importantly for present purposes, the loan agreement alsoincluded a guarantee acknowledgement pursuant to which Mr Cotton as guarantoracknowledged receiving a full and complete copy of the loan agreement, the scheduleof terms, and confirming his agreement to be bound by the terms of the guarantee.[10] The loan agreement was executed by Mr Cotton as a director of MSLN Limitedand was also executed by Mr Cotton as a guarantor. His signature as guarantor waswitnessed by a business manager.[11] On the face of the documentation Mr Cotton is bound by the guarantee and isobliged to pay the shortfall owing to the plaintiff under the loan agreement.[12] In his notice of opposition Mr Cotton stated his grounds of opposition to be:Responsible Lender Issues,The responsible lending obligations involve: making reasonable inquiriesabout a consumer's financial situation, and their requirements and objectives,taking reasonable steps to verify a consumer's financial situation andResponsible lending is to act in a customer's best interests, ensuringaffordability, transparency of terms and conditions and supporting a borrowerif they experience repayment difficulties, I had difficulties including [losing]everything (Family, 23 years of Marriage, Home and Business) yet they stillseemed unwilling to help me. I have nothing left, I live in rentedaccommodation, of which I am under notice to vacate, I have 3 months to findalternate accommodation and I am on furlough with my employer.The respondent relies on Responsible Lender Guidelines as I never completedan application form for any of my loans they were arranged by ScottWendleburn at Continental Cars, how he was able to process the loanapplication was always as if by magic, I wish the loan applications [were]treated with more care and attention and I should have had to fill out and signthe application myself.I have still not been able to secure a legal defence of which I should be entitledas I cannot afford to pay for legal services, I am not sure what else I can do tobe able to defend the claims.[13] In relation to the matters raised by Mr Cotton in the notice of opposition anumber of points can be made. First, there is no evidence before the Court to supportthe matters he sets out by way of proposed defence. It was for that reason the matterwas adjourned on more than one occasion but Mr Cotton has failed to take theopportunity to provide any evidence.[14] Next, it appears that a number of the matters he refers to are matters whichhave occurred subsequent to MSLN Limited and him entering the loan agreement inthe first place. Further, to the extent he suggests he never completed an applicationform for any loans, as noted, the loan agreement was completed by him, both on behalfof MSLN Limited as a director and in his personal capacity.[15] The only issue of any potential legal interest is whether or not in fact there wereany responsible lender obligations under the Credit Contracts and Consumer FinanceAct 2003 (CCCFA) in any event, given the nature of the transaction as a business tobusiness loan. Mr Langdana submitted the answer to that lies in the definition sectionsin the CCCFA itself. First, relevant guarantee:1 a relevant guarantee for the purposesof the CCCFA is:1 Credit Contracts and Consumer Finance Act 2003, s 9B.a guarantee given, by a natural person in respect of a consumer creditcontract, .[16] Consumer credit contract is itself defined in s 11 as a contract where the debtoris a natural person, so that a relevant guarantee is a guarantee given by a natural personin respect of borrowing by another natural person. It does not apply to thecircumstances of a business to business loan or credit contract guaranteed by anotherperson, even if that other person is a natural person. The Act has no application to theborrowing in this case.[17] Finally, as a general observation it is stretching credibility somewhat for MrCotton to suggest that as a director of a company he would enter a loan agreement toborrow a substantial sum of money to purchase a high value motor vehicle withoutknowing what was involved, and as noted, the obligations under that borrowing weremet for a significant period of time before default.Result[18] For the above reasons I am satisfied that there is no arguable defence to theplaintiff's claim. The plaintiff is entitled to the judgment it seeks. There will bejudgment for the plaintiff in the sum of $145,543.58, which includes the principal sum,enforcement costs, and costs on a 2B basis.__________________________Venning J