The Supreme Court has dismissed a bid by Pyne Gould's Torchlight Fund No 1 LP and NZ Credit Fund to appeal a prior ruling that ordered it to pay more than A$30 million to Wilaci Pty in late payment fees.
The case concerns a loan to TLF1 from Wilaci, an entity connected with Australian businessman John Grill. Wilaci loaned the funds in August 2012 to help Torchlight Fund No 1 LP through what managing director George Kerr described as "a very tight liquidity situation" when Bank of Scotland International was leaving Australasia and calling for repayment from its debtors, including Torchlight's Australian real estate investment, RCL Group. A high-profile dispute with the Financial Markets Authority made it more difficult for Kerr to recapitalise Torchlight.
The loan was due to be repaid by October 26, 2012, a deadline that was missed, although Wilaci didn't immediately call on the loan. Rather it managed the repayment through seven tranches between October 2013 and May 2014. In late May of that year Wilaci issued a demand for payment of A$33.6m, which included a $5m facility fee, A$320,000 of interest and late payment fees, which by then totalled A$28.3m. Payment was not made and TLF1 was placed in receivership in 2014.
Torchlight then issued proceedings in the High Court and in October 2015, the High Court ruled that a late payment fee claimed by Wilaci was a "penalty fee" and was unenforceable. Wilaci then appealed this ruling. Earlier this year, the Court of Appeal overturned that ruling and ordered the TLF1 to pay A$31.5m in late payment fees to Wilaci.
Torchlight then turned to the Supreme Court for the right to appeal, arguing that the proposed appeal would provide greater certainty about the application of penalty doctrine to commercial agreements and the proper identification of the "legitimate interests" of the lender to be protected in such cases.
The Supreme Court noted, however, the contract was governed by the law of New South Wales and the focus of the Court of Appeal decision was on the application of the decision of the High Court of Australia in a different case that also involved the doctrine of penalties in Australia.
While Torchlight submits that the Court's views would be helpful more generally in New Zealand the Supreme Court said it would be deciding based on that case "with no ability - given it is under New South Wales law, - to depart from that decision or to address how the same issue might be approached in New Zealand."
It also said the case is not one that was marked by a "sufficiently apparent error, made or left uncorrected by the Court of Appeal," that would warrant an appeal.
As a result, it dismissed the application for leave to appeal and ordered to applicants to pay the respondent cost of $2,500.