Pyne Gould wins court tussle

  • 20/10/2015
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By Paul McBeth

Pyne Gould Corp, the financial services firm controlled by George Kerr, has won a court battle with Australian businessman John Grill, whose Wilaci investment unit was seeking AU$33.6 million (NZ$35.8M) from the financial services firm in late payment fees over a short-term loan.

In the High Court in Auckland, Justice Matthew Muir today ruled Pyne Gould subsidiary Torchlight Fund No.1 LP didn't have to pay a late penalty fee on a AU$37M loan from Wilaci, which "so significantly exceeds the loss likely to be caused by the breach that it qualifies as extravagant and therefore unenforceable."

The AU$2.17 million per month fee "was undoubtedly extravagant in relation to any such loss."

Shortly before the August hearing, Torchlight admitted liability for a AU$5 million fee plus interest, and the judge also ordered the Pyne Gould entity to pay $1.18 million in receivers' costs and disbursements, plus additional costs that had been incurred since July 31.

Wilaci loaned the funds to Torchlight on August 22, 2012, to help the Pyne Gould entity manage what Kerr described as "a very tight liquidity situation" when Bank of Scotland International was exiting Australasia and calling for repayment on 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.

Justice Muir determined the late payment fee was imposed as a way to create an incentive for the loan to be repaid on time, and that "at the time the contract was made what the parties could have reasonably expected to occur in the event of a failure to repay on 26 October 2012, mirrors closely what actually occurred."

In a separate statement, Pyne Gould's Kerr said he welcomed the ruling "which confirms that Torchlight's position was reasonable."

NZN