BUDGET LOANS LIMITED v COMMERCE COMMISSION [2017] NZCA 539

BUDGET LOANS LIMITED v COMMERCE COMMISSION [2017] NZCA 539 [23 November 2017]NOTE: HIGH COURT ORDER PROHIBITING PUBLICATION OF NAMESOR IDENTIFYING PARTICULARS OF THE DEBTORS IDENTIFIED INTHAT JUDGMENT PURSUANT TO S 202 OF THE CRIMINALPROCEDURE ACT 2011 REMAINS IN FORCEIN THE COURT OF APPEAL OF NEW ZEALANDCA254/2017[2017] NZCA 539BETWEEN BUDGET LOANS LIMITEDApplicantAND COMMERCE COMMISSIONRespondentCA255/2017BETWEEN EVOLUTION FINANCE LIMITEDApplicantAND COMMERCE COMMISSIONRespondentHearing: 6 November 2017Court: Kós P, Courtney and Toogood JJCounsel: J E M Lethbridge for ApplicantsA M McClintock and K R Muirhead for RespondentJudgment: 23 November 2017 at 3.00 pmJUDGMENT OF THE COURTA The applications for extensions of time to file the applications for leave toappeal are granted.B The applications for leave to appeal are dismissed.____________________________________________________________________REASONS OF THE COURT(Given by Courtney J)Introduction[1] Budget Loans Ltd (Budget) and Evolution Finance Ltd (Evolution) wereconvicted in the District Court on 106 charges under s 13 of the Fair Trading Act 1986(FTA)1 and discharged on 19 others.2 They appealed their convictions and theCommerce Commission appealed the discharges. Edwards J dismissed the appealsagainst conviction and allowed the appeal against the discharges.3 Budget andEvolution now apply for leave to bring a second appeal.[2] The applications fall to be determined under s 237 of the Criminal ProcedureAct 2011 which precludes a second appeal unless the appeal involves a matter ofgeneral or public importance or a miscarriage of justice may have occurred or mayoccur unless the appeal is heard. Budget and Evolution say that their proposed appealraises four questions that are of general or public importance and assert that amiscarriage of justice has or will occur if they are not granted a second appeal.[3] The leave applications were filed very slightly out of time. TheCommerce Commission does not object to the request to extend time for filing theapplications. The applications for extensions of time to file the applications for leaveto appeal are granted.Background[4] Budget and Evolution are finance companies. They purchased loans booksfrom other finance companies that contained loans already in default or likely to fallinto default. Their methods of recovery led to an investigation by theCommerce Commission and the charges on which they were ultimately convicted.1 Commerce Commission v Budget Loans Ltd [2016] NZDC 8714.2 Commerce Commission v Budget Loans Ltd [2016] NZDC 9294.3 Budget Loans Ltd v Commerce Commission [2017] NZHC 695.[5] The charges against Budget and Evolution alleged that, in enforcing the loans,they made false or misleading representations. They were alleged to have representedthat they had the rights to:(a) repossess goods when they did not have that right;(b) repossess goods when a valid pre-possession notice had not beenissued;(c) repossess goods on the ground that the goods were "at risk" when thegoods did not meet that definition;(d) add costs to loans after repossession and sale of secured goods;(e) add interest to loans beyond the amount approved in an attachmentorder; and(f) require debtors to make loan payments at a higher rate than specified inan attachment order.[6] In addition, there were alleged representations made about the benefits todebtors in refinancing their loans.A matter of general or public importance?[7] The first proposed ground of appeal is that Edwards J erred in her interpretationof s 35 of the Credit (Repossession) Act 1997 (CRA) (now repealed) and itsapplication to loan contracts granting multiple security interests.[8] Many of the loan agreements contained clauses under which the loans weresecured by "all present and after acquired property". Budget and Evolution contendedthat such clauses permitted them to add interest and/or costs to loan balances after thefirst repossession. Edwards J considered the underlying purpose of s 35 was tocrystallise the debt at the date of sale of the repossessed property, so that interest andcosts did not continue to accrue on the outstanding balance.4 Differing from theDistrict Court Judge in relation to cases of multiple security interests, she interpreteds 35 as meaning that the debt crystallised after the first repossession and sale of asecured item. She rejected the other possible interpretations as incompatible with theunderlying purpose of s 35.5[9] Budget and Evolution wish to argue that Edwards J was wrong to conclude thatthere was no real ambiguity in s 35. They say that s 35 was ambiguous, with the resultthat the Commerce Commission could not prove beyond reasonable doubt that Budgetand Evolution had no right to additional interest or further costs following second andsubsequent repossessions. They point to Edwards J's initial comment that the plainmeaning of the text of s 35 gave "little in the way of clues as to the preferred meaning",the view taken by commentators that s 35 was ambiguous, and the fact that there isnow specific provision for multiple security interests in s 83ZM of the CreditContracts and Consumer Finance Act 2003 (CCCFA).[10] In our view this proposed ground of appeal does not raise any matter of generalor public importance. Edwards J undertook a thorough and orthodox interpretativeexercise to which there could not be any serious challenge. Further, since the CRAhas been repealed and s 83ZM of the CCCFA applies to all consumer loan agreementsentered into after 6 June 2015, the number of loans affected by s 35 is diminishing. Inthese circumstances the proposed ground of appeal cannot properly be describedraising a matter of general or public importance.[11] The second proposed ground of appeal is that the District Court and High Courtwere both wrong to find that Budget and Evolution were "in trade" at the relevanttime. Budget and Evolution had maintained that their enforcement of security afterjudgment did not fall within the meaning of "in trade".6 Ms Lethbridge, for Budgetand Evolution, acknowledged that the phrase "in trade" has a settled meaning butargued that it is, nevertheless, important to obtain clarification for the specific4 At [42].5 At [45].6 Fair Trading Act 1986, s 13.circumstances relevant to this case because that would be of wider importance to thelending and other industries.[12] We do not accept this argument. Determination of this issue simply requiredthe application of the settled meaning of "in trade" to the facts of the case and bothcourts below came to the same conclusion. As this Court in McAllister v R confirmed,the test for a second appeal is high.7 Leave will generally not be granted where theapplication raises issues calling for a factual assessment specific to the circumstancesof the case in question.8 But Ms Lethbridge asks us to assess the application of settledprinciples to the particular circumstances of this case. There is, therefore, no matterof general or public importance.[13] The third proposed ground of appeal is that many of the representations tookthe form of internal communications that were not proven to have been received bythe consumers. This argument does not justify a second appeal because the decisionin the District Court rested on the factual finding, accepted by Edwards J, that therepresentations were made to external repossession agents.[14] The fourth proposed ground is that the Judge should have applied the CRAlimitation period rather than that provided under the FTA. Ms Lethbridge submittedthat the lending and other industries rely on the certainty provided by such limitationperiods as raising an issue of general or public importance. Realistically, it is notarguable that the incorrect limitation period was applied. To the extent thatclarification might be needed, Edwards J's decision provides that.Miscarriage of justice?[15] Budget and Evolution say that, for two reasons, a miscarriage of justice hasoccurred or will occur unless they are granted leave for a second appeal. First, theyargue that the High Court decision could result in retrospective criminal liability beingimposed in a situation of clear statutory ambiguity. This proposed ground depends onthe argument regarding the interpretation of s 35 that we have already rejected.7 McAllister v R [2014] NZCA 175, [2014] 2 NZLR 764.8 At [36].[16] Secondly, Budget and Evolution say that there is a serious risk of a miscarriageof justice because the Commerce Commission has indicated its intention to seekmanagement banning orders, which would have significant consequences forindividuals associated with the companies. The fact that the convictions may haveconsequences for those associated with the companies cannot, in itself, amount to amiscarriage of justice in this case. A miscarriage of justice would only occur in thiscase if there was a realistic prospect of error in the High Court and we are satisfiedthat there is not.Result[17] The applications for extensions of time to file the applications for leave toappeal are granted.[18] The applications for leave to appeal are dismissed.Solicitors:Lowndes, Auckland for ApplicantsMeredith Connell, Auckland for Respondent