Greenbank New Zealand Ltd v Haas [2000] NZCA 145; [2000] 3 NZLR 341 (27 July 2000)

Last Updated: 8 December 2011

IN THE COURT OF APPEAL OF NEW ZEALAND

CA306/99

	BETWEEN	GREENBANK NEW ZEALAND LIMITED
		Appellant

	AND	THOMAS HAAS AND DESLEY HAAS
		Respondents

Hearing:	18 July 2000
Coram:	Tipping J John Hansen J Baragwanath J
Appearances:	P J Rutledge for Appellant M J Stewart-Wallace for Respondents
Judgment:	27 July 2000

JUDGMENT OF THE COURT DELIVERED BY TIPPING J

Introduction

[1] The principal issue in this summary judgment appeal from Master Venning is whether a credit contract was arguably oppressive in terms of s9 of the Credit Contracts Act 1981 (the Act). The Master held it was and declined to enter summary judgment in favour of the appellant Greenbank New Zealand Limited (Greenbank). The respondent Thomas Haas (Mr Haas) was a shareholder in and director of Transworld Investments Limited (Transworld). That company had contracted with people called Bolton to purchase from them a block of potentially subdivisable land at Albany, near Auckland. The sale and purchase agreement was dated 27 June 1997. The price was $1,285,000. A deposit of 10%, ie. $128,500 was payable when the contract became unconditional. Settlement was due on 28 November 1997. Transworld did not have the money to pay the deposit and appears to have been already in default in that respect. It borrowed $140,000 from Greenbank for that purpose. Aspects of that loan transaction have led to the first and principal point of dispute between the parties.
[2] The loan to Transworld was guaranteed by Mr Haas and his wife. The loan agreement was signed on 17 September 1997 and the money was advanced the following day. The interest rate was 21.7% rising to 25% on default. The agreement provided for the principal sum to be repaid with interest in one sum on the earlier of 60 days from the date of advance or the day on which Transworld received a GST refund in relation to its purchase from the Boltons. The Boltons were not GST registered, and thus the anticipated refund did not come to hand when expected. The absence of the refund caused difficulties and resulted in the money owing to Greenbank having to be sourced elsewhere. Transworld was unable to make repayment and fell into default.
[3] The crucial aspect of the loan agreement which is said to have rendered the contract oppressive, is that it stipulated for a fee of $45,000 to be payable to Greenbank no later than 90 days after the date of the advance. The fee amounted to 32.14% of the principal sum. Because of the short duration of the term, the fee resulted in a finance rate of 217.3% as per s6 of the Act. On Transworld's default, Greenbank looked to Mr and Mrs Haas under the guarantee. Transworld was also unable to raise the money required to complete the purchase from the Boltons. It was therefore vulnerable to having that contract cancelled and the deposit, which had been paid with Greenbank's money, forfeited. In the event Greenbank negotiated an agreement with the Boltons whereby it became the purchaser under the contract. Greenbank was thus able to take advantage of the deposit already paid, and consequently, having received that benefit, agreed to credit the amount involved against the indebtedness of Mr and Mrs Haas.
[4] The loan transaction at issue came about because Transworld saw what it regarded as a lucrative opportunity to make a substantial profit. But it lacked the means, not only to pay for the property from its own resources, but to provide worthwhile security to a financier. It elected to take the bold step of committing itself to the purchase prior to securing its funding. Having taken legal advice, of which no criticism has ever been made, it entered into the loan contract with Greenbank containing terms which reflected the high risk of an effectively unsecured and speculative transaction. When the venture failed, Mr and Mrs Haas asked the High Court not to enter summary judgment against them on the basis that the loan contract was arguably oppressive. For the reasons which follow we are satisfied that it was not, and that the appeal should be allowed.
[5] The arrangements made between Greenbank, the Boltons, and Mr and Mrs Haas were recorded in a deed dated 13 February 1998, in conjunction with a letter of 12 February 1998 written by Greenbank's solicitors to the solicitors who had been acting for Mr and Mrs Haas throughout. The deed recited the sale and purchase agreement between the Boltons and Transworld, the loan agreement, the Haas's guarantee, the defaults of Transworld, and the fact that it had been removed from the register. The recital concerning the loan agreement stated:

Pursuant to a loan agreement dated 17 September 1997 ("the Loan Agreement") Transworld borrowed $140,000 from Greenbank New Zealand Limited ("Greenbank") which was used by Transworld to pay the deposit of $128,500 ("the Deposit") payable under the Contract to Boltons. The Loan Agreement required that Transworld repay the sum of $140,000 and interest of $5,000 within 60 days and a fee of $45,000 within 90 days. The Loan Agreement further provided for payment of default interest and enforcement costs in the event of default by Transworld.

[6] The deed also recited that Greenbank was, at its date, owed $225,000 under the loan contract. The difference between the total of the sums earlier recited, which was $190,000, and the sum of $225,000, which Mr and Mrs Haas acknowledged to be owing, appears to relate to default interest and enforcement costs. The operative part of the deed effectively allowed Greenbank to become the purchaser from the Boltons. It did so through an associated company called Studio 55 Limited. The solicitor's letter stated that if Mr and Mrs Haas signed the deed within 5 days (they did so within 24 hours), Greenbank would credit the amount of the deposit paid under the Boltons' contract to the amount owing by them under the loan contract. The letter also stated that Greenbank would allow a period of 12 months, interest free, for payment of the balance owing after that credit. That balance was $96,500 ($225,000 less $128,500). Thus, by entering into the deed, Mr and Mrs Haas obtained a credit of $128,500, and a 12 month interest free breathing space. In spite of that they seek to impugn the deed, alleging undue influence on the part of Greenbank.

Evidence

[7] The affidavit in support of Greenbank's application for summary judgment was sworn by a director, Mr Peter Hanson. He referred to the loan agreement, and then to the deed, which contained the Haas's acknowledgement of liability in the sum of $225,000. He confirmed the statement of claim and averred that Mr and Mrs Haas had no defence to Greenbank's claim for $96,500 which allowed for the agreed credit of $128,500. By arrangement Mr Haas swore two affidavits in opposition to the application for summary judgment. These were both filed before Greenbank made any reply. In the first Mr Haas confirmed that he and his wife had no personal liability to the Boltons under that contract. They therefore stood to lose nothing personally if Transworld defaulted on its obligation to the Boltons. Mr Haas said he was "very reluctant" to sign the deed. Notwithstanding the obvious advantages of the deed to himself and his wife, Mr Haas did not elaborate on his reluctance, save by giving the impression that he resented the fact that, according to his perception, Greenbank had made "a substantial profit on the transaction" over and above the amount for which it was claiming judgment. In reality, however, it appears that Greenbank have not made a profit, let alone a substantial profit, from the transaction.
[8] Mr Haas then referred to the fact that immediately prior to his signing the deed, Mr Hanson had threatened to bankrupt him unless he did sign. This statement was presumably made in support of the undue influence allegation. Mr Hanson accepted that he did make reference to bankruptcy as a consequence of non-signature of the deed. But the irony is that before the deed was signed, Mr and Mrs Haas (subject to the oppression point) owed Greenbank the sum $190,000 immediately. After the deed was signed, they owed only $96,500 in 12 months time interest free. Even if they had been wholly successful on the oppression point, they would be likely to have still owed the principal sum of $140,000, as against $96,500 under the arrangement evidenced by the deed and solicitor's letter.
[9] The commercial purpose of the claim that Greenbank asserted undue influence in procuring that arrangement is therefore extremely hard to understand. Of major significance when considering the oppression issue is the fact that, in his first affidavit, Mr Haas made no complaint at all about the $45,000 fee and the consequential finance rate of 217.3%. His first complaint in terms of the notice of opposition, was not even mentioned in his first affidavit.
[10] In his second affidavit there is no direct complaint about the fee either. All Mr Haas did in that affidavit was to compare the fee, which he wrongly stated to be $50,000, with fees to be charged in relation to a first mortgage which Transworld was endeavouring to raise to fund the purchase. That transaction was hardly comparable with the one in issue. There is no reference in either affidavit to the finance rate, let alone any complaint that in the circumstances it was oppressive or otherwise objectionable. No other evidence was filed in opposition to the application for summary judgment, and specifically no evidence commenting on the fee charged or the finance rate, when viewed against the terms, risk and purpose of the transaction and relevant conditions in the marketplace.
[11] It is not necessary to refer to Mr Hanson's second affidavit. Brief reference to the affidavit of Mr Boyle filed for Greenbank demonstrates that Mr Boyle acted as something of an intermediary between Mr Haas and Greenbank. From that perspective he deposed:

.... it was Mr Haas who offered to pay that fee and that interest rate if the Plaintiff would make the loan advance - it was certainly not the Plaintiff who stipulated for or imposed those terms. As I have said Mr Haas regarded the property purchased by Transworld from Mr and Mrs Bolton as potentially extremely profitable and I believe that the terms that he offered are a reflection of his concern that Transworld should not lose the benefit of the contract and of the difficulty that Transworld had obviously had raising the funds to proceed.

[12] Although Mr Haas would have needed leave to respond to that evidence, it would almost certainly have been granted, given the sequence in which the issue of oppression was addressed in the affidavits on either side. We regard the absence of any direct challenge to Mr Boyle's statement as having significance, notwithstanding the Master's view that there was some basis for saying that Mr Boyle's evidence was "not uncontroverted".

Master's judgment

[13] After setting out the background, the Master commenced by noting the submission of Mr Stewart-Wallace for Mr and Mrs Haas that the finance rate of 217.3% and the fee of $45,000 on a loan advance of $140,000 were, per se, oppressive terms of the contract. After citing from the judgment of Vautier J in Italia Holdings (Properties) Ltd v Lonsdale Holdings (Auckland) Ltd [1984] 2 NZLR 1, and that of Gallen J in Anderson v Burbery Finance Ltd [1986] 2 NZLR 20, the Master said:

However, while respectfully accepting the force of Gallen J's comments, they cannot be interpreted as leading to the conclusion that a high finance rate of itself and without more cannot be oppressive. Such an interpretation would be contrary to the express wording of the Act. Section 10(1)(a) provides that the contract may be re-opened if any term of the contract is oppressive. The finance rate is clearly a term of the contract. The matter is put beyond doubt by s11(2)(b)(i) which expressly directs the Court to consider whether the finance rate for the contract or any amount payable is oppressive.

[14] He then referred to certain words of Randerson J in M v R (unreported, CP 590/97, HC Auckland, 24/4/98):

.... I note in passing that the letter from the Ministry expressed the view that an interest rate of 69.2% was 'probably not sufficient to make the loan harsh or oppressive under the Credit Contracts Act'. I have difficulty in accepting that view.

The Master then noted that, while what the Judge had said was obiter, it was nevertheless supportive of the fact that a high finance rate is or may of itself be oppressive.

[15] Referring to the present case, the Master observed:

The finance rate of 217.3% is extreme and arguably harsh or unconscionable. The requirement to pay a fee of $45,000 (or in excess of 32% of the principal sum borrowed) is also arguably harsh or unjustly burdensome. Prima facie the finance rate and the fee could be said to be oppressive applying the statutory wording of s9.

[16] Having said this he proceeded to accept Mr Rutledge's submission for Greenbank that, when considering oppression, the Court must have regard to all the circumstances relating to the making of the contract: s11(2)(a) of the Act. He then noted the relevance of only three matters, all of which seemed to him to point against Greenbank. First, Transworld and Mr Haas were desperate to obtain funds to pay the deposit; second, the comparison between the fee and the finance rate in the instant case, and what was payable in respect of the intended first mortgage, the former being about double the latter; and third, the fact that in spite of the credit for $128,500 against an original principal sum of $140,000, there was still $96,500 owing.
[17] The Master indicated that in summary these matters appeared to him to reinforce the argument of oppression. In response to Mr Rutledge's invitation to consider the ameliorating effect of the deed and the modification evidenced by the solicitor's letter and their overall effect on the position of Mr and Mrs Haas and the finance rate, the Master asserted that this argument seemed to overlook "that the credit contract may be oppressive as at the date it is made if the finance rate is at that time oppressive. Subsequent conduct may not cure the oppression which speaks from the date of the contract."
[18] The Master also saw what he described as a practical difficulty for Greenbank in the fact that there was no explanation how the sum outstanding rose from $190,000 to $225,000. We have already observed that the answer probably lies in the combination of the default interest rate and enforcement costs. It must also be noted that no complaint was made in Mr Haas's evidence about this aspect; nor did it feature in the notice of opposition; nor was complaint made about it at the time, despite Mr and Mrs Haas being independently advised.

Onus of proof

[19] Greenbank had the ultimate legal onus of demonstrating that Mr and Mrs Haas had no defence to its claim. It did not however have to anticipate any allegation of oppression or undue influence, for none had been made in the period of two years from the date the transaction was entered into until Greenbank commenced proceedings. The lack of any such allegation, notwithstanding the way the transaction was varied and the demands later made for the money owing, is of itself of significance. Mr and Mrs Haas had an evidential onus to demonstrate some tenable basis upon which they might be able to resist their clear prima facie liability for the balance outstanding. In the end, in the light of such evidence as Mr and Mrs Haas produced, the Court had to decide whether Greenbank had satisfied the ultimate onus which lay upon it. In essence this meant that Greenbank had to satisfy the Master that Mr and Mrs Haas had no arguable basis for resisting judgment. Whether Greenbank could establish that depended on a consideration of the strength of the material advanced by Mr and Mrs Haas against the strength of the material Greenbank was able to advance on the issues raised. There can be no doubt that the Master correctly applied this approach. The argument before us was that in doing so he had erred in several respects, causing him to reach the wrong conclusion.

The original transaction

[20] Mr Stewart-Wallace was constrained to accept that the only arguable element of oppression lay in the size of the fee against the principal sum to be advanced. This, coupled with the shortness of the term, led directly to the finance rate as determined under s6. But it should be noted that because the credit was to be provided for a period not exceeding 2 months, and no part of it was to be paid back to the creditor under another contract, the finance rate did not have to be disclosed: 2nd schedule clause 4(3). That point is not of course decisive of the issue of oppression but it has some relevance when one considers the structure of the transaction as a whole. The long title to the Act describes it as designed to reform the law relating to the provision of credit in order to achieve various purposes including the prevention of "oppressive contracts and conduct". The long title also expressly notes the repeal of the Moneylenders Act 1908. Part I deals with reopening of Oppressive Credit Contracts. Section 9 states that in the Act the term "oppressive" means:

oppressive, harsh, unjustly burdensome, unconscionable, or in contravention of reasonable standards of commercial practice.

[21] Sections 10 and 11 must also be noted. They provide:

10 RE-OPENING OF CREDIT CONTRACTS--

(1) Where, in any proceedings (whether or not instituted pursuant to this Act), the Court considers that--

(a) A credit contract, or any term thereof, is oppressive; or

(b) A party under a credit contract has exercised, or intends to exercise, a right or power conferred by the contract in an oppressive manner; or

(c) A party under a credit contract has induced another party to enter into the contract by oppressive means--

the Court may re-open the contract.

(2) Where a party under a credit contract refuses to agree to the early termination of the contract, or to vary or waive any term of the contract, or imposes conditions on such agreement he shall, for the purposes of this Act, be deemed to be exercising a right or power under the contract.

(3) Where, with the knowledge of the creditor under a re-opened credit contract,--

(a) The credit provided pursuant to the contract was used (whether in whole or in part) to pay amounts owing under another credit contract or other credit contracts; or

(b) Amounts owing under the contract were paid from credit provided pursuant to another credit contract or other credit contracts--

and the creditors under the contracts are either the same person or related bodies corporate, the Court may re-open all or any of those other contracts (whether or not it considers that any of paragraphs (a) to (c) of subsection (1) of this section apply in respect thereof).

.....

11 GUIDELINES FOR RE-OPENING CREDIT CONTRACTS--

(1) No credit contract or term of a credit contract, or act performed pursuant to or in relation to a credit contract, shall be considered to be oppressive if the contract, term, or act would not have been considered oppressive at the time at which, and in the circumstances in which, it was made or performed.

(2) In deciding whether paragraphs (a) to (c) of section 10(1) of this Act apply in respect of a credit contract and whether to re-open the contract under that section, the Court shall have regard to--

a) All the circumstances relating to the making of the contract, the exercise of the right or power conferred by the contract, or the inducement to enter the contract, as the case may be; and

(b) Such of the following matters as are applicable (if any):

(i) Whether the finance rate for the contract, or any amount payable by the debtor under the contract (whether or not on default by the debtor), is oppressive:

(ii) Where a debtor is in default under the contract, whether the time given to the debtor by or pursuant to the contract to remedy the default is oppressive having regard to the likelihood of loss to the creditor:

(iii) Where the creditor has required, as a condition of early repayment of the credit outstanding under the contract, that the debtor pay interest for a period subsequent to the date of repayment, whether the amount of interest is oppressive having regard to the expenses of the creditor and the likelihood that the amount repaid can be reinvested on similar terms:

(iv) Where the creditor has refused to release part of any security relating to the contract or has agreed to such a release subject to conditions, whether the refusal is, or the conditions are, oppressive having regard to the amount of the credit and the extent of the security that would remain after the release; and

(c) Such other matters as the Court thinks fit.

[22] The principal thrust of s10 is to allow a credit contract to be reopened if (1) the contract or any term is oppressive, or (2) a right or power is exercised in an oppressive manner, or (3) entry into the contract is induced by oppressive means. Here it is the contract or a term (ie. that for payment of the fee) which is said to be oppressive.
[23] Section 11 has a dual ambit. First, it focuses on the date of entry into the contract and the date of performance as the relevant dates for determining oppressiveness. Second, it applies the criteria in paras (a) (b) and (c) of ss2 not only to the determination whether a contract or term is oppressive, but also to the further question whether to reopen, if oppressiveness is found. Thus in deciding whether, for example, a term in a contract is oppressive it may be relevant to consider whether the finance rate for the contract is oppressive. The finance rate is not a term but can of course be influenced by a term such as that in issue here, namely the fee, it being in the language of ss2(a), an amount payable by the debtor under the contract. As the Court is required by s11(2)(b)(i) only to have regard to an oppressive finance rate it cannot be said that an oppressive finance rate will automatically lead to the conclusion that the contract or term is oppressive.
[24] That said, it is necessary to return to the key concept of oppression as defined in s9. 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. Something which is, for example, unjustly burdensome must necessarily be regarded as being in contravention of reasonable standards of commercial practice; similarly with something harsh. To determine 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. Something which is in accordance with such reasonable standards could hardly be held to be oppressive. Conversely something which is not in accordance (ie. in contravention of) such standards is, by definition, oppressive. It is therefore 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 s13. There would be difficulties and dangers in expecting Judges and Masters to take an intuitive or impressionistic approach to the question. What to one Judge might seem unjustly burdensome might not necessarily seem so to another. The commercial experience of judicial officers may differ markedly. Save in the plainest of cases, Judges cannot be expected to take some form of judicial notice of what is or is not in accordance with reasonable standards of commercial practice: see the similar approach which the Court took in Tucker Wool Processors Ltd v Harrison [1999] 3 NZLR 576, 600 (CA) in relation to harsh and oppressive contracts under s57(1)(b) of the Employment Contracts Act 1991. Of course, if there is a conflict of evidence, the familiar judicial role of deciding which evidence should be preferred will come into play, but that is a different issue. There is another reason why it is important for there to be evidence of what is regarded as acceptable or unacceptable in the marketplace. While the Act serves a valuable 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 what terms. It is in such circumstances important for commercial stability not to have credit contracts reopened too readily. That should happen only when there is clear evidence, or the conclusion is otherwise irresistible, that the contract or term is oppressive within the proper meaning of that term.
[26] With respect to the Master we do not consider he was correct in deciding on the material before him that Mr and Mrs Haas had raised an arguable case of oppression. Transworld had no money. It thought it had an advantageous contract which would be very profitable. It was anxious to hold the contract. So were Mr and Mrs Haas. They and Transworld wished to make use of Greenbank's money to help secure for themselves the substantial profit they envisaged would result from buying and subdividing the Boltons' land. To all appearances Mr Haas was an experienced businessman. He and Mrs Haas were acting with the benefit of independent legal advice throughout. In practical terms Transworld could offer no security for Greenbank's advance, save for the contract which the advance was designed to protect. From Greenbank's point of view it was seriously exposed if for some reason, as happened, the contract fell through. For Greenbank it was therefore a high risk transaction.
[27] There was no evidence before the Master that in these circumstances the $45,000 fee should be regarded as oppressive. In a sense the venture had elements of profit sharing with Greenbank putting up a vital sum of money to pay the deposit, and Transworld getting the advantage of the profit which it expected to be derived from the contract. There can be no suggestion of Greenbank taking advantage of difficulties Transworld was already in, save for its inability to finance a venture which it saw as profitable. It is not a case where the Court should find an arguably oppressive term simply because, on one view, the finance rate might appear extremely high, or the fee might appear to have been high as a percentage of the principal sum being advanced. There is no basis in the evidence for saying that Greenbank was not entitled to some premium by way of fee to reflect the nature of the transaction and the risks it was taking. Nor is there any evidence to support the view that the premium was oppressively high.
[28] In these circumstances Mr and Mrs Haas did no more than simply assert that the fee was oppressive. This, as the Master noted, is not enough: see Autohelp & Towage Ltd v Central Acceptance Ltd (CA 144/91, 11 June 1992) per Hardie Boys J at p4:

The onus of establishing oppressive conduct lies on the party asserting it, and it is well settled that except in the plainest of cases evidence to support the assertion is required: see for example Cambridge Clothing Co Ltd v Simpson [1988] 2 NZLR 340, 348. Mr Ryan submitted that in this case, where the opposition to summary judgment was in part founded on this part of the definition, it was encumbent on the plaintiff to adduce evidence that its conduct was not in breach of the standards described. But a plaintiff is not obliged to adduce evidence to counter mere assertion. The facts may of course speak for themselves, and so provide evidence which needs to be countered. Cases will differ, but we cannot accept Mr Ryan's submission as a general proposition.

[29] It is significant that Mr Haas at no stage in his evidence directly challenged the amount of the fee. Where we differ from the Master is in his acceptance, as a matter of impression, that the fee and consequential finance rate, in light of their percentage values, were arguably oppressive. When all the circumstances are brought to account, we do not consider Mr and Mrs Haas laid a sufficient foundation for their allegation of oppression to enable it to be regarded as arguable. We would therefore allow the appeal before reaching the question of the deed and solicitor's letter and the modifications they introduced; but we will nevertheless make some brief reference to that aspect after discussing the suggestion that Greenbank exerted undue influence to procure the deed.

Undue influence

[30] The undue influence allegation is limited to the deed, although it and the solicitor's letter are interlinked. Mr and Mrs Haas appear to want the advantages of the solicitor's letter without what they perceive as the disadvantages of the deed. The allegation in the notice of opposition is that Greenbank "exerted undue influence" on Mr and Mrs Haas "in requiring them" to enter into the deed. The undue influence relied upon can only be the observation of Mr Hanson that he would bankrupt Mr Haas if he did not pay the loan. Mr Hanson deposed that he felt that he had been dealt with particularly poorly by Mr Haas, and bankruptcy was certainly an option. As noted earlier, the strange aspect of the undue influence allegation is that the arrangement brought about by the deed and solicitor's letter, unless one artificially severs the two, actually put Mr and Mrs Haas into a better position than they would have otherwise occupied. The Master appropriately noted the description of undue influence given by Richardson J in Contractors Bonding Ltd v Snee [1992] 2 NZLR 157, 165 (CA).

".... undue influence consists in the gaining of an unfair advantage by an unconscientious use of power by a stronger party against a weaker in the form of some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating, and generally, though not always, some personal advantage obtained by the stronger party. It is directed at conduct within a relationship which justifies the conclusion that the disposition or agreement was not the result of a free exercise of the disponer's will. The doctrine is founded on the principle that equity will protect the party who is subject to the influence of another from victimisation.

[31] There are some analogies with the concept of economic duress: Shivas v Bank of New Zealand [1990] 2 NZLR 327, 342-352 (HC). The Master correctly noted that the bankruptcy threat was not of itself necessarily an exercise of undue influence. As he put it, the threat was:

.... a statement of a creditor who, at that time, had rights pursuant to the agreement, and as a statement of the intention of the credit or as to how those rights were to be exercised.

[32] The Master considered that of more significance in relation to the argument of undue influence was the advantage to Studio 55 Ltd and the actions of Greenbank leading to the execution of the deed. He continued:

In that regard it is significant that in early February 1998 the Plaintiff [Greenbank] sought and obtained advice from Boffa Miskell Ltd, planners, as to the opportunities and constraints for subdivision of the property at Albany Road. It is apparent that at least by that time and before the deed was executed the Plaintiff was interested, either by itself or by an associate, in purchasing the property itself. The Plaintiff, or at least its associate, Studio 55 Ltd, through the provisions of the deed obtained a credit of $128,500 towards the ultimate purchase price paid for the property by it. Without Transworld's and the Defendants' agreement to that, the Boltons would have been entitled to forfeit the deposit and Studio 55 Ltd would not have had the benefit of it.

The unexplained increase in the Defendants' indebtedness is also a relevant factor supportive of the submission of undue influence.

I do not overlook that it appears from correspondence that at all material times relating to the execution of the deed the Defendants were in receipt of legal advice. It may be that ultimately the fact of the legal advice may answer the submission that they were under undue influence when entering the deed and making the subsequent agreement. At the present time, however, the evidence currently before the Court fails to take me that far.

[33] We find this line of reasoning unconvincing. Greenbank, through Studio 55, clearly embarked on the substitute purchase from the Boltons as a means of saving what they could from the predicament they found themselves in. The increase in the indebtedness was explained. Mr Hanson spoke of the considerable costs which Greenbank had incurred in the process of negotiating and implementing the Bolton deal. These he regarded as reasonably coming within the ambit of enforcement costs. There was indeed no complaint by Mr and Mrs Haas about that aspect. Unless Greenbank had intervened Transworld was inevitably going to lose the deposit. It was entirely logical and sensible for Greenbank to try and retrieve its position by the method adopted. The consent which Transworld and Mr and Mrs Haas gave to Greenbank in this respect was matched by the benefits which the deed and solicitor's letter gave them as already described.
[34] It is interesting to note that they were given 5 days to consider their position and came back after only one day with their acceptance. That hardly looks as if they were acting under undue influence. There is no suggestion in Mr Haas's evidence that his will was in any way overborne by pressure exerted by Greenbank. Indeed, in the light of there being no complaint for two years, any such assertion would have appeared very hollow. There is no evidence from the solicitor who was advising Mr and Mrs Haas at the time, indeed throughout. With respect to the Master, the allegation of undue influence appears to us to be untenable on the material before the Court. Transworld and Mr and Mrs Haas were in a difficult position through no fault of Greenbank. They were offered a solution which, on its face, was reasonable. It was significantly more favourable to them than would have been the case if Greenbank had adopted a less accommodating attitude. The mention of bankruptcy was only a reference to what was obviously a realistic option if the parties could not come to terms. The message inherent in the mention of bankruptcy cannot possibly be regarded in the circumstances as the exercise of illegitimate commercial pressure, and thus as some basis for the assertion of undue influence. Overall Mr and Mrs Haas fell well short of establishing any arguable basis for saying that the deed was procured by undue influence exerted upon them by Greenbank. The deed and the solicitor's letter were thus capable of being taken into account as a material modification of the earlier contract.

The modification of the transaction

[35] Essentially Mr and Mrs Haas received a credit of $128,500, which Greenbank did not strictly have to allow them, plus a 12 months interest free deferment of their obligation to answer to the guarantee. If a term or contract is oppressive when entered into it does not retrospectively cease to be so by dint of some later modification. But such a modification can be relevant to whether the Court should reopen the contract: s11(2)(c). Clearly if the modification has removed the element of oppression before the creditor seeks to enforce the contract, there would be little justice in reopening it. The modification here had two significant dimensions. Looked at in one way the credit of $128,500 waived all interest, the fee and part of the principal. The fact that Transworld and Mr and Mrs Haas lost the Bolton contract and still had to pay Greenbank an appreciable sum was a risk inherent in the venture they were seeking to undertake.
[36] The 12 month interest free moratorium coupled with the credit had the effect of reducing the finance rate on the modified basis to a figure in the vicinity of 45%. In view of the very reasonable way in which Greenbank treated Mr and Mrs Haas by dint of the modification, we think the chances of the Court reopening the contract, even had it been capable of being viewed originally as oppressive, were extremely slim. Thus if the original contract and the modification are looked at together, we do not consider Mr and Mrs Haas raised an arguable case for reopening either the original contract or the modified contract. For completeness we record that the point raised by Mr Stewart-Wallace in reliance on s17 was not open to him because it might well have been affected by evidence which Greenbank could have called had the point been raised below: see Savill v Chase Holdings (Wellington) Ltd [1989] 1 NZLR 257, 307 (McMullin J), 315-316 (Casey J), Bisson J concurring.

Conclusion

[37] For the reasons given the appeal is allowed. The case is remitted to the High Court for the entry of summary judgment in favour of Greenbank for $96,500 plus interest as may be agreed between the parties or fixed by the High Court. The respondents are to pay the appellant costs in this Court in the sum of $5000 plus disbursements including the reasonable travel and accommodation expenses of counsel, to be fixed if necessary by the Registrar. Costs in the High Court are to be as fixed by that Court.

Solicitors
Rutledge Rolton, Christchurch, for Appellant
Wynn Williams & Co, Christchurch, for Respondents