MAYES v SOUTHERN CROSS FINANCE LTD [2014] NZHC 1164

MAYES v SOUTHERN CROSS FINANCE LTD [2014] NZHC 1164 [29 May 2014]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV 2013-404-002797[2014] NZHC 1164UNDER the Credit Contracts Act 1981BETWEEN JOHN WILLIAM NEWTON MAYESPlaintiffAND SOUTHERN CROSS FINANCELIMITEDDefendantHearing: 6-8 May 2014Appearances: A J B Holmes and A J Steel for PlaintiffN R Campbell QC and K M Wight for DefendantJudgment: 29 May 2014 at 11am(RESERVED) JUDGMENT OF ANDREWS JThis judgment is delivered by me on 29 May 2014 at 11ampursuant to r 11.5 of the High Court Rules......................................................Registrar / Deputy RegistrarSolicitors:Sharp Legal, Wellington (Plaintiff)Duncan Cotterill, Auckland (Defendant)ContentsIntroduction .......................................................................................................... [1]Background ........................................................................................................... [3]Preliminary issue: which Act applies?The issue ............................................................................................................... [25]Relevant statutory provisions ............................................................................... [26]Submissions .......................................................................................................... [28]Did SCFL elect that the CCCFA was to apply to the loan agreement? ............... [30]Were the extensions and variations after 1 April 2005 "credit contracts"and thus subject to the CCCFA? .......................................................................... [33]Issues for determination .................................................................................... [36]Was there proper disclosure?Relevant statutory provisions ............................................................................... [37]Was there proper initial disclosure?..................................................................... [39]Was there proper modification disclosure? .......................................................... [49]Were the Mayes entitled to cancel the loan agreement? ................................. [53]Was the loan agreement validly cancelled?...................................................... [56]Are the Mayes entitled to receive the benefit of penalties for non-disclosure?Relevant statutory provisions ............................................................................... [69]Submissions .......................................................................................................... [73]What penalties are payable? ................................................................................ [80]Should SCFL be allowed relief against penalties? .............................................. [82]Should the loan agreement be re-opened?Relevant statutory provisions ............................................................................... [87]Submissions .......................................................................................................... [89]Was there oppression? .......................................................................................... [94]Result and directions........................................................................................ [106]Introduction[1] In this proceeding the plaintiff, Mr Mayes, claims that on 16 March 2012 he validly cancelled a credit contract (a term loan agreement) with the defendant,Southern Cross Finance Limited ("SCFL"), pursuant to s 22 of the Credit ContractsAct 1981 ("the CCA"). Mr Mayes seeks a declaration pursuant to s 23 of the CCA that he owes no money to SCFL, and he seeks orders that SCFL release its security and refund the cost of credit.[2] In the alternative, Mr Mayes claims to be entitled to the benefit of penalty orders against SCFL, pursuant to s 25 of the CCA. As a second alternative claim, Mr Mayes contends that SCFL exercised its right under the credit contract in an oppressive manner. SCFL counterclaims for orders pursuant to s 32 of the CCA, either that it is entitled to recover all fees, interest and costs under the credit contract, or that any penalties imposed are reduced or extinguished.Background[3] Mr Mayes' mother owned a unit at 2/1 Waitara Road, Glendowie. As at February 2001 it was encumbered by a mortgage to ASB Bank, and a second mortgage to Lock Buie Estates Ltd. The second mortgage secured a principal sum of $40,000, borrowed by Mrs Mayes in October 2000 during a difficult separation from her husband.[4] In February 2001, Mr Mayes and his mother ("the Mayes") decided to refinance the Lock Buie loan and to consolidate debt. Through a broker CynotechSecurities Ltd ("Cynotech"), they sought finance from SCFL. On 26 February 2001, SCFL sent them a loan offer letter setting out the terms on which SCFL was preparedto make a loan. The letter recorded the purpose of the loan as being "to assist withrefinance/debt consolidation". The terms set out in the letter included:(a) Advance: $60,000, including capitalised fees and interest.(b) Term: 12 months from the date of advance.(c) Interest: Ordinary interest at 13 per cent per annum, penalty interest at 9 per cent per annum above the ordinary rate.(d) The sum of $7,800 would be retained by SCFL for "interest payments for the full 12 months", the first interest payment to be made inadvance.(e) SCFL would charge a funding reservation fee of $1,500. $500 of this fee was to be paid to SCFL on acceptance of the loan offer, and the remaining $1,000 was to be deducted from the advance at draw down.(f) A broker's fee was to be paid to Cynotech, to be deducted from theadvance at draw down.(g) A fee of $250 would be charged on any late or dishonoured interest payments.(h) The borrowers were to be responsible for all expenses incurred by SCFL for legal fees and registration costs relating to the secondmortgage, and were to make an advance payment of $250 to SCFL'ssolicitors, to be held for legal fees.[5] Mr Mayes and his mother signed the offer letter and returned it to SCFL on 27 February 2001. They included two cheques: one for $500, made out to SCFL,and one for $250 made out to SCFL's solicitors. SCFL recorded receipt of both payments on 5 March 2001, on its copy of the offer letter and in its ledger.[6] On 6 April 2001, the Mayes entered into a term loan agreement with SCFL("the loan agreement"). The terms of the loan agreement included:(a) Advance: Under clause 2.1, SCFL agreed to advance $60,000 "on theterms and subject to the conditions of this agreement".(b) Purpose of loan: Clause 2.2 of the loan agreement provided that:The Loan shall only be used by the Borrower to assist with refinancing, debt consolidation, and any such other purpose previously notified in writing to, and accepted in writing by, the Lender. The Borrower shall not utilise the Loan for any other purpose without obtaining the prior written consent of the Lender.(c) Interest: Clauses 4.1 and 4.2 provided that interest was to be paid for each interest period of one month, in arrears, calculated on the basis of days elapsed, and was to be capitalised if not paid on the due date. The interest rate was defined in clause 1.1 as 13 per cent per annum,but that could be changed by SCFL on giving one month's notice in writing. Pursuant to clause 4.3, the default interest rate was 9 per cent above the ordinary interest rate, and could also be changed on onemonth's written notice.(d) Interest retention: Clause 2.4 provided that $7,800 was to be retained by SCFL for interest for the term of the loan.(e) Late payment fee: Clause 4.4 provided that SCFL could charge $250 in respect of late or missed payments.(f) Costs and expenses: Pursuant to clauses 18.1–18.4, the Mayes wereto pay SCFL's costs and expenses relating to negotiation and execution of the loan agreement, amendment, discharge or release of the loan agreement and security documents, and the preservation,enforcement, or attempted or intended enforcement of SCFL's rightsor remedies under the loan agreement or security documents.(g) Clause 18.18 provided that the loan agreement contained all terms of the advance and superseded all prior discussions and arrangements. Pursuant to clause 18.14, the loan agreement could not be varied other than in writing and signed by both SCFL and the Mayes.[7] The loan agreement was a controlled credit contract under the CCA. On 6 April 2001, SCFL provided the Mayes with an initial disclosure document. The document set out the amount advanced, the interest rate, and "monthly interestpayments" of $650. The document set out the finance rate as being 17.19 per cent.It is contended on behalf of Mr Mayes that the initial disclosure document contained errors.[8] The loan was drawn down on 3 May 2001. A financial statement fromSCFL's solicitors shows that the amount paid to Mr Mayes and his mother was$48,756.25, made up as follows:Loan advance $60,000.00Plus received on account fordisbursements$250.00Less interest retained -$7,800.00Less balance of funding reservation fee -$1,000.00Less Cynotech brokerage fee -$1,500.00Less legal fees, disbursements, andretained for disbursements-$1193.75Balance $48,756.25[9] Mrs Mayes' solicitors arranged for repayment of the Lock Buie loan and discharge of the second mortgage, and the registration of a new second mortgage in favour of SCFL. The net amount available to the Mayes was in the order of $8,000.[10] The Mayes did not repay the loan on 3 May 2002. On 31 July 2002 SCFL agreed to extend the loan agreement until 3 May 2003. A disclosure letter was sent to Mr Mayes as his new address at 54 Washington Avenue, Glendowie (the initialdisclosure having been sent to Mrs Mayes' Waitara Road address). The disclosuredocument recorded the extension of the loan, the interest rate, and a renewal fee of$1,500. The disclosure document also recorded that "the disclosures below do not form part of the Term Loan and Mortgage."[11] The loan agreement was subsequently extended on ten further occasions, up to 3 June 2012. On two occasions when the loan agreement was extended, there were "top ups" of the loan: a further $15,000 was advanced in March 2006, and afurther $6,000 was advanced in December 2006. The extensions, with or without top ups, will be referred to as "the extensions". SCFL charged a fee for each extension,variously referred to as an "extension fee", "renewal fee", "top up fee", "loan term extension fee", or a combination of these. The amounts charged as fees also varied.[12] No new loan agreement was ever entered into. SCFL sent Mr Mayes a letter on each occasion of extension or increase, by way of modification disclosure. Mr Mayes made interest payments intermittently after the end of the initial 12 month term, until 2012.[13] During this period Mr Mayes was at times seriously ill. He had contracted hepatitis in the 1980s, and by 2002 it had caused serious liver damage. By 2004 Mr Mayes was assessed as needing a liver transplant. On 28 May 2005, SCFL wrote to Mr Mayes. Mr Mayes was at the time in hospital awaiting his liver transplant. Asat the date of SCFL's letter, the loan balance was $66,058.79. Mr Mayes had last made an interest payment in February 2005. In the letter, SCFL noted that the loanwas "3 months in arrears" (the previous extension having ended on 3 February 2005) and set out a proposal to extend the loan agreement until May 2006, conditional on a satisfactory valuation of the Waitara Street property. The proposal was for interestpayments and fees to be capitalised which would, it was said, "take the pressure off you to concentrate on your health and your deliberations re your mother's future, not to mention finalising the outcome of your court case."1[14] Mr Mayes signed a copy of SCFL's letter and his partner faxed it back toSCFL. As to signing the letter, Mr Mayes said:I had been told that I only had 2 days left to live because my liver was failing. Southern Cross decided itself to capitalise interest. I had never requested this. I had asked for a 3 month holiday. I was dying and was not able to think clearly so I just signed the documents.[15] On 29 June 2005, SCFL debited the loan account with the valuation charge($506.25), a "loan term extension fee" of $2,500, "default fees charged on renewal"of $2,225, and $13,720 (capitalised future interest). $2,698.52 was then credited to the account. The loan balance was thus increased to $83,057.47.1 Mr Mayes' mother is elderly (she is now in residential care), and Mr Mayes was at the timeinvolved in litigation with Telecom New Zealand.[16] On 18 October 2011, Mr Mayes hand-delivered a letter to SCFL setting out his concerns in relation to the manner in which the loan was being administered. SCFL's response, emailed the same day, was that Mr Mayes could make a complaint to Financial Services Complaints Ltd ("FSC"), SCFL's approved dispute resolutionprovider under the Financial Service Providers (Registration and Dispute Resolution) Act 2008. On 23 May 2012, Mr Mayes lodged a complaint, but on 4 July 2012 FSC advised him it could not investigate it as it related to events occurring before 1 April 2010. SCFL charged the fee charged by FSC ($1325) ("the FSC fee") to the Mayes'loan account.[17] In a letter dated 16 March 2012, Mr Mayes cancelled the loan agreement onthe ground of SCFL's failure to give proper initial disclosure. He said that that he had ceased further loan repayments because of the cancellation and the fact that SCFL had received repayments that exceeded the amount actually advanced.[18] On 15 October 2012, SCFL served Property Law Act notices on Mrs Mayes. On 17 October 2012 Mrs Mayes (by her attorney) confirmed that she, too, had cancelled the loan agreement. On the same day Mr Mayes lodged a caveat against the title to the Waitara Street property.[19] SCFL pursued a mortgagee sale. In a letter dated 5 December 2012, its solicitors disputed the cancellation, asserting that there was no failure in the initial disclosure. The solicitors had by then found SCFL's handwritten note on the offerletter, recording the Mayes' payment of $500 on 3 May 2001, SCFL havingpreviously denied that the payment had been made. Without admission, SCFL provided an amended disclosure document and offered compensation of $500.[20] The Waitara Street property was sold by mortgagee tender on 14 December 2012. Mr Mayes was therefore obliged to apply for an order that the caveat not lapse ("the caveat proceeding"). An order that the caveat not lapse was made in the High Court at Auckland on 6 May 2013.2 The order was conditional on Mr Mayes filing and serving, and diligently prosecuting, this proceeding.2 Mayes v Southern Cross Finance Ltd [2013] NZHC 972.[21] Costs were ordered to be paid to Mr Mayes by SCFL ("the Court-orderedcosts"). These costs (totalling $9,352.30) were paid to Mr Mayes, but SCFL then charged that sum to the Mayes' loan account. SCFL also charged the loan account with legal fees recorded as being "re: application to sustain caveat". It was submitted for Mr Mayes that these fees totalled more than $105,000.[22] As at 22 February 2014, the loan balance was $386,958.57.[23] SCFL now accepts that it should not have charged the loan account with the FSC fees, or the Court-ordered costs in the caveat proceeding. In his closing submissions for SCFL, Mr Campbell advised that those debits (with compound interest) had been reversed on 7 May 2014.[24] Finally, it is relevant to record that on 6 July 2010 SCFL and the CommerceCommission executed a Deed of Settlement ("the Commerce Commission settlement") relating to "establishment fees" (fees charged in relation to applicationsfor consumer credit, processing and documenting such applications, and advancing credit, and including fees charged on extensions or renewals of consumer loans) charged by SCFL after the CCCFA came into effect. Pursuant to the agreement SCFL agreed to make refunds to debtors who entered into consumer credit contracts after 1 July 2006 and who were charged unreasonable establishment fees. At the time of the Commerce Commission settlement, SCFL took the view that the Mayes'loan was not a consumer loan.Preliminary issue: which Act applies?The issue[25] A preliminary issue to be determined in this case is whether the loan agreement and its extensions and variations continued to be governed by the CCA, notwithstanding the repeal of that Act by the Credit Contracts and Consumer FinanceAct 2003 ("the CCCFA").Relevant statutory provisions[26] At the time the loan agreement was entered into, the CCA was in force. The relevant provisions of that Act were repealed as from 1 April 2005 by ss 2(3) and 140(a) of the CCCFA. Pursuant to ss 2(3) and 141 of the CCCFA, the CCCFA applies to credit contracts made after 1 April 2005.[27] Section 142 of the CCCFA provides that a creditor under a credit contract made before 1 April 2005 may elect that the CCCFA applies to the credit contract as from a particular date, defined as "the effective date" ("the election"). Section142(4) sets out requirements for giving notice of the election to the debtor. Section 142(4)(b) provides that if the creditor makes an election it must, within five working days of the day that the election is made, notify the debtor that the election has been made, and that the CCCFA applies as from the effective date. Section 143 of the CCCFA provides that if the CCCFA does not apply to a credit contract made before 1 April 2005, the CCA continues to apply.Submissions[28] For Mr Mayes, Mr Holmes submitted that there is no evidence of SCFL having made the election, or of the Mayes having been notified. For that reason, he submitted, the Court cannot find that there was an election, the CCCFA does not apply to the loan agreement, and the CCA continues to apply. In reply to asubmission made in Mr Campbell's closing submissions for SCFL, Mr Holmessubmitted that the extensions and variations granted after 1 April 2005 were not new credit contracts, so are not governed by the CCCFA.[29] Mr Campbell submitted for SCFL that an election had been made. He submitted that while SCFL accepted that it had not given the Mayes notice as required by s 142(4) of the CCCFA, that did not invalidate the election. He further submitted that each of the extensions and variations to the loan agreement after 1April 2005 was a "credit contract" as defined in ss 6 and 7 of the CCCFA, so are subject to that Act.Did SCFL elect that the CCCFA was to apply to the loan agreement?[30] Although Mr Butler, a director of SCFL, asserted in his evidence that theelection had been made "in April 2005", he did not produce any contemporaneous document recording the election, and he could not say what the effective date of the election was. Further, as SCFL accepted, the Mayes were not notified of the election, as required by s 142(4) of the CCCFA. In the absence of any contemporaneous confirmation of an election, and the effective date of any such election, I find that SCFL did not make the election.[31] Further, I reject Mr Campbell's submission that the failure to notify theMayes of an election, and its effective date, would not invalidate an election. It can be accepted that an election is a prerequisite to the requirement to notify the debtor, rather than the other way around. That said, however, the provision of a period of five working days within which the creditor must notify the debtor is clearly an integral part of the election, such that if notice is not given to a debtor in accordance with s 142(4), the election will not be valid as regards that debtor. Such aninterpretation is consistent with the CCCFA's purpose (as set out in s 3(a) of theCCCFA) to "protect the interests of consumers in connection with credit contracts".[32] Accordingly, I find that SCFL did not elect that the CCCFA would apply to the loan agreement.Were the extensions and variations after 1 April 2005 "credit contracts" and thus subject to the CCCFA?[33] Section 6(a) of the CCCFA provides that "credit" is provided under a contract if a person is given a right to (among other things) "defer payment of a debt". Section 7(1) of the CCCFA provides that in the CCCFA, "unless the context otherwise requires, credit contract means a contract under which credit is or may begiven".[34] In this case, when the loan agreement was extended or varied, SCFL's letterto Mr Mayes recording the extension or variation stated that the terms and conditionsof the "existing loan documentation" continued to apply. In the circumstances, asthe terms and conditions of the loan agreement continued to apply, the extensionsand variations cannot be "new" credit contracts.[35] Accordingly, I conclude that the CCA continues to apply to the loan agreement and its extensions and variations after 1 April 2005. I record, however, that SCFL now accepts that if the CCCFA applies, any new credit contracts after 1 April 2005 were "consumer credit contracts" as defined in s 11 of the CCCFA.Under the CCCFA, the parties' rights and obligations in respect of consumercontracts are similar to those set out in the CCA for controlled credit contracts. On the basis of that acceptance, SCFL has decided to refund to the Mayes the difference between the fees charged to the loan account for extensions and variations after 1 April 2005, and the fees recorded as being reasonable in the Commerce Commission settlement, together with compound interest on that sum. Further, I record that, if it were necessary, I would have given Mr Mayes leave to further amend his amended statement of claim, so as to include the claim under the CCCFA.Issues for determination[36] The remaining issues for determination may be summarised as follows:(a) Did SCFL make proper:(i) initial disclosure; and(ii) modification disclosure at each extension and variation?(b) Were the Mayes entitled to cancel the loan agreement?(c) Was the loan agreement effectively cancelled, and if so:(i) Are the Mayes entitled to any relief?(ii) Is SCFL entitled to any relief?(d) Are the Mayes entitled to the benefit of penalties under ss 25 and 26of the CCA for SCFL's failures to make initial disclosure andmodification disclosure, and if so, is SCFL entitled to relief?(e) Are the loan agreement and its extensions and variations oppressive, and has SCFL acted oppressively in seeking to exercise its rights under the loan agreement?(i) If so, should the loan agreement be re-opened under s 10 of the CCA, and if so,(ii) On what terms and conditions should an order for re-opening be made?Was there proper disclosure?Relevant statutory provisions[37] Pursuant to s 16 of the CCA, SCFL was required to make "initial disclosure"within 15 days after the day the loan agreement was entered into. Initial disclosure had to comply with s 21 of the CCA, and to contain all the information, statements, and other matters specified in the Second Schedule to the CCA. The information, statements, and other matters specified in the Second Schedule included the amount of credit (that is, the principal advanced), the total cost of credit (interest and other charges), the finance rate (defined in s 6 of the CCA) and the payments required.[38] Pursuant to s 17 of the CCA, SCFL was also required to make "modificationdisclosure" within 15 days after a modification contract (defined in s 2 of the CCA as a contract that modifies a controlled credit contract) was entered into. Section 21 of the CCA and the Second Schedule also applied to modification disclosure.Was there proper initial disclosure?[39] Mr Holmes submitted that SCFL's initial disclosure document failed to give proper initial disclosure, for these reasons:(a) The finance rate stated (17.19 per cent) was inaccurate and understated, in that the correct finance rate was 18.34 per cent.(b) The interest payable as stated in the initial disclosure ($7,800) did not comply with the interest provisions in the loan agreement.(c) The initial disclosure did not include the fee of $1,500 paid to Cynotech. Mr Holmes submitted that if the Cynotech fee had been included as part of the cost of credit, the correct finance rate would have been significantly higher.[40] At trial, SCFL's witnesses (Ms Millward and Mr Butler) accepted that thestated finance rate was wrong, as it had not taken into account the Mayes' paymentof $500 on 3 May 2001. It had, instead, calculated the finance rate on the basis that the whole funding reservation fee of $1,500 was being paid out of the advance. Thishad not been accepted in SCFL's pleadings, although a "without prejudice" offer of$500 compensation had been made to the Mayes in December 2012.[41] Mr Holmes' submission that the interest payable was incorrectly stated wasfounded on the evidence of Mr Mark Weaver, an actuary. It will be recalled that $7,800 was retained by SCFL at the time of the initial advance, and applied to interest for the first 12 months. The loan agreement provided that interest on the loan for each "interest period" (one month) was to accrue and be "calculated on the basis of days elapsed and be capitalised if not paid on the due date", at 13 per cent per annum.[42] Mr Weaver provided a calculation which showed that had interest been accrued on a monthly basis, in arrears, then capitalised, the total interest accrued would have been $7,152.59. Mr Weaver's evidence was that $7,800 represented theinterest payable over the 12 month period, calculated in advance, as if the full year'sinterest was payable on day one of the loan, rather than accruing monthly in arrears.[43] Mr Weaver was not cross-examined. Mr Campbell submitted that it was plain that Mr Mayes understood the terms of the loan, and had accepted that $7,800 was the interest payable.[44] I accept Mr Holmes' submission that the initial disclosure inaccurately statedthe interest payable, as the stated interest did not comply with the provisions of the loan agreement. Put simply, $7,800 was not the amount of interest payable for 12 months, calculated in accordance with the loan agreement. The fact that Mr Mayes"accepted" that $7,800 was the interest payable does not assist SCFL. As Mr Mayes said in his evidence, he simply accepted that interest had to be paid.[45] Regarding the Cynotech fee, Mr Holmes submitted that it was a condition of the offer letter that the "broking fee to [Cynotech was] to be deducted at drawdown", and that the fee was deducted at draw down. As such, he submitted, the feeproperly formed part of the cost of credit.3 Mr Campbell submitted that Mr Mayes had not pleaded that the initial disclosure was defective in failing to include the Cynotech fee, and that Mr Weaver had not referred to it in his evidence. For that reason, he submitted, the Cynotech fee cannot be taken into account.[46] I find that the initial disclosure was inaccurate in that it inaccurately stated the finance rate, and inaccurately stated the interest payable under the loan agreement. In the light of that conclusion, and the fact that there was no pleading regarding the Cynotech fee, I do not go on to consider whether the initial disclosure was also inaccurate in not including the Cynotech fee as part of the cost of credit.[47] The effect of finding that the initial disclosure was inaccurate in respect of the finance rate and the interest rate is that I am satisfied that the initial disclosure did not contain "all of the information specified in the Second Schedule". Thefinance rate and interest rate were each particulars that were material to the contract. I am satisfied that the initial disclosure did not comply with s 21(1)(c) of the CCA, which required that it was "not likely to deceive a reasonable person with regard to any particular that is material to the contract". The Mayes' position is to becontrasted with that of the borrower in Anderson v Burbery Finance Ltd, who was3 Citing Elia v Commercial & Mortgage Nominees (1988) 2 NZBLC 103,296 (HC) in support.described by the Court of Appeal as an "experienced borrower" who had "dealt with the respondent as a financier on equal terms".4[48] As the initial disclosure did not comply with s 21 of the CCA, there was no initial disclosure.5Was there proper modification disclosure?[49] Mr Holmes submitted that the modification disclosure made when the loan agreement was extended in 2002 and 2003 was inaccurate as to the actual amount owing to SCFL as at the date disclosure was made, as a result of the incorrect charging of interest in the first 12 month period. Thereafter, he submitted, there were errors in all of the disclosure documents provided to the Mayes when the loan agreement was extended, in that none set out the finance rate or disclosed the total cost of credit, the documents disclosed inaccurate initial unpaid balances, stated that fees were not included when they were included and, on two occasions, were not sent to Mr Mayes at his known address.[50] Mr Holmes submitted that the repeated errors were systemic, not one-off typographical errors and demonstrated a failure to comply with the CCA. He submitted that SCFL had inadequate procedures in place.[51] Mr Campbell submitted that in his amended statement of claim, Mr Mayes relied only on a failure to make initial disclosure as being grounds to cancel the contract. Accordingly, he did not address disclosure after the initial disclosure.[52] I am satisfied that there were errors in each of SCFL's modificationdisclosure documents. Accordingly, I conclude that SCFL's modification disclosure did not comply with s 17 of the CCA and that SCFL therefore failed to make modification disclosure. I take Mr Campbell's point that only a failure to make proper initial disclosure was relied on by Mr Mayes in his letter of cancellation. Accordingly, the admitted errors in modification disclosure will not be considered in4 Anderson v Burbery Finance Ltd [1988] 2 NZLR 196 (CA) at 199.5 Credit Contracts Act 1981, s 20.the context of whether the Mayes were entitled to cancel the loan agreement. Those errors are, however, relevant to the issue of penalty, which is addressed later.Were the Mayes entitled to cancel the loan agreement?[53] Pursuant to s 22(1) of the CCA, a debtor under a controlled credit contractmay cancel the contract, "at any time", if disclosure has not been made. Mr Holmessubmitted that the Mayes were entitled to cancel the loan agreement, and all subsequent extensions and variations, under s 22 of the CCA.[54] SCFL did not dispute that, if there were no proper initial disclosure, the Mayes were entitled to cancel the loan agreement. However, Mr Campbell went on to submit that the extensions after 1 April 2005 could not be cancelled under s 22 of the CCA, as they were not governed by that Act.[55] I have rejected Mr Campbell's submission that the CCCFA, rather than theCCA, applied to the extensions after 1 April 2005. I have found that the CCA continued to apply. Accordingly, I find that the Mayes were entitled to cancel the loan agreement, and its subsequent extensions, under s 22 of the CCA.Was the loan agreement validly cancelled?[56] It was not disputed that both Mr Mayes and his mother (by her attorney) gave written notice of cancellation of the loan agreement. Nor was it disputed that a failure to give proper initial disclosure entitles the debtor to cancel a controlled creditcontract. The parties' dispute was as to whether the Mayes had complied with the requirement in s 22(1) of the CCA, to "return any credit received".[57] Mr Holmes submitted that as the Mayes had, by the time of cancellation, paid SCFL more than they had received as credit, the fact that they did not make a separate payment to "return credit" was not fatal to the validity of their cancellation.He submitted that while s 22(1) of the CCA requires a debtor to "return any credit"in order to cancel, s 23(1)(c) provides that upon cancellation, the debtor is not liableto pay "any part of the cost of credit", and the creditor "shall repay any part thereofalready received by him". The creditor may only receive interest or any other part ofthe cost of credit if the Court grants it relief in that form.[58] Accordingly, Mr Holmes submitted, given the debtor's obligation to return the credit and the creditor's obligation to repay the cost of credit, the Mayes wereentitled to apply earlier payments of interest and fees to the obligation to return the credit. Such an interpretation of s 22(1) was, he submitted, consistent with the purpose of the CCA. He submitted that the Mayes had more than complied with the obligation to return credit.[59] Mr Campbell submitted that the CCA requires, first, the debtor to return the credit advanced. Then, once there is a valid cancellation of the credit contract, the creditor becomes liable to repay the cost of credit. He submitted that the CCAclearly sets out the process, and makes a clear distinction between "credit" and "cost of credit". The creditor's obligation to repay the cost of credit does not arise untilthere is a valid cancellation. Then, the creditor's obligation to repay the cost ofcredit is subject to the possibility of relief under ss 31 and 32 of the CCA.[60] Mr Campbell submitted that a creditor cannot "return credit" by characterising prior "cost of credit" payments as "credit". That is because the debtor's right to have "cost of credit" repaid is not guaranteed; it is subject to anapplication for relief under ss 31 and 32 of the CCA. Accordingly, he submitted, a debtor cannot shortcut the process by, in effect, setting off his obligation to returncredit against the creditor's obligation to repay the cost of credit.[61] Both counsel referred me to the judgment of the Court of Appeal in Hobbs v Ratcliffe.6 In that case, Mr Hobbs and Mr Ratcliffe agreed to purchase each other'sfarms. The price for each farm was $210,000 plus GST, payable on settlement.Settlement of the sale of Mr Hobbs' property was completed in June 1992, and MrRatcliffe took possession of it. The agreement for sale and purchase of MrRatcliffe's property provided that settlement was to be completed on 1 June 1995,but that Mr Hobbs could take possession in June 1992. The agreement further provided that Mr Hobbs was to pay interest on the purchase price until settlement.6 Hobbs v Ratcliffe (1996) 3 NZ ConvC 192,291 (CA).Mr Ratcliffe also advanced Mr Hobbs a further $10,000 on the same terms as to interest.[62] The solicitor acting (for both parties) did not recognise that the extended sale and purchase agreement was a controlled credit contract under the CCA. Accordingly, initial disclosure was not given to Mr Hobbs. Mr Hobbs made two interest payments, but then defaulted. In June 1994, Mr Hobbs purported to cancel the credit provisions of the agreement, under s 22(2) of the CCA, and offered to paythe "cash price", but claimed that deductions had to be made for the interestpayments made, and to allow for a penalty of $48,400 pursuant to s 25(1)(a) of the CCA for failure to make initial disclosure.[63] The Court of Appeal held that Mr Hobbs had not validly cancelled the agreement. In so holding, the Court rejected a submission from Mr Hobbs that, inoffering to pay the "cash price", he was entitled to deduct interest he had paid, andthe effect of a penalty under s 25 of the CCA. It held that deducting those amountsmeant that the offered payment was not of the cash price "at the time the contract was made". The Court also noted that any penalty payable was subject to ss 31 and 32 of the CCA.7[64] Mr Holmes submitted that Hobbs v Ratcliffe was distinguishable, as it wasconcerned with a "cash price". He also submitted that it was only in respect of the deduction of potential penalties that the Court of Appeal referred to ss 31 and 32 of the CCA. He submitted that payments actually made to the creditor (by way of cost of credit payments) could be applied to form part of the "return of credit", and in thiscase, the Mayes had actually paid more than the credit advanced.[65] I accept that Hobbs v Ratcliffe is concerned with cancellation under s 22(2) of the CCA, rather than s 22(1). However, I am satisfied that it is applicable to cancellation under s 22(1). Under both subsections, return of the credit advanced is an essential prerequisite to an exercise of the power of cancellation. It is a "statutorypre-condition".8 I see no reason why the approach taken by the Court of Appeal, that7 At 192,305.8 See R G Webb v Steel and Tube Holdings Ltd HC Hamilton A115/99, 17 November 1999.what must be returned is the credit (cash price) at the time the contract was made, should not also apply to the return of credit (principal advanced) under s 22(1).[66] Just as Mr Hobbs was required to return the cash price at the time the contract was made, without reference to interest payments made, or potentially to be credited by way of penalties, so, too, were the Mayes required to return the principal advanced when the loan agreement was entered into, without reference to payments he had made subsequently. Such an interpretation is necessary to achieve internal consistency in s 22 of the CCA, and is not inconsistent with the purpose of the CCA.[67] Further, I do not accept the submission that Mr Mayes could (in effect) set offhis obligation to return credit against the creditor's obligation to repay him the costof credit. This is because the obligation to return credit is a statutory pre-condition to a valid cancellation, and the creditor's obligation to repay the cost of credit only arises once there is a valid cancellation. Furthermore, the creditor's obligation to repay the cost of credit is subject to the creditor's right to seek relief under ss 31 and 32 of the CCA. As such, as Mr Campbell submitted, the Mayes did not have a guaranteed entitlement to be repaid all of the cost of credit paid.[68] Accordingly, I find that the Mayes did not validly cancel the loan agreement. Their first cause of action must, therefore, fail. In the light of that conclusion, I am not required to consider whether, as a result of cancellation, the Mayes or SCFL are entitled to any relief. I therefore turn to the next issue, concerning penalties.Are the Mayes entitled to receive the benefit of penalties for non-disclosure?Relevant statutory provisions[69] Section 25(1)(a) of the CCA provides that if a creditor fails to make initialdisclosure, the debtor's liability under the credit contract to pay an amount equal tothe "specified amount" is extinguished, and every provision in the contract to the contrary is of no effect. Section 25(2) provides that the "specified amount" is thelesser of:(a) An amount equal to three times the part of the total cost of credit that relates to the period from the day the contract is made until the earlier of the day on which the initial disclosure is made, and the day that the contract is made, and(b) The total cost of credit payable under the contract.[70] Section 26 provides for a similar penalty in respect of each modification contract, if the creditor fails to make modification disclosure.[71] Both ss 25 and 26 of the CCA are expressly subject to ss 31 to 33 of the CCA, under which a creditor may seek relief. In this case, SCFL does not seek relief under s 31, but seeks relief under s 32, pursuant to which a court may order that any of ss 24 to 28 of the CCA shall not apply in respect of a credit contract or a modification contract, or that an amount by which liability has been extinguished under ss 24 ro 26 may be reduced to an amount specified by the court.[72] When deciding whether to make an order under s 32(1) the Court: shall have regard to the following matters:(a) whether the creditor is a financier:(b) the extent of, and the reasons for, the non-disclosure:(c) the extent to which a debtor has been prejudiced by the non- disclosure:(d) such other matters as the Court thinks fit.Submissions[73] Mr Holmes submitted that SCFL failed to make initial disclosure, by failing to disclose the correct finance rate. He submitted that the appropriate penalty for the failure to make initial disclosure is the total cost of credit.[74] As to the modifications of the loan agreement, he submitted that, first, each modification contract must have the effect of ending the previous modification contract, and, secondly, not every contractual variation was a "modification contract"for the purpose of the CCA. He did not seek a penalty in respect of the modification disclosure provided by SCFL in relation to the 2002 and 2003 modification contracts. However, he submitted that there was no modification disclosure given inrelation to the modification of 28 May 2005, which extended the loan to 3 May 2006. In respect of that modification, he sought a penalty of the total cost of credit for that modification contract.[75] In respect of the modifications from March 2006 onwards, he submitted that SCFL had failed to make proper modification disclosure under the CCA, but had purported to make disclosure under the CCCFA. He submitted that all disclosure documents from March 2006 onwards contained errors such as inaccurately stating the initial unpaid balance, and stating that fees were not included in that sum when they were. He submitted that the repeated errors were systemic, showing a failure of compliance and the fact that SCFL had inadequate procedures in place.[76] Mr Holmes also submitted that relief should not be granted under s 32 because SCFL was a financier (financiers being held to a higher standard), non- disclosure had occurred as a result of SCFL's failure to develop, maintain andmonitor adequate systems to ensure compliance with the CCA (and the CCCFA), the Mayes never had the opportunity to compare the cost of their borrowing as they never received an accurate finance rate, and subsequent disclosure was misleading or at least confusing.[77] Mr Holmes further submitted that SCFL levied charges on the Mayes'account before those charges had been disclosed to them, and had sent notices and disclosure documents to an address where they knew Mr Mayes was not living. He also submitted that SCFL had failed to send either notification or disclosure in respect of fees charges and interest capitalised in 2005, when Mr Mayes was in hospital. In all the circumstances, he submitted, relief should not be granted.[78] Mr Campbell submitted that the error in stating the finance rate in SCFL'sinitial disclosure was minor, was the result of inadvertence, and had not caused the Mayes to be misled by the error. He submitted that the Mayes understood the terms of the agreement, and had not been prejudiced by the error. Mr Campbell submitted that Mr Mayes had not given evidence that if the correct finance rate had been disclosed, he would have reconsidered. Accordingly, Mr Campbell sought full relief under s 32 in respect of the failure to make initial disclosure, and sought an orderthat s 25 not apply, such that there would be no penalty under s 25. He further submitted that such relief is appropriate as the Mayes would otherwise have had the benefit of the money advanced for 11 years without paying any interest.[79] With respect to the modification disclosure, Mr Campbell submitted that the CCCFA applied. He submitted that there was no basis for a finding that any of the contracts were modification contracts, or that modification disclosure of the finance rate was required.What penalties are payable?[80] I have found, at [48] and [52], above, that SCFL failed to make both initial disclosure and modification disclosure. Mr Holmes did not seek a penalty in respect of the modification disclosure given on 31 July 2002 and 28 November 2003. However, in respect of the failure to make initial disclosure, and the failures to make modification disclosure subsequently (that is, the loan modification on 28 May 2005, the extensions and top up on 6 March 2006 and 14 June 2007, and the loan extensions on 19 December 2006, 13 November 2007, 26 May 2008, 9 November 2009 and 22 June 2010), he sought a penalty of the total cost of credit applicable on each occasion. In respect of the extension on 13 June 2011, Mr Holmes submitted(on the assumption that the Mayes' cancellation was not effective) that thatmodification is ongoing, and the penalty should be the total cost of credit for two years.[81] However, he submitted, the quantum of penalties to be applied cannot be determined. Although the assessment is straight-forward for the initial disclosure, applying a penalty of the total cost of credit for the initial year has a flow-on effect on subsequent years. Likewise, applying a penalty for each subsequent failure to make modification disclosure has a flow-on effect for later years. Mr Holmes submitted that an account should be ordered.Should SCFL be allowed relief against penalties?[82] In considering the extent to which the Mayes' liability should be extinguished(if at all) as penalty for non-disclosure, I am mindful of the summary by Asher J ofthe authorities on the application of s 32 of the CCA in Mardon & Stephens Group Ltd v Zenn Holdings Ltd:9These authorities indicate that the Courts do not allow the penalty provisions of the Credit Contracts Act to operate in a penal manner. Deterrence, at least in relation to non-financiers, is given only limited weight, and the Courts have regard to the commercial morality of the position of each party. If there has been real prejudice to the debtor, then that will be reflected in the penalty. If there has been no real prejudice and no high-handed or unfair conduct on the part of the creditor, this will also lead to substantial reduction of the penalty.[83] SCFL's failures to make proper disclosure were ongoing. In no case, whetherin initial or modification disclosure, did SCFL get it right. It is of particular concern that in the case of initial disclosure, SCFL failed to take into account the Mayes'payment of $500 towards the funding reservation fee, and thus miscalculated the finance rate. The difference may appear to be minor, at first glance, but when interest is charged on the sum of $500, and compounded over several years, the effect is significant. Further, SCFL took interest in advance, when the loan agreement required it to be calculated on a daily basis on funds owing, in arrears. Again, when compounded over a number of years, the effect becomes significant. Ihave concluded that the extent of SCFL's failures in disclosure, both in initial andmodification disclosure, takes them out of the range in which the failure to make disclosure can be regarded as inadvertent, or minor.[84] Mr Holmes properly described SCFL's failures as systemic. As a financier, it should have been at pains to ensure that all figures set out in the disclosure documents were correct, that documents were sent to the correct address, and that it retained appropriate records to demonstrate that proper disclosure had been made. It did not do this. Against that is the fact that the Mayes were provided with finance from 2001, for a period which was intended to be 12 months, but was extended for 11 years. They had the use of the money for all that time. I accept that it would not be appropriate for them not to be required to pay any interest.[85] Recognising that the Mayes should pay interest does not, however, lead to the conclusion that SCFL is entitled to relief in the form of an order that s 25 does not9 Mardon & Stephens Group Ltd v Zenn Holdings Ltd HC Auckland CIV-2006-404-707, 1 August 2006 at [84].apply (that is, that no penalty should be applied). I cannot conclude that a penaltyshould not be applied. The Mayes were not dealing with SCFL on "equal terms",10and for a considerable period of time Mr Mayes was at a serious disadvantage because of his very poor health.[86] In all of the circumstances, I have concluded that the appropriate penalty isthat the Mayes' liability under the initial contract, and the modification contractsfrom 28 May 2005 to 13 June 2011 must be extinguished to the extent of 50 per cent of the total cost of credit, and in the case of the 13 June 2011 extension, 50 per centof two years' cost of credit. An account will be required to establish the correct balance of the Mayes' loan when recalculated in this manner.Should the loan agreement be re-opened?Relevant statutory provisions[87] The final issue to consider is whether the Court should exercise its power under s 10 of the CCA to re-open the loan agreement. Pursuant to s 10 of the CCA, the Court may re-open a credit contract if it considers that:(a) A credit contract, or any term of the contract, is oppressive; or(b) A party to the contract has exercised, or intends to exercise, a right or power conferred by the contract in an oppressive manner; or(c) A party to the contract has induced another party to enter the contract by oppressive means.[88] "Oppressive" is defined in s 9 of the CCA as "oppressive, harsh, unjustlyburdensome, unconscionable, or in contravention of reasonable standards ofcommercial practice". Guidelines for deciding whether to re-open a contract are set out in s 11 of the CCA. Section 11(1) provides that no credit contract, or term of or act performed pursuant to a credit contract will be considered oppressive if the contract, term, or act would not have been considered oppressive at the time at10 Contrast the borrower in Anderson v Burbery Finance Ltd, above n 4.which, and in the circumstances in which, it was made or performed. The Court is required to have regard to all relevant circumstances, and in particular matters such as whether the finance rate payable under the contract is oppressive, whether the debtor was in default under the contract, whether the creditor has required certain payments of interest as a pre-condition to earlier repayment, and whether the creditor has refused to release a security.Submissions[89] Mr Holmes submitted that there were grounds to re-open the loan agreement under s 10(a) and (b). He submitted that SCFL acted oppressively in seeking to enforce its rights under the loan agreement without first establishing the correct amount payable. Related to that submission, he submitted that the charges levied by SCFL for each extension were oppressive having regard to its charges in respect of other consumer loans.[90] In support of this argument Mr Holmes referred to SCFL having:(a) Overcharged in the first year of the loan agreement by $647.21 (by failing to calculate interest in accordance with the loan agreement);(b) Charged the Court-ordered costs in the caveat proceeding ($9,352.30)and associated legal fees to the Mayes' loan account;(c) Charged the FSC fees ($1,325) to the loan account;(d) Charged fees on the extensions that were in excess of those charged for other consumer loans (in particular, having regard to those set out in the Commerce Commission settlement);(e) Charged compound interest on all of the above; and(f) Extended the loan on unfair terms when it knew that Mr Mayes was very ill and in hospital.[91] Mr Campbell first submitted that Mr Mayes' claim should fail in respect ofany extensions after 1 April 2005, as the CCCFA applied to those contracts. He also submitted that Mr Mayes has the onus to establish oppression which "almost always" requires evidence as to "reasonable standards of commercial practice". Asno such evidence had been given, he submitted, Mr Mayes had not satisfied the burden of proving oppression.[92] Mr Campbell further submitted that the matters referred to by Mr Holmes did not establish that particular terms in the loan agreement were oppressive, or that anything SCFL did was oppressive. He also submitted that Mr Mayes had commercial knowledge (having previously been involved in a company), had experience with borrowing, and had chosen not to seek legal advice. All of these, he submitted, pointed against a finding of oppression.11[93] As to the extension of the loan in 2005, when Mr Mayes was in hospital, Mr Campbell submitted that at that point the Mayes had been in default for 14 months, and while it was acknowledged that Mr Mayes had become increasingly ill and was deserving of sympathy, his hardship cannot be brought home to SCFL. He submitted that if a debtor suffers hardship that affects his ability to repay the debt, but the creditor is not the cause of that hardship, the hardship will not go to oppression.12Was there oppression?[94] In his judgment in Italia Holdings (Property) Ltd v Lonsdale Holdings (Auckland) Ltd, Vautier J considered the application of s 10 of the CCA in the context of the provision of finance for property development.13 His Honour contrasted the consideration of whether a contract was oppressive under the CCA with the situation where equitable relief is sought for unconscionable bargains. His Honour said:1411 Citing Jenkins v NZI Finance Ltd (1991) 3 NZBLC 102,198 (CA).12 Citing Monkley v Allied Mortgage Nominees Ltd HC Hamilton CP 83/89, 26 April 1989 at 9–10; and National Westminster Finance Ltd v Boyd HC Christchurch A337/84, 29 October 1986, at 11..13 Italia Holdings (Property) Ltd v Lonsdale Holdings (Auckland) Ltd [1984] 2 NZLR 1 (HC).14 At 15–16.In my view, a party who has the onus of demonstrating that a particularcontract was "unfair" perhaps may be said to have imposed upon him alesser burden than that which rests upon a party seeking to secure a decision in his favour for the re-opening of a contract in terms of s 10 on the ground that the contract or any term thereof is oppressive. something more thanan inquiry into whether a particular contract is advantageous or disadvantageous from the point of view of a party applying must certainly beintended. The word "oppressive" clearly connotes that some real detriment or hardship is involved. The word "harsh" is indicative of something of thesame nature. The phrase "unjustly burdensome" clearly shows, for example,that the fact that the performance of the contract is difficult for the party applying is insufficient. An injustice must be shown to exist as well. Theword "unconscionable" [requires] something more than an inquiry into whether a contract was fair or unfair to one party or the other. The finalphrase "in contravention of reasonable standards of commercial practice" requires same more than a simply uninformed conclusion as to what is fair or unfair from the standpoint of commercial dealings.[95] In Greenbank New Zealand Ltd v Haas, the Court of Appeal said of oppression as defined in s 9:15[24] The various words which together form the definition of the term "oppressive" all contain different shades of meaning but they all contain the underlying idea that the transaction or some term of it is in contravention of reasonable standards of commercial practice. In a sense that phrase gives the underlying commercial rationale for the earlier words or phrases. Todetermine whether a contract or term is oppressive within any of the words or phrases in the definition, it is necessary to have some basis of comparison. In the context the comparator can only be what would be expected or acceptable in terms of reasonable standards of commercial practice. It istherefore important, unless the oppressive aspect is beyond rational dispute, for the Court to be properly informed how the contract or term measures up against reasonable standards of commercial practice.[25] That will usually, indeed almost always, necessitate the calling of evidence on the point, as is contemplated by s 13. While the Act serves avaluable protective purpose, that purpose must be harmonised with the need to allow business people, especially when, as here, they are in receipt of competent legal advice, to be free to decide what contracts they should enter into and upon which terms. It is in such circumstances important for commercial stability not to have credit contracts reopened too readily. That should happen only where there is clear evidence, or the conclusion is otherwise irresistible, that the contract or term is oppressive within the proper meaning of that term.[96] Mr Holmes accepted that no evidence had been called for Mr Mayes as to reasonable standards of commercial practice. Nevertheless, he submitted, the matters he submitted as being evidence of oppression were ones where there was clear evidence, or the conclusion was irresistible.15 Greenbank New Zealand Ltd v Haas [2000] 3 NZLR 341 (CA) at [24]–[25].[97] I accept Mr Holmes' submission (based on Mr Weaver's evidence) thatinterest for the first year of the loan agreement was not calculated in accordance with the terms of the loan agreement. In the circumstances, evidence of reasonable standards of commercial practice is not necessary. It cannot be "reasonable" incommercial practice to fail to comply with the terms of a loan agreement.[98] I also accept that, following the order to pay the Mayes' costs in the caveatproceeding, it cannot be regarded as being in accordance with reasonable standards of commercial practice to pay those costs and then charge the costs to the Mayes'loan account. SCFL had been ordered to pay the costs to the Mayes. No evidence of reasonable standards of commercial practice is required to establish that; simply put,SCFL was not entitled to charge the costs to the Mayes' loan account, and in doingso it acted contrary to the Court order.[99] The same considerations apply to the FSC fees, which were charged to theMayes' loan account, as apply to SCFL's charging of Court-ordered costs. Clause5.2 of the terms of reference of the FSC scheme provided that "[SCFL] must not inany circumstances charge the complainant [Mr Mayes] any fee, or seek to be reimbursed for any fee payable by [SCFL] to [FSC], in connection with a complaintmade to [FSC]". SCFL was not entitled to charge the FSC fees to the loan account.[100] Regarding the fees charged by SCFL's solicitors in relation to the caveatproceeding, cl 18.4 of the loan agreement provided that the Mayes were to pay toSCFL "all costs, charges and expenses (including legal fees and disbursements calculated on a solicitor and own client basis) incurred by [SCFL] in connection withthe attempted or intended enforcement of [SCFL's] rights or remedies under thisAgreement " I accept Mr Campbell's submission that whether SCFL was entitled to charge the fees to the Mayes' loan account, and whether the fees charged were reasonable, are not issues that can be resolved in this proceeding.[101] SCFL's decision not to apply the Commerce Commission settlement to theMayes' loan account (and therefore, not refund fees charged on extensions of the loan) stemmed from its conclusion that the loan was a "business" loan rather than a "consumer" loan. SCFL now accepts that the Mayes' loan should be classified as aconsumer credit contract, as Mr Mayes has contended. SCFL's acceptance, and itsexpressed intention to credit the loan account, may be seen as indicating that its earlier decision was not in accordance with reasonable standards of commercial practice.[102] Regarding the extension of the loan when Mr Mayes was in hospital in 2005, Mr Holmes submitted that in the cases cited by Mr Campbell, it was relevant that the creditor did not know of the particular hardship; here, he submitted, SCFL knew ofMr Mayes' health condition. He submitted that, knowing of that condition, SCFL'sconduct was oppressive. On this point I cannot conclude, in the absence of evidence as to reasonable standards of commercial practice, that SCFL's conduct wasoppressive.[103] SCFL was clearly mistaken in believing that it could charge costs, fees and interest as it did, and I have concluded that in some respects it acted contrary to reasonable standards of commercial practice. But it has refunded the Court-ordered costs in the caveat proceeding, and the FSC fees, and will refund the fees charged in excess of the Commerce Commission settlement, in each case with compound interest. Those refunds can be taken into account when deciding whether to re-open the loan agreement under s 11(2)(c) of the CCA.[104] I have also concluded that SCFL was not entitled to overcharge the initial interest, as it was not calculated in accordance with the term loan agreement. However, that is a matter of what SCFL could do under the terms of the loan agreement, not necessarily a matter of oppression. It does not lead me to conclude that the loan agreement should be re-opened. It simply requires SCFL to correct the loan account.[105] Accordingly, I am not satisfied that the loan agreement should be re-opened.Result and directions[106] I have found that:(a) The CCA applies to the loan agreement and all of the extensions.(b) SCFL did not make proper initial disclosure, or modification disclosure on each extension.(c) The Mayes were entitled to cancel the loan agreement, but did not effectively cancel the agreement.(d) The Mayes are entitled to the benefit of penalties under ss 25 and 26of the CCA for SCFL's failures to make initial and modificationdisclosure, but SCFL is entitled to relief. As recorded at [86], above, the Mayes' liability under the initial contract and the modificationcontracts from 28 May 2005 to 13 June 2011 must be extinguished to the extent of 50 per cent of the total cost of credit, and in the case of the 13 June 2011 extension, 50 per cent of two years' cost of credit.(e) SCFL overcharged interest for the first year of the loan in the sum of$647.21. The Mayes' loan account should be corrected accordingly.(f) SCFL was not entitled to charge the Court-ordered costs and FSC feesto the Mayes' loan account, and has refunded the loan account, with compound interest. SCFL will also refund the fees charged in excess of the Commerce Commission settlement, again with compound interest.(g) There are no grounds on which the Mayes' loan account should be re- opened on the ground that a term in the agreement is oppressive, or that SCFL has exercised a power conferred by the contract in an oppressive manner.[107] I direct that an account be taken of the Mayes' loan, in the light of the mattersset out above, in order to ascertain the amount owing to SCFL.[108] Mr Holmes sought an order for costs. If the parties are not able to agree as to costs then memoranda may be filed: that for Mr Mayes within 20 working days of the date of this judgment and that for SCFL within a further 15 working days.Unless counsel indicate that a hearing is required, I anticipate making a decision on the papers.________________________Andrews J