Under the Credit Contracts Act 1981, the Court has the power to re-open credit contracts if the contract, or a term of the contract, is oppressive or if the creditor acts oppressively.
Sometimes debtors argue the finance or penalty rate of a contract is so high that it is oppressive and try to persuade the Court to vary the term. The Courts are usually reluctant to re-open a contract simply because the finance rate is high - especially if the parties entered into the contract willingly and with full knowledge and understanding of the term.
A recent example is the High Court's refusal to re-open a contract which had an effective interest rate of 60%. In Glenhu Properties Limited v Janssen, the Court recognised the rate was high, but took into account the following:
the purpose of the loan was for property development - 'the rewards for this can be high as indeed can the consequences be disastrous' the borrower was unlikely to get better terms from another lender the borrower had previously borrowed on similar terms and would have been appraised of the financial realities of the loan.This is a general summary only and should not be taken as a substitute for specific advice.
For further information please contact Dean Knight:
dean.knight@phillipsfox.com
Web site:
Phillips Fox