In Real Finance Ltd v Stefano [2016] NZHC 2293, the High Court found that it had jurisdiction to reopen a credit contract if it considered the contract oppressive, even where neither party to the proceeding had raised the issue.
The general jurisdiction to reopen credit contracts arises under section 120 of the Credit Contracts and Consumer Finance Act 2003 (CCCFA). The High Court found that the wording of section 120, which provides the jurisdiction to reopen “if, in any proceedings (whether or not brought under this Act), [the Court] considers that … the contract … is oppressive”, was expressed widely. The language did not suggest that a party must bring a proceeding specifically seeking to reopen a contract before the Court can intervene to exercise this power.
The High Court found that this interpretation of section 120 was consistent with the CCCFA’s purpose of protecting the interests of consumers in connection with credit contracts. There were many reasons why proceedings might be brought by a creditor seeking to enforce an oppressive contract against a debtor, with the debtor lacking the means to argue defences such as oppression under section 120. Courts should be able to act on their own motion when circumstances called for it.
The High Court considered other arguments such as whether the best course was for a court to refer potential oppression issues to the Commerce Commission. However, that might not serve the interests of justice in every case, given the Commerce Commission’s varied priorities. Overall, the High Court concluded that courts should exercise caution before acting on their own initiative, but were not prevented from doing so where they have all necessary information to decide whether the section 120 jurisdiction should be exercised.